Coffee Catch-Up
Providing the latest market insights is vital for our clients, we caught up with our Executive Director of Credit Strategy and Portfolio Management, Matt Macreadie for a quick Q&A.
Read what he had to say, below:
Hi Matt! Let’s dive in and get started with a little bit about your career.
1. Was being a credit strategy superstar always what you had planned for your career?
Definitely not. Growing up I had an avid love of sports and commentary. I would place the television on mute and then try and replicate the commentary occurring live in the sports game. I would spend countless hours researching and analysing statistics across a wide variety of sports, so I was in tune with each players strengths and weaknesses..
Funnily enough, this only lasted until my late teens.
2. What brought you to IAM? Talk us through your journey till here?
I started my working career in accounting at KPMG. This was a great place to begin my career as it provided me with the building blocks with which to assess the financial worthiness of companies. I then joined Colonial First State as a credit analyst just before Lehmann Brothers filed for bankruptcy in 2008. In early 2013, I joined Aberdeen Asset Management as a portfolio manager managing their Australian fixed income credit strategies before joining IAM in early 2021.
3: As Executive Director of Credit Strategy and portfolio management at IAM, describe your job in one sentence!
I advise investors as to the best way to generate returns across the credit spectrum within a portfolio risk context.
Connect WITH OUR TEAM
With a growing presence on LinkedIn, we encourage you to stay in touch with our team on the platform to always stay updated.
Speaking of credit strategy, let’s look at some of your expertise at work:
4. What according to you are some of the best investment practices to succeed in today’s Australian economy?
In today’s environment where there is so much uncertainty locally and abroad, well founded investment practices need to be followed not forgotten.
Invest for the long-term. Market volatility can be temporary in nature. By investing for the long-term, you can tide over short-term uncertainties without jeopardising your investments. In fact, using market volatility to accumulate good bonds at higher yields, can stand you in good stead.
Focus on non-cyclical sectors. With a global recession looking more likely, bonds and equities in defensive sectors should do well. One example is the Ausnet subordinated bonds.
Finally, the Australian economy has typically attracted investors into housing on the expectation that prices always go up! With higher interest rates and associated pressure on household budgets, housing may not be as stable as it once was. The bottom-line is don’t put all your eggs in one basket – shock proofing your portfolio with bonds is a great idea.
5. (Since you are ours), we’re curious to know, who or what is your go-to source for investment insights?
There are a multitude of sources for investment insights locally and abroad, from the Australian Financial Review, to the Wall St Journal, to CreditSights, to PIMCO’s Viewpoints, or even George Soros’ weekly newsletter.
However, to be a successful investor, it is very important to overcome the common human cognitive or psychological biases that can often lead to poor decisions and investment mistakes. Many investors can act irrationally and so it’s important when assessing credit and financial markets to focus on the facts and read material which provides a balanced picture of the risks.
6. As we’re reaching the end of 2022, what’s your outlook on investing in the new year? Do you have a top investing tip?
My outlook for 2023 is to remain nimble and flexible. We may be near the end of the interest rate cycle after the US Fed’s aggressive ‘front-loading’ of rate rises. As imbalances created by COVID-19 and the war in Ukraine recede, lower inflation can be expected. That means better returns for bond and equity investors in 2023 – which would be welcome relief after the negative performance across both assets in 2022.
If you’re considering individual bonds, you should know that the bond market is large and diverse. IAM can help constructing a portfolio that meets your needs, risk tolerance and time horizon. However, for the first time in decades, it’s now possible to generate a reliable flow of income by arranging low-risk, high-quality bonds of varying maturities in a ladder.
7. Describe your approach to credit strategy
The credit strategy approach is two-folded: a bottom-up and a top-down approach.
1 – The bottom-up approach is which credits or issuers should I have in my portfolio. This is where credit and valuation analysis fits in. For example, should I be owning Woolworths or Wesfarmers? Ausnet or Ampol?
2 – The top-down approach is what macro factors will affect my credit portfolio. Firstly, establish the outlook for interest rates, credit spreads, and currencies, locally and abroad. Then, determine which sectors in the credit spectrum should outperform or underperform in that environment. For example, should I be owning Investment-Grade or High-Yield? Long duration or short duration? AUD or USD bonds?
Both are equally important for credit strategy, and ultimately, portfolio construction.
And lastly, how do you effectively divide your time between credit research, portfolio management and having a life outside work?
8. How do you unwind after a long day at IAM
I have two small dogs called Finn and Kevin which I generally walk of an evening with my partner. I also love to exercise and swim – when I’m not playing soccer or futsal. Of an evening, my partner and I really enjoy watching and listening to true crime documentaries. The Crime Junkie Podcast is a weekly crime podcast dedicated to giving listeners a fix.
9. You’re currently based in Sydney, what would you say are the best & worst parts about living here?
Sydney is a great city. It’s got amazing beaches and a plentiful amount of coastline and nature strips. Just yesterday, stargazers in Sydney got their first total lunar eclipse of the year! I love the Royal National Park which has stunning cliffs, water pools, lagoons, and remote beaches. We often go down to Bundeena and hire some kayaks to explore some of these lagoons and remote beaches.
Worst part has probably been the weather this year – it just keeps on raining! Also, I am a stickler for coffee. Sydney coffee just doesn’t stack up to Melbourne coffee – one of Melbourne’s finer achievements.
10. What was the best holiday you took this year?
The best holiday I took was to the Gold Coast where I got engaged to my partner. We’d always wanted to go to Venice, so I thought I’d bring Venice to Australia and propose on a Gold Coast Gondola cruise. Many people wouldn’t even know there are Gondola cruises on the Gold Coast through the sheltered canals of Main Beach and Surfers Paradise.
Matt’s Favourite Bonds
Why are they your favourite bonds at this time?
Pacific National 3.8% 09/08/2031 – a rail freight business, which is making strong headway in the intermodal segment. Stands to benefit from the shift from road to rail transport.
Ausnet Float 10/06/2080 – a regulated business now owned by Brookfield with a call in June 2025. Stands to benefit from regulated revenues rising as a result of the increased weighted average cost of capital (WACC).
