May 28, 2025 • 37 mins
What’s driving global interest in infrastructure investment?
We’re talking to Paul Newfield, CEO at Morrison, a pioneering infrastructure manager with assets worth $25B USD.
Their holdings include a portfolio of renewable energy, data centres, and healthcare infrastructure.Paul shares how Morrison plays the long game, finding businesses with sustainable competitive advantages and often holding them for decades—resisting political trends and the quick ‘flips’ common from private equity firms.
And hear how this philosophy led them to invest $800M AUD in data infrastructure—an investment that has turned into a $17B AUD enterprise.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Everything for us is a long game. It's never like,
what's a business that I could just buy, put some
cost out, fixed up and sell Wherever people are taking simplistic,
top down views. If you're writing the details, you'll find opportunity.
What we say is is this something that's critical to
society in a society going to need more of this
(00:20):
over the next few decades. We like investing in private
companies to unlisted companies. The reason for that is it's
going to sound nasty.
Speaker 2 (00:32):
Hello and welcome to Shared Lunch, brought to you by Shas's.
My name is Sonya and at Shazas we're on a
mission to create financial empowerment for everyone, which is why
we do these chats. It's a chance to peek behind
the curtain and chat about what's going on in the
world of business today. On Shared Lunch, we're joined by
Paul Newfield, who's the CEO of Morrison, a global infrastructure
manager who is known as the manager of ASEX and
(00:54):
INSIDEX listed INFANTOL. Before we get started, here's some important information.
Speaker 3 (00:58):
Investing in involves the rest You might lose the money
you start with. We recommend talking to a licensed financial advisor.
We also recommend reading product disclosure documents before deciding to invest.
Everything you're about to see and here is current at
the time of recording.
Speaker 2 (01:12):
Welcome Paul Hey, Thanks Sonya, thanks for joining us today.
So you lead Morrison, which has about, from our records,
twenty five billion US dollars in assets under management, seven
off officers across five countries from Europe to Singapore, and
over two hundred professionals working with you. So tell us
how did it all begin for you? I think we
(01:34):
know you studied philosophy and now you're managing this company.
How did you get here?
Speaker 1 (01:39):
Obviously, what you're asking is when you do a philosophy degree,
out of all of the many job of office that
came to you after you finish your master's in the
philosophy of love, why did you choose infrastructure. I did
my degree, I then went backpacking, came back thinking I'd
come back with ideas about what I do with my career,
and instead I just came back with a credit card
bill and literally went into the career's office at university
(02:02):
and said, can you give me the whole list of
any employers who come willing to look at philosophy grads
and it was quite a shortlist and happened to have
on at Boston Consulting. I didn't know anything about what
strategy consulting was, but was lucky enough to kind of
find this organization where they didn't care too much what
your degree was and they would teach you the basics
(02:23):
of business. And then literally one day I was having
a bad day at work and I caught up with Rachel,
who was an old colleague and friend who now worked
at Morrison, and she said, oh, this is great. I've
been telling Lloyd Morrison about you. You should meet Lloyd. The
next thing I know, I get this text message from
Lloyd Morrison, who at the time was a real big
(02:44):
figure in New Zealand, not just in business but campaigning
to change the flag, always very prominent on issues that
were important for the long term good of the country
and the world. And he said, I'm going to be
an Auckland. I'd love to have a coffee. We did that.
We talked about all kinds of things, none of which
were my CV. In fact, you hadn't seen my CV.
And at the end of that conversation he said, you
(03:07):
should to come and work for me if you want to.
If you don't, You're an idiot. And then I got
another text from him saying I wasn't kidding. Come and
meet the team. What really excited me was here is
this guy who had started what was basically the world's
first infrastructure investment firm when the asset class didn't exist,
and had been able to do that because New Zealand
(03:28):
was so early introducing private capital into things like renewable
energy and airports, and then had gone to take that
to the world and had this complete attitude of well,
if anyone can do it, why wouldn't it be us,
And having spent my career in professional services were surrounded
by really smart, overachieving, insecure people who always fear and failure.
(03:52):
I was like, here's a guy who's really smart, overachieving,
but doesn't have any fear of failure, and so I
basically resigned. Look up the job offer what a story.
Speaker 2 (04:02):
I think. Definitely known for the impact of the infrastructure
and to art as well.
Speaker 1 (04:05):
Right, Yeah, and actually that was one of the cool things.
Lloyd was. Yeah, great sport of the arts and all
kinds of music, so from opera, some quite obscure or
kestral things through to great Wellington bands who I liked,
and so to think like, here's this guy who's got
such broad interests and genuinely seem to and all things
(04:27):
start with what does the world need more of? And
how do I make that happen? And when you think
about it, even today, we never spend any time fussing
on an investment idea to say is this infrastructure or not?
What we say is is this something that's critical to society?
And is society going to need more of this over
the next few decades. And that leads you to places
(04:48):
like investing in renewable energy, secure storage of data, which
is actually a really great way to think about investing
because it's good for the world. But also you tend
to find and you make better returns because you're investing
in things the world's going to need more of. You're
always making putting your marginal dollar at work into something
that has got its own investment options inside it.
Speaker 2 (05:10):
Yeah, So tell us about how Morrison is structured. You
well known for managing Infertil, So tell us about the group.
Speaker 1 (05:18):
We started purely as the manager of Infertil and for
the longest time all Morrison was was the manager of Infertils.
Infertils unusual in the New Zealand market, probably usual in
most markets, and that it doesn't have its own management team.
What it has as an independent board and then Morrison
managing it under a contract and so that was set
(05:41):
up way back in nineteen ninety four. And then as
infertill has succeeded and growing, Morrison's always tried to invest
in building our team and capability ahead of Infertl's needs,
so that you're trying to find what's the next great idea.
So how we structured, we're basically two hundred and twenty
people around the world. A small set of people have
(06:03):
got very dedicated roles to specific funds like Infantal, so
Jason is the Infantal CEO with an Infantal finance function
underneath him. And then a bunch of people who are
out there just trying to find the best investment ideas
in the world. So those are people sitting in offices
in New York, London and Singapore, etc. Combing the world
(06:23):
for good investment ideas. You've got people who are just
kind of deep research thinkers who are saying ask that
question of what will the world need more of? So
they're doing quite top down research, and then you've got
people who are real kind of grease out of the
fingernail operators. So typically, whenever we've invested in a business
(06:44):
and you found a great CEO or a great chief
development officer or someone with really special skills, if you've
sold that business, we've tried to hold on to that person.
So you end up with a team that's this unusual
mix of some quite deal oriented finant people, some people
are these very kind of esoteric big picture thinkers, and
then some very practical operators. And where the magic happens,
(07:09):
and it's quite hard to make the mix work culturally.
Whether the magic happens is when you get those people
looking at the same problem from different angles and really
debating and trying to find the truth. And so we
spend a lot of time trying to find make sure
the people are smart at all those criteria, but actually
are people who like a debate like challenge can deal
(07:30):
with people who are different because it's always a lot
easier to just work with people who are like you.
But when you make that all happen, that works really beautifully.
Speaker 2 (07:37):
And so how do you go about making investment decisions?
