Mark LaMonica: Welcome to another edition of Market Minute. We are going to talk a little bit about fixed interest today, but also AI. And the big news last week was alphabet. So Google’s parent company did a big bond issuance in Australia. So I guess start out talking a little bit about what they did.

Joel Grosvenor: Yes, they they came to Shreya and they raised around 5.5 billion AUD in both fixed and floating rate securities. It was one of the biggest issuance deals that has happened within the corporate bond space. But pleasingly it was very well received in the Australian marketplace. It was three times oversubscribed as well.

Mark: You mentioned that it’s oversubscribed. It’s obviously very popular with investors. Why do you think that is?

Joel: Well, the Australian fixed income market has always been quite dominated in the corporate space, at least by financials. And they tend to issue much shorter dated securities as well. And so alphabet coming to the market, you know there’s a different sector exposure they issued across different maturities. So I think it really helped the market sort of look for sources where they can diversify more.

Mark: Okay. And let’s talk a little bit about you know we’ve always heard about these technology companies asset light lots of cash flow. Now things have changed a little bit with AI. I think everyone’s aware they are investing heavily in data centers. I guess how does that fit in with obviously this debt raising and some of the different things that these so-called hyperscalers are doing now.

Joel: You know, it’s an interesting change that they’ve sort of gone through where most of the AI spend that they’ve done to date has been through, as you mentioned, like cash flows, their own cash flows, which is still quite strong, but now they’re sort of pivoting to more issuing debt as well to fund a lot of these. The AI build out that’s required.

Mark: And let’s talk a little bit about a portfolio. I mean, I think traditionally when people think about diversification you’re just trying to check these different boxes. You know you have equities, you have fixed interest. How is the AI theme? We’ve talked a lot about it. You know, the influence it has over the share market. But now is it creeping into other parts of a multi-asset portfolio.

Joel: I think so there’s quite a few areas where it’s the AI spend is influencing markets. So you know, a lot of these issuers are the biggest components of your global equity exposure. You’ve got data centers coming through your listed property exposure. There’s a lot of spend on energy. Build that within your listed infrastructure exposure. And now you’ve got a lot of the hyperscalers issuing mooring the corporate debt space.

So again feeding through your your fixed income exposure. So it’s not something I think is an immediate source of panic. But I think it’s something you should be aware of that a lot of these, the risks that these companies might be exposed to can flow through multiple asset classes, not just within an asset class.

Mark: So I guess maybe what are you guys doing looking at this overall theme and how it’s going into these different asset classes, and how can investors think about their portfolio and maybe things they can do?

Joel: Well, I think you have to have a really good understanding of what you own and why you own it. And I guess always question whether your assumptions around diversification across different asset classes are going to remain, or has the asset class actually fundamentally changed. And so the risks that your portfolio is exposed to or that you’re trying to diversify away whether they’ve actually changed.