Foresight Active Advantage Podcast Series

Episode 2: Sandhurst Strategic Income Fund with Bendigo & Adelaide Bank's Thadeus McCrindle

January 14, 2022 Dan Grioli Season 1 Episode 2
Foresight Active Advantage Podcast Series
Episode 2: Sandhurst Strategic Income Fund with Bendigo & Adelaide Bank's Thadeus McCrindle
Show Notes Transcript

Today's guest is Thadeus McCrindle, Chief Investment Officer of Sandhurst Trustees, a wholly-owned subsidiary of Bendigo and Adelaide Bank.

Thadeus joins our host Dan Grioli to discuss the Sandhurst Strategic Income Fund. We discuss the fund, how it invests and how investors can use the Sandhurst Strategic Income in their portfolios.

Thadeus shares his experiences managing credit portfolios during the Global Financial Crisis. He explains how what he learned during this period shared his approach to managing risk and in particular, liquidity risk.

We discuss how being a wholly-owned subsidiary of Bendigo and Adelaide Bank helps Sandhurst Trustees in forming a view on the Australian economy, the housing market and assessing the credit risk of Residential Mortgage-Backed Securities (RMBS).

Thadeus explains the impact of Covid-19 on credit markets and the Sandhurst Strategic Income Fund. We then look forward, discussing the risk of rising inflation and the Australian housing market.


Disclaimer:
This podcast is for informational purposes only. It does not constitute financial advice or take into account the particular investment objectives, financial situations or needs of individual listeners. Listeners should consider whether any opinions or recommendations in this document are suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice. 

This podcast has been prepared with care. However, Foresight Analytics and Ratings and Grioli and Company make no warrant of any kind in regard to the contents and shall not be liable for incidental or consequential damages, financial or otherwise, arising out of the use of this document.

This podcast is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. 

The price and value of investments referred to in this podcast and the income from them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. 

The contents of this podcast are subject to the provisions of the Copyright Act, 1968, and any unauthorized reproduction of it is subject to prosecution under the provisions of the Act.


Daniel Grioli 
Welcome to the Foresight Active Advantage Investment podcast. My name is Daniel Grioli. I'm your host, and today I'm joined by Thadeus McCrindle Chief Investment Officer at Sandhurst trustees, a wholly-owned subsidiary of Bendigo and Adelaide bank. We're here to talk about Sandhurst and its strategic Income Fund. Thaddeus, welcome to the podcast.


Thadeus McCrindle 
Thanks, Daniel for having me. It's nice to see you.


Daniel Grioli
Good to see you, too. Over there in Adelaide. Is the weather. bad or good? Here we've had rotten weather.


Thadeus McCrindle 
It's very similar to your weather over in Melbourne. And but looking forward to some clearer skies and being able to complain about the heat.


Daniel Grioli 
That would be a nice change definitely would be a nice change. So tell us a little bit about Sandhurst, yourself and your team. What sort of strategies do you manage at stat Sandhurst?


Thadeus McCrindle 
Sure, for sure. So Sandhurst has been around actually for about 130 years. So quite an old trusty business. It, we've got about seven, just over $7 billion of funds under management and administration. And around about 100,000 customers in total, we do a few things at Sandhurst, and they really are including, well, principally funds management, superannuation, and, and actually, there's a custody business as well Sandhurst trustees act as a custodian, as well as a few other smaller businesses. Within funds management, we really have a couple of key parts to our business. One is a multi-manager, multi-asset class type business, which is mainly superannuation money at the end of the day, and the other is our income funds asset management business, where we have, in total, roughly about $3 billion under management in some very old mortgage fund actually started in the 50s. Well, before me, and then some, some more modern income products, including the strategic Income Fund, which, which I'm sure we'll talk about more business, we're really, you know, we're a subsidiary of Bendigo Bank fully owned, so operate kind of like a department of the bank in one sense. And we've, we've been operating for quite some time. As I said, and we've been operating this suite of funds for over a decade now, both sets, the business sort of geographically is spread across the major head offices of the bank. So we've got some stuff in Bendigo, Melbourne, and Adelaide, and a lot of my team is based with me in Adelaide, myself, I'm Chief Investment Officer, I've run these two sets of funds, and the super plan from an investment governance kind of perspective for about the last 12 and 13 years. My experience prior to that was more in credit, portfolio management and in structured finance. So I've built structured finance deals or RMBS type deals. And, and we manage portfolios, and, and, you know, used to do a lot of work around the prickly end of these investments or you know, close to the equity part of the game, you know, how the sausage is made? Yeah, and I'm around these products into the GFC. So, it was the heyday of securitization back in so 2005 When I joined the group and yeah, learn a lot about that and learn a lot then in the GFC as well.


Daniel Grioli 
Perhaps you can tell us a little bit about that. What, because that was an interesting time for RMBS and a lot of spread widening a lot of fears of default. A lot of so-called se fixed income strategies, having more capital volatility than people would like. So tell us about it. What was your experience?