Speaker 1 (07:40):
With a lot of angst and thoughtfulness. I took you
through an example of an investment process because I think
it is quite weird and unusual the way we've ended
up doing this, but it's evolved and we've got to
learn what's worked over thirty idears. So how did we
end up buying Canberra data centers? Way back and it's
(08:05):
probably about twenty twelve. Some of that research team was
charged with this question of we can see booming demand
for data storage and transmission, but we want to have
investments that are really downside protected and we know that
if you look at a lot of sectors that are
exposed to data, they're still very high risk or they
(08:27):
don't manage to maintain their margins. So that team did
a lot of research and what's going to drive the
growth of data? Then they looked at what are all
of the physical assets that you need to support that
and then said which have got the biggest barriers to entry,
strongest market positions. And conclusion from that work was they
really liked data centers, the fiber that connects up data
(08:49):
centers and telecommunications towers that mobile operators use. And then
within data centers we said, oh, some of this feels
too much like kind of a property play where you
know you've got a contract, but at some point your
tenants could move out. Some of it feels a little
bit too much like venture at too much risk exposure.
And so we wanted to find the lowest risk way
to invest in that because often what we're looking for
(09:12):
is very long term contracts or very strong market position
in a stable market structure, and that's not always what
you find with tech companies. And so the team found
this business called Canbra Data Centers, which back then was
two locations in Canberra. And when you look through the
government tendersment publishes all of their tenders publicly, you found
(09:37):
this company one about ninety percent of all government tenders
and you're like, okay, how is it when the government's
running an arms link competitive process one company's winning so much.
And what you found was they had done some really
smart positioning about how they set up their business. They
had the most secure operations, the most secure backup power,
(09:57):
They had got some very security conscious government agents as
early customers, and so other government agencies could see that
that was a safe pace to be and then they
got this ecosystem benefit of once one government agencies and
there others want to share data with them, and so
they want to be in the same location. Like wow,
that's fascinating. At that point, the original backers of that
(10:20):
business were looking to exit. We tried to buy it
and we failed. They sold to someone else, and we
were very disappointed. And the team kept talking to the
founder of that business, Greg Borer, who's this amazing entrepreneur,
for three years, and talking to the private equity firm
who had invested in it, and finally we got to
a point where they said, okay, we're thinking about an exit,
(10:43):
tell us your price, and they gave us a period
of exclusivity. So after like by then we'd probably been
work on that there for five years and then you
had this really intense six weeks of trying to get
the deal done. So yeah, so not everything is quite
as secure as route as that, but that's generally the principle.
Find a problem in the world's got to solve, Try
and find the business that's best positioned to solve that problem,
(11:06):
be willing to pay an absolutely fair price, and then
keep investing to grow it. So that business. Originally we
put eight hundred million Ausie dollars into it to buy it,
and we've continued to invest capital and grew it from
Canberra into Sydney and too Melbourne into New Zealand and
today it's worth over thirteen billion.
Speaker 2 (11:26):
And it sounds like you played a bit of the
long game with it too, Like does Horizon play into
those decisions?
Speaker 1 (11:33):
Yeah, Everything for us is a long game, starting with
the fact that the money we invest is very long term.
So if you think about the Morrison business overall, you've
got Infrato and then most of our other clients are
either sovereign wealth funds or pension funds and so they
typically have twenty thirty year horizons. So that's great because
(11:57):
it drives a culture for us of always thinking about
the long term. It's never like what's a business that
I could just buy, pull some cost out, fixed up
and sell. It's what's a business that I'd want to
own for decades, which then means you do do that
really long term thinking about finding the right business, and
then you're willing to spend two or three years trying
to own the best business rather than just responding to
(12:17):
what gets brought to you by investment banks.
Speaker 2 (12:20):
Did geography play and play a part in that with
it being in Australia.
Speaker 1 (12:24):
Yeah, definitely. Infrastructure is a kind of business where you
need to be local because you're owning assets that are
kind of critical to their communities. So for the longest time,
everything Morrison did was New Zealand through the eighties early nineties.
Then when Australia started doing its first infrastructure privatizations, Morrison
(12:48):
kind of jumped the ditch and set up here in
the nineties and was successful in those, and so we'd
become i think enough of part of the furniture in
Australia that when an asset like that came up, we
felt like we were natural owners. And clearly the Australian
government really cares who owns that data center, given that
their own government agencies are in it and they've got
(13:10):
very secure data loads. And so the fact in that
that we were local Australia and New Zealand local infratill
is Australia, New Zealand and the investment partner that we
brought for in Fronto that was Commonwealth Super So that's
the pension scheme for government and military employees. So it's
kind of a perfect match with the end customers of
(13:31):
that business. So today obviously our footprints global, so we
look at those same ideas and a lot of different locations.
But back in twenty thirteen when we started looking at that,
we wouldn't have looked at it if it wasn't in
Australia and New Zealand.
Speaker 2 (13:43):
How does it differ between the private companies and the
public companies knowing that you've got a mix of both.
Speaker 1 (13:49):
We like investing in private companies are unlisted companies and
the reason for that is it's going to sound nasty.
We like control, but what I really mean by that
we want to invest in things where you can fundamentally
make the business better and drive the direction of the business,
which means you want to be able to determine strategy.
(14:12):
You want to be able to determine who's in the
management team, having great people there and work in partnership
with them. So that works really well in private markets,
so you can have a long term perspective infratil. Is
this quite amazing b strip because infertil is a daily
liquid stock that you can buy for a minimum unit
(14:34):
of whatever it is today eleven dollars fifty, but gives
you access to unlisted private market assets with this long duration,
and that's really rere in fact one of the big
trends in our industry of infrastructure funds and management. At
the moment, all the US firms are trying to create
these what they call semi liquid vehicles that will attract
retail and high net wealth money into them, and they're
(14:58):
doing all these really arcane struck suring to create something
which looks like what INFRAT was in nineteen ninety four,
but not quite as liquid now. That's partly to do
with the US regulation that means you couldn't create an
inftill there, but it means inflil is this really cool
thing that you know, you can sit there in Australia
New Zealand as a retail investor and get access to
something that otherwise only the biggest institutional investors in the
(15:20):
world can do.
Speaker 2 (15:21):
You're also credited with integrating sustainable investment in a broader sense.
Can you tell us about Morrison's philosophy.
Speaker 1 (15:27):
In that Yeah, it starts from Lloyd Morrison and that
idea of we will only do well we're investing in
things that the world needs more of. And if you're
investing in things the world needs less of. You should
anticipate that. Sooner or later that catches up with you. You know,
regulators toughened rules on you. Whereas if you're buying investing
(15:48):
in something the world needs more of, you can buy
an initial business, but then keep putting more and more
capital into it, normally at higher average returns because you
really know what you're doing as you grow that business.
So that leads you to know what are the big
problems the world needs to solve. Decapitalization is an obvious one.
And having got our start in New Zealand, like you've
got this weird superpower, right, which New Zealand's got a
(16:10):
lot of rain and wind and not so much coal.
So New Zealand's already ninety percent renewables and we could
start investing in renewables in nineteen ninety four, and then
as the rest of the world has caught up with that,
we've said, well, here's a problem the world's got to
solve that we've got an advantage in. So that's the
starting point. Is actually, it's not a sustainability idea, it's
actually just an investment idea. I think where a lot
(16:32):
of our industries got itself into trouble in recent years
has been where it's tried to tick the box on
ESG and market ESG without actually thinking does this make
my investment better? So for us, we've always just tried
to stay strictly on the what is, what will good
deliver the best returns and what are we good at?
Speaker 2 (16:52):
So while we're pulling the thread of you know, big
ideas well, what's going on in the broader environment, we
are seeing a lot of political volatility. You know, is
there anything you know what worries you the most about
that or excites you the most about that?
Speaker 1 (17:06):
Try and be an optimist. So the optimistic point of
view is wherever there's dislocation, there's opportunities, and wherever people
are taking simplistic, top down views, if you're writing the detail,
you'll find opportunity. So for example, right now, the last
(17:31):
thing most investors want to hear about is a US
renewable energy idea, because they're like, don't Trump hate renewbal energy.
