AFI Alternatives Podcast With Travis Miller

Posted on
10th November 2021
By Shannon Turnbull

AFI Alternatives Podcast With Travis Miller

The Alpha Females Invest Podcast (By Shannon Turnbull, 10th November 2021)

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Transcript (edited)

Welcome back to The Alpha Females Invest Podcast. Two females working in the finance industry searching for Alpha.

My name is Emily and my name is Cluny and together we bring diversified perspectives from the buy and sell side of the finance world. Today on our show, we're hosting the CEO and co-founder of another really interesting and innovative business Travis Miller from iPartners.

Prior to iPartners, he has worked in financial markets for the last 20 years and most recently as a managing director at UBS but he was also previously a director at Deutsche Bank and ANZ.

He has been a pioneer in the evolution of alternative investments and product in Australia and is also a successful investor in his own right, completing various property developments in investing across both public and private markets.

In addition to all of that, I think it's such a great time to have you on the show, Travis as I know iPartners has recently been in the press a fair bit or for positive reasons and we can definitely get into that a little bit later. But for now, welcome to the show.

Thanks for having me appreciate you making time.

 Absolutely Travis and it's great to have you on as Em just mentioned now, we didn't tell you this, but we do like to start every episode with the same question. So today, could you share with us one of your most embarrassing career moments?

So I guess the first observation to make is nothing is embarrassing in the long run, time heals all wounds, but just to get a simple example.

I grew up in a small country town, pre sushi train, and then I got a job at an investment bank as a graduate and I was taken to a Japanese restaurant and expected to eat raw fish with sticks and no idea how to    use chopsticks.

I'd never eaten sushi, so it ended up a total cluster, but in hindsight, as I started with, you know, there's no great reason to be embarrassed.  I   had a couple of great bosses and they laughed it off, as did I, but I guess at the time it felt it felt important.

You a big sushi fan still to this day or have you really steered clear of the chopstick’s usage?

I've grown up, I can use chopsticks, I like sushi.

I like to think I'm a little bit more cultured now.

It was good lesson, definitely. And sushi is not the only thing that you love, it seems like the best ideas are often create over a casual drink. So, can you please tell us how you came up with iPartners and what you guys actually do?

It was literally me and Rob Nankivell my co-founder.

We just thought there must be a better way to access alternative assets for the normal investor.

And we think of ourselves as the normal investor.

You know, we're not a large institution, we're not in a large family office, we just think we're normal wholesale investors.

So, we went out and build a tech platform to make investing easy. And we think using our platform, we've actually made it easier to invest in alternatives than actually invest in equities using tech.

And I guess the second part of the question of what we do, but we primarily represent our investors. So, it's hard for investors, to be experts on everything. We see ourselves as representing them when we go out  to source assets. Primarily it's about the investor.

The second piece.

We spend a lot of time just finding good investments because if you're not finding good risk adjusted returns are interesting assets for investors and you're not really much use for them to be honest. And what we do, how we make this work is that we give investors choice because we allow them to invest in relatively small increments. So as long as their wholesale investor, they can invest a minimum of $10,000 and what we do with the technology will aggregate lots of small investors to create one big investor and when that one big investor comes along, that's when the  fun starts, you have a bit of power at the negotiating table.

And when we go to capital raisers who are looking for capital, we can go then with a large investment, which allows us to get a little bit more power for our investors.

The other thing I'd mention is that we focus a lot on building trust and educating investors because the way we see it is education is the ticket to the alternatives dance in a way in that unless you can understand the product you're investing in, then you're highly probably not going to invest.

Unless you trust the party you're working with, then you're highly unlikely to invest with them.

So, we spend a lot of time on that basic education side of things, we've still got a heap of work to do.

But you know, podcasts like this are part of what we get up to. We do a lot of research articles, we set up lots of educational pieces we do round tables.

We just think that the alternative asset space will only grow when education gets out to a broader audience.

I think that's really interesting and great to hear you are promoting, I guess education in the alternative space going into that in a  little more detail. I'm really interested Travis what are the specific types of products and funds that you guys have on offer. And you mentioned investors coming in and once you get a big enough investor, then you've got a bit more bargaining power at the table. So can I ask where FUM is at the moment and does that move around a fair bit?