Thadeus McCrindle 
Yeah, for sure. So, I was supporting the management of, of a, I guess what you call like a higher yield kind of fund and I was running a more enhanced cash kind of product at the time when the GFC occurred. And just before that, as I said, I've been helping the organization build these kinds of deals. So it was quite an eye-opening experience. When you sort of have origins bit like mine, you know, there's a lot of time spent on trying to make sure the outcome you get is very like systemic, if I can put it that way. So a lot of time on the composition of the loans that go into the pool, what are the vulnerabilities from the people borrowing the money, as the vulnerabilities to their income, their ability to repay? And then, you know, the other side of the equation, making sure you've got the right protections in place, if, for those people that will default. And when you've got 1000’s of loans in a trust, someone's going to default. That's almost certain. So, you know, do you have the right collateral in place? What's the geographical kind of exposure? So that's, that's where we started. And the idea really was, if you build it, right, obviously, there's some risk for the people near the first loss point of the equation, because you've got, you know, you've got an amount of income that's coming through, and most of that goes out, pay bondholders, that income, the net, net interest margin that's left is vulnerable to losses and things like that. But the idea is, if you structured it, well, you're really only at risk if there's a recession or a really bad recession. And obviously, that's what the GFC was a really bad recession. And, and it really was triggered by this technology, if I can call it that, you know, was built sort of became really popular out of the tech wreck. It was already popular sort of by 2000. And, and the yields were getting really low. Again, if we talk about say 2005 to 2006. And so some people not now business, but others, mainly in Wall Street, came up with ideas and ways to squeeze out a bit more return for the risk. And, you know, and the term you know, most people heard the term CDO and then CDO squared. And then there was actively managed CDO squared and CDO cubed and, and really what they were doing was concentrating that systemic risk. And arbitraging, the weakness in the S&P and Moody's and Fitch models for thinking about risk. Because of the first layer, their model is really good. It's sort of like well, he enough loans in there, you're just going to be lifting systemic exposure. However, if you then take the early loss, first loss, I don't wanna use the term first loss, but because it typically wasn't, but if you take something that's going to wear all of the pain if you get losses, say, three or four times normal, and you put all those together, then you've kind of effectively-highly leveraged and portfolio to mortgage risk. And then if you take the notes and you again, use you know, you create the subordination you, you get a higher yield for further down the lot. And then you take these junior ones from the one that's already got the livered risk, you create super levered investments that obviously compared really good yields. And we are talking about many multiples of a standard yield on a credit rating. But the reality is the credit ratings were wrong, that's probably the best way to put it. So my experience was I was managing these funds. And, you know, we, we got out there and talked to our customers and show them evidence that Australian property is pretty solid. And that and that losses in this kind of investment weren't likely to occur hadn't occurred. But fair enough, Lehman Brothers fell apart, we started to see pretty substantial redemptions out of our products and so that was the point where I learned a lot about liquidity management and the true liquidity of some credit investments. Even a triple-A-rated note that didn't really have many risks of loss. Still could be something that no one wanted to own today and no one doesn’t want to own tomorrow. So you know, learn than a lot about interbank funding markets and our guess alternative sources of liquidity. And also, you know, making sure you're right size your liquidity for the worst case or, or pretty bad case at least have taken that since then. We didn't have any of our funds locked up. We didn't have bad credit events. We definitely had, we had one or two losses in underlying notes. But the income, we didn't sort of impair capital is what I'm trying to get at. The income was what was impacted by those. So, yeah, learned a lot of pre the GFC people used to use the saying, Well, if that happens, you know, the whole markets imploded and gone. Yeah, now learn that you've got to prepare for, if that happens, because just about anything can happen.

 

Daniel Grioli 
Where you're right. And it's not just what happens, but also investors reactions, because, as you know, in Australia, sort of two or three years after the GFC, a lot of these credit notes recovered. But at the time, it looked like they may not, and investors were certainly acting like they wouldn't. And those mark to market losses that people experienced, even though many of them resolved themselves in time. They were pretty serious at the moment, you had no visibility about whether that would, would end well at the time. So yeah, tricky period.

 

Thadeus McCrindle 
Certainly. And I think that you know, that was a really good example of a period where we had clear illiquidity premium, you know, like, there were a whole bunch of notes that I looked at, that we did research on, and we found, we thought there was zero way that they were not gonna pay to repay in full, their 100 bucks, and they traded, say 95 cents in the dollar, you know, the really high-quality assets, I mean, you could do the work on the others. And if you're accepting that you did enough, it was between 90 payback 100 cents and 80 cents, well, you know, stuff like that was trading at 30 cents in the dollar. There was a lot of illiquidity premium because if you bought it, you probably wouldn't be able to sell it, you're gonna have to wait to collect the principle. And look at, and I've used that, you know when since taking on, you know, superannuation money. And, you know, the concept of the illiquidity premium, and when you build a portfolio, you've got a better sort of making sure you frame liquidity in the equation. It’s not at risk and returns it's, it's the other arm, maybe.

 

Daniel Grioli 
Definitely. And we've seen that again, with COVID. Because with some of the other asset classes, for example, infrastructure and property being especially hit in the lockdown period, you know, the illiquidity that comes with those asset classes, caught some investors off guard, because they assumed that they would be defensive that that'd be the part that would hold up the best, but not necessarily, you know, recession triggered by lockdown as we found so definitely, definitely interesting. Interesting. So moving back to Sandhurst, and the strategic Income Fund, more specifically. The team, I believe, has both a top-down approach and a bottom-up credit research approach. Take us through the top-down approach and how that informs the portfolio's allocations across how much you're willing to allocate to credit risk and duration and what type of credit risk.

 

Thadeus McCrindle 
Yeah, certainly, certainly. So look, I've got a team, as I said, and I probably should have given this at the introduction. Roger Coates is the portfolio manager who focuses on this for this fund. And he's got a team of analysts, which, which I think a really, really good guys that get out there and, and probe things. From a top-down perspective, we think it's really important to be clear on where we see both the value and the, I guess, directionality momentum of credit markets, and that helps us set out perhaps along with liquidity, and we'll come back to that helps us set the broad amount of risk-taking we should be doing in our funds. And what does that sort of look like? Well, in the income fund, we do invest a lot in floating-rate notes. And, and RMBS. And, and at the top of the structure, these kinds of assets have good liquidity and so we can sort of move the fund around to have a little bit longer duration, so you know, buy five-year floating-rate notes instead of two years of floating-rate notes or the equivalent on RMBS. And, and that has a material impact on if, you know, if we see improving conditions, you know, changes the number of capital gains return you're going to achieve. And so, a process is very cognizant of the value in different sectors, we spent a lot of time on the relative value of, say a credit curve, compared to the relative value of a different asset class or if perhaps if I can give the example of a bank, major bank credit curve versus a regional bank credit curve and or a particular corporates credit curve. So we saw, we look a lot at the relative value as one input from a top-down perspective. The next one would be, the, you know, the momentum in markets. So, I'm a believer that markets have a mean reversion property as well as momentum properties. And there's a lot of evidence to that point, we sort of think that the good way to invest is to, combine the strength of both not ignoring liquidity. And again, I'll add that into the equation, but combine the strength of both to, you know, just I guess it's to reduce the risk and improve the sort of timeframe for payoff of risk-taking. The simple way to put it is that we like to own things that are relatively cheap when they are catching up to whatever they're relatively cheap too, we're comfortable to keep owning them if they get to Fair, fair value, they will start rebalancing. One, they can become relatively expensive, if I can put it that way. We don't just buy relatively cheap things, with no momentum. So that's a piece there, I won't go into momentum, it's reasonably straightforward. In terms of we're looking for evidence of price movement, I think the last part of the puzzle, though, is really important to focus on is liquidity. So we do, we do give some consideration economics, but frankly, they they're pretty slow to change economics, except perhaps in March last year, so in March 2020, the but liquidity is something that does sort of change a bit more frequently. So the support that both governments and central banks, and as well, the private bank system is providing to the flow of capital available to the economy is, I think, really critical and has been an important driver too, to the returns in, is not just credit markets, but even equity markets, I think, as well. And so over a number of years now, we're very focused on those sources of liquidity, where the dynamics today and where we expect them to go. And I think that you know like central banks are really good at communicating what they intend to do, you know, they've become good at this forward guidance kind of stuff. But the, you know, politicians perhaps, have to play political games, and so they are not quite so good. They're certainly not giving us good forward guidance on opportunities. But it's about reading some of those things and what, you know, what is the support coming from those two and then or the opposite or tightening coming from those two. And then the commercial private banks, which really can create a lot of money. If if the conditions are right, and the regulatory frameworks are right for them. So yeah.