But if you can actually work through the detail of
what things will do well and what won't and exactly
how will tax credits work and what energy demand from
(17:51):
US data centers means that can they Actually I'll turn
inshing fact, there's all this talk about we're going to
not to renew will do gas generation. If you wanted
to buy a gas turbine for a power plant right now,
the earliest delivery you'd get would be twenty twenty nine
(18:12):
or twenty thirty. So one way or another, if you
need energy to fuel the data center, you're going to
be using some combination of solar wind batteries unless you
happen to live in the area nuclear plant that can
has got access capacity. So you kind of work through
all of that, and you see there's actually these really
interesting micro opportunities that seem quite counterintuitive. So that's the
(18:37):
optimist in anything great opportunity when everyone else is going
to running. One way to work out where the opportunity is. Underneath.
The deep worry I have is there's a risk that
some things which have underpinned the whole global capital system
get strained and ultimately, you know, people always talk about
(19:01):
US exceptionalism, like what does US exceptionalism really mean? Apart
from being a wonderful dynamic economy, which it definitely is,
it means because you've got the reserve currency every year
you get to buy all the world's stuff, run whatever
it is about a seven percent budget deficit, and then
(19:22):
hand them bits of paper saying I'll give you money
later in ten or twenty years, and you keep low
interest rates because you're the world's kind of reserve currency.
I think that if the combination of lack of trust
in US institutions along with lack of fiscal discipline means
(19:43):
that you have a blowout in the US's ability to
borrow long term, I just think that will uncover all
kinds of problems in the financial system that we haven't contemplated.
Because no one thought that US ten year rates would
go above a certain number. So that's probably the biggest
where in everything we do basically prices off US ten
(20:04):
year bond rates, you then kind of adding your risk
adjustice on top of that. What happens if that's no
longer considered the risk free rate in the world.
Speaker 2 (20:11):
How do you think about that? Why do you think
through that?
Speaker 1 (20:14):
There's no simple answer other than we're being really cautious.
I don't think there's any really clear kind of economic
winners in the long run from that, Like you love
that if you go well, the US might lose in Germany,
White win. But I think everyone has problems if you
(20:37):
end up in that situation. So you just have to
be cautious. So it means you want to keep borrowing
levels low on your businesses, You want to understand any
refinancing opportunities you want to that are coming. You want
to be really kind of greedy and selfish about where
you invest. So we're last year you might have accepted
a return of X. Now it might be X plus
two hundred or three hundred basis points, but it probably
(20:59):
does had a really great environment from investing if you're
doing it carefully. But yeah, definitely rest to the downside.
Speaker 2 (21:06):
Infrastructure is having a moment. What do you think is
behind the global surch of interest from investors? Yeah, I
mean you've always been in this infrastructure.
Speaker 1 (21:15):
Yeah, that's the weird thing, right. Like one of one
of our favorite clients here in Australia said to me
a few years ago about Morrison, it's like he's like
me at Child of the nineties. He said, you know,
it's like when there's that band you love all of
a sudden everyone heard about and you're like, ah, they
used to be my thing. Like that's how you feel
(21:35):
a bit about infrastructure like it used to be this weird,
obscure accid class that people don't even know it was
an accid class and underground. Yeah, So I think there's
a couple of things going on. One is everyone is
realizing there's this massive investment required. So if the world's
going to decarbonize, if the world's going to get much
more efficient in terms of its kind of core physical
(21:58):
infrastructure like roads, etc. A lot of capital has to
go in. Also, the asset class is now expanding to
cover things like data centers that hadn't been thought of before,
So it feels like enormous amount of capital to be
invested there for a good investment opportunity. The other thing
that's going on, I think is Australia has been a
(22:21):
world leader, So the average Australian superannuation fund probably has
fifteen to eighteen percent of its portfolio invested in infrastructure.
That's not the case around the world, so US pension
funds might be at two percent. Australia was just really
early at privatizing airports and things, and because the US
has been much slower in those things, the asset class
(22:43):
hasn't really developed and so as it started to emerge,
a lot of the big global asset managers have said,
while there this thing that's currently two percent grow to
fifteen percent of growing capital pools, and this demand for
where that money is going to go, we ought to
get into it. So you're seeing a lot of investors
want to go there, but also the kind of fund
managers want to build businesses there, so they're hyping it up,
(23:05):
which is ultimately probably a good thing for us. More competition,
but more attention in the space.
Speaker 2 (23:11):
You know, you've got a real strength and digital and
connectivity assets. How do you balance the environmental footprint on
those that the data centers have.
Speaker 1 (23:20):
Yeah, that's a really big question. So energy consumption of
data centers is high and is growing rapidly with AI
and water use can be very high for cooling that equipment. Again,
some of these things are better to be lucky than good,
(23:42):
Like we happen to come from New Zealand, which was
good for renewables and data center is our first data
center coming from Australia. Greg Border, the entrepreneur there, actually
was the first person to build water cooled data centers
that use a closed loop. So you've got you're not
checking water out of every day, you're kind of rotating
it around the loop. That turns out to be perfect
(24:04):
for AI and excellent for the environment. So we feel
like in that one, actually the focus on that area
could be a benefit with renewable energy or with the
risk of a lot of carbon footprint from your data centers. Actually,
your customers are your best friends. So the Hyperscalis, the Microsoft,
(24:24):
the Amazons, etc. Generally all have their own net zero
commitments and so they are wanting you to show that
you can source renewable energy for your data centers. So
you've still got the challenges of can the grid just
keep up with demand? But I think we will actually
be a driver of grenification of the grids through our
(24:45):
data centers. But yes, really it's the kind of thing
where you can quickly lose your social license. So you
saw in the past, Ireland and Singapore put in bands
on new data centers for a period because there just
wasn't enough energy to go around. And when that's putting
people's home power bills up, it's quite an easy thing
(25:05):
to turn off. So means we also need to be
part of the solution with our renewble energy business, How are.
Speaker 2 (25:11):
You thinking about the developments in AI and infrastructure.
Speaker 1 (25:17):
So there's a few different ways. The first and most
direct way of experiencing it is through the data center business,
and that is just insane if you look at this
rate of advances and therefore the rate of growth of
demand for computational power. I think we're kind of only
just at the very start of what that's all going
to mean. There's still a bunch of concernadis right, like
(25:38):
when deep seat came out, it showed that you could
do a lot of stuff more efficiently, and I expect
that that efficient frontier will keep moving. So it's kind
of a battle between exponentially growing demand and exponentially improving efficiency.
But ultimately, in that I think the demand's just going
to rise because as things can get efficient and cheaper,
(26:00):
we'll use more of them. So AI will be massive
for the data center business. We're starting to see it
roll through now through some of our other digital infrastructure businesses,
like booming demand for fiber networks that connect end users
to data centers, for example. And then we're seeing it
in our renewable energy business, like our biggest customers for
(26:21):
our renewable energy business in the US are the same
as our biggest customers for our data center business in Australia,
you know, it's the HYPERSCALUS. So that's all hitting us
kind of first, there is in the question of how
do you use AI within the businesses. You know, I
talked about those kind of creative strategic research thinkers you
(26:41):
can imagine that are some of our best experimenters, and
they're doing things like whenever anyone in our team globally
comes across an interesting research report on anything relevant, it
all comes into central place, gets ingested so that you
can then start asking creative prompts about what we're experiencing
never in the world. Yes, it feels like we're right
(27:04):
at the beginning of something that will be transformational for
our portfolio but also for ourn business.
