Packhorse chair Tim Samway is a veteran in funds management. Joint founder and chairman of Hyperion, an Australian and global equities fund manager with over $13 billion under management, Mr Samway’s interest in Australian rural land spans two decades when he first met Packhorse co-founder and entrepreneur, Tom Strachan.
Passionate advocates for regenerative agriculture and the importance of animal impact in restoring soil health, the Packhorse business ethos centres around achieving environmental benefits and financial returns in parallel.
The InvestorDaily team sat down with Mr Samway to chat 2022 and his expectations.
1. As we head into 2022, what do you expect from the economy, and do you see Omicron impacting our currently strong recovery?
Most major pandemics only last a couple of years and while it might be too early to call the end of this one, there is light at the end of the tunnel, at least for first world economies. The UK, for example, has experienced a surge in cases but no real surge in deaths. Having been in London recently for the Global AGInvest Conference, it’s clear the shoppers are out in full. Although masks are back on with Omicron in the air, people are getting on with life. Some big businesses have quickly switched to working from home for the time being as a result of the Omicron scare but have just managed to squeeze the office Christmas party in before the office doors shut. Omicron seems to be just another variant, but one with enough scary looking mutations that our government’s hope will encourage the last of the reticent population to get a jab. I have met a number of people this week who take their NHS supplied free antigen rapid self-test every morning before they go out and then just get on with their day.
2. Are you nervous about the (winter months and the) implications they could have on possibly resurrecting lockdowns?
No. Lockdowns make no sense now without evidence of a killer variant that would change our overall population’s death rate. Governments are only just starting to recognise the challenges to mental health and preventative medical systems that extended and repetitive lockdowns create.
3. Looking back on 2021, what would you say were the key challenges for investors as the COVID pandemic pressed on?
Investors need to understand that the world has changed. E-commerce has become a larger part of the total retail experience. Working from home has changed the trajectory for cloud computing. It’s becoming a necessity for many businesses that previously had held off. There are a number of thematics that will play out over the next 10 years but perhaps the most powerful is the effect of the drop in the birth rate in Western economies. We are set to experience an ageing population with a higher dependency ratio. Combining the depressing effect of an ageing population on GDP growth with current levels of government debt and we are bound to see downward pressure on government expenditure and the need for higher taxes on the wealthy; neither good for long-term economic growth. Normalisation in interest rates in the years to come, however gentle, will see fixed interest investments look even less attractive than they are today. Real assets with inflation hedges are looking very attractive.
4. ESG is increasingly important and Packhorse is doing its share to prioritise sustainable investing, do you think ESG will be something firms begin to pay a lot more attention to in 2022?
In years past, ESG was a page that investment managers included at the back of their pitch decks. That’s changed. Asset owners, such as the Australian major super funds, now consider sustainability to be an important part of their investment filtering and manager selection process. Carbon risk will be the most important ESG factor to understand in the years to come. Global Carbon Efficiency Platform EMMI.io notes that there are trillions of dollars of unpriced carbon risks hiding in investment portfolios. The challenge for investors is to understand the difference between the regular cry of “sell all the greenhouse gas emitters and fossil fuel users” on the one hand and on the other hand, retaining greenhouse gas emitters who are using their emissions efficiently and will be able to flourish in a carbon-constrained world. The first approach is the ultimate investment risk management approach but ignores reality. Fossil fuels keep people alive. They are a necessary part of the food production chain and keep people warm and will do so for some time to come while we create a flourishing alternative decarbonised energy supply. But more importantly for investors, selling all emitters ignores alpha generation opportunities. In my experience, investment managers who ignore the necessity of exploiting investment opportunities don’t last long.
5. What role will agribusinesses play in that regard?
The Australian government has decided to place substantial reliance on agribusinesses to sequester carbon dioxide in soils as soil organic carbon. This reliance is not misplaced, although reducing emissions is clearly more effective than any post-emission strategy. The cattle industry, for example, has lost the argument on methane burping cows, even though methane is a short-acting greenhouse gas and has been emitted at similar levels for decades, and is now focused on reducing those emissions by changing farming practices. The exciting opportunity is to move farmers to regenerative farming practices that improve the pastures we have been degrading since Australia was colonised, and in the process, lock carbon dioxide back into the soil. It will not only do good and feel good, it will also provide income opportunities for investors in a real asset called agricultural land with inflation hedged, uncorrelated investment returns that should enjoy substantial future long-term growth.
Maja Garaca Djurdjevic
Maja's career in journalism spans well over a decade across finance, business and politics. Now an experienced editor and reporter across all elements of the financial services sector, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies.
