126: Professor Scott Donald – Should Trustees Use AI?

Welcome to the i3 podcast. Today, we're revisiting a conversation from 2021 with John Pearce, Chief Investment Officer at UniSuper. From the humble beginnings at the back office of Westpac, John went on to become one of the most influential CIOs of Australia, leadings one of the biggest in-house investment programs, built on what he calls "logical incrementalism." We talked about his best and worst trades, why he doesn't believe in tidy asset class buckets, and his early doubts about China. We also cover the APRA performance test and UniSuper's decision to open up to the public. Here's my conversation with John Pearce. __________ Follow the Investment Innovation Institute [i3] on Linkedin Subscribe to our Newsletter Explore our library of insights from leading institutional investors at [i3] Insights __________ Overview of Podcast with John Pearce, Chief Investment Officer of UniSuper 1:00 Starting in the back office of Westpac Investment Management 3:00 There is no way you can believe in market efficiency when looking at emotions take over in the dealing room 4:30 You need board support if you are going to run assets in-house 5:30 We didn't really have a vision going into in-house management. Visions can be scary things. 6:00 Michael Chaney's 'Logical incrementalism' 8:00 Moving to in-house is a business transition, not a project. It can't be done in a day. 10:00 Pearce' best and worst trades 12:00 We had a $9.6 billion option position on during COVID, which gave us the confidence to buy more risky assets at the bottom of the market. 12:30 But our position in China is not looking good at all. 14:00 We should have loaded up on green tech two years ago when we decided carbon neutrality was going to play a big factor 14:30 If you had to put a label on UniSuper's investment style, then it would be Quality at a reasonable price 15:30 Has in-house management changed the way you structure external mandates? 16:30 Yes, the questions are better and there is some bluff-calling 20:00 If there is a good investment, then we will find a home for it. Hybrides are a good example. 22:00 On China: "More than the average person, I know what I don't know." 22:30 The last three months has really been testing our conviction [in China] and it is not Evergrande 25:30 If China invades Taiwan then all bets are off. You can't structure a portfolio based on that. 27:30 How do you solve the asset allocation problem of low yielding bonds? 28:00 We are looking at gradually increasing our unlisted assets 30:30 Views on the APRA performance test: "When you get results like that, you know there is something fundamentally wrong with the test." 36:00 Since becoming a public offer fund, UniSuper has raised $6 million just through word of mouth. 36:30 Yes, we would be open to a merger, but it has to make sense for our members. 39:00 You don't build real culture over virtual meetings, so we decided as a team to come back to the office the same three days a week. 41:00 But there are also benefits of virtual meetings: our whole team gets to sit in our investment committee meetings Full Transcription of Episode 145 Wouter Klijn 00:11 John, welcome to the show. John Pearce 01:27 Pleasure. Wouter Klijn 01:28 So you're pretty well known in Australia, but can you take us a little bit back to where it all started? How did you get interested in investing? John Pearce 01:35 Well, I started off in the back office of Westpac Investment management, which, and staying in the back office, I would recommend that to any investment professional. I think it's a really good grounding. You learn the nuts and bolts of the business, and I think you also start. You know, you learn a bit of humility as well. So, and look, I spent pretty much the first two decades of my career, then moving on into a dealing room environment. So, which was a pretty exciting place to be for a young guy. Wouter Klijn 02:08 Yeah, I can imagine so. So, already from that

In this episode, we speak with Dr. Michael Kollo, who's the author of the book Future Ready with Generative AI: Skills, Mindsets, and Stories in the Age of AI, about the Hugging Face incident, where a cybersecurity experiment went wrong and AI agents found a way to communicate with each other, escape onto the internet and hack the company Hugging Face. What does this incident mean for controlling agentic AI and how would design a governance framework around it? What are the key risks for investment organisations? Should they run autonomous systems at all? In this discussion, we delve deep into the key issues and ask what institutional investors can do to stay on top of it. Follow the Investment Innovation Institute [i3] on Linkedin Subscribe to our Newsletter Explore our library of insights from leading institutional investors at [i3] Insights Sources mentioned in this podcast: An Alien Mind by Jakub Pachocki, Chief Scientist at OpenAI On the Loose – The Coming of Userless Agents by Dean Ball, Head of Strategic Futures at OpenAI We Must Pace the Frontier – By Dario Amodei, CEO of Anthropic Future Ready with Generative AI: Skills, Mindsets, and Stories in the Age of AI by Michael Kollo [i3] Podcast Episode 132: Michael Kollo on his New AI Book Overview of Podcast with Michael Kollo on the Hugging Face Incident