Speaker 2 (27:10):
Feels like the transformation is coming back. We're not quite
like we've got. On the one hand, people you know,
using it to you know, create Barbie Doll versions of
themselves or like what Barbie would I be? And then
on the other hand these incredible business efficiencies and I
think we're only coming to know the ways that it
will transform.
Speaker 1 (27:29):
Our world exactly. And one of the things that was
really opening in the last while, right when when we
all first experienced chat GPT and then Microsoft pulled off
that amazing deal with open Ai. I think we'd started
to think this is a kind of like winner takes
all space, and there's going to be one winning LLM
and one winning hyperscala out of it. And these days
(27:52):
you see there's probably six l lms that every few
months on releases an update and they become the best
in the world at some different air So really dynamic,
which probably means it's not when it takes all for
the llms. Probably the efficiency benefits all flow out to
companies using these products, right, So I think that's really
(28:12):
good for the economy, probably drives productivity. Hopefully it's something
countering those higher interest rates that you might otherwise get
through all the other fiscal issues in the world.
Speaker 2 (28:22):
Are there any other interesting areas that you're investing in
that we haven't touched on.
Speaker 1 (28:25):
You were doing really interesting stuff in healthcare related infrastructure,
So that's one of those spaces where really clear problem
to solve. As populations age, there's more and more healthcare
requirement and the government's budget to pay for it is
limited and that was what led us first to diagnostic imaging.
(28:50):
So radiologists think about, for anything, bring your spill x rator,
pet scans. That's an area where early detect and early
intervention can really reduce the system wide costs of disease.
And so then we went about saying like, how do
you find really nice, defensive businesses with good market positions
(29:11):
to do that. And that's got a real global growth
story because radiology has moved from being something where you
go to your local clinic and they take an X
ray and the radiologist in the next room read your
scan to being something where that scan can be read
by appropriately qualified for your jurisdiction doctor anywhere in the world.
(29:34):
And so for example, as you've got Australia New Zealand
qualified radiologists sitting in London, they can be working on
the scans at are urgent overnight that otherwise you pay
two or three times the amount for. And then if
you've got these qualified people in New Zealand and you
bring a few people from London, you can actually serve
the UK market. So I think that's one of those
(29:55):
ideas that's globally scalable. From a base at the bottom
of the world. In fact, the the world's a bit
of an advantage for the time zones.
Speaker 2 (30:03):
You've got to let stuff go to how do you
feel about letting stuff go?
Speaker 1 (30:07):
So because we are such long term investors and you
do everything with a perspective of onwing it for twenty
or thirty years, I think one of our failings is
we don't always think about exit as actively as others
think about normal private equity managers who buy something, fix
it up, flick it on in three or five years
and collect their carry. They are always thinking about the sale.
(30:30):
That's just not the way we're built. So it does
mean we need to be really disciplined. So you know
what does we now do For every asset, no matter
how wonderful it is, We do an annual buy, sell,
hold review. And sometimes a question can be actually, this
is a great business, therefore you should sell it. So
(30:50):
think about Tilt Renewables. You know that was close to
my heart. That literally we work for that management team
to create it, to pull it out of TrustPower and
make this thing. We built it up, got it to
a point where you thought it was the best renewable
energy business in Australia and New Zealand. So then to
be willing when people started making your offers for it
(31:11):
to entertain them was a bit of an emotional stretch.
But then when they started coming, you're like, actually, I
think this with more to them than it is to
the Infantal shareholders. We can always go again, And so
being willing to do that and redeploy that capital. I
think one of the good things about the trust that
the market has built over the years and the Infantal
(31:33):
board and the Mount Morrison team is they do believe
that we can reinvest well. So it's not like you
sell things and they immediately say give us all that
capital back. I think they're starting to believe over the
last few years, actually, if we leave that capital with
you and a patient like you are, you'll probably find
something really good to do with it.
Speaker 2 (31:53):
So let's look to the future. What excites you the
most and what keeps you in your job, I think that.
Speaker 1 (31:59):
Excites the most is actually this idea of building our
own into generational business. So just like the things we
invest in go for multiple decades, having a Morrison that
goes kind of in perpetuity, and when you look around
the world, because we're the longest standing specialist infrastructure manager
(32:23):
in the world. We've actually been the third CEO. We've
been through multiple market cycles. You've seen kind of generational
change that's really rare. Like most of our peers are
ten to twenty years old, the original founders probably still
own most of the business and they're looking for a
way to sell it and retire, so their horizons us
(32:46):
to shrink. Whereas for us, we've got this wonderful structure
where almost all of our team are shareholders and when
we retire, we sell the shares back to the next generation,
and along the way we keep kind of increasing the
ownership of the next generation. And then we've got the
foundation that Lloyd said up before he died as a
Cornerstone shareholder there in perpetuity and means you really can
(33:09):
think on the same horizon that our clients think about you.
So that's actually what exciting when you look around and
go there's all these fullness business who are way smarter
than I am, way more equipped than I was at
their age to think about investing, and one day they're
going to be running this business and it's going to
(33:30):
be way bigger, way better than it is today.
Speaker 2 (33:33):
It's one thing you'd like to your shareholders to know, I.
Speaker 1 (33:36):
Reckon the thing that would surprise people most who kind
of look at and film Morrison from the outside. Like,
I think people expect us to be this group of
really kind of financially driven, almost like investment bankers, and
I think they'd be really surprised if they walked into
(33:57):
the office and there's this very kind of curious, inquiring,
collaborative group of people trying to problem solve and always
kind of thinking about the long term and then trusting
that the financial outcomes kind of fall out the bottom
of that rather than being the thing you're targeting. I think, like,
(34:20):
certainly that was the thing that surprised me most when
I turned up, and I think there were only seventeen
other people when I turned up at Morrison that it
was this kind of quirky, esoteric, kind of truth seeking,
curious bunch of people. See, that's probably the thing I'd
most like if people understood, because I think it's the
coolest thing about working here.
Speaker 2 (34:40):
Do you have a favorite quote or piece of advice
that you like.
Speaker 1 (34:43):
I'll tell you the thing that Lloyd Morrison said to
me that always somethink Lloyd had a lot of good voudisms.
But when I was talking about moving to Australia and
that we should set up a business here and back
in I guess two thousand and eight, two thousand and
nine this market was dominated by people like Babcock and
(35:06):
Brown who had got themselves into trouble kind of being
too short term and not thinking about their clans. And
I kind of said, I can see an opportunity there,
but I can see all the reasons why this be
really hard. And Lloyd said to me, the day you
decide to run a marathon, you can't run a marathon.
What matters is that you decide to do it, and
through deciding to do it, you commit and thenk you
(35:27):
do all the things that make it possible. So don't
be put off by the fact that you're not capable
of doing something. Now, just make the decision and then
you'll do it. So, yeah, that was the thing I remembered,
The day you decide to run a marathon. You can't
run a marathon, but you'll never run a marathon until
you decide to do it.
Speaker 2 (35:42):
Well, I love that. I'm going to write that one down.
And I think now that we've had the chat, I
can definitely think I think philosophy and economics need a
rebrand because I think there is definitely more in common
with those ideas than we think. Definitely, definitely they are
way more connected then I think where we started at
(36:02):
this time of it exactly.
Speaker 1 (36:03):
I think, like all philosophy really is is the study
of things we don't you'd have a proper methodology for,
so it is really esoteric, esoteric great things, which is
kind of what we do when we're investing. Like once
you've got a formula for it, it stopped being the
source of alpha. So yeah, we kind of just do
philosophy every day.
