WEBVTT 00:00:10.089 --> 00:00:12.089 Welcome back to The Rate of Change with York 00:00:12.089 --> 00:00:14.630 Wealth Management. As advisors to some of the 00:00:14.630 --> 00:00:16.350 wealthiest families in the country, The Rate 00:00:16.350 --> 00:00:18.469 of Change is a podcast designed to help you in 00:00:18.469 --> 00:00:20.809 the pursuit of building long -term wealth through 00:00:20.809 --> 00:00:22.710 the insights of some of the brightest minds in 00:00:22.710 --> 00:00:25.230 asset management. I'm your host, Murdoch Gaddy, 00:00:25.230 --> 00:00:27.429 and in today's broadcast, we're joined by Ben 00:00:27.429 --> 00:00:30.329 Harrison, co -founder and chief investment officer 00:00:30.329 --> 00:00:34.390 of Outdoor Capital, which as of February 2024 00:00:34.390 --> 00:00:39.359 has been acquired by Prime Financial Group. Ben's 00:00:39.359 --> 00:00:42.020 career began in engineering, project management 00:00:42.020 --> 00:00:44.619 on major infrastructure projects across Australia 00:00:44.619 --> 00:00:46.899 and Southeast Asia before moving into finance 00:00:46.899 --> 00:00:51.140 with Wilson's, where he worked in equity research, 00:00:51.420 --> 00:00:55.259 ECM and M &A. Nearly a decade ago, he co -founded 00:00:55.259 --> 00:00:58.420 Outdoor, building it into a specialist alternative 00:00:58.420 --> 00:01:01.659 asset manager with a focus on private credit 00:01:01.659 --> 00:01:05.200 and growth equity. For me, what I found most 00:01:05.200 --> 00:01:07.599 interesting about the conversation with Ben is 00:01:07.599 --> 00:01:09.879 what they're looking to achieve. It's not just 00:01:09.879 --> 00:01:12.980 another lending business. They want to get in 00:01:12.980 --> 00:01:16.079 alongside the businesses they're working with 00:01:16.079 --> 00:01:20.079 in both an equity facility and a debt facility 00:01:20.079 --> 00:01:23.579 and work with the founders to help access the 00:01:23.579 --> 00:01:27.420 capital they need to support the growth and trajectory 00:01:27.420 --> 00:01:30.989 of where they want their business to go. Their 00:01:30.989 --> 00:01:33.829 loans are senior secured, giving investors downside 00:01:33.829 --> 00:01:38.269 protection, but Alto offers the equity stake 00:01:38.269 --> 00:01:40.170 too. So it puts them on the same side of the 00:01:40.170 --> 00:01:43.930 table as management, giving investors a share 00:01:43.930 --> 00:01:48.549 in the potential upside. Their borrowers, the 00:01:48.549 --> 00:01:51.049 businesses they work with, are typically operating 00:01:51.049 --> 00:01:54.150 companies with 20 to 100 million in revenue. 00:01:54.810 --> 00:01:58.790 $2 to $10 million in EBITDA, looking for capital 00:01:58.790 --> 00:02:01.829 to expand, make acquisitions, or invest in growth. 00:02:03.230 --> 00:02:07.290 So as mentioned, then Altor isn't a property 00:02:07.290 --> 00:02:11.210 lender. They don't fund land, banking, or any 00:02:11.210 --> 00:02:16.060 property development. In saying that... The businesses 00:02:16.060 --> 00:02:18.379 which they lend to, they consider everything, 00:02:18.539 --> 00:02:20.879 all our hard assets on the balance sheet. So 00:02:20.879 --> 00:02:24.000 they will take in consideration property if it's 00:02:24.000 --> 00:02:27.219 a hard asset of the business when looking at 00:02:27.219 --> 00:02:30.680 the overall collateral of the business which 00:02:30.680 --> 00:02:33.819 you're lending to. As of time recording, Outdoor's 00:02:33.819 --> 00:02:36.460 flagship private credit fund had delivered just 00:02:36.460 --> 00:02:41.280 under 12 % per annum net of fees. It has a seven 00:02:41.280 --> 00:02:45.360 -year track record. It pays its... distributions 00:02:45.360 --> 00:02:50.539 quarterly and has a target yield of 10%. We also 00:02:50.539 --> 00:02:55.000 talk about Altor's decision to join Prime Financial 00:02:55.000 --> 00:03:00.560 Group. Why Ben did it? What was the goal behind 00:03:00.560 --> 00:03:03.400 it? So on a high level, Ben said it gave him 00:03:03.400 --> 00:03:05.259 the ability to scale, gave him access to it. 00:03:05.520 --> 00:03:08.460 to really accelerate what they're looking to 00:03:08.460 --> 00:03:10.800 achieve. And he also really likes what Prime 00:03:10.800 --> 00:03:14.539 does. Prime has a focus on sports and entertainment 00:03:14.539 --> 00:03:17.639 advisory businesses. And we quickly unpack, and 00:03:17.639 --> 00:03:21.080 it's going to be another podcast for sure, Prime 00:03:21.080 --> 00:03:26.400 purchased the Tasmanian Jackjumpers basketball 00:03:26.400 --> 00:03:30.969 team in the NBL. And this shows how sports franchises 00:03:30.969 --> 00:03:33.430 can be treated as platform assets with strong 00:03:33.430 --> 00:03:37.710 brands, loyal fans, and multiple streams of revenue. 00:03:37.849 --> 00:03:39.349 So I'm really looking forward to that conversation. 00:03:40.210 --> 00:03:42.710 In saying that, before we get into this conversation, 00:03:43.009 --> 00:03:45.590 please remember this broadcast is made for entertainment 00:03:45.590 --> 00:03:48.360 purposes only. I encourage you to do... to listen 00:03:48.360 --> 00:03:50.539 to the disclaimer at the end of the broadcast 00:03:50.539 --> 00:03:53.840 and keep your feedback coming. You can reach 00:03:53.840 --> 00:03:58.800 me at mgatty at ywm .com .au. So with that being 00:03:58.800 --> 00:04:00.780 said, I hope you enjoyed this conversation as 00:04:00.780 --> 00:04:03.139 much as I did. So sit back, relax, and enjoy. 00:04:13.219 --> 00:04:16.220 Ben Harrison, Altor Capital. Welcome to The Rate 00:04:16.220 --> 00:04:19.040 of Change with York Wealth Management. Thanks, 00:04:19.060 --> 00:04:21.100 Murdoch. Great to be here, mate. Good to have 00:04:21.100 --> 00:04:23.439 you on, Ben. Why don't we begin like we always 00:04:23.439 --> 00:04:25.060 do and tell everyone a little bit about yourself 00:04:25.060 --> 00:04:29.180 and how you got into finance? Yeah, I started 00:04:29.180 --> 00:04:32.399 my professional career as a consulting engineer 00:04:32.399 --> 00:04:36.879 and ended up sort of moving quite gradually into 00:04:36.879 --> 00:04:40.779 finance, went and did a master's degree. And 00:04:40.779 --> 00:04:43.339 I think I realized actually quite early in my 00:04:43.339 --> 00:04:48.339 engineering world that the money was made when 00:04:48.339 --> 00:04:51.160 you were making money for your clients. And engineers 00:04:51.160 --> 00:04:54.459 sometimes are considered as a cost base. So it 00:04:54.459 --> 00:04:56.439 took me a couple of years. I went back and studied 00:04:56.439 --> 00:04:58.759 that degree while I was still in engineering 00:04:58.759 --> 00:05:03.899 and did some time with Wilson's. So interestingly, 00:05:04.019 --> 00:05:08.779 saw them acquired last week by... So I did cut 00:05:08.779 --> 00:05:12.399 my teeth at Wilson's and equities research and 00:05:12.399 --> 00:05:17.120 M &A and ECM. And then ended up moving out into 00:05:17.120 --> 00:05:20.300 the investment world as working for a small family 00:05:20.300 --> 00:05:23.160 office and then ultimately established Altor 00:05:23.160 --> 00:05:26.879 Capital about nine years ago. Yeah, right. Yeah, 00:05:26.899 --> 00:05:29.399 Wilson's. I've got a lot of friends at Wilson's 00:05:29.399 --> 00:05:32.480 and my wife's actually at Canaccord. Okay, great. 00:05:32.660 --> 00:05:35.699 I mean, it's one of the great things I've found 00:05:35.699 --> 00:05:39.459 is, that alumni network that's been created out 00:05:39.459 --> 00:05:43.779 of Wilson. So still regularly speak to a number 00:05:43.779 --> 00:05:46.920 of the people there. Small community there, that's 00:05:46.920 --> 00:05:49.100 for sure. But that'd be very interesting, the 00:05:49.100 --> 00:05:51.660 size of that transaction. But I'm wondering if 00:05:51.660 --> 00:05:54.240 that AFR article was leaked. I don't know. We'll 00:05:54.240 --> 00:05:57.240 find out what your numbers really look like. 00:05:57.259 --> 00:06:01.100 Good old AFR. Yeah, very interesting. So engineering 00:06:01.100 --> 00:06:05.410 background. Wait, did you end up doing any work 00:06:05.410 --> 00:06:07.430 in engineering before you ended up at Wilson's 00:06:07.430 --> 00:06:09.209 or did you just do the engineering degree and 00:06:09.209 --> 00:06:11.910 then rotate into finance? Yeah, I actually did 00:06:11.910 --> 00:06:17.569 a science degree in planning. And so I ended 00:06:17.569 --> 00:06:20.870 up working in project management more so than 00:06:20.870 --> 00:06:23.129 anything. So, yeah, I got an opportunity to work 00:06:23.129 --> 00:06:27.670 on very large infrastructure sites, doing sort 00:06:27.670 --> 00:06:31.009 of project delivery, project management. I spent 00:06:31.009 --> 00:06:34.850 a lot of time. Working in coal mines as well. 00:06:34.970 --> 00:06:37.370 So I did a big stint in Indonesia, working in, 00:06:37.449 --> 00:06:39.649 at the time, largest coal mine in the world, 00:06:39.750 --> 00:06:42.110 doing a large infrastructure delivery there. 00:06:42.209 --> 00:06:44.149 So it was more infrastructure and planning that 00:06:44.149 --> 00:06:46.209 I was doing more than the kind of mechanical 00:06:46.209 --> 00:06:50.829 engineering side. But it was a very large multidisciplinary 00:06:50.829 --> 00:06:53.970 engineering consulting firm. And I think that's 00:06:53.970 --> 00:06:57.709 what got me the opportunity to think about, you 00:06:57.709 --> 00:07:01.740 know, how things are working, I guess. Within 00:07:01.740 --> 00:07:04.620 the operations, whether it's delivering on budgets 00:07:04.620 --> 00:07:07.899 and on project management, which is really what 00:07:07.899 --> 00:07:11.100 we do in finance, really. We're project managers 00:07:11.100 --> 00:07:14.980 and problem solvers at the end of the day. And 00:07:14.980 --> 00:07:17.339 that's very much project management discipline. 00:07:18.439 --> 00:07:21.300 So then through the journey, how did Altoil Capital 00:07:21.300 --> 00:07:24.600 come to be? When did that happen? Why did you? 00:07:24.920 --> 00:07:27.740 Yeah, so my business partner, Harley Dalton, 00:07:27.800 --> 00:07:31.540 I'd known for a very, very long time. He actually 00:07:31.540 --> 00:07:34.699 helped me land my job at Wilson's when I was 00:07:34.699 --> 00:07:37.819 coming out of engineering. So we'd kept in contact 00:07:37.819 --> 00:07:41.000 for a long period of time. At the same time, 00:07:41.160 --> 00:07:46.139 I left my previous employer and he sold his business. 00:07:46.180 --> 00:07:50.550 He was one of the founders of DNR. Dalton Nickel 00:07:50.550 --> 00:07:54.149 Reed or DNR Capital as it's now called. So he 00:07:54.149 --> 00:07:58.290 sold out of that and, you know, was basically 00:07:58.290 --> 00:08:01.769 looking for something to do. So was I. We really 00:08:01.769 --> 00:08:04.829 wanted to focus on alts. We thought there was 00:08:04.829 --> 00:08:07.589 a really, so this is nine, 10 years ago, we thought 00:08:07.589 --> 00:08:09.689 there was going to be an amazing opportunity 00:08:09.689 --> 00:08:14.370 to invest outside of traditional markets. So 00:08:14.370 --> 00:08:17.860 that's how we kind of. came to be and I think 00:08:17.860 --> 00:08:21.199 really it was very much like capital protection 00:08:21.199 --> 00:08:25.720 led as well so Altor means protector so how we 00:08:25.720 --> 00:08:27.399 kind of thought about the world when we sort 00:08:27.399 --> 00:08:30.139 of saw an opportunity to kind of get more involved 00:08:30.139 --> 00:08:32.299 in the structuring of deals and I think having 00:08:32.299 --> 00:08:36.039 a kind of M &A background and capital markets 00:08:36.039 --> 00:08:39.220 background allowed me to kind of think a lot 00:08:39.220 --> 00:08:42.100 about how to protect capital through structuring 00:08:42.100 --> 00:08:45.080 so that was kind of very big and then we developed 00:08:46.319 --> 00:08:49.840 you know, a couple of different mandates that 00:08:49.840 --> 00:08:53.259 really focused on the SME. So that mid -market 00:08:53.259 --> 00:08:57.259 or lower mid -market corporate category and developed 00:08:57.259 --> 00:09:00.179 an investment process. I mean, one of the great 00:09:00.179 --> 00:09:02.580 things having Harley on board with me was it 00:09:02.580 --> 00:09:04.799 being through this process of setting up a multi 00:09:04.799 --> 00:09:07.340 -billion dollar funds management business. So 00:09:07.340 --> 00:09:09.399 I knew exactly what we need to be doing on day 00:09:09.399 --> 00:09:13.490 one. develop you know a track record so you know 00:09:13.490 --> 00:09:16.009 people and performance and process the three 00:09:16.009 --> 00:09:18.909 p's so as a fundee that's the things you need 00:09:18.909 --> 00:09:22.570 to focus on so we developed that very early it's 00:09:22.570 --> 00:09:25.149 interesting the um the the journey of alternative 00:09:25.149 --> 00:09:27.250 investments like do you remember like when we're 00:09:27.250 --> 00:09:29.190 coming up it was all pretty much like the 60 00:09:29.190 --> 00:09:32.269 40 portfolio everyone needed bonds cash gold 00:09:32.269 --> 00:09:35.350 and well that all went out the window with 2008 00:09:35.350 --> 00:09:39.559 right so how interesting is it you know the thought 00:09:39.559 --> 00:09:41.559 process now that you speak to a lot of advisors 00:09:41.559 --> 00:09:45.419 like myself included like the it's almost pivoted 00:09:45.419 --> 00:09:48.000 to like core satellite allocations but more like 00:09:48.000 --> 00:09:50.240 you have a defensive part of the portfolio then 00:09:50.240 --> 00:09:52.519 the offense right and before you have to have 00:09:52.519 --> 00:09:54.299 like australia in there but the world's gotten 00:09:54.299 --> 00:09:56.120 so global you know a lot of people out there 00:09:56.120 --> 00:09:58.039 saying australia is nigh uninvestable when you 00:09:58.039 --> 00:09:59.960 got returns double digits you know on the other 00:09:59.960 --> 00:10:03.340 side of the on the waterways ben what and but 00:10:03.340 --> 00:10:05.360 for people not familiar with say alternatives 00:10:05.360 --> 00:10:07.360 what what is alternatives and where i'm going 00:10:07.360 --> 00:10:10.299 with this is If you look at the average ASX return, 00:10:10.440 --> 00:10:12.460 it's something like 8 and a bit percent. Meanwhile, 00:10:12.620 --> 00:10:14.860 a lot of these alternative private credit assets, 00:10:14.980 --> 00:10:18.100 which you guys do as well, you're returning in 00:10:18.100 --> 00:10:20.759 the tens and the higher. And it's potentially 00:10:20.759 --> 00:10:22.899 more stable because it's like asset back depending 00:10:22.899 --> 00:10:25.139 on what you're lending against. So it's really 00:10:25.139 --> 00:10:30.659 the evolution of it as an asset allocation. Everyone's 00:10:30.659 --> 00:10:33.340 using it to essentially ensure deliverability 00:10:33.340 --> 00:10:35.519 and then clients actually get... more protected 00:10:35.519 --> 00:10:37.639 instead of the whippiness of just holding direct 00:10:37.639 --> 00:10:40.899 equities. How fascinating has been this asset 00:10:40.899 --> 00:10:43.519 class, the evolution of it? Yeah, that's right. 