La Trobe Financial’s Post

Transcript

As presidential elect Donald Trump makes more appointments to his cabinet, investors are starting to get a better understanding of what Trump 2.0 might look like. I caught up with Chris Andrews, the CEO of Latrobe Financial, a little earlier, and he says while Trump's proposed tariffs are a risk, the middle America segment of the US economy is a huge investment opportunity. Markets are positive and certainly at the moment we're seeing the equities market surge, we're seeing a cab ranking of deals coming. So certainly the markets initial impression is positive. But if you look longer term, I think really they're just looking at a really big ambit of uncertainty from here on in, which truth be told is the perennial in investment markets. So there's a lot of uncertainty as to how it plays out from here. Yeah, one of the big uncertainty parts of it is the potential tariffs that the Trump administration might put on to the price of goods. Coming into the country, what could that mean for Aussie exporters? For example, if you take the the biggest claim, if you think of 40% or 60% tariffs, that would be ruinous for international trade and for the US and the Australian economy. But it's been said before. And I think truly when when President Trump speaks, the first thing he says, think of it as the opening salvo in a negotiation. So I think like the Reserve Bank, we're just taking a very cautious, measured view. We'll see how things unfold over the next 12 months and truthfully. We're not expecting any of those really big shocks. Yeah, because this is Trump 2.0. Markets have seen what happened in the previous administration. He tried to wanted to put tariffs on Aussie goods, sort of got an exemption for things like steel and copper and products like that. So, well, I guess we'll find out what's gonna happen. Yeah. I've spoken to a lot of CEO's in the US and business leaders around the US over the last three or four weeks, and you keep hearing that back again and again. Whether they were supportive of the Republicans or whether they were Democrats themselves personally, they all said we've seen this before. We don't think it will be a disaster. This will be business as usual for America, yes. So what is the sort of the vibe like in the States amongst that sort of CEO level? Are they sort of opted cautiously optimistic about the future, cautiously optimistic, pragmatic? You know, the US political system has checks and balances everywhere. It's not like a president can come in and completely throw over the table and start again from Page 1. So there'll be change, make no mistake about it. And one observation is that middle America, that constituency that Trump picked, absolutely pulled for that part of America, has got both political parties now fair and square behind it. So, you know, for investors, if you want a piece of the next four years, probably the next 10 or 20 years, to tell the truth, you're thinking about investing in the middle America. Yeah. Talk to me about the advantages for private credit in particular in that middle America manufacturing space or whatever it might be. Well, we've recently started a product in this middle America space. And because we saw this opportunity, Democrats, Republicans, it's absolutely bipartisan and their sense is this move to globalization, it really ripped the heart out of those middle states, the smaller to medium enterprises, factories, services, et cetera. It ripped the heart out of that part of America and we've seen the problems. Both parties are now looking to fix that and you have very big focus from all parts of government on rebuilding that, you know, for Australian investors, obviously you, you, you're looking at international exposure there. But you do need to think whether you would want to step out of and miss out of what? Miss out on what is one of the really big investment thematics of probably the next 10 or 20 years. Yeah, Private credits really expanded the last couple of decades into sort of multiple different asset classes. What's really been driving that? Well, we've had globally, we've had the banks gradually contracting their credit jaws and that's been absolutely intended. That's been the push of regulatory action across the world since the global financial crisis. In 2008. But you've still got great businesses who have a need for finance and who have need for really smart, really flexible, really adaptable capital providers who can provide them the capital to grow their businesses and invest in their own businesses. So where we are today, we're seeing a really great diversity of credit strategies. We're seeing some at the higher risk end at La Trobe Financial. Our focus obviously is more on the more conservative end that's consistent, consistent with what our investors are asking for us. But you're seeing a great diversity of. Approaches in a really wonderful asset class and the fundamental proposition there is you're getting equity like returns for fixed interest type risk, which we think is very attractive and what's the investor appetite in Australia like for things like that? We've seen terrific take up by our investors. There is really interest. I think you know fundamentally investors are seeing the same thing that we are seeing. They're seeing the headlines, they've watched the political saga unfolding over the last five and 10 years in the US very carefully. They can see that both parties are circling around this middle American economy. It's the reshoring of factories, it's the reshoring of business. It's the potentially imposition of tariffs to accelerate that as well. All of that is focused on rebuilding middle America. When we talk to investors, you know, we're not talking to them about anything they haven't been thinking about already. So it's a I think there's a wonderful receptivity to the to this development in markets. Chris Andrews, Chief executive, Latrobe Financial, thanks for coming on the show. Always great talking to you.