 

Daniel Grioli 
There's a lot of interesting points to unpack in your answer. I was very interested to hear you describe the linkage between value and momentum and how they, almost exist on a continuum. And the way I, I like to think of it is a little bit like the weather. In that, if I asked you to describe what you think the weather will be like tomorrow, the best guess is to say it's more or less like today. In other words, there's a bit of momentum. If you're in the same season, it's going to keep being sunny. If it's summer, it's gonna keep being rainy if it's winter, however, if I asked you to tell me what the weather's going to be, like five or six months from now, your best guess would be the opposite season to where we are now. And that's that sort of longer-term mean reversion. So that's sort of the way I've always put it together in my head that momentum and value aren't so many opposites but exist on a continuum. And it sounds like your sort of thinking about trying to find your sweet spot along that continuum, as you described it, I think, very happily looking for things that are relatively cheap. But moving in the right direction. Where do you see relative value at the moment?

 

Thadeus McCrindle 
Yeah, good question. So we've, sorry, I think you're sorry before I get there. I think your examples are really good and the timeframes are also right. So mean reversion. Or in the case of credit, it's actually sort of more mode reversion. The mean is above the mode, in terms of you think that credit spreads normally, but the same principle, right. But yeah, that's a longer-term, return source. And it works over a longer time frame, whereas momentum works over shorter timeframes. But so, to your question, what, what relative value at the moment, like we're very focused quite often on the value of bank major bank FRN’s versus regional banks versus corporates and then and then also RMBS. And I think that we sort of see a bit of value at the senior end of the RMBS curve. So those lower risk notes, we've seen some spread widening, they're certainly relative to a major bank, shorter data curves or lower risk on parts of the major bank curve. And, and I think the other thing that we observe structurally, is that RMBS, shorter-dated notes tend to be structurally very attractive, the market doesn't seem to price the time element of the risk very well. And obviously, in the case of credit investing, obviously, your risk reduces every day, in a normal investment, because it's less likely that it can default if you've got less time to go to maturity. And we don't see a lot of so shorter, dated RMBS, we don't see having a materially lower yield and longer data ones have the same kind of credit risk profile. So that's something we see and we have seen quite a lot of for a long time. And probably they would be standout points. We always very, like look at the value of regional banks versus majors. And I think we certainly in the team have a difference of opinion on this one, because spreads have sort of close to what they have historically been so like a bank, like Bank of Queensland spread versus Commonwealth Bank spread, that premiums about close to close to average, but when the raw yield of the is lower, I'm kind of the view that you got to think of it in ratios, rather than raw basis point spreads. So I think there's a bit of value there, but the analysts in the team have done some work and point out that that's not, you know, that's not necessarily a reliable source of potential gains, that spreads do sort of tend to stick a bit more in a basis point kind of premium way, rather than an as a ratio. You know, time will tell who's more right on that one.

 

Daniel Grioli 
Very good. I also wanted to come back to a comment you made about liquidity because we know that as a result of COVID, there was an extraordinary amount of liquidity that was poured into the system. You know, some of the indicators that I look at in my work, for example, is the US money supply, literally off the chart. And as somebody that was managing an overseas portfolio and looking at the dollar, you know, the day that the Reserve Bank announced that they were going to intervene in the currency market and provide liquidity there. The change in the dollar was just extraordinary. It had just suffered a three standard deviation move to an 18 year low and then it bounced off that immediately as soon as the liquidity was there. So we've had all this extraordinary liquidity and we're starting to hear the Reserve Bank talking about taking some of this away, I think they have already started with some of their longer-dated bond purchasing and sort of winding that back. How is that going to affect the environment for credit investment and, and housing as well, because it affects obviously, banks’ ability to fund loans?

 

Thadeus McCrindle 
Yeah, for sure, I'll start with credit. And if I forget, if you could remind me to come back to housing, in terms of credit, so one of the other really substantial liquidity facilities, the RBA, offered, the banking system was the TFF, the “Term Funding Facility” that was quite a material source of funding for all banks, it was sort of linked to the size of banks to how much they had each to borrow against. And, again, that one had a fixed, quite low rate assigned to it that ended a number of months ago. And so we've already seen an increase in the credit spreads on the bank, senior unsecured bonds, and, sorry, floating-rate notes. And also, as I said before, on RMBS. Now, I'm not going to the relative motion between those two and the relative raw yield levels is where I see relative value for RMBS. Compared, to the bank FRN’s, but I think the point to make, though, is some has been withdrawn, and it's had an impact. So we've seen a yeah, the some of that some of the mean reversion perhaps, against if I can put it that way. You’re right, there are further quantitative easing, taper kinds of commitments here in Australia and overseas that are withdrawing liquidity but I think the difference there is you have to remember they're not withdrawing liquidity, they're reducing future increases in liquidity. So the moment that kind of impacts markets is only when either at ends or I think it's become a lot more popular. And I'll be honest, I think until COVID, not many people seem to focus on liquidity as a signal to how you invest top-down perhaps other than a few hedge funds. But it's more popular than now and so the market may move ahead of that. And that's something we try to think about and look at in our process, what we'll do is we'll use a whole series of the combo, longshore ETF performance to try and help us see when elements of the market start repricing things like, you know, liquidity, changes in liquidity, views or appetite. I think that the bigger thing I worry about from a liquidity perspective in, say, 2022 is the government response. So to your point, there's a huge amount of deficit spending, that government, the Australian Government and foreign governments, particularly the US did last year, and this year, and I think that the current plans are to not continue that. And I think that the rhetoric and the tone around austerity or responsible fiscal responsibility is the thing that would scare me a bit more in terms of the whole liquidity support for markets. Because if, if governments stop net spending, and they start net saving by obviously, targeting or at least moving towards surpluses, then that is pretty hard liquidity to draw. And, and the regulatory environment. The last piece of the puzzle, which people don't talk about much anymore, but was the only way money was created up until COVID. The banking system, the regulatory frameworks are not exceptional to incentivize banks that create grow credit, which is a different way of creating more and more liquidity. There is obviously you know, it's pretty profitable for banks to do residential loans. But, but there's also a whole series of actions that APRA and the Reserve Bank are looking to take to curb house prices, which curb house prices, that probably reduces the increase in debt accumulation in the community. So, I think that's how I'm thinking about liquidity. And but But you certainly are thinking about the right kinds of things here.