00:10:43.620 --> 00:10:45.980 And you can speak to it more than I can, but 00:10:45.980 --> 00:10:50.580 that's the evolution of the advised client in 00:10:50.580 --> 00:10:53.120 Australia, really. It's gone to the days where 00:10:53.120 --> 00:10:56.679 people didn't have access to great – they might 00:10:56.679 --> 00:10:58.419 have had a stockbroker, but they didn't really 00:10:58.419 --> 00:11:00.620 have a relationship with a financial advisor. 00:11:01.100 --> 00:11:07.389 That industry is obviously – has really matured. 00:11:07.429 --> 00:11:10.590 So being able, you know, advisors being able 00:11:10.590 --> 00:11:13.710 to understand the other types of products out 00:11:13.710 --> 00:11:15.929 there that can get that right balance in their 00:11:15.929 --> 00:11:19.610 portfolios outside of Aussie equities and property. 00:11:20.870 --> 00:11:23.850 Even bonds is probably not even sophisticated 00:11:23.850 --> 00:11:26.809 up until, you know, recent years in terms of 00:11:26.809 --> 00:11:28.970 the 60 -40 allocation. That was more a funds 00:11:28.970 --> 00:11:33.350 management concept. in terms of, you know, the... 00:11:33.350 --> 00:11:36.970 So I think for us, yeah, it's been amazing to 00:11:36.970 --> 00:11:39.669 go on that journey. But what we saw was an ability 00:11:39.669 --> 00:11:43.269 to, you know, take a long -term view. I think 00:11:43.269 --> 00:11:45.710 the problem with markets often is it's very short 00:11:45.710 --> 00:11:47.870 -term focused. You don't know what you're really 00:11:47.870 --> 00:11:51.090 buying in terms of, you know, the arbitrage of 00:11:51.090 --> 00:11:53.549 the markets and the buyers and sellers and the 00:11:53.549 --> 00:11:56.250 behaviour of such. So I think kind of bringing 00:11:56.250 --> 00:11:58.879 it back to a private market. taking away the 00:11:58.879 --> 00:12:01.720 noise and allowing you to think more long -term 00:12:01.720 --> 00:12:06.340 was really important for us. And also we're quite 00:12:06.340 --> 00:12:09.139 macro driven from an industry perspective. So 00:12:09.139 --> 00:12:12.139 we like to invest in businesses that will all 00:12:12.139 --> 00:12:17.039 borrow and to businesses that got strong macro 00:12:17.039 --> 00:12:21.600 thematics, really strong tailwinds. Being a business 00:12:21.600 --> 00:12:24.720 founder, we know that it's not always linear. 00:12:25.529 --> 00:12:27.970 So you've got to be in the right sectors to kind 00:12:27.970 --> 00:12:30.909 of push you through those troughs when they happen 00:12:30.909 --> 00:12:33.049 because they do happen. That's part of life. 00:12:33.850 --> 00:12:36.850 So with Outdoor, what are the funds and what 00:12:36.850 --> 00:12:38.970 are the assets you cover? Because Prime's also 00:12:38.970 --> 00:12:41.330 associated with Outdoor as well, right? So you 00:12:41.330 --> 00:12:45.129 wear many different hats. So maybe let's begin 00:12:45.129 --> 00:12:48.710 there. What hats do you wear and why have you 00:12:48.710 --> 00:12:50.549 chosen these asset class and what are the funds? 00:12:52.009 --> 00:12:54.450 Yeah, so I'm the Chief Investment Officer at 00:12:54.450 --> 00:12:57.190 Altor Capital. We have a number of different 00:12:57.190 --> 00:12:59.149 strategies. We've got a private credit fund, 00:12:59.330 --> 00:13:03.690 which is our flagship strategy. It's a diversified 00:13:03.690 --> 00:13:07.509 private credit, corporate credit fund. It's been 00:13:07.509 --> 00:13:11.350 around for over seven years now. So that's strategy 00:13:11.350 --> 00:13:14.090 one. We've got an emerging growth fund, which 00:13:14.090 --> 00:13:17.360 is our growth equity strategy. And then we've 00:13:17.360 --> 00:13:21.019 got a recently formed fund in the last 12 months, 00:13:21.100 --> 00:13:23.299 which is a social infrastructure fund. And there's 00:13:23.299 --> 00:13:25.919 a whole nother podcast associated with that. 00:13:26.000 --> 00:13:28.639 So I won't spend too much time on that. And then 00:13:28.639 --> 00:13:31.019 the other thing we've been doing a bit more recently 00:13:31.019 --> 00:13:35.019 is a lot more in sports and entertainment. So 00:13:35.019 --> 00:13:37.200 we think that's a great asset class and a great 00:13:37.200 --> 00:13:40.659 industry to be investing in, a great time to 00:13:40.659 --> 00:13:43.220 be investing in that space. So we're doing... 00:13:43.629 --> 00:13:47.009 a lot more of that, more so on sort of special 00:13:47.009 --> 00:13:50.570 purpose vehicles, SVVs, rather than in the funds 00:13:50.570 --> 00:13:53.470 themselves. Well, just flag quickly before we 00:13:53.470 --> 00:13:54.570 get into the private credit. That's essentially 00:13:54.570 --> 00:13:58.450 how we met. So my cousin, Mark Arena, just purchased 00:13:58.450 --> 00:14:01.889 the Perth Wildcats, you know, what, nearly 12 00:14:01.889 --> 00:14:04.190 or 18 months ago, right? And your guy's a prime. 00:14:04.289 --> 00:14:05.929 I think Reece essentially helped him with the 00:14:05.929 --> 00:14:08.049 buy side on that contract. We won't get into 00:14:08.049 --> 00:14:09.870 it too much, but that's essentially how we connected. 00:14:12.080 --> 00:14:15.039 It was so often how a lot of us connect as well. 00:14:15.139 --> 00:14:20.600 Sports is an amazing network of people. Everyone 00:14:20.600 --> 00:14:23.120 watches sport in Australia and everyone has a 00:14:23.120 --> 00:14:25.399 passion for sport. So it's amazing the connectivity 00:14:25.399 --> 00:14:27.620 that you get by being in that industry. It's 00:14:27.620 --> 00:14:31.049 quite impressive. Yeah, and then when I caught 00:14:31.049 --> 00:14:33.190 up with you guys and tested my cars and I'm like, 00:14:33.269 --> 00:14:34.889 hey, so are these Alto guys? Are they legit? 00:14:34.970 --> 00:14:36.850 He goes, no, no, no, they're fantastic. And they 00:14:36.850 --> 00:14:40.529 helped me really well through the process with 00:14:40.529 --> 00:14:42.389 that acquisition. So you guys should really have 00:14:42.389 --> 00:14:45.610 a chat. So yeah, I've been enjoying learning 00:14:45.610 --> 00:14:49.110 about your firm. But let's go back to the private 00:14:49.110 --> 00:14:52.210 credit fund. What are the mechanics? What's the 00:14:52.210 --> 00:14:54.350 asset? What are you actually lending against? 00:14:54.529 --> 00:14:56.730 I can't remember. Is it B2B? Is it property? 00:14:56.909 --> 00:14:59.590 What's actually underneath the hood? Yeah, so 00:14:59.590 --> 00:15:02.570 it's a corporate credit strategy. We don't have 00:15:02.570 --> 00:15:05.029 any property exposure. And I think that was quite 00:15:05.029 --> 00:15:08.450 purposeful as well in the sense that we, you 00:15:08.450 --> 00:15:10.529 know, a number of our clients already had quite 00:15:10.529 --> 00:15:14.049 large property exposure. So we wanted to bring 00:15:14.049 --> 00:15:16.769 to market something that allowed them to diversify 00:15:16.769 --> 00:15:21.990 away from that exposure to property. So we purely 00:15:21.990 --> 00:15:25.710 focused on what we call a low mid -market category 00:15:25.710 --> 00:15:29.809 of... of corporates uh so it's anywhere from 00:15:29.809 --> 00:15:32.730 kind of 20 to 100 mil revenue is kind of the 00:15:32.730 --> 00:15:36.529 sweet uh for us the sweet zone for us and anywhere 00:15:36.529 --> 00:15:39.350 from kind of two to three mil of ebitda up to 00:15:39.350 --> 00:15:43.490 kind of 10 mil of ebitda we are what we call 00:15:43.490 --> 00:15:46.669 an active credit manager uh growth manager so 00:15:46.669 --> 00:15:49.669 i think you know you've had a few guests on the 00:15:49.669 --> 00:15:54.220 on the pod uh that focus on growth um segments 00:15:54.220 --> 00:15:56.100 so that's very important for us and we talked 00:15:56.100 --> 00:15:58.679 a bit about that around the the industries we're 00:15:58.679 --> 00:16:02.340 targeting but what we are is also a very active 00:16:02.340 --> 00:16:06.559 manager so we actually become quite actively 00:16:06.559 --> 00:16:09.159 involved in these businesses and that's very 00:16:09.159 --> 00:16:12.460 very unique and what does active look like it 00:16:12.460 --> 00:16:15.080 could be taking a board position it could be 00:16:15.080 --> 00:16:18.429 helping them uh invest understand how their business 00:16:18.429 --> 00:16:21.029 works so it's it's like a private equity mindset 00:16:21.029 --> 00:16:25.230 but we're obviously investing um you know at 00:16:25.230 --> 00:16:28.110 the top of the table in senior secured facility 00:16:28.110 --> 00:16:30.490 so to kind of answer the second part of that 00:16:30.490 --> 00:16:33.769 question uh you know we're investing in senior 00:16:33.769 --> 00:16:36.950 secured loans uh those lines are secured against 00:16:36.950 --> 00:16:41.570 you know assets receivables or cash flow so it's 00:16:41.570 --> 00:16:45.870 not one particular asset um that we're that we're 00:16:45.870 --> 00:16:49.389 looking at it could be combination of uh but 00:16:49.389 --> 00:16:52.590 it's very specific for you know the borrowers 00:16:52.590 --> 00:16:54.570 that are seeking us out so they've all got a 00:16:54.570 --> 00:16:57.210 funding requirement a growth funding requirement 00:16:57.210 --> 00:17:00.509 and we're there to really design uh you know 00:17:00.509 --> 00:17:04.289 a package uh of um of capital that can basically 00:17:04.289 --> 00:17:06.789 allow them to achieve their objectives and then 00:17:06.789 --> 00:17:10.609 we go on the on the journey with them so growth 00:17:10.609 --> 00:17:13.049 -based lending to businesses essentially is the 00:17:13.049 --> 00:17:16.420 yep Exactly. But you don't do property. Just 00:17:16.420 --> 00:17:18.240 quickly on this. So hypothetically, you've got 00:17:18.240 --> 00:17:20.599 a, I don't know, a gym rollout, right? Or whatever 00:17:20.599 --> 00:17:23.900 it is, you know, a Chuck E. Cheese or Nando's. 00:17:24.119 --> 00:17:30.180 So what happens there if, say, a business is, 00:17:30.299 --> 00:17:32.980 say, on the retail or, you know, front -facing 00:17:32.980 --> 00:17:35.660 commercial shops when they have, you mentioned 00:17:35.660 --> 00:17:37.279 you look at different assets but you don't touch 00:17:37.279 --> 00:17:39.220 property. So if you've got one side of the business 00:17:39.220 --> 00:17:40.660 and they're looking to roll out and they want 00:17:40.660 --> 00:17:43.440 to do, I don't know, 30 stores. um you know for 00:17:43.440 --> 00:17:47.119 the next you know inside the next 12 months but 00:17:47.119 --> 00:17:49.740 part of the business has another entity which 00:17:49.740 --> 00:17:51.500 is running the mcdonald's model where they want 00:17:51.500 --> 00:17:53.480 to essentially own the land you know and then 00:17:53.480 --> 00:17:55.339 and then you know put someone in there and get 00:17:55.339 --> 00:17:57.140 the lease and pay it all off but you don't touch 00:17:57.140 --> 00:17:59.460 the property side do you help with that type 00:17:59.460 --> 00:18:01.740 of lending where it's essentially two separate 00:18:01.740 --> 00:18:04.720 asset classes but you have you have to have one 00:18:04.720 --> 00:18:07.980 to have the other yeah i mean if there's uh property 00:18:07.980 --> 00:18:11.410 or assets that um uh support the business then 00:18:11.410 --> 00:18:13.710 we definitely take security against those assets 00:18:13.710 --> 00:18:16.390 so we're not if it's an operating business that 00:18:16.390 --> 00:18:20.690 has has a property asset then we will um take 00:18:20.690 --> 00:18:23.069 security over that property if it's not already 00:18:23.069 --> 00:18:25.710 encumbered so yes we will look at but it has 00:18:25.710 --> 00:18:27.769 to be an operating business that's i guess the 00:18:27.769 --> 00:18:30.609 key difference we're not involved in you know 00:18:30.609 --> 00:18:34.349 developments property developments um land banking 00:18:34.349 --> 00:18:37.759 any of those things that Our friends that run 00:18:37.759 --> 00:18:41.119 private credit funds, they do that really well. 00:18:41.240 --> 00:18:44.460 We're not property people or property investors. 