Speaker 2 (36:22):
Yeah. Hey, well thanks heaps. I've really enjoyed the chat,
and I'm sure everyone else will too. I appreciate your time.
Speaker 1 (36:29):
Thank you very much for being part
Everything for us is a long game. It's never like,
what's a business that I could just buy, put some
cost out, fixed up and sell Wherever people are taking simplistic,
top down views. If you're writing the details, you'll find opportunity.
What we say is is this something that's critical to
society in a society going to need more of this
(00:20):
over the next few decades. We like investing in private
companies to unlisted companies. The reason for that is it's
going to sound nasty.
Speaker 2 (00:32):
Hello and welcome to Shared Lunch, brought to you by Shas's.
My name is Sonya and at Shazas we're on a
mission to create financial empowerment for everyone, which is why
we do these chats. It's a chance to peek behind
the curtain and chat about what's going on in the
world of business today. On Shared Lunch, we're joined by
Paul Newfield, who's the CEO of Morrison, a global infrastructure
manager who is known as the manager of ASEX and
(00:54):
INSIDEX listed INFANTOL. Before we get started, here's some important information.
Speaker 3 (00:58):
Investing in involves the rest You might lose the money
you start with. We recommend talking to a licensed financial advisor.
We also recommend reading product disclosure documents before deciding to invest.
Everything you're about to see and here is current at
the time of recording.
Speaker 2 (01:12):
Welcome Paul Hey, Thanks Sonya, thanks for joining us today.
So you lead Morrison, which has about, from our records,
twenty five billion US dollars in assets under management, seven
off officers across five countries from Europe to Singapore, and
over two hundred professionals working with you. So tell us
how did it all begin for you? I think we
(01:34):
know you studied philosophy and now you're managing this company.
How did you get here?
Speaker 1 (01:39):
Obviously, what you're asking is when you do a philosophy degree,
out of all of the many job of office that
came to you after you finish your master's in the
philosophy of love, why did you choose infrastructure. I did
my degree, I then went backpacking, came back thinking I'd
come back with ideas about what I do with my career,
and instead I just came back with a credit card
bill and literally went into the career's office at university
(02:02):
and said, can you give me the whole list of
any employers who come willing to look at philosophy grads
and it was quite a shortlist and happened to have
on at Boston Consulting. I didn't know anything about what
strategy consulting was, but was lucky enough to kind of
find this organization where they didn't care too much what
your degree was and they would teach you the basics
(02:23):
of business. And then literally one day I was having
a bad day at work and I caught up with Rachel,
who was an old colleague and friend who now worked
at Morrison, and she said, oh, this is great. I've
been telling Lloyd Morrison about you. You should meet Lloyd. The
next thing I know, I get this text message from
Lloyd Morrison, who at the time was a real big
(02:44):
figure in New Zealand, not just in business but campaigning
to change the flag, always very prominent on issues that
were important for the long term good of the country
and the world. And he said, I'm going to be
an Auckland. I'd love to have a coffee. We did that.
We talked about all kinds of things, none of which
were my CV. In fact, you hadn't seen my CV.
And at the end of that conversation he said, you
(03:07):
should to come and work for me if you want to.
If you don't, You're an idiot. And then I got
another text from him saying I wasn't kidding. Come and
meet the team. What really excited me was here is
this guy who had started what was basically the world's
first infrastructure investment firm when the asset class didn't exist,
and had been able to do that because New Zealand
(03:28):
was so early introducing private capital into things like renewable
energy and airports, and then had gone to take that
to the world and had this complete attitude of well,
if anyone can do it, why wouldn't it be us,
And having spent my career in professional services were surrounded
by really smart, overachieving, insecure people who always fear and failure.
(03:52):
I was like, here's a guy who's really smart, overachieving,
but doesn't have any fear of failure, and so I
basically resigned. Look up the job offer what a story.
Speaker 2 (04:02):
I think. Definitely known for the impact of the infrastructure
and to art as well.
Speaker 1 (04:05):
Right, Yeah, and actually that was one of the cool things.
Lloyd was. Yeah, great sport of the arts and all
kinds of music, so from opera, some quite obscure or
kestral things through to great Wellington bands who I liked,
and so to think like, here's this guy who's got
such broad interests and genuinely seem to and all things
(04:27):
start with what does the world need more of? And
how do I make that happen? And when you think
about it, even today, we never spend any time fussing
on an investment idea to say is this infrastructure or not?
What we say is is this something that's critical to society?
And is society going to need more of this over
the next few decades. And that leads you to places
(04:48):
like investing in renewable energy, secure storage of data, which
is actually a really great way to think about investing
because it's good for the world. But also you tend
to find and you make better returns because you're investing
in things the world's going to need more of. You're
always making putting your marginal dollar at work into something
that has got its own investment options inside it.
Speaker 2 (05:10):
Yeah, So tell us about how Morrison is structured. You
well known for managing Infertil, So tell us about the group.
Speaker 1 (05:18):
We started purely as the manager of Infertil and for
the longest time all Morrison was was the manager of Infertils.
Infertils unusual in the New Zealand market, probably usual in
most markets, and that it doesn't have its own management team.
What it has as an independent board and then Morrison
managing it under a contract and so that was set
(05:41):
up way back in nineteen ninety four. And then as
infertill has succeeded and growing, Morrison's always tried to invest
in building our team and capability ahead of Infertl's needs,
so that you're trying to find what's the next great idea.
So how we structured, we're basically two hundred and twenty
people around the world. A small set of people have
(06:03):
got very dedicated roles to specific funds like Infantal, so
Jason is the Infantal CEO with an Infantal finance function
underneath him. And then a bunch of people who are
out there just trying to find the best investment ideas
in the world. So those are people sitting in offices
in New York, London and Singapore, etc. Combing the world
(06:23):
for good investment ideas. You've got people who are just
kind of deep research thinkers who are saying ask that
question of what will the world need more of? So
they're doing quite top down research, and then you've got
people who are real kind of grease out of the
fingernail operators. So typically, whenever we've invested in a business
(06:44):
and you found a great CEO or a great chief
development officer or someone with really special skills, if you've
sold that business, we've tried to hold on to that person.
So you end up with a team that's this unusual
mix of some quite deal oriented finant people, some people
are these very kind of esoteric big picture thinkers, and
then some very practical operators. And where the magic happens,
(07:09):
and it's quite hard to make the mix work culturally.
Whether the magic happens is when you get those people
looking at the same problem from different angles and really
debating and trying to find the truth. And so we
spend a lot of time trying to find make sure
the people are smart at all those criteria, but actually
are people who like a debate like challenge can deal
(07:30):
with people who are different because it's always a lot
easier to just work with people who are like you.
But when you make that all happen, that works really beautifully.
Speaker 2 (07:37):
And so how do you go about making investment decisions?
Speaker 1 (07:40):
With a lot of angst and thoughtfulness. I took you
through an example of an investment process because I think
it is quite weird and unusual the way we've ended
up doing this, but it's evolved and we've got to
learn what's worked over thirty idears. So how did we
end up buying Canberra data centers? Way back and it's
(08:05):
probably about twenty twelve. Some of that research team was
charged with this question of we can see booming demand
for data storage and transmission, but we want to have
investments that are really downside protected and we know that
if you look at a lot of sectors that are
exposed to data, they're still very high risk or they
(08:27):
don't manage to maintain their margins. So that team did
a lot of research and what's going to drive the
growth of data? Then they looked at what are all
of the physical assets that you need to support that
and then said which have got the biggest barriers to entry,
strongest market positions. And conclusion from that work was they
really liked data centers, the fiber that connects up data
(08:49):
centers and telecommunications towers that mobile operators use. And then
within data centers we said, oh, some of this feels
too much like kind of a property play where you
know you've got a contract, but at some point your
tenants could move out. Some of it feels a little
bit too much like venture at too much risk exposure.