 

Daniel Grioli 
On that point about some of the potential impacts on house prices from changes by regulators. And I know APRA has asked everybody to tighten their lending assessment criteria, and I believe they've circulated a paper recently asking banks, what the effect of some other macro-prudential controls might be. I think that's an interesting segue into how being a subsidiary of Bendigo, and Adelaide bank can help give you a different lens on the credit world because we were talking before the podcast that you actually can sit down with the bank’s credit team, and workshop, how some of these changes affect what they're doing, which then gives you some ideas of how it might affect the, you know, the asset-backed securities that you're looking at in your portfolio. So tell us a little bit about how those sorts of conversations can improve your, your understanding of the market and what's happening.

 

Thadeus McCrindle 
Yeah, for sure. It's, it is an interesting one. And we certainly often get questions about, you know, you know, do we invest in the bank? You know, do they shove assets in us that they don't want? That kind of thing? And I think it's, you know, there's been some bad behaviours by some in the past, and I'm very comfortable and proud to work for Bendigo Bank, who certainly doesn't have the reputation to do that, and, and doesn't do it, we don't invest very much at all, in RMBS, or FRN’s issued by Bendigo. Bank and, and I think we've got no exposure today, now we can take some exposure, but we do that, again, quite opportunistically. But in terms of, it's really interesting, when you have access to, you know, the chief credit officer, you have access to the head of capital. And, and, and the regulatory compliance department, which, which obviously, that kind of stuff really big in a bank. Because it does give you good like, I can sit down with those people and get a good sense of, what are they thinking? How's their first response going to be to new regulatory change or those kinds of things? Because I think, you know, the whole industry hears about every move APRA would make and the Reserve Bank and, and there's always a quick response from the sell-side on what does this mean for banks. But my observation is that that's not always the sort of operating living practical truth. An example I can give you is, and perhaps one that would help us if we turn the clock back to the Royal Commission, that bizarrely, some people have forgotten about already. But I guess COVID has been a pretty big deal. But if you turn the clocks back to the Royal Commission, you know, perhaps you and I, and many were watching those, those each day, you know, with some, some tough questioning on some bank executives, and, and senior managers and, and one of the things that we sort of picked up, and I had a good chat with the head of the risk. And then the head of credit, here, the bank about pretty early on in the Royal Commission was the responsible lending and really the call out that it hadn't been applied correctly and appropriately. And, you know, maybe there was compensation. And I think, I think the market kind of saw that, and banks have been not being responsible and kind and fair, and, you know, all right, there'll be a little bit of remediation cost. All right, great. And that was the kind of stuff you heard from the sell-side desks. But when I spoke to credit, and head of the risk, you know, that the attitude response was, Well, we have to move people off of this sort of model of what they're going to spend onto what are they actually spend. And when you do that, you know, and it is not very hard if, if you understand these models, to pretty quickly learn that people's borrowing capacity is a lot lower in that kind of situation. And that's because these models don't include things like private schools, they don't include holidays, other than, you know, really basic holidays. And so all of us have a very limited amount for entertainment, which obviously a lot of Australians spend a decent amount of money on entertainment. So When when you look at this, you know, quite simplistically, we worked out that borrowing capacity of, of the average Australian was going to half very quickly. And the other thing I could read the media in the, in the notes from, you know, in the media articles and the responses of the major banks in the context of these conversations that had told me when Westpac, Comm bank, ANZ, etc, were literally cutting them, their spending models for every single Australian, the response for us was easy, it was to focus on the collateral quality, because we sort of looked at that situation and saw house prices were going to probably fall, we didn't really know how much but certainly, that the rug pulled out from under them because of lending capacity in the community, and, and the places that would be worst hit were the most expensive properties. So Sydney, in the city, Melbourne, and, you know, parts of Queensland as well, where some of the highest price houses are. And so we spent the time we're able to, in a reasonably orderly way, consider our RMBS investments, what exposures we had, we made some divestments, we actually added exposure and some people that we thought were reasonably immune, but it gave us in a different conversation to go and have with those issues as well as non-bank issuers. Like AFG. And, and, and the like, and talk about what were their practices, where were they going to stand on this on this equation and issue of Responsible Lending? And it really gave us a good clean, a good clear sense of the people that were already running pretty conservative credit underwriting versus those that were more aggressive. And we kind of where thinking about where are the possible law, lawsuits, but then it was more about if people were using all of their capacity to buy the properties in the pool, then those properties were the most vulnerable to a decline, and so the quality of your collateral, and bring that into your equation. And again, that's a bit of a top-down kind of activity as well, though it's not so economic if I can put it that way. But yeah, so we see a lot of value in getting the bank's perspective, but there's always changes to capital rules you’re right, at the moment, macro-prudential is certainly being discussed. And I think I think, you know, sometimes we get a bit of just a little bit more flavour on what is the regulatory strength behind a move, which you don't always get from, from the consensus view.

 

Daniel Grioli 
So all in all, it sounds like a very useful input into your investment process, and understanding the world that you're operating.