00:18:44.779 --> 00:18:48.660 So we really wanted to be quite specific around 00:18:48.660 --> 00:18:51.140 corporates and just sticking, we call it sticking 00:18:51.140 --> 00:18:54.299 to our knitting. But yeah, just focus on the 00:18:54.299 --> 00:18:59.779 corporate. Nice. What returns is the fund delivered 00:18:59.779 --> 00:19:01.579 historically and what are you expecting for the 00:19:01.579 --> 00:19:04.380 next 12 months? Yeah, so it's done. Well, we 00:19:04.380 --> 00:19:06.700 can put the caveat here about, you know, historical 00:19:06.700 --> 00:19:10.000 performance and future performance. But, you 00:19:10.000 --> 00:19:13.059 know, we've done just under 12 % for the last 00:19:13.059 --> 00:19:18.140 seven years per annum after fees. And the running 00:19:18.140 --> 00:19:20.579 yield on the portfolio at the moment is around 00:19:20.579 --> 00:19:25.579 12%, 12 .5%, something like that. The fund's 00:19:25.579 --> 00:19:31.220 targeting cash return of 10 % after fees. That's 00:19:31.220 --> 00:19:34.019 paid quarterly. So there's two components to 00:19:34.019 --> 00:19:37.279 the fund. There's the cash element, which is 00:19:37.279 --> 00:19:40.359 the recurring interest income that comes through 00:19:40.359 --> 00:19:43.680 the loan facility. So that's a target of 10 % 00:19:43.680 --> 00:19:47.119 per annum. But because we are active in these 00:19:47.119 --> 00:19:50.819 borrowers, we also look to take equity positions, 00:19:50.960 --> 00:19:53.099 free attaching equity positions in the businesses 00:19:53.099 --> 00:19:55.380 as well. And they're either in the form of options 00:19:55.380 --> 00:20:00.599 or free equity. And depending on the deal construct, 00:20:00.940 --> 00:20:03.880 they can be either or. But for us, and that's 00:20:03.880 --> 00:20:05.980 obviously not revolutionary. We've had credit 00:20:05.980 --> 00:20:08.579 hedge funds for many years taking options positions 00:20:08.579 --> 00:20:11.039 or warrant positions in businesses. But what 00:20:11.039 --> 00:20:15.079 we try to do is take outsized equity positions, 00:20:15.240 --> 00:20:18.779 but also back ourselves to create the value by 00:20:18.779 --> 00:20:21.339 working a lot more hands on with these businesses. 00:20:21.460 --> 00:20:24.359 So we think that we've got a greater chance of 00:20:24.359 --> 00:20:26.779 actually delivering on the second part of the 00:20:26.779 --> 00:20:30.539 return, which is really the. capital return because 00:20:30.539 --> 00:20:33.180 we are very hands -on with these businesses and 00:20:33.180 --> 00:20:37.259 we've now realized over five portfolio businesses 00:20:37.259 --> 00:20:40.000 where we've taken meaningful equity off the table 00:20:40.000 --> 00:20:42.599 for the work that we're doing with these businesses 00:20:42.599 --> 00:20:46.079 yeah let's really dig into this because every 00:20:46.079 --> 00:20:48.259 man his dog out there wants to land same in property 00:20:48.259 --> 00:20:50.279 right you know yeah but when it comes to the 00:20:50.279 --> 00:20:53.079 equity piece People want to essentially lend 00:20:53.079 --> 00:20:55.640 five or six, maybe seven times to develop a relationship 00:20:55.640 --> 00:20:57.599 before essentially the equity piece, however 00:20:57.599 --> 00:20:59.359 it's structured, comes into even the conversation, 00:20:59.599 --> 00:21:02.299 right? So I find that very interesting that you 00:21:02.299 --> 00:21:05.259 – so are you the same? Do you have to lend to 00:21:05.259 --> 00:21:07.099 someone a number of times before essentially 00:21:07.099 --> 00:21:10.980 you consider the equity piece or you just say 00:21:10.980 --> 00:21:13.759 it based on a deal -by -deal basis? Yeah, it's 00:21:13.759 --> 00:21:16.980 definitely – and all our portfolio companies 00:21:16.980 --> 00:21:20.140 at the moment have attaching equity in some form. 00:21:20.490 --> 00:21:23.930 So when we look at the deal and the opportunity, 00:21:24.369 --> 00:21:27.589 we spend a lot of time working with the founders 00:21:27.589 --> 00:21:33.269 and the executive to find out what it is. We've 00:21:33.269 --> 00:21:35.869 got two parts to our filter in terms of the process, 00:21:35.930 --> 00:21:39.730 but the first part is actually quite equity -driven 00:21:39.730 --> 00:21:42.849 versus the serviceability and coverage, which 00:21:42.849 --> 00:21:46.329 is the second component of that process. So we 00:21:46.329 --> 00:21:47.910 really want to understand who are the people 00:21:47.910 --> 00:21:50.430 behind the business, what's the moat. all those 00:21:50.430 --> 00:21:52.450 things that it may be a traditional equity investor 00:21:52.450 --> 00:21:55.109 would look at. And then what's this business? 00:21:55.430 --> 00:21:57.450 What do they actually want to achieve over the 00:21:57.450 --> 00:21:59.470 next three to five years? And what are the key 00:21:59.470 --> 00:22:01.829 catalysts in the business? And where is that 00:22:01.829 --> 00:22:05.450 funding being deployed to help with that growth? 00:22:05.529 --> 00:22:08.369 And that could be acquisitions, could be capital 00:22:08.369 --> 00:22:11.970 improvements, all those kind of typical growth 00:22:11.970 --> 00:22:15.170 scenarios. And then we sit down with the founders 00:22:15.170 --> 00:22:17.130 and say, all right, well, this is how we're going 00:22:17.130 --> 00:22:19.210 to help you. We'll give you the money, but it's 00:22:19.210 --> 00:22:24.789 just not money. It's smart money. Some people 00:22:24.789 --> 00:22:27.150 might argue that's not that smart, but it's money 00:22:27.150 --> 00:22:30.809 that comes with partnership and advice and help. 00:22:30.930 --> 00:22:33.309 So then we go on the journey with that founder 00:22:33.309 --> 00:22:35.069 and that management team and say, all right, 00:22:35.069 --> 00:22:38.349 well, how can we do this? How can we do that? 00:22:38.369 --> 00:22:40.569 We've got plenty of examples of what we've done, 00:22:40.650 --> 00:22:42.460 and I'm sure that... will probably be your next 00:22:42.460 --> 00:22:46.420 question. And then what we ask for is equity, 00:22:46.579 --> 00:22:49.660 attaching equity to help and add that value. 00:22:50.079 --> 00:22:53.660 And a lot of the time, those business owners 00:22:53.660 --> 00:22:57.400 actually love having us in the equity stack because 00:22:57.400 --> 00:23:00.460 it means that we're a really aligned partner. 00:23:01.559 --> 00:23:04.420 And then we can look at the total facility from 00:23:04.420 --> 00:23:06.839 an IRR perspective. So we can look at the interest 00:23:06.839 --> 00:23:09.900 income and we can also look at the equity returns 00:23:11.359 --> 00:23:13.420 that we think are realistic to achieve. They 00:23:13.420 --> 00:23:16.759 don't always come to fruition, but we think it's 00:23:16.759 --> 00:23:20.180 likely that we can achieve equity returns or 00:23:20.180 --> 00:23:23.039 growth returns from those positions. No, I couldn't 00:23:23.039 --> 00:23:25.920 agree more. If you're in bed with the business 00:23:25.920 --> 00:23:29.039 or both the equity piece and the lending piece, 00:23:29.220 --> 00:23:31.839 if you're just doing the lending, you just want 00:23:31.839 --> 00:23:33.880 to essentially get paid and have the loan paid 00:23:33.880 --> 00:23:35.819 out and don't lose. But if you're in bed with 00:23:35.819 --> 00:23:38.500 the equity side, you have complete interest to 00:23:38.500 --> 00:23:41.670 see this actually... you know go all the way 00:23:41.670 --> 00:23:44.049 and i find that quite fascinating and i think 00:23:44.049 --> 00:23:47.609 i last year the year before i did a southeast 00:23:47.609 --> 00:23:50.690 asian uh firm i won't mention which one it is 00:23:50.690 --> 00:23:56.210 uh that specializes in was it uh venture debt 00:23:56.210 --> 00:23:59.529 right so venture debt using warrants uh southeast 00:23:59.529 --> 00:24:01.829 asia but i think he was saying and i was going 00:24:01.829 --> 00:24:04.369 to ask you as well on the risk side that the 00:24:04.369 --> 00:24:07.299 deals that he was looking at begin at was it 00:24:07.299 --> 00:24:09.440 50 million or something like that so when you're 00:24:09.440 --> 00:24:12.099 lending out say five or ten percent you only 00:24:12.099 --> 00:24:15.859 require it's the ability to say if it all goes 00:24:15.859 --> 00:24:19.119 to pot to sell off and when you sell the business 00:24:19.119 --> 00:24:21.160 to get your five to ten percent back on the equity 00:24:21.160 --> 00:24:24.019 piece and you still cover it right so from my 00:24:24.019 --> 00:24:25.619 understanding and please correct me if i'm wrong 00:24:25.619 --> 00:24:27.980 or please explain a bit better if you have the 00:24:27.980 --> 00:24:31.720 ability to do a venture debt style or however 00:24:31.720 --> 00:24:35.079 you structure it the investors and the people 00:24:35.079 --> 00:24:37.539 you'll, you know, they're investing with you 00:24:37.539 --> 00:24:39.559 in these transactions seem to be in a better 00:24:39.559 --> 00:24:42.240 position in the capital stack from a risk reward. 00:24:42.480 --> 00:24:44.480 Have I got that correct? Maybe you can do a better 00:24:44.480 --> 00:24:46.900 explanation. Yeah, and I know the guys you're 00:24:46.900 --> 00:24:49.380 talking about as well, but for us, you know, 00:24:49.380 --> 00:24:51.779 obviously we're not on the venture debt side. 00:24:51.859 --> 00:24:54.519 These are, you know, more traditional kind of 00:24:54.519 --> 00:24:57.500 industrial type businesses. So financial services. 00:24:58.440 --> 00:25:01.460 healthcare energy transition so really really 00:25:01.460 --> 00:25:04.839 big kind of macro driven businesses but the kind 00:25:04.839 --> 00:25:07.220 of way that I would explain it is that you've 00:25:07.220 --> 00:25:11.319 got a contractual obligation which is where your 00:25:11.319 --> 00:25:14.259 debt is right so that company borrows that money 00:25:14.259 --> 00:25:16.500 they've got a contractual obligation to repay 00:25:16.500 --> 00:25:19.619 that to repay that loan and there's obviously 00:25:19.619 --> 00:25:22.619 interest that's attached to that and that incomes 00:25:23.630 --> 00:25:26.049 great for our clients because it turns up every 00:25:26.049 --> 00:25:29.569 quarter and allows them to achieve what they 00:25:29.569 --> 00:25:32.410 need to achieve from a retirement or financial 00:25:32.410 --> 00:25:38.089 outcomes perspective. But we would be also remiss 00:25:38.089 --> 00:25:40.089 to say that if we're going to be active in these 00:25:40.089 --> 00:25:42.309 businesses and we want to be active because it's 00:25:42.309 --> 00:25:44.789 great to actually keep an eye on things and that's 00:25:44.789 --> 00:25:50.150 a good thing from a defensive protection perspective. 00:25:51.180 --> 00:25:54.119 We've also, our skill sets as managers have been 00:25:54.119 --> 00:25:56.839 very much more growth orientated and advisory 00:25:56.839 --> 00:26:00.319 partnership led. So how do we actually capture 00:26:00.319 --> 00:26:03.700 additional value by being more hands -on with 00:26:03.700 --> 00:26:05.720 these businesses as well? And that's where that 00:26:05.720 --> 00:26:09.559 equity enhancement comes from. So it's not necessarily 00:26:09.559 --> 00:26:12.859 taking more risk. It's actually about selling 00:26:12.859 --> 00:26:17.299 your value to the person who's borrowing off 00:26:17.299 --> 00:26:21.420 you. and then taking them on that journey and 00:26:21.420 --> 00:26:23.640 demonstrating that you can add value. And a really 00:26:23.640 --> 00:26:27.880 good example of that was a business that we lent 00:26:27.880 --> 00:26:31.319 to a number of years ago, the business, and we 00:26:31.319 --> 00:26:34.480 took a free attaching equity instrument as well 00:26:34.480 --> 00:26:37.059 as part of that. But when it came to the business 00:26:37.059 --> 00:26:39.599 being at the point where the founder actually 00:26:39.599 --> 00:26:42.380 wanted to raise a significant growth capital 00:26:42.380 --> 00:26:45.400 round that we couldn't provide, we actually ran 00:26:45.400 --> 00:26:48.990 a formal process where we actually did, you know, 00:26:49.009 --> 00:26:53.529 like a proper kind of advised M &A advice process 00:26:53.529 --> 00:26:57.150 where we ran our competitive process, setting 00:26:57.150 --> 00:26:59.549 up a data room, introducing parties, working 00:26:59.549 --> 00:27:02.509 on the financial model, the documentation and 00:27:02.509 --> 00:27:05.630 didn't charge them, you know, a traditional capital 00:27:05.630 --> 00:27:09.369 advisory fee because we were aligned by value 00:27:09.369 --> 00:27:11.150 that we were creating in the equity position. 