In 2023, Macquarie Group celebrates 25 years of the Australia Conference, the largest annual gathering of Australian companies with both domestic and international institutional investors. Over three days, the conference attracts more than 750 institutional investors and feature presentations from over 100 top Australian and New Zealand companies.
Between Tuesday 2 May and Thursday 4 May 2023, the Macquarie Australia Conference brings together institutional investors and covers macro trends driving business activity in the year ahead. Here we share the some unique insights and highlights from the event.
|Recognising opportunity in AI technology|
|Venture capital through a technology lens|
|Emerging trends and future outlook of private equity|
|Superannuation and the evolving landscape|
|Building a more resilient and sustainable transport network in New Zealand|
|Data Privacy, Security & Cyber Insurance|
|Welcome from Shemara Wikramanayake|
Explore the takeaways from this year’s Macquarie Australia Conference, including the corporate sentiment and key themes of the 100+ companies that presented.
“A superb augmentation tool that offers a way of uplifting our collective potential,” concluded Dr Michael Kollo as he brought the ‘Beyond the fear: The impact of AI on the investment industry’ session to a close with his summary of the potential offered by artificial intelligence chatbot ChatGPT.
A majority show of raised hands in the audience had already demonstrated widespread awareness of the technology that has been trained to have human-like conversations using a process known as natural language processing. But, when less than a quarter of hands remained up when asked whether their business had embraced it, the focus for the session quickly became clear: how can businesses start recognising the opportunity in this technology.
Kollo highlighted the biggest potential for ChatGPT and similar technologies is in industries and economies where AI adoption has been lagging. By seeing the technology as an augmentation tool – an additional resource that allows them to raise the standard of their output in numerous areas – they can increase their competitiveness.
Commenting on the investment industry, Kollo highlighted how these range from executing tasks – analysing and summarising reports, material and conversations – to planning and defining workscopes, and preparing more granular personalisation of client communications and engagements. At a deeper level, he encouraged businesses to consider how their strategies might be impacted and whether they can be evolved to benefit from the potential it offers.
Work on these models has been underway for years, but the speed of change with ChatGPT is something we haven’t seen before; it’s surprised a lot of people.”
Dr Michael Kollo
In a panel exploring trends and opportunities in the technology space, venture capitalists Jonathan Lay, Associate Director in Macquarie Capital Venture Capital, and Dirk Van Quaquebeke, Managing Partner at Beenext, discussed techniques for identifying potential growth companies.
Van Quaquebeke’s team invests early. He uses a surfing analogy for identifying the entrepreneurs he partners with. “We look for a surfer who can show us a bay where you have fantastic waves and there’s no competition,” says Dirk, “ideally, the surfer can surf these waves perfectly fine and can tell us why we should go out surfing now.” His team then focuses on the why now and whether the founding team is qualified to make it happen.
In terms of addressable markets, Lay is looking for the ‘medium-sized waves’. He aims to strike the balance: avoiding markets that are too small and the ones with large capital requirements that risk dilution. “Medium-sized waves might combine with other ones to make that perfect big wave and that’s the dynamic to provide a really good return.”
Looking ahead, Lay sees opportunity in local B2B software. With regulators cracking down and issuing fines for data breaches, he identifies, “Increasing regulation and emphasis on customer privacy as part of a larger macro trend, and we see companies building solutions in this risk management space as attractive investments.”
Matt Robinson and Rohan Wolfers, Managing Directors - Private Equity at Pacific Equity Partners, sat down with Macquarie’s Philip Zammit, Head of Emerging Leaders Sales for ANZ, to discuss the private equity industry. They discussed its role in investment markets, recent trends and the future outlook.
Watch Rohan explore the reasons for partnerships between private equity funds and corporates increasing over the past 20 years.
On the second day of the 2023 Macquarie Australia Conference, Joanne Spillane, Head of Global Private Capital Markets at Macquarie Capital was joined by Kylie Willment, Chief Investment Officer at Mercer in the Pacific; Stewart Brentnall, Chief Investment Officer at NSW Treasury Corporation; and Ian Patrick, Chief Investment Officer at Australian Retirement Trust.
In a world of inflation and rising interest rates, panellists discussed the increasing importance of portfolio diversification, striking the right balance between active and passive management, and the changing expectations of investment managers when it comes to ESG integration, stewardship, and managing systemic risks.
While it was expected monetary stimulus driven market was going to end at some point, there has been additional unforeseen dynamics with the return of significant inflation and global supply chain issues. According to Willment, funds need to be able to cater for uncertainty by maintaining focus on diversification, getting the right balance between listed and unlisted asset classes, thinking about ‘middle-risk’ asset classes (like real assets), building out less traditional fixed interest exposures, and setting an overarching goal of better portfolio resilience to keep expected returns up, but with the best risk profile funds can possibly achieve.
As active investing has become more popular during recent market disruption, Brentnall reflected on the complexity of allocations to active managers over passive or static. “It’s important that asset owners are clear in what is being delivered above the benchmark. If the manager is using a correct benchmark and only investing in stocks within that, then you have a reasonable starting point to determining if there are unique skills there. Even then – of any excess return – funds need to determine contributing factors like style and size, versus unique skills of the manager,” said Brentnall.
Looking forward, how do active managers remain attractive? The answer is simple: active managers need to consistently deliver returns above benchmark. However, the journey to harvest active return is reliant on skill, and it’s an enormous leap of faith for boards to trust that active will be able to deliver consistent returns on a long-term basis.
