Coffee Catch-Up Meet Frederick Stewart
Read excerpts from our Q&A below:
Hi Freddie!
It’s so good to have you spend time with us!
G’day Freddie! Hope the crispy Sydney air isn’t getting to a Brissy boy like you. Thank you so much for joining me today! A late welcome to IAM. While you’re new to IAM, you’re definitely not new to the fixed income landscape. Can you please tell us about your role within the Capital Markets team?
Thank you for having me and great to be a part of IAM! My role within the capital markets team is to assist clients ranging from private high net worth individuals through to private banking institutions and their clients in allocating to fixed income and private debt with confidence around pricing and execution.
That’s great to hear! You have an extensive background in financial services. How were you drawn to this role within Capital Markets? Did your background give your insight into the different strategies investors employ since you’ve been in the space for over a decade? Were there any passion projects you were involved in or currently involved in?
Having worked in fixed income in Australia going on ten years now, I have a pretty accurate idea of the needs and requirements of the Australian fixed income investor. To my mind, these participants have been crying out for a company like IAM who offer direct access to investment grade, high yield and private debt but from a company who are committed to tight and transparent pricing and first-class service. This is what drew me to Income Asset Management, and it is a pleasure to be here delivering on that promise across the HNW, advisor and institutional channels.
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Let’s dive deeper into your expertise and how you operate within the ever-changing financial markets:
There is so much that goes on at the desk and behind the scenes. What are some misconceptions you’ve come across, and how do you set the record straight with your investors?
I think the biggest misconception I come across in Australian investors’ minds is a lack of understanding of the benefits of investment grade credit versus term deposits. Australian investors as a whole are overweight term deposits and property and underweight investment grade credit. When you take into account historical default rates and the additional income generated on IG credit combined with the liquidity you are afforded in these instruments, they should make up a much larger part of Australian portfolios.
While term deposits are certainly a lower risk proposition than Australian investment grade credit, historically the levels of default on investment grade bonds are minimal and they still offer a return well in excess of what is achievable on term deposits. In fact, from data dating back to 1983, Standard & Poor’s found that cumulative global default rates on BBB rated (the lower rated part of the IG spectrum) investment grade credit tracked at below 3% on a five-year time horizon. That figure is even less if you focus on data exclusively on Australian corporates given the tighter regulatory scrutiny companies are subjected to in Aus. In addition to this, there is another key aspect to bonds versus deposits here which is liquidity. Investment grade corporate bonds are liquid and don’t carry penalties as deposits do if you need cash prior to their redemption – you can simply sell all or part of your holding to the market. If you consider the low probability of default and the liquidity on investment grade corporate bonds and combine it with their offering a higher return than deposits, it makes a compelling case for investors to be allocating more to this side of the market.
Amazing! When it comes to investing, do you have any personal mantras or principles that guide your approach or your investors?
I would say my key principle is being as transparent and upfront with my clients on the benefits and costs of transacting and holding securities through our company. In my experience, the biggest pain point for investors is incurring unseen or unexpected costs relating to the management of their investments which is something that can ruin a relationship. At IAM we use a rules-based approach on transaction spread and communicate this to clients at the outset so that there can be no misunderstanding.
Shifting gears a bit, we’d like to get to know you on a more personal level.
When you’re not at Martin Place, I hear you enjoy teeing up on the beautiful course at Moore Park. Can you share your handicap?
After the way I have played the last month, I wouldn’t dream of sharing my hacker handicap with the wider world! However, I’m confident that my colleagues Victor Gugger and Harry Roberts would wipe the floor with me.
Other than golf, you are a bit of a globetrotter. Is there a place you would like to teleport to and maybe escape the Australian winter?
There is an epic little hotel/farm stay gem called Masseria Moroseta in Ostuni Puglia in Italy which my partner Amelie and I dream about every summer since we first went. No crowds, Italian summertime surrounded by olive trees. Local wine and fare can’t be beaten!