00:27:11.410 --> 00:27:13.369 And the founder loved that about what we were 00:27:13.369 --> 00:27:15.529 doing. He knew that we were at the table with 00:27:15.529 --> 00:27:19.170 him. trying to get the best outcome because we 00:27:19.170 --> 00:27:21.289 were going to generate financial returns from 00:27:21.289 --> 00:27:24.190 that equity position. No, that is so important. 00:27:24.349 --> 00:27:27.859 So I'll just jump in there. Yeah, I mean, I make 00:27:27.859 --> 00:27:30.579 stockbroking as well. How many times have we 00:27:30.579 --> 00:27:32.940 seen a transaction where the brokers get involved 00:27:32.940 --> 00:27:35.519 and all they care about is just getting their 00:27:35.519 --> 00:27:37.900 fee? And then they convince them to do A, B, 00:27:38.000 --> 00:27:40.839 C, D, E, F, G. And the only people that win are 00:27:40.839 --> 00:27:42.519 essentially the brokers raising the capital. 00:27:42.619 --> 00:27:44.299 But as soon as the money is done, they either 00:27:44.299 --> 00:27:47.220 flog it or something happens. There's no accountability 00:27:47.220 --> 00:27:51.099 or interest in helping that business after they've 00:27:51.099 --> 00:27:53.579 done the raise. And it just ends up cannibalizing 00:27:53.579 --> 00:27:56.640 itself. How many times have you seen the consequences 00:27:56.640 --> 00:27:59.920 of the actions? But no, this particular strategy 00:27:59.920 --> 00:28:05.680 which you have is fantastic. Yeah, advisory is 00:28:05.680 --> 00:28:08.740 like dating and what we do is like marriage. 00:28:08.839 --> 00:28:10.880 Like you go on, you've got to take a... Advisory 00:28:10.880 --> 00:28:16.079 is like just going on Tinder. Yeah. So yeah, 00:28:16.140 --> 00:28:19.039 it's definitely a long... uh yeah we think that 00:28:19.039 --> 00:28:21.579 we think a very long -dated strategy like you 00:28:21.579 --> 00:28:24.819 have to uh it's not these things aren't you're 00:28:24.819 --> 00:28:28.240 not in for a quick turn and you know a true alignment 00:28:28.240 --> 00:28:30.420 and partnerships also very important as well 00:28:30.420 --> 00:28:34.140 so bringing bringing those uh borrowers and founders 00:28:34.140 --> 00:28:37.140 and executive on that journey and adding real 00:28:37.140 --> 00:28:40.119 value and we've fortunately now been able to 00:28:40.119 --> 00:28:43.000 to do that a number of different times and developing 00:28:43.849 --> 00:28:46.950 you know, a good reputation for that partnership 00:28:46.950 --> 00:28:49.250 approach, which you think is really, really important. 00:28:49.829 --> 00:28:53.049 So are these businesses ASX listed or are they 00:28:53.049 --> 00:28:55.549 predominantly private companies? Predominantly 00:28:55.549 --> 00:28:58.730 private. We've done a couple of public companies. 00:28:58.769 --> 00:29:04.049 So, yeah, we do both and we're happy to do both, 00:29:04.150 --> 00:29:09.750 but primarily private companies. So can you talk 00:29:09.750 --> 00:29:11.430 to any of the businesses which you've done this 00:29:11.430 --> 00:29:17.039 for? You mentioned a little bit about the engineering 00:29:17.039 --> 00:29:18.799 side, but what type of businesses are these? 00:29:18.859 --> 00:29:21.599 Are these telcos? Are these engineering firms? 00:29:21.759 --> 00:29:24.099 What is your bread and butter? What do you find 00:29:24.099 --> 00:29:27.680 the majority of these asset classes are? Yeah, 00:29:27.720 --> 00:29:29.799 so in terms of the portfolio at the moment, it's 00:29:29.799 --> 00:29:33.920 financial services, engineering and infrastructure 00:29:33.920 --> 00:29:37.759 services, and energy transition are probably, 00:29:37.819 --> 00:29:40.779 I guess, the major kind of categories that we're 00:29:40.779 --> 00:29:45.220 in. And there's obviously probably subsectors 00:29:45.220 --> 00:29:49.019 to those kind of larger categories. So that's, 00:29:49.019 --> 00:29:53.519 I'd say, probably 70 % of the portfolio, 75 % 00:29:53.519 --> 00:29:56.640 of the portfolios in those three categories. 00:29:58.619 --> 00:30:02.740 And they're, you know, typical, you know, Australian 00:30:02.740 --> 00:30:06.880 businesses that have, you know, founders and, 00:30:07.000 --> 00:30:09.960 you know, need to have access to capital. But 00:30:09.960 --> 00:30:12.490 they're in. industries that we understand. We're 00:30:12.490 --> 00:30:16.029 quite industry agnostic, but there's industries 00:30:16.029 --> 00:30:19.210 obviously we prefer because there's some macro 00:30:19.210 --> 00:30:23.509 around them or we've got the skills inside and 00:30:23.509 --> 00:30:25.930 internally that can add most value. And that 00:30:25.930 --> 00:30:29.410 could be introducing, you know, relevant client 00:30:29.410 --> 00:30:32.269 relationships to win work. So we're at that level 00:30:32.269 --> 00:30:34.549 too around how do we actually help these businesses 00:30:34.549 --> 00:30:37.990 with sales strategies. introducing them to um 00:30:37.990 --> 00:30:40.730 you know key relationships that we have to drive 00:30:40.730 --> 00:30:43.589 revenue growth so that's the kind of approach 00:30:43.589 --> 00:30:46.990 that we have so you say financial services like 00:30:46.990 --> 00:30:49.109 i'm an advisor and look we've all seen the numbers 00:30:49.109 --> 00:30:52.349 i think what advisors dropped from 16 000 down 00:30:52.349 --> 00:30:53.789 like eight and a half thousand recently there's 00:30:53.789 --> 00:30:55.309 been the tightening up in that financial planning 00:30:55.309 --> 00:30:57.869 space you know it's just been acquisition after 00:30:57.869 --> 00:30:59.950 acquisition you know anyone that's retiring that 00:30:59.950 --> 00:31:01.750 wants out all the young guys are coming in and 00:31:01.750 --> 00:31:03.509 trying to jump and then well who's the other 00:31:03.509 --> 00:31:05.470 competitor i can't remember the name There's 00:31:05.470 --> 00:31:07.630 one other main lender that really likes lending 00:31:07.630 --> 00:31:11.210 in that financial space. But if I'm understanding 00:31:11.210 --> 00:31:13.589 it correctly, is that something that you do? 00:31:13.730 --> 00:31:16.650 So if there's a large acquisition, well, let's 00:31:16.650 --> 00:31:18.309 call it, say the revenue is $10 million, you're 00:31:18.309 --> 00:31:21.450 paying three times book, $30 million ticket. 00:31:22.230 --> 00:31:24.509 Is that, you know, for a large acquisition, we 00:31:24.509 --> 00:31:26.529 just discussed, you know, Canaccord's potentially 00:31:26.529 --> 00:31:28.890 looking at buying Wilson's. really confirmed 00:31:28.890 --> 00:31:30.930 yet we'll find out how that goes but that's a 00:31:30.930 --> 00:31:33.789 very big deal but is that somewhere where you 00:31:33.789 --> 00:31:36.150 come in that you know growth -based lending looking 00:31:36.150 --> 00:31:39.549 at acquisitions you know is it just in the advisory 00:31:39.549 --> 00:31:42.029 space do you touch mortgage brokers like just 00:31:42.029 --> 00:31:44.569 trying to get an understanding of and the other 00:31:44.569 --> 00:31:46.250 reason i'm really digging into this i find a 00:31:46.250 --> 00:31:47.789 lot of people that listen to this are actually 00:31:47.789 --> 00:31:49.789 people that own and run these types of businesses 00:31:49.789 --> 00:31:51.650 and they might be actually finding it hard to 00:31:51.650 --> 00:31:54.910 find you know credit or the right partner in 00:31:54.910 --> 00:31:56.289 this particular space. And you never know what 00:31:56.289 --> 00:31:58.369 comes from these things. So I just want to dig 00:31:58.369 --> 00:32:00.990 into, you know, who is the right type of client 00:32:00.990 --> 00:32:03.210 in the financial services space for you? Yeah, 00:32:03.210 --> 00:32:07.250 so that's, you know, we've got a business called 00:32:07.250 --> 00:32:09.750 WT Financial. It's actually a listed company. 00:32:11.170 --> 00:32:15.789 It's acquisitive. We've helped them fund acquisitions, 00:32:15.789 --> 00:32:20.490 multiple acquisitions. And, you know, we, interestingly, 00:32:20.650 --> 00:32:23.369 when, you know, we talk about why they don't 00:32:23.369 --> 00:32:25.990 seek out traditional, I mean, are these businesses 00:32:25.990 --> 00:32:28.230 not able to get access to traditional banks? 00:32:28.390 --> 00:32:31.589 We actually refinanced a big four as part of 00:32:31.589 --> 00:32:37.369 that facility and then gave the business an opportunity 00:32:37.369 --> 00:32:40.349 to get access to the right type of capital they 00:32:40.349 --> 00:32:43.529 needed to grow because the bank wasn't there 00:32:43.529 --> 00:32:46.059 and the bank. is not there for a variety of other 00:32:46.059 --> 00:32:49.500 reasons around timeframes or complexity of transactions. 00:32:50.119 --> 00:32:53.740 And I think that private credit managers have 00:32:53.740 --> 00:32:56.700 done a great job of really dispelling a lot of 00:32:56.700 --> 00:32:59.940 those myths around the types of businesses that 00:32:59.940 --> 00:33:02.950 they're lending to. We just have that flexibility 00:33:02.950 --> 00:33:07.650 to create the right product and the right funding 00:33:07.650 --> 00:33:10.490 structure that these businesses are after. So 00:33:10.490 --> 00:33:13.509 WT is a great example. So it's a dealer group, 00:33:13.609 --> 00:33:17.910 basically. Its whole premise is around how it 00:33:17.910 --> 00:33:21.869 can provide the right services to financial advisors, 00:33:22.230 --> 00:33:25.650 whether that's around compliance, et cetera. 00:33:25.829 --> 00:33:28.269 And we've been able to help Keith, who's the 00:33:28.269 --> 00:33:32.279 managing director there, lead a... quite successful 00:33:32.279 --> 00:33:35.440 acquisition strategy so that is definitely something 00:33:35.440 --> 00:33:38.920 that we we like doing it's been a great uh it's 00:33:38.920 --> 00:33:41.000 been a great lend for us and a great relationship 00:33:41.000 --> 00:33:43.079 for us and we're you know looking to continue 00:33:43.079 --> 00:33:46.900 to support him um with his growth aspirations 00:33:46.900 --> 00:33:52.359 does that also uh pivot into like the the horizontal 00:33:52.359 --> 00:33:54.279 integration and financial services i'm seeing 00:33:54.279 --> 00:33:56.140 a lot of things happening now and like you get 00:33:56.140 --> 00:33:58.059 an advisory shop or an accounting firm or mortgage 00:33:58.059 --> 00:34:01.460 broking the whole one stop shop service type 00:34:01.460 --> 00:34:03.500 routine is really starting to take traction. 00:34:03.579 --> 00:34:05.019 Clients are coming in and they don't want to 00:34:05.019 --> 00:34:06.839 leave. You've got a good relationship here and 00:34:06.839 --> 00:34:08.920 why do I have to leave? Can it just all be in 00:34:08.920 --> 00:34:10.880 -house? Are you finding a lot of the acquisitions, 00:34:10.880 --> 00:34:14.099 are they still keeping in their lane or are they 00:34:14.099 --> 00:34:18.639 trying to do a one -stop shop? I think it's probably 00:34:18.639 --> 00:34:20.880 a combination of both. I wouldn't say there's 00:34:20.880 --> 00:34:23.960 any one particular trend. We always are very 00:34:23.960 --> 00:34:29.679 cautious about synergies around cross -selling. 00:34:30.139 --> 00:34:33.079 I think that there's plenty of businesses that 00:34:33.079 --> 00:34:35.039 have gone before that have probably misjudged 00:34:35.039 --> 00:34:38.840 that concept. So I guess we're quite cautious 00:34:38.840 --> 00:34:44.340 about focusing or thinking that the return profile 00:34:44.340 --> 00:34:46.840 is predicated on that. But yeah, we're seeing 00:34:46.840 --> 00:34:50.000 even other businesses as well that we get involved 00:34:50.000 --> 00:34:52.860 with are naturally looking for scale benefits 00:34:52.860 --> 00:34:56.900 as well. So whether they're buying... because 00:34:56.900 --> 00:35:00.880 they've got a larger fixed cost base or investment 00:35:00.880 --> 00:35:04.019 they've made in shared services or whether it's 00:35:04.019 --> 00:35:06.539 other businesses that are trying to be a little 00:35:06.539 --> 00:35:08.860 bit more vertically integrated. I think they 00:35:08.860 --> 00:35:12.340 regularly happen and the financing that we provide 00:35:12.340 --> 00:35:15.239 does help. Our financing is not always about 00:35:15.239 --> 00:35:17.539 acquisition financing. I know there are funds 00:35:17.539 --> 00:35:22.019 out there that do specifically focus on particularly 00:35:22.019 --> 00:35:26.570 sponsored. uh credit or or leverage loans but 00:35:26.570 --> 00:35:30.449 for us it acquisitions is just one of many growth 00:35:30.449 --> 00:35:33.269 strategies that we would be looking to for our 00:35:33.269 --> 00:35:36.690 borrowers to undertake that makes sense so in 00:35:36.690 --> 00:35:39.349 the um in the other part of the portfolio are 00:35:39.349 --> 00:35:41.690 there any other companies uh you can discuss 00:35:41.690 --> 00:35:45.289 uh like on the engineering side or anything or 00:35:45.289 --> 00:35:47.269 is it everything everything's pretty much underneath 00:35:47.269 --> 00:35:50.510 an nda and no one wants to no one wants to be 00:35:50.510 --> 00:35:54.940 talked about No, no, each quarter we give, you 00:35:54.940 --> 00:35:57.920 know, we give regular updates with, you know, 00:35:57.920 --> 00:36:01.260 with the portfolio to the clients. So, you know, 00:36:01.300 --> 00:36:06.139 the clients have that look into the businesses 00:36:06.139 --> 00:36:10.300 that we're working with. But no, there's no, 00:36:10.460 --> 00:36:12.920 I mean, we've got, you know, a business called 00:36:12.920 --> 00:36:15.659 Energy Build, which is in the renewable space. 