And so we wanted to find the lowest risk way
to invest in that because often what we're looking for
(09:12):
is very long term contracts or very strong market position
in a stable market structure, and that's not always what
you find with tech companies. And so the team found
this business called Canbra Data Centers, which back then was
two locations in Canberra. And when you look through the
government tendersment publishes all of their tenders publicly, you found
(09:37):
this company one about ninety percent of all government tenders
and you're like, okay, how is it when the government's
running an arms link competitive process one company's winning so much.
And what you found was they had done some really
smart positioning about how they set up their business. They
had the most secure operations, the most secure backup power,
(09:57):
They had got some very security conscious government agents as
early customers, and so other government agencies could see that
that was a safe pace to be and then they
got this ecosystem benefit of once one government agencies and
there others want to share data with them, and so
they want to be in the same location. Like wow,
that's fascinating. At that point, the original backers of that
(10:20):
business were looking to exit. We tried to buy it
and we failed. They sold to someone else, and we
were very disappointed. And the team kept talking to the
founder of that business, Greg Borer, who's this amazing entrepreneur,
for three years, and talking to the private equity firm
who had invested in it, and finally we got to
a point where they said, okay, we're thinking about an exit,
(10:43):
tell us your price, and they gave us a period
of exclusivity. So after like by then we'd probably been
work on that there for five years and then you
had this really intense six weeks of trying to get
the deal done. So yeah, so not everything is quite
as secure as route as that, but that's generally the principle.
Find a problem in the world's got to solve, Try
and find the business that's best positioned to solve that problem,
(11:06):
be willing to pay an absolutely fair price, and then
keep investing to grow it. So that business. Originally we
put eight hundred million Ausie dollars into it to buy it,
and we've continued to invest capital and grew it from
Canberra into Sydney and too Melbourne into New Zealand and
today it's worth over thirteen billion.
Speaker 2 (11:26):
And it sounds like you played a bit of the
long game with it too, Like does Horizon play into
those decisions?
Speaker 1 (11:33):
Yeah, Everything for us is a long game, starting with
the fact that the money we invest is very long term.
So if you think about the Morrison business overall, you've
got Infrato and then most of our other clients are
either sovereign wealth funds or pension funds and so they
typically have twenty thirty year horizons. So that's great because
(11:57):
it drives a culture for us of always thinking about
the long term. It's never like what's a business that
I could just buy, pull some cost out, fixed up
and sell. It's what's a business that I'd want to
own for decades, which then means you do do that
really long term thinking about finding the right business, and
then you're willing to spend two or three years trying
to own the best business rather than just responding to
(12:17):
what gets brought to you by investment banks.
Speaker 2 (12:20):
Did geography play and play a part in that with
it being in Australia.
Speaker 1 (12:24):
Yeah, definitely. Infrastructure is a kind of business where you
need to be local because you're owning assets that are
kind of critical to their communities. So for the longest time,
everything Morrison did was New Zealand through the eighties early nineties.
Then when Australia started doing its first infrastructure privatizations, Morrison
(12:48):
kind of jumped the ditch and set up here in
the nineties and was successful in those, and so we'd
become i think enough of part of the furniture in
Australia that when an asset like that came up, we
felt like we were natural owners. And clearly the Australian
government really cares who owns that data center, given that
their own government agencies are in it and they've got
(13:10):
very secure data loads. And so the fact in that
that we were local Australia and New Zealand local infratill
is Australia, New Zealand and the investment partner that we
brought for in Fronto that was Commonwealth Super So that's
the pension scheme for government and military employees. So it's
kind of a perfect match with the end customers of
(13:31):
that business. So today obviously our footprints global, so we
look at those same ideas and a lot of different locations.
But back in twenty thirteen when we started looking at that,
we wouldn't have looked at it if it wasn't in
Australia and New Zealand.
Speaker 2 (13:43):
How does it differ between the private companies and the
public companies knowing that you've got a mix of both.
Speaker 1 (13:49):
We like investing in private companies are unlisted companies and
the reason for that is it's going to sound nasty.
We like control, but what I really mean by that
we want to invest in things where you can fundamentally
make the business better and drive the direction of the business,
which means you want to be able to determine strategy.
(14:12):
You want to be able to determine who's in the
management team, having great people there and work in partnership
with them. So that works really well in private markets,
so you can have a long term perspective infratil. Is
this quite amazing b strip because infertil is a daily
liquid stock that you can buy for a minimum unit
(14:34):
of whatever it is today eleven dollars fifty, but gives
you access to unlisted private market assets with this long duration,
and that's really rere in fact one of the big
trends in our industry of infrastructure funds and management. At
the moment, all the US firms are trying to create
these what they call semi liquid vehicles that will attract
retail and high net wealth money into them, and they're
(14:58):
doing all these really arcane struck suring to create something
which looks like what INFRAT was in nineteen ninety four,
but not quite as liquid now. That's partly to do
with the US regulation that means you couldn't create an
inftill there, but it means inflil is this really cool
thing that you know, you can sit there in Australia
New Zealand as a retail investor and get access to
something that otherwise only the biggest institutional investors in the
(15:20):
world can do.
Speaker 2 (15:21):
You're also credited with integrating sustainable investment in a broader sense.
Can you tell us about Morrison's philosophy.
Speaker 1 (15:27):
In that Yeah, it starts from Lloyd Morrison and that
idea of we will only do well we're investing in
things that the world needs more of. And if you're
investing in things the world needs less of. You should
anticipate that. Sooner or later that catches up with you. You know,
regulators toughened rules on you. Whereas if you're buying investing
(15:48):
in something the world needs more of, you can buy
an initial business, but then keep putting more and more
capital into it, normally at higher average returns because you
really know what you're doing as you grow that business.
So that leads you to know what are the big
problems the world needs to solve. Decapitalization is an obvious one.
And having got our start in New Zealand, like you've
got this weird superpower, right, which New Zealand's got a
(16:10):
lot of rain and wind and not so much coal.
So New Zealand's already ninety percent renewables and we could
start investing in renewables in nineteen ninety four, and then
as the rest of the world has caught up with that,
we've said, well, here's a problem the world's got to
solve that we've got an advantage in. So that's the
starting point. Is actually, it's not a sustainability idea, it's
actually just an investment idea. I think where a lot
(16:32):
of our industries got itself into trouble in recent years
has been where it's tried to tick the box on
ESG and market ESG without actually thinking does this make
my investment better? So for us, we've always just tried
to stay strictly on the what is, what will good
deliver the best returns and what are we good at?
Speaker 2 (16:52):
So while we're pulling the thread of you know, big
ideas well, what's going on in the broader environment, we
are seeing a lot of political volatility. You know, is
there anything you know what worries you the most about
that or excites you the most about that?
Speaker 1 (17:06):
Try and be an optimist. So the optimistic point of
view is wherever there's dislocation, there's opportunities, and wherever people
are taking simplistic, top down views, if you're writing the detail,
you'll find opportunity. So for example, right now, the last
(17:31):
thing most investors want to hear about is a US
renewable energy idea, because they're like, don't Trump hate renewbal energy.
