1:10 – Start
1:40 – Investing with your eyes: Paul’s itinerary (Chile, Brazil, New York City)
3:05 – Chile: Brookfield Asset Management
- What cemented our view of Brookfield’s competitive advantage: complexity and culture
- Seeing the assets, understanding the assets, and meeting their people and finding out how they make decisions
- Learnings from a tour of a Brookfield-owned toll road
- Painting the picture of how complex it is to do what Brookfield does and the competitive advantage this provides:
- The deal had to be done quickly
- Regulation—they had to go to arbitration with the government over tariffs for the toll road
- A bridge was damaged by a recent earthquake and had to be repaired immediately
- Painting the picture of how complex it is to do what Brookfield does and the competitive advantage this provides:
7:30 – What Paul learned walking around downtown Santiago
- Seeing an advertisement for an investment firm’s performance sparked key questions
- Paul asked the CEO what it was about their investment team that can enable strong returns—he didn’t have a good answer
- Paul’s insight: you can only control an input—e.g., culture, investment process—things you can “put in” that tends to improve performance
10:55 – Blind dates: Paul utilizes dinner to meet with various contacts
12:45 – Brazil
Investing with your eyes
- Seeing the ways the world has changed
- Paul noticed Robeco bank’s large real estate presence
- In his opinion, they have way too much real estate because the internet has changed the game
- Putting it into perspective, Banco Santander in Santiago has gone a different way in trying to utilize real estate. Enter: high end coffee shops
- Paul’s view: there is probably some opportunities to remove some real estate on many banks’ income statements
- Paul noticed Robeco bank’s large real estate presence
15:10 – Connecting the themes: NYC
Meeting with CEO of DBS bank (Singapore), held in Mawer’s global equity and international equity strategies and talking about what they’re doing about technology
- 5 years ago, they were very concerned about what Alibaba (Chinese e-commerce) was doing around technology
- DBS saw Alibaba as a significant threat—potential for them to make inroads into financial products/banking
- If DBS was going to stay relevant, they would have to change what they were doing
- DBS changed the core culture and technological architecture which amounts to progress and impact
This very much relates to seeing legacy bank branches in South America and realizing that some companies are going to be ahead of the curve in terms of technology, and some will not.
16:50 – As a research team, discussing more and more the concept of technical debt
- Companies have to invest in technology in some shape or form and it is not always clear from looking at a financial statement—we need to dig in and have conversations and ask questions (scuttlebutt)
19:34 – Is there a sense of urgency around Amazon as a potential disrupter to North American banks?
20:41 – Performing scuttlebutt in a pharmacy in Sao Paulo
- Seeing what products are selling
- How many products are private label
- How many cosmetics do they sell
- The Disneyland queue effect: How is the store structured to encourage purchases
23:00—Chaos theory: interconnection between financial markets
- Bond yields have been increasing in the U.S.
- Expectation that bond yields will continue to increase because the economy is strong has seemed to have resulted in a strong U.S. dollar
- Therefore, currencies such as the Brazilian real have been depreciating against the U.S. dollar
- This in combination with the price of oil recovering has led to higher fuel costs in Brazil which eats into truckers’ profits—the truckers decided to go on strike and block roads
- So…increasing bond yields in the U.S. led to Paul almost not being able to leave Brazil!
26:46 – Why our CIO goes on research trips: leading by example and the role of the “generalist” analyst at Mawer
27:55 – One Mawer thought: book Paul brought on his trip