00:36:17.769 --> 00:36:20.269 We've got a business called OnSpec, which is, 00:36:20.309 --> 00:36:22.869 you know, an amazing business. That's more in 00:36:22.869 --> 00:36:27.769 oil, gas field work. So they work with all the 00:36:27.769 --> 00:36:31.929 large oil and gas producers and that business 00:36:31.929 --> 00:36:36.690 creates basically like a tool, a monitoring tool 00:36:36.690 --> 00:36:40.969 that provides those customers with data to allow 00:36:40.969 --> 00:36:44.710 them to increase flow rates out of their wells. 00:36:45.740 --> 00:36:51.599 So we're leading a very, very strong growth capital 00:36:51.599 --> 00:36:54.699 injection for those guys. They've won some amazing 00:36:54.699 --> 00:36:57.940 contracts recently and have had amazing growth. 00:36:58.179 --> 00:37:02.199 So, you know, these businesses, they range and 00:37:02.199 --> 00:37:05.659 vary, but that's kind of a snapshot of some of 00:37:05.659 --> 00:37:08.380 the names. With the oil and gas one, where are 00:37:08.380 --> 00:37:10.619 their main clients? Is it everywhere across Australia? 00:37:10.699 --> 00:37:13.719 Is it data centric helping with the flow rates 00:37:13.719 --> 00:37:16.489 or is it? they just specifically focus on one 00:37:16.489 --> 00:37:19.809 side of the coast or yeah they've got uh relationships 00:37:19.809 --> 00:37:22.750 in wa they've got relationships in queensland 00:37:22.750 --> 00:37:25.889 new south wales and then we've recently uh expanded 00:37:25.889 --> 00:37:30.769 into the us um but but this this type of interestingly 00:37:30.769 --> 00:37:32.869 they've been winning a lot of work in that hydrogen 00:37:32.869 --> 00:37:38.530 space as well um so there's you know green greener 00:37:38.530 --> 00:37:42.469 energy i guess for those uh investors or others 00:37:42.469 --> 00:37:45.280 that are kind of more focused on moving away 00:37:45.280 --> 00:37:50.920 from oil and gas. You know, they are looking 00:37:50.920 --> 00:37:54.480 at expanding and doing work in other sectors 00:37:54.480 --> 00:37:58.340 that aren't so emitive, I guess. But the benefit 00:37:58.340 --> 00:38:01.960 of improving flow rates is not only is production 00:38:01.960 --> 00:38:05.139 is improving, but it actually prevents a lot 00:38:05.139 --> 00:38:08.059 of flaring as well. So it does have some secondary 00:38:08.059 --> 00:38:14.880 benefits to emissions. So it's quite a unique 00:38:14.880 --> 00:38:18.880 business and they've been very successful. We've 00:38:18.880 --> 00:38:21.980 only been on that journey now for about just 00:38:21.980 --> 00:38:24.840 under two years. I think now the EBITDA of that 00:38:24.840 --> 00:38:31.179 business has tripled and likely to continue a 00:38:31.179 --> 00:38:33.440 pretty similar growth trajectory over the next 00:38:33.440 --> 00:38:35.840 couple of years. To give some context on that 00:38:35.840 --> 00:38:38.760 business, two years ago, what were the numbers? 00:38:38.880 --> 00:38:40.199 What are they today? And, you know, how have 00:38:40.199 --> 00:38:41.679 you helped? Like, I suppose some people would 00:38:41.679 --> 00:38:44.400 be interested to hear, you know, you working 00:38:44.400 --> 00:38:45.880 with them. What are the numbers actually look 00:38:45.880 --> 00:38:47.559 like for that type of business? Because it's 00:38:47.559 --> 00:38:49.460 a very interesting business. And also the TV 00:38:49.460 --> 00:38:51.219 show Landman's come out, you know, after the 00:38:51.219 --> 00:38:53.539 success of the, you know, Yellowstone. You know, 00:38:53.599 --> 00:38:55.360 he's come in and there was that particular thing 00:38:55.360 --> 00:38:58.059 where he drags the chick lawyer out in front 00:38:58.059 --> 00:39:00.760 of the wind farms, right? And just discusses 00:39:00.760 --> 00:39:03.699 with a point blank that, you know. everything 00:39:03.699 --> 00:39:05.659 is essentially petroleum -based. It doesn't matter 00:39:05.659 --> 00:39:07.420 how you want to do it. You can't stick up enough 00:39:07.420 --> 00:39:10.400 wind farms to do a thing. Otherwise, these big 00:39:10.400 --> 00:39:12.099 oil and gas companies, they have them scattered 00:39:12.099 --> 00:39:15.219 everywhere, right? So we're stuck with it. For 00:39:15.219 --> 00:39:16.639 the people that don't like that, it's just a 00:39:16.639 --> 00:39:18.900 reality. People that do like it, it's fantastic. 00:39:19.179 --> 00:39:22.820 But how have you gotten in to help a business 00:39:22.820 --> 00:39:25.300 like this? And as you made a comment, it prevents 00:39:25.300 --> 00:39:27.079 the flaring, which saves them money, but it also 00:39:27.079 --> 00:39:29.480 stops harmful gases getting into the atmosphere, 00:39:29.639 --> 00:39:34.809 right? fantastic yeah i haven't watched it yet 00:39:34.809 --> 00:39:37.550 but it's definitely on on the list because i've 00:39:37.550 --> 00:39:41.670 heard some amazing um yeah amazing reviews but 00:39:41.670 --> 00:39:43.630 i think from out it was quite an interesting 00:39:43.630 --> 00:39:45.969 journey we went on with that business and it 00:39:45.969 --> 00:39:48.349 was actually referred to us from a client of 00:39:48.349 --> 00:39:51.670 ours um so that was quite a unique thing that 00:39:51.670 --> 00:39:54.329 we hadn't seen you know either so we're actually 00:39:54.329 --> 00:39:57.170 seeing a lot of our investing clients referring 00:39:57.170 --> 00:39:59.429 us businesses which has been you know like an 00:39:59.429 --> 00:40:04.000 interesting change recently as well. But we did 00:40:04.000 --> 00:40:06.380 a lot of work. We actually commissioned an independent 00:40:06.380 --> 00:40:10.099 expert to have a look at the gas market. We knew 00:40:10.099 --> 00:40:14.059 ourselves that there was a need for gas as part 00:40:14.059 --> 00:40:17.659 of the transition to renewables, but we didn't 00:40:17.659 --> 00:40:21.619 have kind of the hard numbers and the hard view 00:40:21.619 --> 00:40:24.239 and the facts behind that. So we actually commissioned 00:40:24.239 --> 00:40:27.880 a report that looked at the policy settings, 00:40:28.000 --> 00:40:31.500 supply and demand settings. And we use that and 00:40:31.500 --> 00:40:34.219 also help us with thinking around the investment 00:40:34.219 --> 00:40:38.039 horizon as gas was being used as a transition 00:40:38.039 --> 00:40:41.260 fuel. So that was a key part of what we were 00:40:41.260 --> 00:40:44.579 doing. The business, we helped the founders buy 00:40:44.579 --> 00:40:47.480 a business off a larger parent company that owned. 00:40:47.639 --> 00:40:50.000 It was basically a business that parent company 00:40:50.000 --> 00:40:53.960 didn't want to pursue anymore. So there were 00:40:53.960 --> 00:40:56.480 a couple of existing management teams. So we 00:40:56.480 --> 00:41:00.130 basically did a management buy -in. um into that 00:41:00.130 --> 00:41:03.190 business um you know so we basically came in 00:41:03.190 --> 00:41:05.929 from scratch it was had very small revenue base 00:41:05.929 --> 00:41:08.570 um it'll do what were the numbers like you know 00:41:08.570 --> 00:41:10.869 how big was the deal what were the revenue yeah 00:41:10.869 --> 00:41:13.269 so the revenue at the time would have been probably 00:41:13.269 --> 00:41:15.969 four or five million and it'd probably be up 00:41:15.969 --> 00:41:20.449 towards kind of 30 million now so they've had 00:41:20.449 --> 00:41:23.409 some quite large in two years yeah it's gone 00:41:23.409 --> 00:41:25.789 from 5 million to 30 million in two years yeah 00:41:25.789 --> 00:41:28.860 some of the contracts were kind of getting worked 00:41:28.860 --> 00:41:31.719 on in the background. So it wasn't kind of a 00:41:31.719 --> 00:41:36.239 full origination of that much revenue in that 00:41:36.239 --> 00:41:39.659 particular year. So a lot of it was being kind 00:41:39.659 --> 00:41:42.380 of incubated and kind of brought into the structure. 00:41:44.119 --> 00:41:48.179 And the deal terms were, we were able to kind 00:41:48.179 --> 00:41:50.619 of buy it at a very, very low valuation, which 00:41:50.619 --> 00:41:53.000 meant the fund could actually contribute the 00:41:53.000 --> 00:41:57.539 debt to fund the growth. but also get themselves 00:41:57.539 --> 00:42:00.199 or get a fund in there and the investors get 00:42:00.199 --> 00:42:02.500 an equity position in it as well. So that's, 00:42:02.500 --> 00:42:04.579 you know, I sit on the board of that business. 00:42:04.639 --> 00:42:07.099 I work with the founders. There's two founders 00:42:07.099 --> 00:42:11.179 that I work with. And, you know, our remit is 00:42:11.179 --> 00:42:14.079 to grow that business, protect the debt and ensure 00:42:14.079 --> 00:42:16.920 that, you know, the things that the contractual 00:42:16.920 --> 00:42:20.280 relationship that comes with that facility is 00:42:20.280 --> 00:42:25.269 continuing, but also. How do you drive additional 00:42:25.269 --> 00:42:27.829 returns through that equity position that we 00:42:27.829 --> 00:42:30.610 received? And that was basically free. The fund 00:42:30.610 --> 00:42:32.449 didn't pay and the investors didn't pay for that 00:42:32.449 --> 00:42:35.469 equity position. How much was the equity position? 00:42:35.610 --> 00:42:38.849 What percentage of the business? How was it structured? 00:42:39.250 --> 00:42:42.849 Yeah, so it depends. It'll depend on, like we 00:42:42.849 --> 00:42:45.630 put an earn out mechanism in place as well. So 00:42:45.630 --> 00:42:48.610 the founders get a right to earn back depending 00:42:48.610 --> 00:42:52.130 on revenue and EBITDA target. So it'll kind of... 00:42:52.519 --> 00:42:58.320 It'll range, but it's a meaningful minority position 00:42:58.320 --> 00:43:02.659 in the business. But I can't give you an exact 00:43:02.659 --> 00:43:04.940 number because it'll depend on a whole bunch 00:43:04.940 --> 00:43:11.260 of different outcomes. Yeah. This is the fun 00:43:11.260 --> 00:43:12.860 part. When you really start picking apart deals, 00:43:13.000 --> 00:43:15.630 how do they work? Why do they work? But what 00:43:15.630 --> 00:43:17.289 I'm trying to understand, so you've got the equity 00:43:17.289 --> 00:43:19.010 piece and then you've got the capacity to buy 00:43:19.010 --> 00:43:20.989 back. I love that because you incentivize the 00:43:20.989 --> 00:43:23.030 – because when you're an owner, all you want 00:43:23.030 --> 00:43:25.010 is equity as much as you can. And everyone knows 00:43:25.010 --> 00:43:26.849 equity is the most expensive thing to give away, 00:43:26.989 --> 00:43:29.190 right? So having the ability to work with a founder 00:43:29.190 --> 00:43:33.230 to grow and then go – otherwise, they get three 00:43:33.230 --> 00:43:34.849 years in and they go, screw this. I'm working 00:43:34.849 --> 00:43:36.250 for someone else. I'm going to flog my stuff 00:43:36.250 --> 00:43:38.610 and go build a competitor, right? But how good 00:43:38.610 --> 00:43:40.849 is the structure with the capacity? If you hit 00:43:40.849 --> 00:43:42.829 your targets, you get more equity back. Doesn't 00:43:42.829 --> 00:43:45.730 that really incentivize? someone's behavioral 00:43:45.730 --> 00:43:48.710 psychology in their mind just to really you know 00:43:48.710 --> 00:43:51.510 roll up the sleeves and get stuck in because 00:43:51.510 --> 00:43:53.969 it's and it's a natural deleveraging exercise 00:43:53.969 --> 00:43:57.630 too so if we can incentivize those founders to 00:43:57.630 --> 00:44:00.769 to grow from you know a couple of million ebitda 00:44:00.769 --> 00:44:02.809 which was what we were kind of targeting at the 00:44:02.809 --> 00:44:05.690 front end up until you know four or five million 00:44:05.690 --> 00:44:08.190 dollars of ebitda that that's a natural way of 00:44:08.190 --> 00:44:10.449 deleveraging the business as well so you you're 00:44:10.449 --> 00:44:12.610 willing to give up some of the equity return 00:44:12.610 --> 00:44:16.869 because you know that your debt position is, 00:44:16.869 --> 00:44:24.829 you know, not as high as it would have been when 00:44:24.829 --> 00:44:28.210 you started the journey. So I guess it rewards 00:44:28.210 --> 00:44:29.929 a whole bunch of different behaviours that we 00:44:29.929 --> 00:44:33.050 really like. And it doesn't work for every... 