But if you can actually work through the detail of
what things will do well and what won't and exactly
how will tax credits work and what energy demand from
(17:51):
US data centers means that can they Actually I'll turn
inshing fact, there's all this talk about we're going to
not to renew will do gas generation. If you wanted
to buy a gas turbine for a power plant right now,
the earliest delivery you'd get would be twenty twenty nine
(18:12):
or twenty thirty. So one way or another, if you
need energy to fuel the data center, you're going to
be using some combination of solar wind batteries unless you
happen to live in the area nuclear plant that can
has got access capacity. So you kind of work through
all of that, and you see there's actually these really
interesting micro opportunities that seem quite counterintuitive. So that's the
(18:37):
optimist in anything great opportunity when everyone else is going
to running. One way to work out where the opportunity is. Underneath.
The deep worry I have is there's a risk that
some things which have underpinned the whole global capital system
get strained and ultimately, you know, people always talk about
(19:01):
US exceptionalism, like what does US exceptionalism really mean? Apart
from being a wonderful dynamic economy, which it definitely is,
it means because you've got the reserve currency every year
you get to buy all the world's stuff, run whatever
it is about a seven percent budget deficit, and then
(19:22):
hand them bits of paper saying I'll give you money
later in ten or twenty years, and you keep low
interest rates because you're the world's kind of reserve currency.
I think that if the combination of lack of trust
in US institutions along with lack of fiscal discipline means
(19:43):
that you have a blowout in the US's ability to
borrow long term, I just think that will uncover all
kinds of problems in the financial system that we haven't contemplated.
Because no one thought that US ten year rates would
go above a certain number. So that's probably the biggest
where in everything we do basically prices off US ten
(20:04):
year bond rates, you then kind of adding your risk
adjustice on top of that. What happens if that's no
longer considered the risk free rate in the world.
Speaker 2 (20:11):
How do you think about that? Why do you think
through that?
Speaker 1 (20:14):
There's no simple answer other than we're being really cautious.
I don't think there's any really clear kind of economic
winners in the long run from that, Like you love
that if you go well, the US might lose in Germany,
White win. But I think everyone has problems if you
(20:37):
end up in that situation. So you just have to
be cautious. So it means you want to keep borrowing
levels low on your businesses, You want to understand any
refinancing opportunities you want to that are coming. You want
to be really kind of greedy and selfish about where
you invest. So we're last year you might have accepted
a return of X. Now it might be X plus
two hundred or three hundred basis points, but it probably
(20:59):
does had a really great environment from investing if you're
doing it carefully. But yeah, definitely rest to the downside.
Speaker 2 (21:06):
Infrastructure is having a moment. What do you think is
behind the global surch of interest from investors? Yeah, I
mean you've always been in this infrastructure.
Speaker 1 (21:15):
Yeah, that's the weird thing, right. Like one of one
of our favorite clients here in Australia said to me
a few years ago about Morrison, it's like he's like
me at Child of the nineties. He said, you know,
it's like when there's that band you love all of
a sudden everyone heard about and you're like, ah, they
used to be my thing. Like that's how you feel
(21:35):
a bit about infrastructure like it used to be this weird,
obscure accid class that people don't even know it was
an accid class and underground. Yeah, So I think there's
a couple of things going on. One is everyone is
realizing there's this massive investment required. So if the world's
going to decarbonize, if the world's going to get much
more efficient in terms of its kind of core physical
(21:58):
infrastructure like roads, etc. A lot of capital has to
go in. Also, the asset class is now expanding to
cover things like data centers that hadn't been thought of before,
So it feels like enormous amount of capital to be
invested there for a good investment opportunity. The other thing
that's going on, I think is Australia has been a
(22:21):
world leader, So the average Australian superannuation fund probably has
fifteen to eighteen percent of its portfolio invested in infrastructure.
That's not the case around the world, so US pension
funds might be at two percent. Australia was just really
early at privatizing airports and things, and because the US
has been much slower in those things, the asset class
(22:43):
hasn't really developed and so as it started to emerge,
a lot of the big global asset managers have said,
while there this thing that's currently two percent grow to
fifteen percent of growing capital pools, and this demand for
where that money is going to go, we ought to
get into it. So you're seeing a lot of investors
want to go there, but also the kind of fund
managers want to build businesses there, so they're hyping it up,
(23:05):
which is ultimately probably a good thing for us. More competition,
but more attention in the space.
Speaker 2 (23:11):
You know, you've got a real strength and digital and
connectivity assets. How do you balance the environmental footprint on
those that the data centers have.
Speaker 1 (23:20):
Yeah, that's a really big question. So energy consumption of
data centers is high and is growing rapidly with AI
and water use can be very high for cooling that equipment. Again,
some of these things are better to be lucky than good,
(23:42):
Like we happen to come from New Zealand, which was
good for renewables and data center is our first data
center coming from Australia. Greg Border, the entrepreneur there, actually
was the first person to build water cooled data centers
that use a closed loop. So you've got you're not
checking water out of every day, you're kind of rotating
it around the loop. That turns out to be perfect
(24:04):
for AI and excellent for the environment. So we feel
like in that one, actually the focus on that area
could be a benefit with renewable energy or with the
risk of a lot of carbon footprint from your data centers. Actually,
your customers are your best friends. So the Hyperscalis, the Microsoft,
(24:24):
the Amazons, etc. Generally all have their own net zero
commitments and so they are wanting you to show that
you can source renewable energy for your data centers. So
you've still got the challenges of can the grid just
keep up with demand? But I think we will actually
be a driver of grenification of the grids through our
(24:45):
data centers. But yes, really it's the kind of thing
where you can quickly lose your social license. So you
saw in the past, Ireland and Singapore put in bands
on new data centers for a period because there just
wasn't enough energy to go around. And when that's putting
people's home power bills up, it's quite an easy thing
(25:05):
to turn off. So means we also need to be
part of the solution with our renewble energy business, How are.
Speaker 2 (25:11):
You thinking about the developments in AI and infrastructure.
Speaker 1 (25:17):
So there's a few different ways. The first and most
direct way of experiencing it is through the data center business,
and that is just insane if you look at this
rate of advances and therefore the rate of growth of
demand for computational power. I think we're kind of only
just at the very start of what that's all going
to mean. There's still a bunch of concernadis right, like
(25:38):
when deep seat came out, it showed that you could
do a lot of stuff more efficiently, and I expect
that that efficient frontier will keep moving. So it's kind
of a battle between exponentially growing demand and exponentially improving efficiency.
But ultimately, in that I think the demand's just going
to rise because as things can get efficient and cheaper,
(26:00):
we'll use more of them. So AI will be massive
for the data center business. We're starting to see it
roll through now through some of our other digital infrastructure businesses,
like booming demand for fiber networks that connect end users
to data centers, for example. And then we're seeing it
in our renewable energy business, like our biggest customers for
(26:21):
our renewable energy business in the US are the same
as our biggest customers for our data center business in Australia,
you know, it's the HYPERSCALUS. So that's all hitting us
kind of first, there is in the question of how
do you use AI within the businesses. You know, I
talked about those kind of creative strategic research thinkers you
(26:41):
can imagine that are some of our best experimenters, and
they're doing things like whenever anyone in our team globally
comes across an interesting research report on anything relevant, it
all comes into central place, gets ingested so that you
can then start asking creative prompts about what we're experiencing
never in the world. Yes, it feels like we're right
(27:04):
at the beginning of something that will be transformational for
our portfolio but also for ourn business.
Speaker 2 (27:10):
Feels like the transformation is coming back. We're not quite
like we've got. On the one hand, people you know,
using it to you know, create Barbie Doll versions of
themselves or like what Barbie would I be? And then
on the other hand these incredible business efficiencies and I
think we're only coming to know the ways that it
will transform.