 

Thadeus McCrindle
It certainly creates a bit of leverage and given like, with these funds, you know, you're investing in the bank. You know, FRN’s bonds, you're investing in RMBS, it's all sort of mostly boils down to residential property risk. And so it is, from that perspective, it is, you know, great leverage to for my team, you know, we're, we're not tiny, but we're not enormous, and we just get so much value out of some of those conversations in that kind of particular area. From this, from the bigger organization,

 

Daniel Grioli 
I guess you can also benchmark too what you're seeing from the issuers, because yeah, the issuers might be saying they see the world this way. And then you can ask your, your peers, how are you seeing it from your end, and it gives you a basis of comparison to see who's, as you say, perhaps being a little bit too sharp with their underwriting and so simple as they might need to be,

 

Thadeus McCrindle 
sometimes as well, you speak to the, you know, the in house legal and on an issue. And so one that's just coming to mind now is self-managed Superfund lending, you know, it's one of those things, that's this two camps, and there are not many people in between those two camps. Some people think it's terrible, highly risky, and other things. Fantastic. But it's really good to speak to people who've done some work, and where are the pitfalls? Where are the opportunities, and then you as you say, use that takes that when we're looking at a pool where there might be a bit of SMSF lending? And really challenge, you know, show me and talk to me about what's involved here the in the application process. You know you say to me that, yeah, we make sure it's relevant, this is appropriate For the investment strategy, the SMSF. But, you know, how do you do that? Show me your documentation and your and your evidence point, which I think that quite often people like they take the first response. And they're sort of like, yep, take that risks being addressed. You know, when when you can talk to people that have done the activity at the front line. And, and you know, you can trust their responses, frankly, you're right, it really creates really good benchmarking.

 

Daniel Grioli 
And it cuts your learning curve down a lot to save you a lot of time. So you've described this top-down process where you, you're looking for relative value, you're looking for relative value that's starting to be recognized by the market, we've got some momentum going your way, you're looking across asset classes as well for, for the dynamics that are happening there. And what that might mean for credit, you're also looking at liquidity. You're looking at fiscal spending, and you're looking at what the regulators are doing. So that's the top-down approach, and you're using that to set, sort of a, let's call it a, a target duration for the portfolio and a target, credit risk level, and the buckets that you think are relatively more attractive in which to take that credit risk. So moving from that to the bottom-up process, where you're actually going through the issuers and you're looking through the floating rate notes and the corporate debt, and the asset-backed securities, how does that process work?

 

Thadeus McCrindle 
Yeah, for sure. So, if I start with the company, be it a bank, or a real corporate, and I call them real banks, one of the things people don't really understand about banks is the concept of money is different to a bank than any other person or a company, for bank money is an inventory, is the best way to put it. That's the product they're selling is money. And it's very easy to get more of, except in the most terrible of market conditions. It's more the price they pay to get their money. But anyway, sorry. So. So in the case of sort of more corporate analysis, you know, that there's obviously an element of that’s financial information gathering, modelling and forecasting. You have to understand how business works, what are its sources of income, where its customers coming from, and business strategy, and I guess, you know, like, corporate strategy. So we spent a bit of time at the desk on the spreadsheet, going through that kind of information, we then always make sure we, we talk to the company, we want to understand from management, some of these softer things like what is the strategy? How are they, How are they going to build and grow their business, etc, we like to have a good understanding of the competitive environment. So where is this business positioned in its market? Why does it have an advantage? Or where's it sourcing its customers from? And then what are its relative strengths or weaknesses? And frankly, most businesses have some weaknesses somewhere. In the case of banks, you know, there's a lot of time spent, for example, on the process they use, we want to understand, are they writing conservative or aggressive credit, when they are lending money for simplistically, and that often actually is quite different between businesses and residential, or you know, consumer lending. And then, and then, we took a look at the competitive position, speak to management. And then we also want to sort of gauge I guess, from more a customer perspective, what are the reasons to keep using this business? Give us a bit of a sense of what's the growth outlook for this business? Like, you know, where can they source customers? Is there value for those customers? And, and that kind of like? So, there's that sort of activity. For for for companies. What we then also like to do in the case of say, something like a well is pretty important for banks, and this is perhaps one item that almost can be put in a top-down bucket or bottom-up, it's just part of it. process and I guess it sort of sits somewhere in between is to think about the liquidity profile through time. So is this entity going to continue to participate in the market that will have an impact on the liquidity of their bonds? But then equally, how reliant are they on participating in issuing more debt, or more equity for that matter. So there's a fine balance, that you want someone to be regular, but in both markets equity and debt, assuming they're a public company, of course. But at the same time, you don't want their core needs, to have to be financed out of those markets. Otherwise, you know, there's a particular vulnerability and you sort of have to discount in, well, if we're investing in that kind of business, then we would up the expected cost of capital for that business because, at some point, they're gonna have to issue and source capital in a very, very expensive price. So again, prefer not to go there. But it's all about getting a really good understanding of where each individual business is at. And, and whether its situation is likely to be net improving, roughly staying the same or deteriorating. And that also includes talking to people like management directors, testing and probing and making sure that their procedures and controls are strong, robust, and that, you know, some of those sorts of fraud kind of risks are managed, well, none of those kinds of risks are entirely avoidable, but you want to you want clarity that they're being managed well, when it comes to RMBS, we, we do spend a lot of time on understanding both the loans that are in the deal that's being done, as well as the issuer. And of course, in each deal, there's sort of structural elements to the way they build the subordination. And sometimes I put little frills in the way that the payments work. And, and we spend a lot of time on really understanding the cash flow structure, structuring. What does that look like in terms of, you know, like on investment, we do loan-level analysis on every single investment. So, you know, and RMBS is coming to market, say, late this week or early next week, we've already got an established relationship with all the issuers and so they will flag look, we're bringing a deal to market, here's our pool, here's our loan pool. And again, we do a loan-level analysis so that we don't know anyone's names, there, you know, anonymized in terms of that way, but we do know, the postcode people live in the size of loans, their arrears history, and all that kind of stuff. And we do a probability of default at a loan level, obviously, aggregate all that up. And then we and then we play around with, the particular characteristics, and if particular scenarios will occur, how that might adjust and change the defaults. But then also, in particular, because you can attach this default likelihood to a particular property. You know, you know what the valuation is, you know, what data was done. And so, and the LVR, sorry, and, and so, it allows you to sort of cross-reference if this does default, where's the what has to happen for us, for there to be a loss. And again, that's a bit of a scenario testing kind of thing. Aggregates up and, and obviously, we want to stay away from anything we think could see a loss. As I said, before, we do a bit of a cash flow analysis, there's something some, some deals are really simple and vanilla, but some, they just throw in some cool little bits that make it a bit confusing and save them a bit of dollar like the issue or make a bit more money if they do some of these things. So spend a lot of time on really stressing what the impacts are and where that could be good or bad for different notes because they're typically good for senior notes and not as good for other notes. So we'll play around and push and pull that in assumptions to just see risks there. And then probably the last piece of the puzzle is, it's all about understanding what's the actual stuff that the stuff that happens to get those loans there. So that's underwriting risk. So you spent a lot of time with issuers understanding their processes. You know, what, what, what do they believe about credit risk? How does that manifest in their process about when they're going to whom they're going to reject and whom they're going to accept? Where are their limits? And then, and then the all-important collections, you really need to understand what are the processes an RMBS issuer uses to collect because some, we've found that sometimes, some issuers are so upfront and proactive with their collections process, and it's a positive, they try to make it a positive process with their borrowers that they have very high arrears. And so when you sort of get the standard information from the issuer, and I guess, the deal originator, the arrangers, they, it might look like an average issuer, they've got higher arrears, they seem to have high arrears and all their deals. But when you