00:44:33.050 --> 00:44:34.909 Like, this is quite unique. These businesses 00:44:34.909 --> 00:44:37.550 are the exception rather than the rule in terms 00:44:37.550 --> 00:44:40.170 of what we would generally do. But there's a 00:44:40.170 --> 00:44:43.500 very specific set of... um attributes that we 00:44:43.500 --> 00:44:46.440 know works really well when it comes to these 00:44:46.440 --> 00:44:49.239 types of businesses that that you can buy you 00:44:49.239 --> 00:44:51.760 know the founders can buy them well they can 00:44:51.760 --> 00:44:54.300 use a bit of leverage to help them they don't 00:44:54.300 --> 00:44:56.699 need to raise equity to fund the acquisitions 00:44:56.699 --> 00:44:58.800 they're intimately involved in the businesses 00:44:58.800 --> 00:45:02.079 because they're already management teams and 00:45:02.079 --> 00:45:04.000 they're willing to share in some of the upside 00:45:04.000 --> 00:45:08.820 for um for that contribution of capital and and 00:45:08.820 --> 00:45:11.940 you know we were able to give them a lot of comfort 00:45:11.940 --> 00:45:14.280 about how we operate because we've we had other 00:45:14.280 --> 00:45:16.800 businesses that were able to give like you know 00:45:16.800 --> 00:45:18.940 testimonials and those things that allowed them 00:45:18.940 --> 00:45:22.639 to um you know that allowed them to get comfort 00:45:22.639 --> 00:45:25.940 about the value we could bring i've got a question 00:45:25.940 --> 00:45:28.840 for you like as a fund manager you need a deliverability 00:45:28.840 --> 00:45:30.840 to clients now there's an equity piece in it 00:45:30.840 --> 00:45:33.059 you know people that have invested in this yes 00:45:33.059 --> 00:45:34.559 you've got the income component coming through 00:45:34.559 --> 00:45:39.420 everyone's happy but in order to you know get 00:45:39.420 --> 00:45:42.239 the equity piece back to a client normally everyone 00:45:42.239 --> 00:45:43.820 has to sell part of the equity as you mentioned 00:45:43.820 --> 00:45:46.860 have exits right but as the expression goes you 00:45:46.860 --> 00:45:48.619 never sell a good business you don't know what 00:45:48.619 --> 00:45:50.199 this business could be you know this could be 00:45:50.199 --> 00:45:52.719 a 30 it's all in gas right you know it could 00:45:52.719 --> 00:45:55.699 keep evolving and be a 200 year old company right 00:45:55.699 --> 00:45:58.179 so what i'm just wondering is how What are the 00:45:58.179 --> 00:46:01.139 other strategies or do you have any other strategies 00:46:01.139 --> 00:46:03.960 that give the ability to provide exits without 00:46:03.960 --> 00:46:05.820 diluting your equity? And where I'm going with 00:46:05.820 --> 00:46:07.460 this, just been reading quite a lot. I think 00:46:07.460 --> 00:46:10.619 I've been working with someone else who, because 00:46:10.619 --> 00:46:12.099 everyone understands about borrowing against 00:46:12.099 --> 00:46:13.940 assets like property, right? You can do that 00:46:13.940 --> 00:46:16.000 all the time. You build one, let it grow, you 00:46:16.000 --> 00:46:17.679 refinance, take the capital and go to another. 00:46:18.000 --> 00:46:20.139 But it's very uncommon. People aren't familiar 00:46:20.139 --> 00:46:22.420 with it. You can actually borrow against equity 00:46:22.420 --> 00:46:24.639 positions in business. So you don't actually 00:46:24.639 --> 00:46:28.550 have a... um capital gains event and there's 00:46:28.550 --> 00:46:30.409 no tax on essentially the borrowed money after 00:46:30.409 --> 00:46:32.489 it gets read on in the valuation do you consider 00:46:32.489 --> 00:46:35.650 those types of strategies um or is that too much 00:46:35.650 --> 00:46:39.349 uh risk i'm just i'm just curious because you 00:46:39.349 --> 00:46:41.969 know it's now becoming a really common topic 00:46:41.969 --> 00:46:43.530 to talk about like you know it's pretty much 00:46:43.530 --> 00:46:45.730 how elon musk you know founded twitter uh found 00:46:45.730 --> 00:46:47.929 a twitter and x you know so i bought it you know 00:46:47.929 --> 00:46:49.550 he didn't sell anything you know he used that 00:46:49.550 --> 00:46:51.289 capital to redo another business so i'm just 00:46:51.289 --> 00:46:53.590 curious about your thoughts on that strategy 00:46:53.590 --> 00:46:56.190 or if you consider it yeah we don't we don't 00:46:56.190 --> 00:46:59.469 generally do kind of personal lending or all 00:46:59.469 --> 00:47:02.710 those like we've always got to take a view that 00:47:02.710 --> 00:47:06.269 the business can support the the facilities that 00:47:06.269 --> 00:47:09.909 we're that we're deploying i think the way we 00:47:09.909 --> 00:47:12.530 do think about exits and how do we get exit outcomes 00:47:12.530 --> 00:47:15.550 for the equity as well like we are we're not 00:47:15.550 --> 00:47:18.969 perpetual capital vehicles so you know the way 00:47:18.969 --> 00:47:22.400 we think of the same way we think about the contractual 00:47:22.400 --> 00:47:25.519 obligation to repay the loan. We also think about 00:47:25.519 --> 00:47:28.920 the contractual obligation for us to sell the 00:47:28.920 --> 00:47:31.420 equity if there is value there. So there's a 00:47:31.420 --> 00:47:33.619 lot of work that's done around shareholders agreements 00:47:33.619 --> 00:47:37.039 in advance of deploying that capital as well. 00:47:37.159 --> 00:47:39.679 So we're thinking about how do we exit the equity 00:47:39.679 --> 00:47:42.460 position if there's an opportunity to, and that's 00:47:42.460 --> 00:47:46.300 first giving the founders a right to buy our 00:47:46.300 --> 00:47:50.309 equity positions off us. before we run a process. 00:47:50.530 --> 00:47:54.269 But yeah, we are very conscious about the, you 00:47:54.269 --> 00:47:56.429 know, realising the value for the equity as well. 00:47:57.349 --> 00:48:00.070 They're detached anyway, so they can, you know, 00:48:00.090 --> 00:48:04.090 you can have loans without, with the equity being 00:48:04.090 --> 00:48:07.650 sold, which is a case that we've had with Energy 00:48:07.650 --> 00:48:10.250 Bill. We actually have sold the equity there 00:48:10.250 --> 00:48:13.550 and we still remain as a lender. So that does 00:48:13.550 --> 00:48:16.650 happen. then sometimes we can be repaid the loan 00:48:16.650 --> 00:48:19.170 and still have the equity on foot. So that just 00:48:19.170 --> 00:48:24.429 continues. So there's no kind of horses for courses. 00:48:24.429 --> 00:48:26.929 It will kind of vary, but fundamentally we're 00:48:26.929 --> 00:48:30.349 looking to get an exit on both. So I'm just running 00:48:30.349 --> 00:48:33.070 through the numbers. So you said it's two years. 00:48:33.510 --> 00:48:35.710 Revenue's gone from $5 million to $30 million 00:48:35.710 --> 00:48:39.659 plus and expansion is to the US, right? It sounds 00:48:39.659 --> 00:48:41.739 like it's on a very good growth trajectory. Why 00:48:41.739 --> 00:48:44.380 did you sell the equity off? So you have no equity 00:48:44.380 --> 00:48:47.340 and currently... No, that's a... So I was talking, 00:48:47.420 --> 00:48:49.619 there's another business that I was talking about 00:48:49.619 --> 00:48:54.619 on spec. Oh, sorry. Yeah. Right. And what type 00:48:54.619 --> 00:48:58.500 of business is that one? That's the gas field 00:48:58.500 --> 00:49:04.500 services business. Yeah. Energy bill was the 00:49:04.500 --> 00:49:10.840 one that we've exited out of. Right. Sorry, that 00:49:10.840 --> 00:49:14.739 makes a lot more sense. Yeah, I love the idea. 00:49:14.820 --> 00:49:17.420 You have one product in your house that generates 00:49:17.420 --> 00:49:19.460 income. Everyone gets looked after. Meanwhile, 00:49:19.619 --> 00:49:21.260 then you've got the offensive end of town and 00:49:21.260 --> 00:49:24.099 you can use the income. I think I heard the other 00:49:24.099 --> 00:49:27.519 day that, and the math makes sense because I 00:49:27.519 --> 00:49:29.739 do it for my clients as well. We're using different 00:49:29.739 --> 00:49:31.400 fund managers. But if your client's got a million 00:49:31.400 --> 00:49:33.460 dollars in, over like a four -year period, they 00:49:33.460 --> 00:49:40.079 can generate 400 grand. you know deals that you're 00:49:40.079 --> 00:49:41.860 looking at it just makes sense you protect the 00:49:41.860 --> 00:49:45.159 downside yeah um do you find a lot of your clients 00:49:45.159 --> 00:49:48.119 you know use the outdoor products for that they 00:49:48.119 --> 00:49:49.840 stick money in the private credit generate the 00:49:49.840 --> 00:49:53.860 income and then go offensive in your other funds 00:49:53.860 --> 00:49:57.619 or how does it work like some investors will 00:49:57.619 --> 00:50:00.860 have um you know investments across the funds 00:50:00.860 --> 00:50:03.559 not you know i don't know the exact statistics 00:50:03.559 --> 00:50:05.619 i think we did we did we looked at it probably 00:50:05.619 --> 00:50:09.199 a couple of years ago um but you know fundamentally 00:50:09.199 --> 00:50:12.380 they can they know what they're buying i guess 00:50:12.380 --> 00:50:14.559 what that they know they're buying an approach 00:50:14.559 --> 00:50:18.659 uh whether it's you know in credit or in equity 00:50:18.659 --> 00:50:21.800 but fundamentally it's the same approach that 00:50:21.800 --> 00:50:24.400 is growth orientated businesses backing really 00:50:24.400 --> 00:50:27.719 good people and then being active you know actively 00:50:27.719 --> 00:50:30.619 engaged the risk profiles are different and the 00:50:30.619 --> 00:50:32.639 rates of return are a bit different obviously 00:50:32.639 --> 00:50:36.829 the the credit's a lot more defensive more stable 00:50:36.829 --> 00:50:39.190 type returns, whereas the kind of growth equity 00:50:39.190 --> 00:50:43.750 is the more volatile, more higher return concept. 00:50:43.969 --> 00:50:48.170 So that's what they're investing in. It'll just 00:50:48.170 --> 00:50:50.610 kind of depend on what their objectives are. 00:50:51.610 --> 00:50:53.769 Makes sense. Before we pivot to something else, 00:50:53.809 --> 00:50:55.510 is there any other questions you normally get 00:50:55.510 --> 00:50:57.050 that you find quite interesting from other people 00:50:57.050 --> 00:50:58.530 who haven't touched on the private credit fund? 00:51:06.760 --> 00:51:09.320 Oh, no, not particularly. I mean, obviously a 00:51:09.320 --> 00:51:11.460 lot of people are really keen to understand what's 00:51:11.460 --> 00:51:13.940 happening within the business as well, like where 00:51:13.940 --> 00:51:17.320 are the challenges and opportunities. You know, 00:51:17.320 --> 00:51:20.179 I think a lot of clients like asking those questions 00:51:20.179 --> 00:51:23.659 to try and get reads on, you know, what's happening 00:51:23.659 --> 00:51:27.860 in business and the economy more broadly. So 00:51:27.860 --> 00:51:30.909 I think that's... you know, probably a separate 00:51:30.909 --> 00:51:33.909 conversation for another time. No, but that is 00:51:33.909 --> 00:51:36.730 a very good point that they raised because the 00:51:36.730 --> 00:51:38.610 private credit lenders, just like the bankers, 00:51:38.610 --> 00:51:41.090 are the closest to the coalface of figuring out 00:51:41.090 --> 00:51:42.949 because, you know, there's what people tell you 00:51:42.949 --> 00:51:44.429 at a barbecue, how amazing they're doing. But 00:51:44.429 --> 00:51:45.949 meanwhile, you don't know exactly what their 00:51:45.949 --> 00:51:48.289 finances look like and, you know, are we in a 00:51:48.289 --> 00:51:49.909 tough position and everyone's getting squeezed 00:51:49.909 --> 00:51:52.010 or is it, you know, pop the champagne and let's 00:51:52.010 --> 00:51:55.340 go for a run. How are you currently finding business 00:51:55.340 --> 00:51:58.800 right now? Is the economy buoyant? Is everything 00:51:58.800 --> 00:52:02.400 looking very positive? Is it a good time? Because 00:52:02.400 --> 00:52:05.119 the past three or four years, the private credit, 00:52:05.199 --> 00:52:06.900 especially in the raising space, has been quite 00:52:06.900 --> 00:52:10.059 tough. So where do you think we are right now 00:52:10.059 --> 00:52:13.159 in the cycle? Yeah, I think we're certainly coming 00:52:13.159 --> 00:52:16.500 through definitely a more challenged period. 00:52:17.139 --> 00:52:20.849 I mean, we've had... A number of businesses were 00:52:20.849 --> 00:52:24.550 impacted by wet weather. And one thing which 00:52:24.550 --> 00:52:29.610 has been quite interesting is the unionised workforce. 