In this From the Archives episode, we revisit a conversation with Tanya Branwhite, former Head of Portfolio Construction at TCorp, which was originally released in March 2023. Tanya takes us through her unconventional path into investing, from her early days as a credit analyst in the "whiz-bang" late 1980s, through more than a decade at Macquarie, to her move into asset owner organisations at the Future Fund and, eventually, TCorp. In early 2023, TCorp was already wrestling with questions around how to best shape the total portfolio approach for the organisation, as well as how to deal with higher inflation, rising rates and the true cost of implementation, topics that have only grown in relevance today. We did a deep dive into TPA at TCorp and why it thinks about risk rather than asset classes. We spoke about how equity, duration, credit and FX risk together explain the vast majority of portfolio behaviour, and how a "prepare but don't predict" mindset shapes decisions on liquidity, implementation and diversification. Overview of Podcast with Tanya Branwhite, TCorp: 01:00 Starting out as a credit analyst with Elders Finance Group: "It was a fairly interesting baptism of fire…" 03:00 The Macquarie years. The 'loose/tight' culture of rules and entrepreneurship 05:30 During the GFC, I wrote research highlighting that a number of Macquarie vehicles had significant financial risk. That wasn't well accepted within the organisation at the time. But I learned to stand by the rigour of my analysis. 07:30 Ultimately, it made my career at Macquarie, because I became sought after for client work 09:00 Leaving Macquarie for the Future Fund 11:30 The Future Fund didn't feel like it was a restrictive environment from a government-owned perspective. It is a company that is owned by the government, not a department of the government 13:30 How has a Total Portfolio Approach changed the investment portfolio? 17:00 Risk is at the heart of what we do, because we can only control risks and outcomes are the result of that risk. 18:00 Equity risk is at the centre of this model. 21:00 Diversification away from equity risk in an environment where equity and bond correlations are positive 23:00 Not just unlisted assets, but illiquid assets can help diversification. For example, we own a number of hydroelectric dams in Canada. 26:00 Challenge in fixed income is even higher than before, because real returns are a challenge 26:00 Bonds almost had their own global financial crisis last year; it was a three standard deviation event 28:30 We prepare, but we can't predict 34:00 On valuation frequency of unlisted assets: we do try to de-smooth valuations of unlisted assets. And sometimes these assets need additional capital from investors during periods of crisis; that is not often thought about 36:00 Managing liquidity 39:00 We are looking at natural capital and opportunistic liquidity 40:00 Reducing the number of managers, has this work finished? 42:00 On implementation and efficiency Full Transcript of Episode 143 Wouter Klijn 00:11 Tanya, welcome to the podcast. Tanya Branwhite 01:21 Good morning, and I'm really pleased to be here, Wouter. Thanks for the invitation. Wouter Klijn 01:25 Thank you. We always ask a little bit about people's background and how they got into investing. So what made you decide to pursue a career in investing? I think you started out initially as an analyst at Deutsche Bank. Tanya Branwhite 01:38 Well, actually, if we really want to go back, I wouldn't say that I pursued a career in investing. It sort of happened, so I won't say there was any great design in where I've ended up. I actually started off as a credit analyst, and I did that in the whiz-bang years of the late 1980s and early 1990s. Being a credit analyst at that time, for Elders Finance Group, was a fairly interesting baptism of fire. We went from one extreme, operating in an environment where there was a lot of money available, to the o

In episode 142, we take a look at AI disruption among listed Australian companies and their response to the risks arising from this new technology. Fidelity International surveyed 31 ASX-listed companies during the 2025 AGM season to find out how boards are really handling artificial intelligence, beyond the headlines. Portfolio Manager Sam Heithersay and Associate Director Sue Lyn Stubbs of Fidelity join host Wouter Klijn to unpack what they found and discuss several red flags, including CEOs and chairs talking past each other and a lack of focus leading to 100s of AI projects running simultaneously. From "shadow AI" and workforce polarisation to the case for a corporate AI "kill switch," this conversation digs deep into how companies set guardrails around AI's biggest risks. Fidelity International Research Paper: Governing in the age of AI: How ASX boards are navigating a fast-moving frontier | Investment Insights | Fidelity Australia Follow the Investment Innovation Institute [i3] on Linkedin Subscribe to our Newsletter Explore our library of insights from leading institutional investors at [i3] Insights Overview of Episode 142 00:40 – Origins of the survey: understanding how ASX boards are actually governing AI, beyond the hype 02:03 – Overall sentiment: comfort with AI varies widely between "leader" and "laggard" boards 03:56 – AI is mostly framed as a cost/efficiency play, not yet a revenue driver; ROI still hard to pin down 05:35 – Red flag #1: misalignment between CEO and board on AI risk and opportunity 08:22 – Red flag #2: disagreement on workforce impact, discussed against the backdrop of CBA's AI-related redundancies 09:52 – "AI washing" — redundancies mislabelled as AI-driven; most surveyed companies are actually still hiring AI talent 12:14 – The J-curve: near-term costs (e.g., running parallel legacy/AI systems) before efficiency gains show up 15:19 – Red flag #3: scattergun AI project lists (e.g., "300 use cases") signal a lack of strategic focus 16:19 – How boards are handling AI risk oversight, and the rise of "shadow AI" / BYOAI 19:12 – Finding the balance between enabling experimentation and controlling shadow AI use 21:18 – Why "human in the loop" is a weaker safeguard than it sounds 23:27 – Cognitive offloading and skill decline — an airline-industry/autopilot parallel 27:27 – "Super users" and the risk of AI widening productivity gaps within workforces 31:39 – Looking ahead: token cost management as a board-level issue 33:15 – The missing piece: few boards have defined guardrails, no-go zones, or a "kill switch" for AI 35:01 – A recent AI incident is raised as a case for why kill-switch thinking matters 36:17 – The regulatory divide between the US and Europe, and what it means for multinational AI rollouts 37:16 – Existential disruption risk: Fidelity's 11-factor framework, and the Kodak vs. Fujifilm lesson for adapting vs. defending 40:23 – What's next for the survey: cost metrics, guardrails, and expanding coverage across the ASX 200 43:18 – Closing: Sam and Sue Lyn on how they personally use AI Full Transcript of Episode 142 Wouter Klijn 00:00 Welcome to the [i3] podcast. I'm here today with Sam Heithersay, Portfolio Manager Australian Equities, and Sue Lyn Stubbs, Associate Director Sustainable Investing of Fidelity International. And today we're going to talk about artificial intelligence and disruption at listed companies in Australia. Sue Lyn, Sam, welcome to the show. Sam Heithersay 00:21 Thank you for having us. Sue Lyn Stubbs 00:22 Thanks for having us. Wouter Klijn 00:24 Fidelity International conducted a survey of 31 ASX-listed companies during the 2025 AGM season in Australia. Can you tell me a little bit about the survey? What was the catalyst? What started it? And what were you trying to find out? Sam Heithersay 00:40 Well, the main reason for the survey was to understand how boards were handling AI in practice. Through reporting season last year, we hea