 

Thadeus McCrindle 
when you fully understand how they're collecting when they're making phone calls on collections, what their experience and interaction are, what their appetite for putting someone in payment arrangements is, it puts a lot of this other stuff into context. And we so we make a bit of adjustment on our thinking on like arrears unexpected losses based on these qualitative discussions. And I guess investigations of the process they use. I've said a lot there. Sorry.

 

Daniel Grioli 
That's okay. I have two follow up questions. So how many issuers are your team actively following and engaging with? And the second follow up question after you talk about the issuers, as we mentioned, prior to the podcast, you mentioned an example of one issuer where at first pass, you might think that they were quite risky. But when you looked at the nature of the loans, and I won't spoil the story, I'll let you tell it, they're a lot less risky than they might otherwise have been, and therefore offered pretty good relative value. But I'll let you talk about that story.

 

Thadeus McCrindle 
Yeah, for sure. So to answer your first question, there's probably it actually keeps growing, but there's sort of 15, maybe 15 active issuers in the market. And there's more than irregular issuers in RMBS. The major banks have not been playing for a while. And even the regional banks have been issuing a bit less. And I think it's that TFFI I talked about a lot earlier in the, in the discussion, the and so we have really strong working relationships with probably about 10 of them. And, and, you know, we talk to the senior people, at these non-bank lenders, at least monthly, and in some cases, someone in the team might be almost talking to them weekly. So, you know, we've got strong relationships with the CFO’s, and the CEO’s and the head of funding and all these different bits and pieces. So that's to answer your first question. Your second question. So yeah, we, we found that when, when you engage on, you know, you build a relationship with these people, and they're happy to share more and more detail. We've kind of started in a few instances, asking them about some problems. So I kind of half reference before that. There are one or two issues that have these some quite structurally high arrears. And, and so I'm thinking of an issuer in particular, but I won't name them. We kind of sort of found ourselves talking to them about, you know, his new deal coming, what do you think? And we're sort of like, well, you know, we've got a problem with the arrears. Can we were planning to skip this one? But can we talk to you more about some of that? And what we found when we sort of sat down with them, talk to some of their managers in their business, about how they were originating loans and then how they, how they manage collections, we kind of realized that they structurally and there were who are thinking of just a moment ago, they structurally are going to have higher arrears, and it's not because that's necessarily going to lead to higher defaults. It's more the way they work with their customers. So this issuer has a little bit higher exposure to tradespeople. So you know, and tradespeople are either subcontractors or just raw self-employed and so their incomes variable, I guess in nature, and they're not, but they're not very binary. So you know, people that have a PAYG job, they go to go to work and they get paid every fortnight. If they're casual, obviously, the pay varies, but the point is, you know, they, they've got a bit of a binary kind of outcome. So, if they lose their job, then their income falls to zero. Whereas tradespeople, that's not kind of what happens they get quiet. So what do we have in 20 was 2019, we sort of total collapse and building feel like it was 2019. seems ridiculous if you've got tried to try to get traders in to help with anything on your house over the last 12 months. But in 2019, there was a big drop in a building. And so a lot of tradies incomes fell. But they didn't fall to zero, they, you know, they filled a 60% or perhaps what they're earning before that. And so, this business, knowing the customer, when they come to collections, they're very quick to communicate with people, they've got sort of multi platform-style communication. So it's easy for you to know you're in arrears. It's also easy to communicate back where you are early in the process. You know, I think they accept texts as their response, for example, which I was pretty surprised about. And but they are very realistic about having very long payment arrangements and workouts with their customers because they know that the cyclicality in the income, but through time, they've already in the underwriting considered that cyclicality that through time, these people can make a good and they certainly are very comfortable to ask for extra and get, you know, for you to get yourself out of payment arrears, when the times are good, like, presumably they are now.

 

Thadeus McCrindle 
So, like that, that issue is a really interesting one. So we used to, as I said before, sorry, I feel that's a little long-winded. But as I said before, we were looking at them in a pretty negative light. Whereas now we are sort of making adjustments to their arrears numbers in our internal risk modelling because one of the things they brought our attention to is the arrears to default transition. And the fact that they might have run arrears double the industry, but the defaults were less than half the industry. And showed the steps in the process gave us some living examples of how people can easily get to 60 days of arrears, but they're quite good at keeping them within 90 days, and they're willing to have the hard conversation if someone is, you know, it does get sort of four to six months in arrears kind of thing. So yeah, that was a really good example of someone who we were a bit bookish around, had a really good engagement series of engagements, built some good relationships, and a good understanding of the process that leads us then to be able to invest. And the beauty of an issue like that is they tend to invest in you know, at sorry, they tend to issue and they offer a tiny return premium because the market considers them riskier. So we’re then comfortable to sit in there more regularly investing in those deals collecting that, that premium, not usually huge one, I will admit but that premium, and sometimes the premium might be through more credit enhancements. So even lower risk might not be in that return premium, it's a low-risk premium.

 

Daniel Grioli 
I guess that shows the value of having the resources internally to be able to have those conversations and dig a little deeper and find these issuers where just because the people they're lending to have different circumstances doesn't necessarily mean that they’re riskier mortgage customers. So that's I think that's an interesting way to illustrate your process and how you're having the people in the team that can do that work is helping you unlike, as you said, your small return premium, that otherwise you might have overlooked thinking that it was too risky. So we've talked about floating rate notes, corporates, asset-backed mortgages, I just want to talk briefly about one thing that we haven't talked about, and that's hybrids, which usually sit in the income sphere, but I noticed they're not in your strategic impact Income Fund. Perhaps you could tell us why.