00:52:29.809 --> 00:52:34.030 We had one business that had, you know, quite 00:52:34.030 --> 00:52:39.170 a large revenue contribution from Victoria. And 00:52:39.170 --> 00:52:44.150 so they were impacted more so when Labor got 00:52:44.150 --> 00:52:53.159 in federally. specifically the CFMEU. So, you 00:52:53.159 --> 00:52:56.260 know, that's the type of stuff that I guess you 00:52:56.260 --> 00:53:01.179 really see. And, you know, from our perspective, 00:53:01.280 --> 00:53:04.019 businesses have challenges. Like we're not, you 00:53:04.019 --> 00:53:06.039 know, we don't come out there and say everything's 00:53:06.039 --> 00:53:09.480 perfect because that's not the case. And I'd 00:53:09.480 --> 00:53:13.139 be lying to say that. But for us, because we 00:53:13.139 --> 00:53:16.139 are active, we can actually. you know, get involved, 00:53:16.420 --> 00:53:19.920 understand the business, help them out. And, 00:53:20.059 --> 00:53:21.619 you know, so we can help them out if there's 00:53:21.619 --> 00:53:23.360 challenging periods of times, but we can also 00:53:23.360 --> 00:53:27.480 help them out if things are going well. So that's 00:53:27.480 --> 00:53:30.559 been one thing. I mean, obviously COVID was hugely 00:53:30.559 --> 00:53:33.920 disruptive. And as I said, this fund's been around 00:53:33.920 --> 00:53:36.559 for over seven years now. So we went through 00:53:36.559 --> 00:53:40.579 COVID. So, you know, we're having... challenges 00:53:40.579 --> 00:53:44.159 with you know supply and and access to supply 00:53:44.159 --> 00:53:46.820 access to people and resources all those things 00:53:46.820 --> 00:53:50.519 um but you know borrowing costs uh you know are 00:53:50.519 --> 00:53:53.639 falling i think we're probably i'd say through 00:53:53.639 --> 00:53:57.099 the worst of it um you know so we're we're generally 00:53:57.099 --> 00:53:59.440 pretty positive around around the outlook for 00:53:59.440 --> 00:54:03.159 you know small business in in australia that's 00:54:03.159 --> 00:54:05.539 really good to hear um just on the on the risk 00:54:05.539 --> 00:54:08.619 side with covid you know have you had any businesses 00:54:09.849 --> 00:54:12.329 you know not not succeed you know what like people 00:54:12.329 --> 00:54:13.449 it's in the back of their head it's like yeah 00:54:13.449 --> 00:54:15.070 we do these loans but you know every now and 00:54:15.070 --> 00:54:16.969 again it's just part of the business model you 00:54:16.969 --> 00:54:19.369 know one will fall on challenging times and then 00:54:19.369 --> 00:54:20.889 you have to help them go through the process 00:54:20.889 --> 00:54:23.510 roll it up or shift the business or you know 00:54:23.510 --> 00:54:25.550 has that happened in the past couple years and 00:54:25.550 --> 00:54:29.590 how did you yeah we yeah we had this for we had 00:54:29.590 --> 00:54:32.329 this for covid actually we had uh we had a existing 00:54:32.329 --> 00:54:36.349 borrower that um was was a little bit challenge 00:54:36.349 --> 00:54:41.130 coming into to corporate into covert and i had 00:54:41.130 --> 00:54:45.769 two businesses that they owned um so yeah we 00:54:45.769 --> 00:54:49.210 we had to help we had to help them out for uh 00:54:49.210 --> 00:54:52.869 a number of months and that that um meant you 00:54:52.869 --> 00:54:54.349 know a few different things but fundamentally 00:54:54.349 --> 00:54:57.230 we actually helped them sell one of their businesses 00:54:57.230 --> 00:55:00.940 and that actually got the loan repaid So we're 00:55:00.940 --> 00:55:02.880 able to work with them proactively and actually 00:55:02.880 --> 00:55:06.039 help them sell one of their operating businesses 00:55:06.039 --> 00:55:08.579 to repay the loan. So again, that's that hands 00:55:08.579 --> 00:55:13.059 -on approach. The relationship that we form with 00:55:13.059 --> 00:55:16.500 the management team is one of partnership. So 00:55:16.500 --> 00:55:20.239 when those challenging environments happen, then 00:55:20.239 --> 00:55:22.699 you're not shut out of the boardroom. You're 00:55:22.699 --> 00:55:24.579 actually invited into the boardroom and said, 00:55:24.639 --> 00:55:26.500 all right, well, here's the challenge. How do 00:55:26.500 --> 00:55:30.139 we solve it? How can you help? So that was one 00:55:30.139 --> 00:55:35.599 that was basically challenged. It never went 00:55:35.599 --> 00:55:38.760 into administration or receivership. It continued 00:55:38.760 --> 00:55:41.780 to trade and we were able to sell the business, 00:55:41.840 --> 00:55:45.559 got repaid our facility. So that was a fantastic 00:55:45.559 --> 00:55:49.659 result. So that happens. Doesn't happen a lot, 00:55:49.760 --> 00:55:53.380 but it does happen. It makes sense. Just conscious 00:55:53.380 --> 00:55:56.579 of time, we haven't touched on Prime or we can 00:55:56.579 --> 00:55:59.840 just do another podcast on it. what's prime how 00:55:59.840 --> 00:56:01.900 does it all how does it all work and uh come 00:56:01.900 --> 00:56:04.380 on like you guys just helped by the the tasmanian 00:56:04.380 --> 00:56:06.639 jack jumpers the basketball team so that's pretty 00:56:06.639 --> 00:56:08.960 freaking cool you know any basketballing enthusiasts 00:56:08.960 --> 00:56:11.639 out there as well like do you want to give a 00:56:11.639 --> 00:56:13.639 bit of color around that or we can always just 00:56:13.639 --> 00:56:16.559 uh postpone that to another conversation but 00:56:16.559 --> 00:56:19.659 up to you well yeah quickly i mean prime financial 00:56:19.659 --> 00:56:24.219 group is our parent company so harley and i made 00:56:24.219 --> 00:56:27.670 the decision about 18 months ago to uh to sell 00:56:27.670 --> 00:56:31.690 uh altor we it was a very conscious decision 00:56:31.690 --> 00:56:34.449 we for a variety of different reasons but we 00:56:34.449 --> 00:56:39.030 what we wanted to do was really scale altor aggressively 00:56:39.030 --> 00:56:42.409 and we needed access to you know all the right 00:56:42.409 --> 00:56:46.489 uh infrastructure um to do that so we uh we made 00:56:46.489 --> 00:56:50.570 the decision altor still exists um and we've 00:56:50.570 --> 00:56:53.739 been kind of moved into a different world now 00:56:53.739 --> 00:56:57.239 with Prime, but the relationship's been fantastic. 00:56:57.619 --> 00:57:00.280 They kind of leave us in the corner and we get 00:57:00.280 --> 00:57:03.159 on with doing what we do best, which is investing. 00:57:03.900 --> 00:57:11.039 But what they've brought to us is a sports, very, 00:57:11.179 --> 00:57:13.960 very sophisticated, well -respected sports advisory 00:57:13.960 --> 00:57:20.219 concept. that you referred to earlier. So we're 00:57:20.219 --> 00:57:22.300 working very closely with their corporate team 00:57:22.300 --> 00:57:28.340 to buy sports and entertainment assets. And the 00:57:28.340 --> 00:57:31.059 Jackjumpers has been one that we've recently 00:57:31.059 --> 00:57:36.219 done and purchased. We've done about three sports 00:57:36.219 --> 00:57:40.519 and entertainment deals so far. And it's something 00:57:40.519 --> 00:57:43.380 that we want to do a lot more in and think there's 00:57:43.380 --> 00:57:47.710 an amazing opportunity. businesses that are profitable, 00:57:47.909 --> 00:57:51.690 that have great management teams, that have got 00:57:51.690 --> 00:57:54.269 great brands. I don't know if anyone's been down 00:57:54.269 --> 00:57:58.429 to Tassie, but the way the fans just love the 00:57:58.429 --> 00:58:02.269 team, it's amazing. So you've got this great 00:58:02.269 --> 00:58:04.989 brand that supports the business. You've got 00:58:04.989 --> 00:58:07.230 a great management team. And then if you can 00:58:07.230 --> 00:58:09.190 look, we like to think about them as platform 00:58:09.190 --> 00:58:12.719 assets. You've got one revenue stream, which 00:58:12.719 --> 00:58:15.019 is five guys running around on a basketball court. 00:58:15.099 --> 00:58:17.599 But what happens when you extend that through 00:58:17.599 --> 00:58:22.500 infrastructure and facilities, through a women's 00:58:22.500 --> 00:58:25.380 program where you can get scale benefits? So 00:58:25.380 --> 00:58:27.619 that's the way we're kind of thinking about sports. 00:58:27.639 --> 00:58:30.739 So we want to buy assets that are brands, but 00:58:30.739 --> 00:58:33.579 also platform assets that allow us to drive revenue 00:58:33.579 --> 00:58:37.010 growth and profitability. One question I had 00:58:37.010 --> 00:58:38.690 in the back of my head, is this stadium owned 00:58:38.690 --> 00:58:42.070 by the Jackjumpers or is it leased from Tasmania? 00:58:42.309 --> 00:58:46.369 It's owned by the state government. We have a 00:58:46.369 --> 00:58:52.670 revenue, we get revenue from the stadium, not 00:58:52.670 --> 00:58:55.510 just the games that we play there, but the other 00:58:55.510 --> 00:58:57.849 events that are hosted there. So the P &L does 00:58:57.849 --> 00:59:03.750 reflect some stadium revenue, which is quite 00:59:03.750 --> 00:59:06.099 unique. particularly in the Australian context. 00:59:07.280 --> 00:59:09.300 Yeah, that is unique. That's why I was curious 00:59:09.300 --> 00:59:12.239 about it. And for those fans out there that aren't 00:59:12.239 --> 00:59:14.059 really basketball fans, but you have done two 00:59:14.059 --> 00:59:16.960 other transactions, so what sports are they in? 00:59:17.960 --> 00:59:22.400 So one in motor racing and the other one was 00:59:22.400 --> 00:59:24.860 a picks and shovels business called Launched. 00:59:25.380 --> 00:59:29.309 So we've helped fund them. uh for and this is 00:59:29.309 --> 00:59:31.949 in our growth fund but we've helped fund a couple 00:59:31.949 --> 00:59:35.150 of acquisitions accretive acquisitions for them 00:59:35.150 --> 00:59:37.869 as they think about their growth growth trajectory 00:59:37.869 --> 00:59:40.250 so launched is the other business that we've 00:59:40.250 --> 00:59:43.769 done what's the motorsport one i can't remember 00:59:43.769 --> 00:59:46.760 what it is it's not formula one is it no no No, 00:59:46.840 --> 00:59:49.380 it's not public yet, so I'd rather not say. Oh, 00:59:49.380 --> 00:59:51.360 it's not public yet. Yeah, yeah, yeah. One for 00:59:51.360 --> 00:59:55.059 another day. Yeah. One for another day, Ben. 00:59:55.719 --> 00:59:58.199 Ben, it's been great having you on. Is there 00:59:58.199 --> 01:00:01.199 any thoughts you want to, you know, share with 01:00:01.199 --> 01:00:04.599 any listeners or anything on your mind that you 01:00:04.599 --> 01:00:09.039 think's a good topic to discuss? No, I think 01:00:09.039 --> 01:00:12.340 that's covered a range of different things that 01:00:12.340 --> 01:00:15.719 we're focused on and really interested in. i 01:00:15.719 --> 01:00:17.980 hope the listeners have got something out of 01:00:17.980 --> 01:00:22.360 the kind of active approach to credit we think 01:00:22.360 --> 01:00:26.159 that is uh very unique and now has seven years 01:00:26.159 --> 01:00:29.960 of success um so if you know if people are looking 01:00:29.960 --> 01:00:32.460 for you know and i think this is you've probably 01:00:32.460 --> 01:00:35.860 seen this as well like credit in terms of allocation 01:00:35.860 --> 01:00:38.699 to credit managers has changed you know five 01:00:38.699 --> 01:00:41.539 years ago investors were probably allocating 01:00:41.539 --> 01:00:44.260 to one manager now we're seeing like equity managers 01:00:44.260 --> 01:00:47.760 them allocating to multiple managers. So I think 01:00:47.760 --> 01:00:50.320 that's the opportunity now is to think about 01:00:50.320 --> 01:00:54.059 managers and their different strategies and how 01:00:54.059 --> 01:00:56.380 that can play a role in your alts allocation 01:00:56.380 --> 01:01:01.639 or your allocation to income or defensive or 01:01:01.639 --> 01:01:06.079 private credit. One thing I want to just quickly 01:01:06.079 --> 01:01:10.500 cover is impact of falling interest rates on 01:01:10.500 --> 01:01:12.099 your private credit fund because you've got the 01:01:12.099 --> 01:01:14.710 equity piece. So, you know, we've seen it before 01:01:14.710 --> 01:01:17.030 where, you know, some managers now who are targeting 01:01:17.030 --> 01:01:19.929 RBA cash rate plus five, you know, when rates 01:01:19.929 --> 01:01:21.570 went to zero, there's, you know, a good mate 01:01:21.570 --> 01:01:23.909 of mine, he still managed to put out six, 6%, 01:01:23.909 --> 01:01:25.789 which is, you know, quite fantastic considering. 01:01:26.170 --> 01:01:28.730 So what happened during the COVID times? Like 01:01:28.730 --> 01:01:32.329 if rates go down, how much of the equity piece 01:01:32.329 --> 01:01:34.510 play? Does it still just kind of tick along, 01:01:34.610 --> 01:01:37.369 sit at the 12 % because your deals are kind of 01:01:37.369 --> 01:01:39.789 fixed in? Are you impacted by rate changes? Because 01:01:39.789 --> 01:01:41.210 that's probably one of the biggest questions. 01:01:41.869 --> 01:01:44.170 A lot of people are thinking about considering 01:01:44.170 --> 01:01:47.309 they just cut. So, you know what I mean? Well, 01:01:47.449 --> 01:01:49.929 we've got the equity is obviously a bit different. 01:01:50.929 --> 01:01:54.389 I mean, there arguably is benefit to the equity 01:01:54.389 --> 01:01:58.670 is interest rate falling environment because 01:01:58.670 --> 01:02:02.110 your cost of capital is falling. But, you know, 01:02:02.110 --> 01:02:04.789 so from a interest income perspective, we have 01:02:04.789 --> 01:02:09.130 flaws in our facilities. So we're able to mitigate 01:02:09.130 --> 01:02:13.079 against. or hedge against interest rate risk. 01:02:13.880 --> 01:02:20.059 So they're kind of floating over BBSW, but there's 01:02:20.059 --> 01:02:22.880 flaws in those facilities. So if we see large 01:02:22.880 --> 01:02:24.639 interest rate falls, which would be good for 01:02:24.639 --> 01:02:27.139 businesses, the fund investors are protected 01:02:27.139 --> 01:02:31.199 against that. So I call it like a natural hedge. 