Speaker 1 (27:29):
Our world exactly. And one of the things that was
really opening in the last while, right when when we
all first experienced chat GPT and then Microsoft pulled off
that amazing deal with open Ai. I think we'd started
to think this is a kind of like winner takes
all space, and there's going to be one winning LLM
and one winning hyperscala out of it. And these days
(27:52):
you see there's probably six l lms that every few
months on releases an update and they become the best
in the world at some different air So really dynamic,
which probably means it's not when it takes all for
the llms. Probably the efficiency benefits all flow out to
companies using these products, right, So I think that's really
(28:12):
good for the economy, probably drives productivity. Hopefully it's something
countering those higher interest rates that you might otherwise get
through all the other fiscal issues in the world.
Speaker 2 (28:22):
Are there any other interesting areas that you're investing in
that we haven't touched on.
Speaker 1 (28:25):
You were doing really interesting stuff in healthcare related infrastructure,
So that's one of those spaces where really clear problem
to solve. As populations age, there's more and more healthcare
requirement and the government's budget to pay for it is
limited and that was what led us first to diagnostic imaging.
(28:50):
So radiologists think about, for anything, bring your spill x rator,
pet scans. That's an area where early detect and early
intervention can really reduce the system wide costs of disease.
And so then we went about saying like, how do
you find really nice, defensive businesses with good market positions
(29:11):
to do that. And that's got a real global growth
story because radiology has moved from being something where you
go to your local clinic and they take an X
ray and the radiologist in the next room read your
scan to being something where that scan can be read
by appropriately qualified for your jurisdiction doctor anywhere in the world.
(29:34):
And so for example, as you've got Australia New Zealand
qualified radiologists sitting in London, they can be working on
the scans at are urgent overnight that otherwise you pay
two or three times the amount for. And then if
you've got these qualified people in New Zealand and you
bring a few people from London, you can actually serve
the UK market. So I think that's one of those
(29:55):
ideas that's globally scalable. From a base at the bottom
of the world. In fact, the the world's a bit
of an advantage for the time zones.
Speaker 2 (30:03):
You've got to let stuff go to how do you
feel about letting stuff go?
Speaker 1 (30:07):
So because we are such long term investors and you
do everything with a perspective of onwing it for twenty
or thirty years, I think one of our failings is
we don't always think about exit as actively as others
think about normal private equity managers who buy something, fix
it up, flick it on in three or five years
and collect their carry. They are always thinking about the sale.
(30:30):
That's just not the way we're built. So it does
mean we need to be really disciplined. So you know
what does we now do For every asset, no matter
how wonderful it is, We do an annual buy, sell,
hold review. And sometimes a question can be actually, this
is a great business, therefore you should sell it. So
(30:50):
think about Tilt Renewables. You know that was close to
my heart. That literally we work for that management team
to create it, to pull it out of TrustPower and
make this thing. We built it up, got it to
a point where you thought it was the best renewable
energy business in Australia and New Zealand. So then to
be willing when people started making your offers for it
(31:11):
to entertain them was a bit of an emotional stretch.
But then when they started coming, you're like, actually, I
think this with more to them than it is to
the Infantal shareholders. We can always go again, And so
being willing to do that and redeploy that capital. I
think one of the good things about the trust that
the market has built over the years and the Infantal
(31:33):
board and the Mount Morrison team is they do believe
that we can reinvest well. So it's not like you
sell things and they immediately say give us all that
capital back. I think they're starting to believe over the
last few years, actually, if we leave that capital with
you and a patient like you are, you'll probably find
something really good to do with it.
Speaker 2 (31:53):
So let's look to the future. What excites you the
most and what keeps you in your job, I think that.
Speaker 1 (31:59):
Excites the most is actually this idea of building our
own into generational business. So just like the things we
invest in go for multiple decades, having a Morrison that
goes kind of in perpetuity, and when you look around
the world, because we're the longest standing specialist infrastructure manager
(32:23):
in the world. We've actually been the third CEO. We've
been through multiple market cycles. You've seen kind of generational
change that's really rare. Like most of our peers are
ten to twenty years old, the original founders probably still
own most of the business and they're looking for a
way to sell it and retire, so their horizons us
(32:46):
to shrink. Whereas for us, we've got this wonderful structure
where almost all of our team are shareholders and when
we retire, we sell the shares back to the next generation,
and along the way we keep kind of increasing the
ownership of the next generation. And then we've got the
foundation that Lloyd said up before he died as a
Cornerstone shareholder there in perpetuity and means you really can
(33:09):
think on the same horizon that our clients think about you.
So that's actually what exciting when you look around and
go there's all these fullness business who are way smarter
than I am, way more equipped than I was at
their age to think about investing, and one day they're
going to be running this business and it's going to
(33:30):
be way bigger, way better than it is today.
Speaker 2 (33:33):
It's one thing you'd like to your shareholders to know, I.
Speaker 1 (33:36):
Reckon the thing that would surprise people most who kind
of look at and film Morrison from the outside. Like,
I think people expect us to be this group of
really kind of financially driven, almost like investment bankers, and
I think they'd be really surprised if they walked into
(33:57):
the office and there's this very kind of curious, inquiring,
collaborative group of people trying to problem solve and always
kind of thinking about the long term and then trusting
that the financial outcomes kind of fall out the bottom
of that rather than being the thing you're targeting. I think, like,
(34:20):
certainly that was the thing that surprised me most when
I turned up, and I think there were only seventeen
other people when I turned up at Morrison that it
was this kind of quirky, esoteric, kind of truth seeking,
curious bunch of people. See, that's probably the thing I'd
most like if people understood, because I think it's the
coolest thing about working here.
Speaker 2 (34:40):
Do you have a favorite quote or piece of advice
that you like.
Speaker 1 (34:43):
I'll tell you the thing that Lloyd Morrison said to
me that always somethink Lloyd had a lot of good voudisms.
But when I was talking about moving to Australia and
that we should set up a business here and back
in I guess two thousand and eight, two thousand and
nine this market was dominated by people like Babcock and
(35:06):
Brown who had got themselves into trouble kind of being
too short term and not thinking about their clans. And
I kind of said, I can see an opportunity there,
but I can see all the reasons why this be
really hard. And Lloyd said to me, the day you
decide to run a marathon, you can't run a marathon.
What matters is that you decide to do it, and
through deciding to do it, you commit and thenk you
(35:27):
do all the things that make it possible. So don't
be put off by the fact that you're not capable
of doing something. Now, just make the decision and then
you'll do it. So, yeah, that was the thing I remembered,
The day you decide to run a marathon. You can't
run a marathon, but you'll never run a marathon until
you decide to do it.
Speaker 2 (35:42):
Well, I love that. I'm going to write that one down.
And I think now that we've had the chat, I
can definitely think I think philosophy and economics need a
rebrand because I think there is definitely more in common
with those ideas than we think. Definitely, definitely they are
way more connected then I think where we started at
(36:02):
this time of it exactly.
Speaker 1 (36:03):
I think, like all philosophy really is is the study
of things we don't you'd have a proper methodology for,
so it is really esoteric, esoteric great things, which is
kind of what we do when we're investing. Like once
you've got a formula for it, it stopped being the
source of alpha. So yeah, we kind of just do
philosophy every day.
Speaker 2 (36:22):
Yeah. Hey, well thanks heaps. I've really enjoyed the chat,
and I'm sure everyone else will too. I appreciate your time.
Speaker 1 (36:29):
Thank you very much for being part
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