Given the nature of our business, it just continues to grow and it's growing at a rate of knots at the moment.

It was mentioned in the AFR, I think a few weeks back that we cracked a billion dollars and by mid next month, I'd say we're probably at 1.2 billion. So, it's growing really quickly. It’s very diverse, the assets we look at.

When I look at alternatives, it's such a broad universe, but I think about private credit.

So loans secured over an SME business or company property. Debt loans secured over property.  Asset backed debt loans secured by a pool of assets.  Unlisted equity, venture capital, private equity, global infrastructure, anything outside of the traditional box.

When I'm talking to people about alternatives, I say it's best to think about what's not, it's not buying and selling bonds. It's not buying and selling equities. It's not  cash, but it's pretty much most of the other stuff.

Here’s an alternative and that's where we like to play because there's lots of people who do traditional assets really well and they'll continue to do that.

So we'll play where we think we're good, we've got the right skill set.

Yeah, that's great. Thanks for covering that. And I guess when I think about alternatives and thinking they're usually quite long duration and potentially illiquid. Can you maybe give our listeners an idea of what is the typical timeframe foreign investment? Is it that longer duration or do you target a bit more of a shorter investment horizon?

You’re spot on they can be longer duration, but our assets have been around a 12-18 month average maturity.

And the reason for that, the most interesting alternative asset has been private credit for probably the last 2 to 2.5 years because it's had nice relative value. And given how low interest rates have been, it's been a pretty interesting space to invest.

My personal view is that our average maturity will probably drift out a little bit because we're starting to see a lot more opportunities as private credit gets a little bit crowded and in particular property based, private credit, a lot of opportunities popping up in pre-IPO private equity like and as you step into more growth-based assets, you just naturally look to longer duration assets.

So I can see it drifting out.  Private credit, still interesting, but our goal is to give investors access to a diversified pool of alternative assets, which I think means a little bit of growth, a little bit of yield based assets and then just other quirky, assets that fit in the alternatives box.

Travis, we've spoken to a few different investors and in previous episodes on our show, we have focused on active passive investing, small cap, this large cap and how both of those aspects can help to diversify a portfolio. Alternative assets. I guess in my opinion, is the next layer to this.

Can you tell us why holding alternative supports a diversified portfolio and the key benefits of that from your opinion.

The key of it, you're just literally paying in a different pond.

When I was using the example before, what alternatives are not buying, selling equities, buying, selling bonds or cash.

We’re looking at the other part. So you're playing literally a different field and asset prices move to a different beat, right?

They’re not perfectly correlated and they tend to behave in a different manner. And so you're ultimately getting paid for  taking different types of risk.

And to give you an example, a lot of people talk about alternative assets are less liquid and that typically does tend to be the case, but by being less liquid, you can actually generate a liquidity premium and get paid a certain return for taking on that risk that may not exist in actively traded listed equities.

The other thing about the segment, there's often a scarcity of capital playing in this  part of the market and whenever there's a scarcity of capital, if you're providing capital to that segment, you tend to have a better buying power and then you can negotiate a little bit harder with people looking for capital because they have less sources of that capital.

So I think a lot of those factors is you've got the pricing power created by scarcity.

You're looking at different asset classes with different correlations to traditional and you can often push the risk return in your favor.   You've got a lot more control in alternative assets. You can drive the documentation, you can drive the maturity, you can drive the exit. So all those things lead to just by inference, more diverse portfolio.

That's great.  I guess you've really set the scene for why someone should consider alternative investments in their portfolio. I think that diversity and un correlation makes complete sense to hold as part of a portfolio. And you mentioned that you're about a billion dollars in funds under management  now. So how have you had the impact of getting people to trust you with their money and particularly as iPartners is a relatively new business.  How have you gotten your investors to feel comfortable with putting their money with you and you mentioned their wholesale investors  and the minimum is typically lower than a standard alternatives portfolio. But at the same time, you know, you mentioned even at the start that the trust factor, how do you build that with your investors?

We've moved from being a small business to the medium part of SME.

But when it originally started, it was literally about the experience of the team within our team, we've got a number ex-MD’s out of UBS, Goldman's Deutsche, CBA, Westpac and ANZ. And it started with, we were a strong team with good experience.