On ESG, Patrick observed that governance issues like proxy voting and diversity and inclusion on boards have been an ongoing discussion around the investment table for some time. However, the ‘S’ is set to be the toughest piece looking forward. “Beyond the core exclusions around modern slavery – ‘Social’ becomes very nuanced,” says Patrick. Between issues of wage theft, work flexibility, employee wellbeing and more, driving the conversation in a respectful way and deciding on key areas to focus on will be a point of difficulty for many boards.
Over the next three to five years, it is expected the ‘S’ will be the most telling piece in ESG in terms of defining what success looks like and how it will be measured. But one thing is clear: it’s imperative for asset owners to do what they say and to say what they do.
Speaking at the 2023 Macquarie Australia Conference, David McLean, Chair of KiwiRail and; Kiwi Group Capital, discussed the outlook and opportunities for New Zealand’s freight, passenger and tourism rail businesses and their impact on the local economy.
David shared that while historically there has been underinvestment in the country’s rail networks, in the last 5 years, New Zealand’s government has invested over $NZ8 billion.2 It is anticipated that New Zealand freight volumes will increase by 60 per cent by 20423 and David highlighted this as a key opportunity for the rail industry to play a more active role. Accounting for this future growth, KiwiRail is building a sustainable transport network through:
Currently, only 12 per cent of New Zealand’s freight is moved by rail5, so a key focus is on growing this – KiwiRail is targeting an uplift to 20 per cent in the next three years. But rail can’t operate alone, and it is not rail versus road; integrated networks, multi-modal transport systems and integrated logistics are what’s required.
David addressed both KiwiRail’s own carbon goal – becoming net zero by 2050 – and how it is providing a decarbonisation solution to customers, who are increasingly questioning the carbon impact of getting products to their destination. On average, every tonne of freight moved by rail produces at least 70 per cent fewer carbon emissions compared with heavy road freight4, and for commuters, rail in Auckland and Wellington alleviates the need for 26 million car trips each year.5
Resilience is becoming core to KiwiRail’s infrastructure planning, especially taking into consideration extreme weather and natural disaster events such as the recent flooding in Auckland and the 2016 Kaikoura earthquake. KiwiRail’s investment program includes rebuilding legacy infrastructure and making improvements to existing assets, such as improving drainage on Auckland’s metro network.
Looking forward, David states, “New Zealand is going through a rail renaissance, and this presents opportunities for investment, partnerships, and development.”
Preparation is key. That was the resounding word of advice from the Cyber Security Insights – Data Privacy, Security & Cyber Insurance panel at the Macquarie Australia Conference this morning. As cyberattacks become ever more sophisticated, frequent and robust in their approach, the determining factor of how damaging an attack will be on an organisation is how prepared it is.
There are many ways an organisation can bolster its readiness, but according to Nick Klein, Founder and Executive Director at CyberCX, a good place to start is understanding what the threat is, as this will differ between organisations. This understanding enables risk-based discussions around what data is critical to protect and allows organisations to be pragmatic in their approach. From there, organisations can have informed conversations around their cyber security and insurance, and create a solid, tested, response plan. Michael Parrant, Client Director and Cyber Insurance Practice Lender at Aon, urged the audience, “Ask yourself the hard questions, it’s better to ask them now than in the middle of a breach. Ask questions like… would the board support paying a ransom? And why do we have this data in the first place? A major cyber breach isn’t just an IT problem, it will quickly encompass your entire organisation, from developers to C-Suite decision-makers.”
The panel concluded with a discussion around the opportunities and risks presented by emerging generative artificial intelligence models, such as ChatGPT. When asked about the potential impacts, Kate Monckton, Cyber Partner at Deloitte Australia said, “We’re only just on the cusp of understanding what they mean and how this weighs up against legislation. Like many technologies, there are pros and cons and I think organisations should be aware of the often-unintended risks it can present.” Looking ahead to the next 12-24 months, as both Australian organisations and consumers look to capitalise on the opportunities offered by artificial intelligence and machine learning, we can expect, in parallel, sizable reform in privacy laws to ensure legislative protections are in place that balance benefit with responsibility, and better protect all parties from cyberattacks.
Today, Macquarie Group CEO, Shemara Wikramanayake, opened this year’s Macquarie Australia Conference, reflecting on the leading event of its type in the region reaching its 25th anniversary. She noted the key role the conference plays in creating connections between businesses and capital and providing unique and emerging insights into market-shaping trends. Since 1998, the conference has brought together over 18,000 investors and provided access to more than 2,300 presentations from Australia’s most dynamic companies.
Over that time, Shemara highlighted how Australia has outperformed other major industrial countries and cemented a global reputation as an open, well-regulated and stable economy. Recognising that while inflation persists and near-term risks remain, Shemara commented on how Australian companies and markets remain well placed to continue to respond positively to both domestic and global challenges.
With topics of this year’s conference ranging from the ever-increasing role of private capital to cyber security, the disruptive impact and potential of new technologies, and the ongoing urgency of the energy transition, Shemara reflected on progress and opportunities in each of these areas, including:
Macquarie's research team is renowned for our high-quality insights, regional expertise, and strong industry networks. These all combine to drive our leading research offering and deliver value to our clients.
The Macquarie Australia Conference is one of our pinnacle events, showcasing this strength and providing an opportunity for our clients to congregate and share perspectives. This year, we are proud to be celebrating its 25th anniversary."
Head of Equities, ANZ