 

Thadeus McCrindle 
Yeah, so we do actually have another credit Fund, which is a higher, higher-yielding product, the Bendigo income generation fund that does use hybrids, but they're not in this strategy. And, and really, they're not in the strategy. Because, the downside risks on hybrids, quiet material, I think is probably the best way to put it. On this strategy, you know, we're targeting outperforming bank bills, historically, we've outperformed them by close to 1%. And, however, you know, we are this is a more at the enhanced cache kind of end of the spectrum and, and hybrids, they do tend to pay a good return, like, you know, that the, you know, the spreads, you know, say 2 or 3% of Late. However, if you look at how hybrids perform when equities get in trouble, and you see sharp moves down, they sort of have a lot more gap risk is probably the way I'd articulate it. Obviously, The thing with the hybrid is, it's a bond until it's behaving like equity. And, you know, the hints in the name. But you know, they do, they do tend to jump down quite dramatically. And really, we're looking for delivering it to deliver a real, you know, it's not entirely smooth, but a pretty smooth result for customers in this product. And so it doesn't fit in the portfolio in our minds. A lot of people I know have been reaching for yield and trying to sort of delivering on a particular return premium, and have started to introduce more and more hybrids. You know, there's nothing wrong with the strategy that does that. It's just not the kind of strategy we're looking to offer. You know, there are no bad surprises here. If you invest in hybrids, there can be good, better returns, definitely I'll acknowledge that. But there's always the risk of some bad surprises one day. So that would be my comment there.

 

Daniel Grioli 
Definitely. Yeah, the way I was taught to think about it when I started out was that everything is a pairs trade. So you've got to look at both legs of the pair. So if you're investing in hybrids, where are you taking the money from? So if you're taking the money from equities to put into hybrids, you're de-risking your portfolio. But if you're taking it from more defensive, fixed income, or cash to reach for yield, and you're increasing the risk in your portfolio, which kind of leads me on to the next question that I had in mind for you about the strategic Income Fund is? Where would it fit in a client's portfolio? How would they use it? Within their portfolio?

 

Thadeus McCrindle 
Yeah, so I think the strategic Income Fund is certainly on the defensive or income side of the customer balance sheet. When you think growth and defensive or growth and income, both terms seem to be used in the industry. The but that's probably not news to anyone. Right? If they've been listening till now, the part of the portfolio This suits us is like I think I think the best way to put it is strategic cash. Money that you want to that you believe, is appropriately strategically sitting there liquid, ready for something. But has, I guess a bit of term to it. So I'm not talking about the cash that in for someone who's retired, who's got a pension payment next week, and the week after, that should be in should be in a cash account. And, you know, obviously paying nothing at the moment in terms of returns. But I'm more talking about the party's strategic asset allocation that you're allocating to cash but frequently you're not using. That's the part of the portfolio that this product really helps with, you know, we've had, we spend so much time on liquidity management, we make sure we invest in assets that are going to pay a nice return premium but are not going to take the pain when equities sell-off. Because hopefully, for those out there managing money, they do have the ability to call on some on some of that liquidity. When you know, equities that are in a bad way, or other growth assets are in a bad way because that's a really good strategy to call on your liquidity and buy risk when things look pretty sour. After all, you can add returns. But that's probably the short version of the part of the portfolio it fits. Because that return premium is nice and juicy over cash. And really, you're adding such an immaterial amount of capital volatility in the context of the portfolio.

 

Daniel Grioli 
So just to summarize you, we've sort of touched on a couple of times through your targeting a return of 1% above the bank bill rate, by investing in a highly liquid high-quality portfolio of credit assets, predominantly floating rate notes, asset-backed securities, corporate debt, in some term deposits and cash.

 

Thadeus McCrindle

Yeah, yeah. So we do have a material amount actually in the money market and term deposits. And obviously, they're not high returning and not much of an exciting part to talk about in terms of this kind of conversation. But yeah, we were very focused on half the portfolio more being liquid over sort of a pretty short timeframe. And we've even done some stress testing, we're looking at 45 to 50% of the portfolio liquid over three months, even in sort of a GFC kind of liquidity conditions, which is a lot more than we're going to need to meet redemptions. And so there are money market deposit accounts and even term deposits in there in the portfolio. Yeah, but the investment in floating rate notes as well as reasonably defensive, from credit risk and sort of mark to market kind of perspective,

 

Daniel Grioli 
and have those allocations between those asset class buckets sort of shifted over this COVID pandemic, Lockdown recovery period?

 

Thadeus McCrindle 
Yeah, so like, what I was saying with the top down, we definitely sometimes that drives our allocation through time. But one of the things that we definitely, you know, sort of the primary use of the top-down is, it's more about should we be short, dated on bank floating-rate notes, or long-dated because in our portfolios besides that sort of cash type products, those major bank FRN’s or float rate notes really very liquid in the market. They're really almost as liquid as government bonds. But anyway. So I think that probably the easiest way to answer this question is that we saw a quarter repricing of liquidity risk in March 2020. So the types of securities that have got a little bit lower liquidity, so pretty good spreading increases, and, and we had actually had a reasonably a low exposure for us to RMBS. And it's certainly one of our areas of expertise. And so but going into that we had, FRN’s, we were a little bit actually lightweight, we were shorter duration, because we were worried about what was happening in China weren't sure what the impacts would be on global markets, but we thought we'll just de-risk a bit. But we effectively, materially increase in almost doubled our exposure to RMBS. If I go back to sort of yeah, so March 2022. Now or in recent times, what yeah, we had a pretty material increase in RMBS. We have reduced our cash and deposits and, and, frankly, that's really a yield kind of issue. So pre GFC, we saw some really good return premiums on term deposits and some money market securities. And so we've moved those more to toward the comfort minimums from a liquidity perspective. So we set minimums for liquidity reasons out of liquidity forecasting, move those back toward those lines, and allocated more to RMBS. For a while, we were taking the sort of the second note in the structure, there was a lot of value there. And as I said before, when I talked about how we see the market now, we've moved more toward the senior notes, we think they offer more attractive propositions. And an explosion of floating-rate notes hasn't moved a lot, but the ones we own have so We've got a little bit more longer-dated than we had for a while there.

 

Daniel Grioli
Talking about floating-rate notes brings us to my final question and that's inflation and interest rates. So you've got the RBA saying inflation is transitory. I filled up my petrol tank yesterday cost me nearly $80. I don't think that's ever happened before. So there's a bit of anecdotal inflationary evidence. And then you've also got the RBA saying, Look, we're under no pressure to raise rates until 2024. But you've got the market pricing in a rate rise sort of mid next year. So what's your view on inflationary pressures? rate rises? And, you know, how does that feed into the strategic Income Fund?