The reason we've accelerated the last probably 18 months is I think we've done what we told people we're going to do.

We went out and got interesting investments.

We created a line of interest for co investing personally, quite a lot of assets and we actually got a lot of maturities coming through.

We're giving money back to investors.

We pay the distributions on time and they're just starting to see that track record coming through.

And I think that's where you get the trust piece of it because you just do what you say you're going to do and then it's all in the outcome and we are focusing on education.

You know, we're not trying to hide anything. It's literally, this is the product, we're very transparent, this is information needs to understand.       

And I think it just builds on itself and the longer you're in business, I think that feeds from there. And it helps, we've got over a billion now, we've done over 180 funds.

So now that track record is there and there’s evidence that people can point to. 

That track record is clearly very impressive Travis. And as you mentioned, you've clearly got a strong team there behind you. We've also, as we touched on at the beginning scene, some really exciting press around iPartners regarding a capital raise potential I. P. O. and the appointment of your new chair, Bob Mansfield, who is the ex-chair of Telstra.

What can you tell us about the  corporate side of the business and how you found the process of raising capital and what are you using that capital for what made you consider doing that? And if we can also maybe ask, why are you considering your ASX listing as well?

The capital is all about as you grow a certain size, you've got to really focus on the governance side of your business.

So that's getting independent directors in getting independent chairs in building out your compliance team, your legal team. There's a whole pile of staff hiring that was required to match the growth and then you're also your own product team.

You get a lot of product turning up and you've just got to filter through the pipeline of, you know, what's good, what's bad, what's worth taking to investment committee so it's really about resourcing a business properly for growth because you've got to size yourself right now in a way where you want to be in 6 to 12 months. 

 Otherwise, you know, you don't actually get to where you want to be in six and 12 months you've got to spend now.

It was really for growth capital, the business is now profitable because of that investment we've made and that profitability looks like it will continue to grow. So I think it's been a good investment. It was the right time. We've actually got quite a good number of investors on board that can help the business too, which is important.

That's great. Thanks for sharing that. And then obviously a fund management business doesn't have much without returns. So, I'm curious  to understand a bit about what type of return that you're seeking and how that varies between the different funds and the specific investment vehicle. But then also whether you're yield focused or total return and whether there's a benchmark or hurdle return that you're targeting.

The return I seek, I seek a better than fair return. I look at an asset and I go “that asset the return looks like this”. I want a better return than that.  I'm not going out there      and saying, I've got a hurdle of 5%, 15, I'll analyze things on asset by asset basis because we look across the whole alternative asset spectrum, there's no benchmark. It's just all about getting a nice risk adjusted return. But we do, we look across yield, we look at growth, good combination.

I mentioned earlier that the private credit spectrum has been really interesting for a couple of years and will continue to be so for a little while.

But I think the opportunity is starting to pop up more in that pre-IPO equity space. So that will be more growth focused.

So, there's no real number that you look for. But talking about performance like our yield assets have been in that 8-10% type return.

We've got a flagship fund that's been annualized at 9.7% across the last two years our growth assets normally clearly double-digit.

There's a nice track record of performance but it's never about a specific target. It's just that asset that risk profile. What is the fair return and how can I adjust it in my favour?

Which could be by a legal documentation in terms of the transaction.

Or negotiating a little bit harder on behalf of investors to get a better price It’s a  unique space, alternative assets, nothing is written on the box.

It's all about working for the best outcome for a given asset.

I think you touched on a really critical point there in that you assess each asset individually which in alternatives obviously they're alternatives for a reason.

And so every asset is clearly pretty differentiated generally speaking, alternative assets.

 I guess one of the key push backs have been  that they are only accessible by the very wealthy. I'd love to understand who can access your product. You mentioned, it's normally wholesale investors. Could you just break down the definition of a wholesale investor for our listeners and likely what are the minimum amounts associated with that?

And this point, here is a big reason why our business exists because it

was all about giving the normal wholesale investor access to an asset class that they previously wouldn't get access to.

So for us, the minimum investment amount, as long as you're wholesale is $10,000.

