Lewis Jackson: Hi, I'm here with Jessica Melville, Head of Mid Risk Portfolio at AustralianSuper on the sidelines of the Morningstar Advisor Conference.

Jessica, you were just on stage talking about where we are in the economic cycle. How do you think about the risk of a recession right now, in Australia and globally?

Jessica Melville: Yeah, it's a really good question. So, we focus very much on where we think we are in the economic cycle. And then, that gives us a little bit of a guiding light to say how we're going to actually position our portfolios. So, I guess, given that there's been a lot of focus on inflation, and more recently, the Federal Reserve has started to take some pretty considerable action to actually start managing that inflation. So, the risk is that we've seen some rises to interest rates, and we think that that's going to continue as they take action to bring that inflation under control. So, from a cycle perspective, it feels like the expansion phase is starting to sort of fade into the rearview mirror, and we're very much heading into a slowdown now. And I guess that gives us a little bit of a guide to say how we're going to be evolving our portfolios. And we were previously very pro-growth. We've moved to a slightly more defensive posture now.

Jackson: Okay. So, thinking about getting more defensive in the portfolio, what are some of the levers that AustralianSuper and other investors can think about pulling?

Melville: Yeah. I guess it's important to acknowledge where we've come from, which is, we've had this period of economic expansion coming out of COVID. We had a lot of fiscal stimulus in the system. So, our portfolios were very, very pro-growth. As we move into sort of taking a bit more of a defensive stance, we're looking to build up that bond exposure in the portfolio, and that's a really important lever. Important to acknowledge that I wouldn't want to overstate that we're not piling into bonds, but we are slowly building up that exposure, and I think that just feels like it's a prudent risk management tool in the environment that we're facing this year.

Jackson: And just talk us through in brief, you know, for many investors, either they've been burnt by bonds for a long time, especially sort of defensive income investors, really, really low yields. Is this just a story of yields improving, sitting around the 2% to 3% now? Is that why you're sort of nudging, sort of, dipping your toe back in?

Melville: Yeah, that's right. So, it's a function of bonds starting to look a little bit more attractive, but I think it's also from a portfolio construction perspective now it feels like the environment where you've got increased uncertainty that we really need to be thinking about diversification and not just being a bet on growth or equities or not even just mid-risk assets like property and infrastructure. It's about having a number of levers in your portfolio that will benefit from whatever the environment holds going forward.

Jackson: Now, you talked about property and infrastructure. I know you oversee both those at AustralianSuper. What are some of the opportunities you're seeing there, whether domestically or globally?

Melville: Yeah, yeah. We are constantly in the market looking for opportunities to acquire assets in both property and infrastructure and very conscious of how we actually manage the assets that we currently own. For us, the opportunities are very much in the global space. So, we've built out teams and we've got some fantastic people now based in London, and we've actually had the first couple of people join the team in New York. So, for us, the opportunities are very much, the global opportunity set. It gives us access to a lot of sectors that are quite different to what's available in Australia.

Jackson: Give us some examples of what all those sectors are.

Melville: Digital infrastructure is one that has – definitely had a bit of a tailwind coming out of COVID, but we feel like that there is a very long-term structural tailwind and there's going to be ongoing demand for digital assets. So, we've been the proud owners – we've become the proud owners of some telco towers in Australia, but we've also looked to build out our digital infrastructure portfolio offshore as well.