In this interview from November 2023, we speak with Matt Whineray, then CEO of New Zealand Super, to celebrate the fund's 20th anniversary. Established in 2003, with an initial contribution of NZ$2.4 billion, the fund has achieved an impressive average annual return of 9.5 per cent over this 20-year period, adding NZ$40 billion in value. We delve deep into the fund's strategic tilting program, which has been a significant contributor to its success, and this interview contains the startling admission that NZ Super once held a short position in the NZ dollar that grew to 40 per cent of the net asset value of the fund. Overview of Podcast with Matt Whineray 01:00 NZ Super started investing in September 2003 and now has a 20-year track record 03:00 One of the key starting points was to get the risk position right and get the board to understand this position 04:30 The 20 year track record: the country is about $40 billion better off as a result of the creation of the fund 07:00 The fund invested in private equity only two years after the beginning. 8:30 The strategic tilting program; the philosophy behind it and the early days 14:00 There are times when you get tested and 2013 was one of those times 15:30 I borrowed this one from [AQR's] Cliff Asness: 'Don't size a strategy so that when it goes wrong you are dead'. 18:30 The amount of risk that we allocate to our strategic tilting process is definitely the highest of all of our internal strategies 20:30 The strategic tilting program has evolved from trading once a month to trading every day, sometimes multiple times a day 22:00 Introducing the reference portfolio; the beauty about the reference portfolio is that there is real clarity about the decisions that are being made 26:00 Since inception the decision was made that we always hedge the reference portfolio 100 per cent back to NZ dollars, and that is one that is always debated at reference portfolio reviews 28:00 Managing NZ equities in-house 31:00 What else do we do internally? Portfolio completion credit strategies, direct investment and strategic tilting 33:00 Embracing responsible investing 36:00 There is no downside to us helping our friends in the region 37:00 Preparing for the drawdown period 41:00 New Zealand Super has been experimenting with an AI portfolio. What is this? 44:00 Leaving the fund after 15 years and Matt's favourite moments with the fund 45:30 Early 2020, I had a radio interview where I was telling the interviewer that we just went from $48 to $35 billion. The fact I could say that is a testament to our stakeholder management and the education we've done along the way Full Transcription of Episode 141 Wouter Klijn 00:11 Welcome to the [i3] Podcast. I'm here today with Matt Whineray, who is the Chief Executive Officer of New Zealand Super, and today we're celebrating 20 years of the fund. Matt, congratulations on this milestone! Matt Whineray 01:26 Oh, thank you very much, and thanks for having me. Wouter Klijn 01:29 Excellent. So there's a couple of dates that we can take for these 20 years. I think the New Zealand Super Innovation and Retirement Income Act was passed in 2001, and that set up the structure of what is now New Zealand Super. But it wasn't until 2003 that the fund received its first contribution, which I thought was 2.4 billion New Zealand dollars, and started investing later that year. So it's actually in I think October this year that we have a 20-year track record of the fund is that right? And can you share some of the learnings from that period? Matt Whineray 02:08 That is right. Yes. So it took a bit of work between the passing of the legislation and 2001, and and kicking off. So getting a team, getting the team together, and those those board and those first few people that were were involved. That's right. We got the money on 30 September 2003. I understand it actually. We we invested almost straight away, some of it anyway, and had got set up to to be