And the reason we keep it that low is it allows investors to build out a diversified portfolio of direct alternative assets so they can average into an asset class in the investment increment that's appropriate for their personal wealth.

The definition of wholesale investor and it potentially will change over time, is a minimum wage of $250,000 per year across the last two years. Or net assets of $2.5 million.

There's a few other tests for criteria, but they are the primary ones that most would consider.

But yes, so that's why it's an access point we provide is a key part of why our business exists.

Just touching on that. Again, I've heard press speculating and the government speculating that potentially they're going to increase the thresholds to be considered a wholesale investor.  Would that have a few implications for your business in terms of if currently a wholesale investor is deemed to have net assets of 2.5 million and that increased to five, would you see that as being a bit of a hindrance to iPartners or would you lower than the definition of who can invest?

The regulation comes into play and you just deal with it at the time. It may be that a few investors can no longer invest and they don't meet the criteria that may happen. But, you know, the type of investors investing in this type of product tend to be relatively high net worth. But if that was  to occur, we just deal with it at the time.

 Just fitting iPartners into the broader landscape. Are you saying that there's any direct competitors to your business? And I guess then what would you say is your competitive advantage?

There's always competition in different forms, You know, you've got offline competitors domestic and offshore. There's not a heap of competitors at the moment in our sort of one stop shop kind of model or an investor can directly access alternatives in increments that suit their wealth, but that will always change over time.

But I think the differentiation is we've got a very unique platform

 You know,  it's a bit like in the early days, what you had for listed equities, those types of platforms.

We've built something like that for alternative assets, which is a really nice investor experience.

We've got really unique product.

 I don't know if there's many platforms anywhere you could invest in the type of assets we originate given the skill set of the team.

The team expertise. I think is a huge differentiator.

That's how you build the trust.

Most of the people involved in business are well known across the market with good CV's.

I mentioned the tech.  Definitely investor experience, which is, we tend to really try and get a line of interest with our investors.

Most of the staff within our business are actually personally investing in a lot of the funds.

A lot of the typical assets that we put on. I think it would be rare not to have a staff member in those assets.

And we're going in pari passu alongside of other investors.

Exactly the same terms. Exactly the same price.

And I think that creates quite nice alignment of interests with our investors.

Yeah, absolutely. And I think investors love to see that your co investing particularly not being favourable treatment on fees as well. So that's great to hear.

And I have visited your website and seeing your platform and I can say it is very user friendly one of the projects I noticed on there, which I think has expired now, but it was the Koala project, which was a super interesting one. Are there any other I guess projects that you want to call out that have kind of had a lot of attention from your investors.

A big point of differentiation is that we lend a lot of money to non-bank lenders. You know, you're reading the papers about buy now, pay later and these types of entities. We've actually done a lot of lending in that space in the smaller groups. We tend to bridge them provide funding, they can get to institutions, get to the banks.

We've seen as a point of differentiation is that we're very, very good at that space and we've bridged quite a lot of non-bank lenders and investors got quite attractive returns.

So we're seen as, that's something we're quite good at.

But I think we're good at just diversity of assets.

The Koala Fund you mentioned, we've worked on an aggregation of hotels and aggregation of farms so it's very diverse on these kind of things that we can give investors exposure to.

Yeah, I find that really interesting to hear you're in the non-bank lending space. We recently just did an episode with Lee Hatton who is an executive vice president Afterpay and learning about that space I found was incredibly interesting in the way that the financial industry is pivoting I guess a similarity between alternative asset managers and institutional managers is identifying opportunities. How do you guys come across the deal flow and I guess what are the key drivers to choosing to participate in certain deals or offering it to your clients?

Are there certain financial characteristics that you look for or are there more general characteristics that you take into consideration?

Yes, I mean we get a lot now from word of mouth as we've grown and we get a  lot of repeat capital raisers.

So, they've raised money with us two or three years ago. They'll come back to us.

The large advisory firms will be showing us transactions and actually quite a large source of products actually from our investor base. So it's pretty diverse how we're sourcing those leads.

Yeah, great. And I guess as most of our listeners know the aim of the podcast is really to increase our peers knowledge and particularly women. So with that in mind, can you talk a little bit about your clientele and are you seeing an increased interest from female investors or is it still quite largely a male dominated investor base?