01:02:31.260 --> 01:02:34.909 It's embedded into the loan agreements. And then 01:02:34.909 --> 01:02:38.530 just on that point, Trump's made it clear that 01:02:38.530 --> 01:02:42.150 he wants to drop the value of the US dollar as 01:02:42.150 --> 01:02:44.449 a number to attract investment in and jack it 01:02:44.449 --> 01:02:45.690 up again, exactly what the Chinese have been 01:02:45.690 --> 01:02:48.230 doing for like 40 years. And you mentioned the 01:02:48.230 --> 01:02:50.429 oil and gas business looking at expanding into 01:02:50.429 --> 01:02:54.590 the States. How do you help businesses cover 01:02:54.590 --> 01:02:59.070 the currency risk? Yeah, well, fortunately, that 01:02:59.070 --> 01:03:01.170 business is only just launched there, so it's 01:03:01.170 --> 01:03:05.420 not a major component of it. There's another 01:03:05.420 --> 01:03:07.840 business that's about 80%. It's an Aussie business, 01:03:07.960 --> 01:03:12.500 but it's about 80 % US dollar revenue focused. 01:03:12.559 --> 01:03:16.820 So we don't have any official kind of hedging 01:03:16.820 --> 01:03:21.400 in place. It's quite natural on hedging around, 01:03:21.679 --> 01:03:24.519 you know, most of its production costs are in 01:03:24.519 --> 01:03:27.900 US dollars. Most of its operations are in US 01:03:27.900 --> 01:03:30.000 dollars. So it's quite naturally hedged out. 01:03:30.409 --> 01:03:32.769 I mean, we do talk a lot about hedging, particularly 01:03:32.769 --> 01:03:36.789 now as, you know, we think about, you know, funds 01:03:36.789 --> 01:03:40.369 and fund capital going more broadly, whether 01:03:40.369 --> 01:03:43.090 in Asia. One thing that we're very interested 01:03:43.090 --> 01:03:45.730 in is looking at, you know, the opportunity up 01:03:45.730 --> 01:03:48.409 in Asia, which we all kind of get a little bit 01:03:48.409 --> 01:03:50.969 focused on Australia. But, you know, really the 01:03:50.969 --> 01:03:53.610 opportunity is up in Asia and using Australia 01:03:53.610 --> 01:03:57.869 as a launchpad for that type of investment. So 01:03:57.869 --> 01:04:00.280 we regularly talk about. What would hedging look 01:04:00.280 --> 01:04:02.880 like? But we're not that sophisticated yet that 01:04:02.880 --> 01:04:05.019 we're down the path of having done anything yet. 01:04:06.119 --> 01:04:07.739 Actually, one question. This is just for me. 01:04:08.119 --> 01:04:10.239 What impact are you seeing with the businesses 01:04:10.239 --> 01:04:13.320 you talk to that do have exposure into Asia? 01:04:13.480 --> 01:04:17.539 Let's say the US. Say exposure into the US. They 01:04:17.539 --> 01:04:19.460 sell into the US, but now these tariffs are coming 01:04:19.460 --> 01:04:22.199 into play, right? And the expense and the cost. 01:04:22.960 --> 01:04:24.559 And I think I was chatting to a mate at one of 01:04:24.559 --> 01:04:26.880 the banks who looks after a very big one where 01:04:26.880 --> 01:04:30.900 40 % of their business was selling into the States 01:04:30.900 --> 01:04:32.800 and cost just blew out and they're all angry 01:04:32.800 --> 01:04:35.960 about it. But he's saying essentially, well, 01:04:36.019 --> 01:04:38.980 if you come, I'm just looking at the math. Does 01:04:38.980 --> 01:04:41.159 it make sense that they move their manufacturing 01:04:41.159 --> 01:04:44.500 into the States to get their discount or are 01:04:44.500 --> 01:04:46.400 these businesses just going, well, the US is 01:04:46.400 --> 01:04:48.800 just not? worth it like i'm just curious like 01:04:48.800 --> 01:04:50.619 because you see this you'd learn you speak to 01:04:50.619 --> 01:04:52.719 these these businesses you may not be lending 01:04:52.719 --> 01:04:54.619 to anyone that has ux but surely these people 01:04:54.619 --> 01:04:56.260 are coming to you going hey i've got a problem 01:04:56.260 --> 01:05:00.559 like yeah there's there's two words that are 01:05:00.559 --> 01:05:03.679 quite often used at board uh rooms at the moment 01:05:03.679 --> 01:05:07.880 that's tariff mapping so there is a lot of work 01:05:07.880 --> 01:05:11.460 um from executive teams really to understand 01:05:11.460 --> 01:05:14.800 what uh what tariff impacts are having and it's 01:05:14.800 --> 01:05:21.309 it is There's no science to it because it changes 01:05:21.309 --> 01:05:25.989 every day. And it is really, really difficult. 01:05:26.710 --> 01:05:29.969 But it's about how you understand how much your 01:05:29.969 --> 01:05:35.230 customer can wear. And it depends on if it's 01:05:35.230 --> 01:05:38.250 product or what kind of product it is. So, yeah, 01:05:38.329 --> 01:05:42.110 it's definitely a big headache and something 01:05:42.110 --> 01:05:46.159 that consumes. some time of those in those board 01:05:46.159 --> 01:05:51.380 meetings where we have us sales um but only only 01:05:51.380 --> 01:05:54.059 two businesses are probably impacted by it and 01:05:54.059 --> 01:05:56.980 that's one in in on the credit side or one on 01:05:56.980 --> 01:06:00.579 the growth equity side um but yeah tariff mapping 01:06:00.579 --> 01:06:04.739 is a big challenge uh very complicated very complex 01:06:04.739 --> 01:06:07.760 and very fluid from what you've seen does the 01:06:07.760 --> 01:06:12.539 math make sense them picking up and say moving 01:06:12.539 --> 01:06:14.900 manufacturing from i don't know somewhere cheap 01:06:14.900 --> 01:06:17.039 like southeast asia and then moving it to the 01:06:17.039 --> 01:06:19.320 states to get that discount does the math actually 01:06:19.320 --> 01:06:21.619 doesn't try to work out right you see this stuff 01:06:21.619 --> 01:06:25.400 not me does that math make sense i don't think 01:06:25.400 --> 01:06:27.639 so i think the form i think the view that everyone's 01:06:27.639 --> 01:06:30.360 formed is that if you're taking a long -term 01:06:30.360 --> 01:06:33.920 view uh you wouldn't you wouldn't relocate um 01:06:33.920 --> 01:06:37.840 for that for that purpose um you know i think 01:06:37.840 --> 01:06:40.909 that what we know is that we've been able to 01:06:40.909 --> 01:06:43.329 shield a lot against those tariff increases. 01:06:43.510 --> 01:06:45.710 So we've been able to pass them on, whether to 01:06:45.710 --> 01:06:51.210 end consumers or through the value chain to the 01:06:51.210 --> 01:06:55.110 end consumer. So I think the impact hasn't been 01:06:55.110 --> 01:06:58.090 as widely felt as the headline numbers that you're 01:06:58.090 --> 01:07:01.590 listening to or reading in the press every day. 01:07:01.929 --> 01:07:04.710 And it certainly doesn't warrant changing your 01:07:04.710 --> 01:07:08.730 whole strategy based on what could be. uh you 01:07:08.730 --> 01:07:12.489 know something that's so maybe maybe medium term 01:07:12.489 --> 01:07:16.349 maybe three four or five years um right so people 01:07:16.349 --> 01:07:19.010 are sorry long term yeah so people are speculating 01:07:19.010 --> 01:07:22.550 that you know how long is this uh these policies 01:07:22.550 --> 01:07:24.750 going to be in but hypothetically say the republican 01:07:24.750 --> 01:07:28.710 house holds um government for the next 12 years 01:07:28.710 --> 01:07:30.869 and people may have made a decision based on 01:07:30.869 --> 01:07:32.949 no no no everyone hates it the democrats are 01:07:32.949 --> 01:07:34.170 going to come in and we'll be back to business 01:07:34.170 --> 01:07:37.150 as usual But what happens there? Like, you know, 01:07:37.170 --> 01:07:39.329 that's making a decision based on a hope and 01:07:39.329 --> 01:07:42.570 a prayer instead of... Yeah, I think it's definitely 01:07:42.570 --> 01:07:44.769 a two -pronged approach. You've got to understand 01:07:44.769 --> 01:07:48.809 the implications to your business, the financial 01:07:48.809 --> 01:07:50.690 implications, and if you can get comfortable 01:07:50.690 --> 01:07:53.929 that, you know, you're relatively neutral and 01:07:53.929 --> 01:07:57.570 there's no point making large strategic decisions 01:07:57.570 --> 01:08:01.170 to relocate production or work with different 01:08:01.170 --> 01:08:04.920 production facilities to get... to avoid those 01:08:04.920 --> 01:08:07.280 tariffs. But I think fundamentally, no one's 01:08:07.280 --> 01:08:10.900 making kind of really rash decisions just yet. 01:08:11.420 --> 01:08:15.780 We know it's relatively neutral. We'll be quite 01:08:15.780 --> 01:08:18.060 strategic the way that we'll approach it and 01:08:18.060 --> 01:08:21.500 take it on the basis that we get more information. 01:08:21.520 --> 01:08:24.239 At the moment, it's so fluid. It's really hard 01:08:24.239 --> 01:08:28.119 to make long -term strategic decisions. That's 01:08:28.119 --> 01:08:30.520 very interesting, Ben. I'm very happy that no 01:08:30.520 --> 01:08:32.500 bloke's like you so you can tell me what's going 01:08:32.500 --> 01:08:34.819 on because you see this stuff in the papers, 01:08:34.880 --> 01:08:37.100 everyone's asking questions about it. A lot of 01:08:37.100 --> 01:08:39.399 the investments that myself and clients make 01:08:39.399 --> 01:08:42.000 are all businesses that have these implications 01:08:42.000 --> 01:08:43.739 to hear what's actually happening in the border 01:08:43.739 --> 01:08:45.260 and that they're discussing it, but it's more 01:08:45.260 --> 01:08:47.439 like a wait and see instead of let's just do 01:08:47.439 --> 01:08:49.739 something drastic. It's very, very interesting. 01:08:50.680 --> 01:08:52.640 Very interesting, Ben. Well, Ben, thank you very 01:08:52.640 --> 01:08:54.220 much for coming on The Rate of Change with York 01:08:54.220 --> 01:08:56.659 Wealth Management. That's been brilliant. If 01:08:56.659 --> 01:08:58.880 anyone wants to learn more about Altor Prime 01:08:58.880 --> 01:09:01.699 or yourself, what's the best way for them to 01:09:01.699 --> 01:09:07.460 get in touch? Probably head to the website, altorcapital, 01:09:07.520 --> 01:09:10.340 A -L -T -O -R. You'll be able to get a lot of 01:09:10.340 --> 01:09:13.800 information on there, be able to subscribe for 01:09:13.800 --> 01:09:18.750 access to... to updates and, and information 01:09:18.750 --> 01:09:21.069 about our products. So that's probably the best, 01:09:21.109 --> 01:09:25.329 uh, way to go or, um, I'm on LinkedIn. So shoot 01:09:25.329 --> 01:09:28.090 me out on, on LinkedIn. And you're going to get 01:09:28.090 --> 01:09:30.470 like 2000 people saying, Hey, nice to meet you. 01:09:30.630 --> 01:09:34.289 All right. Well, thank you very much for coming 01:09:34.289 --> 01:09:37.750 on and, uh, we'll catch up soon. Thanks. Great. 01:09:37.890 --> 01:09:50.100 Great to be here. The Rate of Change podcast 01:09:50.100 --> 01:09:52.579 is presented by its speakers. The views and opinions 01:09:52.579 --> 01:09:54.680 expressed in this podcast are those of the speaker 01:09:54.680 --> 01:09:56.600 in their personal capacity and do not represent 01:09:56.600 --> 01:09:58.779 the views of York Wealth Management Pty Ltd, 01:09:58.800 --> 01:10:01.000 its shareholders, directors or any other third 01:10:01.000 --> 01:10:03.420 party. Any discussion of financial products, 01:10:03.579 --> 01:10:05.220 investments, credit or property opportunities 01:10:05.220 --> 01:10:07.899 in this podcast is provided strictly for general 01:10:07.899 --> 01:10:10.659 information and discussion purposes only. Nothing 01:10:10.659 --> 01:10:13.239 in this podcast constitutes general advice, personal 01:10:13.239 --> 01:10:15.260 advice, financial product advice, credit advice 01:10:15.260 --> 01:10:17.829 or a recommendation. Before making any financial 01:10:17.829 --> 01:10:20.050 or investment decisions, you should seek advice 01:10:20.050 --> 01:10:21.689 from a licensed professional who will consider 01:10:21.689 --> 01:10:23.630 your objectives, financial situation and needs. 01:10:24.210 --> 01:10:26.390 Australian listeners can obtain further information 01:10:26.390 --> 01:10:28.449 about choosing a financial advisor by visiting 01:10:28.449 --> 01:10:33.050 www .moneysmart .gov .au. For clarity, the Rate 01:10:33.050 --> 01:10:34.850 of Change podcast is a business owned and operated 01:10:34.850 --> 01:10:37.649 by Murdoch Venture Capital Pty Ltd. Any client 01:10:37.649 --> 01:10:39.649 relationship or referral that arises through 01:10:39.649 --> 01:10:41.130 the Rate of Change in connection with services 01:10:41.130 --> 01:10:43.270 outside the scope of financial services requiring 01:10:43.270 --> 01:10:46.149 an Australian financial services license, including... 01:10:46.350 --> 01:10:48.510 Without limitation, private credit, property 01:10:48.510 --> 01:10:51.289 development, or other non -AFSL activities shall 01:10:51.289 --> 01:10:52.890 remain the sole property of the rate of change. 01:10:53.149 --> 01:10:55.289 Where listeners wish to obtain advice in relation 01:10:55.289 --> 01:10:57.449 to their investments or other matters that fall 01:10:57.449 --> 01:10:59.109 within the scope of financial services requiring 01:10:59.109 --> 01:11:02.229 an AFSL, the rate of change may refer them to 01:11:02.229 --> 01:11:04.829 York Wealth Management Pty Ltd. York Wealth Management 01:11:04.829 --> 01:11:07.949 is referenced in this podcast solely in its capacity 01:11:07.949 --> 01:11:10.289 as sponsor. References in the introduction to 01:11:10.289 --> 01:11:12.229 the rate of change with York Wealth Management 01:11:12.229 --> 01:11:14.489 are sponsorship acknowledgements only and do 01:11:14.489 --> 01:11:16.920 not imply ownership. or control of this podcast 01:11:16.920 --> 01:11:19.699 by York Wealth Management. To learn more about 01:11:19.699 --> 01:11:20.920 York Wealth Management as sponsor,