 

Thadeus McCrindle 
Yeah, yeah, really, really good question. So, I'm, I'm not one of those people who's gonna say to you, is inflationary trends, inflation, transitory or not? It's a word that was chosen by the US Fed, and I'm sure they regret it now. I kind of want to say I think inflation is transitory, and it's going to continue. But that's just because I think transitory is more about what's driving the inflation rather than then its timeframe that it will last. I think there's a lot of parallels, actually, between now and the 1970s. And a lot of people talk about is it like the 70s is like, the 20s is like the 30s? Is the like the 60s? I think it's a lot like the 70s. And the reason I think it's a lot like the 70s is that a lot of the inflation, we are seeing really starts at supply, disruption, supply shock, right. And, and I think the reason I kind of worry that we will see higher inflation for some time. And I think we'll definitely see cycles, by the way. I think 2022 is going to see low inflation. But I definitely expect to see generally elevated inflation over the next number of years. And I'm not going to say exactly how long because I don't know. But the fact that we're seeing a lot of inflation through in the energy market definitely is a signal that we should expect to see more broad inflation in goods and to some extent also in services. Because, you know, what we're doing right now is better described as a service than a good. And you've already explained that the costs to the input to come in here are up. Right, but so so I definitely, definitely have a view that inflation is being driven by disruption. And I think that the other thing to remember is globalization certainly has changed direction we for so long, we're globalizing we were concentrating economies, we were specializing economies. And I'm not sure it's aggressively reversed. I'm not saying we're in D global D globalization. I just think that that the momentum is out of that right. And it could, it could recommence as politicians change through time. But whilst we're out of that, the structural deflation that created income inequality was corrected, and effectively, income equality occurred, raising the incomes of those living in the emerging markets. And frankly, raising real incomes for those living in developed markets through goods getting cheaper and cheaper. Like that. trade wind is now absent. So, yeah, I'm gonna, I'm expecting what we would call high inflation, I guess. I don't think we'll see a lot of double-digit inflation. But I also acknowledge we might see it touch a double-digit somewhere, maybe in the US in the near term. But maybe in a few years. One of the things everyone kind of forgets about inflation is that in the 70s, is that it was quite up and down. And the thing that sort of keeps drawing me back to the analogy and you know, the parallel thinking is what commodities have done. If you look at the, at the particularly the early 70s, but it's sort of continued through to really the middle 70s You just saw this weird wave of one commodity running up then following into the next one. And quite often the prices of the first commodity came right back a long way and then moved on to the next one. And that story is playing out today. You know, where did it start? It probably started with gold. And then, you know, if you follow closely enough, you'll have heard of what happened in lumber, where the price went up about five or six times and copper and, and probably coppers got further to go if in the electrification kind of active activity in the world. And you know, just commodity after commodity, obviously, we know here in Australia, iron ore roared up to a ridiculously high price and is, at the time of recording has come right back to, you know, well within sort of long term expected averages. And so a lot of like, that's very similar kind of price action, monetary policies, perhaps not as loose now as it was in the 70s when they came off the gold standard, but it makes sense to expect to see this kind of stuff. The reason I'm not kind of just going to say, I think, you know, you should expect average inflation of 5% for the next five years, is because it is quite critical policy responses, you know, that spent their spending programs by governments, and the monetary programs by central banks are so critical to the, to the end result we get with inflation. I just think that perhaps a beauty of using the term transitory or something I'm sort of looking for is central banks to call out well, you know, the inflation came from energy and food, we're not going to increase rates because that's not going to change people's behaviour around consuming fridges and televisions, they're still going to have to buy, you know, they're going to they, they're going to buy food and energy, whether the price doubles or halves. They're not sort of price you get what I mean that change in rates doesn't create price-sensitive sensitivity to that. So I can kind of see a narrative that I'm looking for. That excuses a lot of the inflation we've seen. And I think probably the last point I want to make is, there has been a lot of inflation over the last decade, and it's been in asset markets. And, you know, I'm not, I'm not going to talk

 

Daniel Grioli 
And school fees and house prices.

 

Thadeus McCrindle 
Yeah, well, I was gonna actually talk about house prices, because, like, it's house prices is just one of those things where, you know, like, everyone's got a view and, and everyone wants to know, your view. And I think that if you talk to people that don't own houses, they, they they they can't fathom paying the prices of housing today. And fair enough, like in raw dollars, and in Might, how many years of income it takes to buy a house, in the suburbs in Sydney, or Melbourne in particular. But really all the capitals in Australia, it's, it's absurd, really. But I think the thing with house prices for me is if you're in the market, and if you're paying off a mortgage, you probably you've hopefully seen the truth. And the secret to the property market at the moment. And that is the actual interest burden on households is lower now than it was four years ago. Now, households are borrowing, you know, 30 40% more, but the raw component of repayments that goes to interest is actually down because of the rate cuts over that timeframe. And so I kind of look at that and go the carry costs or you know, the financing costs of owning property isn't out of control. I think that while we're in a low rate environment, and I do think we will be in a low rate environment for some time, maybe not a zero rate environment forever, but a low rate environment for some time. The property doesn't. It's not as expensive as it looks, which is probably the point I want to make. And I kind of can in our outer suburbs and I mean way out of suburbs in our major cities, but in in the second-tier cities, the outer suburbs, it's actually sort of equal economics to rent or buy the same house, it costs the same even on a P&I loan where you know you're, you're slowly building equity. So I think that that's, to be a bit of a signal that house prices are not perhaps as expensive as we think they are when we just look at the raw price appreciation. And again, if inflation turns into what I'd consider more real inflation, and that's income type inflation, then then we see moving incomes, then, you know, the affordability will be very apparent all of a sudden when you think about house prices is a multiple of incomes.

 

Daniel Grioli 
Very good. So let's hope it's transitory and specific to supply chain issues rather than wage issues and therefore more permanent and hopefully things will be okay if that's the case. So Thadeus McCrindle, thank you for joining us. Thank you for telling us all about the centre strategic Income Fund. We've enjoyed chatting with you today.

 

Thadeus McCrindle
I've enjoyed it too. Thank you, Daniel.

 

Daniel Grioli
The podcast is for informational purposes only. It does not constitute financial advice or take into account the particular investment objectives, financial situations, or needs of individual listeners. listeners should consider whether any opinions or recommendations in this podcast are suitable for their particular circumstances. And, if appropriate, seek professional advice including tax advice