It is yet still largely still male dominated. When I go across our database, the large proportion of investors are male. What is changing is that we track a lot of statistics through our website and our referral channels. The click throughs and activity from women is increasing quite a lot.

Which says that there must be something we have that's at least getting women interested, but they haven't seemed to actually take that next step to invest in.

But I think I mentioned earlier, I think as an industry we haven't done a great job with  education and alternative assets and we're working hard to improve that and will continue to do so because that's something we're passionate about as a business

And my view is just basically if we provide good educational content and once, we can build out trust with the investor base, which takes time, I think we just see a more diverse investor base flowing through which ideally includes women, lots of different investors that we're not seeing at the moment.

That's great to hear women are definitely increasing in terms of the interest in the space, you know, that's clearly an aim of our podcast to identify and promote talent and knowledge across the space. So, it's great to hear you guys are also on board with that you touched on this before Travis, but a lot of your team comes from an investment banking background. Another aim of our podcast is to really help guide, I guess younger generations in terms of their career path and all the different opportunities that are available in finance. Can I ask when you're looking for talent, what type of skill sets do you seek out?

Yes, as a founder it is very, very broad because as you're building up the business, so I see a gap and think I should hire there.  I need that skill set. You’ve got to be on your toes on how you hire.

But my general thing is I really like technical skills. Like I need my team to understand the details  like when I get a document, I want them to go through in detail because documentation is a key part of alternative assets.  It’s often bespoke.  It's deep detailed clauses you have to get right. So, I really love technical skills, attention to detail. You know, diversity is important.

Group think is not of great value in general, in business. You need people to ask questions and challenge. Networkers and connectors.

You think about our business in a way I'm looking for good product and I want to do DD on a broad, universal product, so who can originate and refer that product

And then on the investor side we're looking to build out our investor base.

People who can network and connect it sort of probably pops up every time someone asked that question.  And then good people with good reputations, you know, key part of business that I focus on particular on the product side. I want to know who they are, what is their background.

So, do I know anyone that knows them. Can I get a referral on them. A background check of the people is one of the best filters in hiring You've got a choice who you want to deal with and make sure they're good people. So, I guess don't burn bridges.

Yeah, that's so true, awesome. So, I think you've really highlighted, I guess some of the benefits of being an alternatives, definitely the competitive advantages that iPartners have and some of the really interesting projects that you are offering your investor base. If our listeners are interested to find out a little bit more what's the best way that they can get some more information or get in touch just call or message me or any of our team?

To be honest, we pride ourselves on been pretty open and accessible and it's a differentiator of a business outsides over a larger organisation.

You know, you can get in contact with us, you can have a chat with us, you know, that's why we're here.

But I guess the standard one is, you know, website,, That's where all the information is. But I'm happy to have discussions.

 now before our last question, Travis, I would like to take this opportunity to thank iPartners for supporting the alpha females invest podcast.

It really has been fantastic to gain a deeper understanding of your business and I feel the concept of alternatives is really topical at the moment and investor interest is growing exponentially as you touched on at the beginning, which is fantastic to see. So thank you again for being a part of the show, but before we finish up, as we like to start every episode with one question, we also like to finish the episode with another question, Travis, you've clearly had a huge career, you've been on the investment banking side, you're now founder and entrepreneur. Can you tell us what's your best career tip for younger professionals in the industry?

I've probably got a couple, you've got to continue to learn continuous study and challenge yourself, challenge others, don't accept doing the way things used to be done because there's always a better solution.

Probably the last one is don't respect hierarchy.

My view is everyone's ideas available. Just say what you think, because ultimately some of the greatest ideas have come from interns as good of ideas has come from founders.

I think just you have got to speak up.

That's awesome advice. I love, love that. Well, thank you so much for joining us on the show. Travis, it's been super interesting to do a deep dive into your sector and we really hope to keep up to date with all of the progress that you're making and hopefully next time we speak, you'll be two billion or more. So thanks so much for joining us. I appreciate your time. Thank you. Thank you for listening to the Alpha females invest podcast if you like this episode, we would love your support on instagram. You can find us at Alpha Females invest. You could also leave a podcast review, but most importantly, please keep listening, See you next time.