[i3] Podcast – Interview with Gus Sauter

Gus Sauter is the former Chief Investment Officer of Vanguard for 10 years and was instrumental in the company’s venture into exchange traded funds. He talks to [i3] Insights editor Wouter Klijn about his early career, Jack Boggle’s questioning of ETFs and his current role as adviser to Australian pension fund Sunsuper.

Podcast overview Gus Sauter:

1:00 You started a bank at age 8, is that true?
3:00 Then a goldmine in your 20s?
4:20 Gold is an Armageddon type of investment; if the world collapses, gold is probably going to be fine
5:50 My first stock
6:30 I’ve had the active vs passive debate literally thousands of times and ‘no’ I’m not tired of it.
7:00 Passive is a good investment strategy, but it is never going to be top performing in any given year
9:00 I’m not totally on board with the efficient market hypothesis
10:00 Why indexing works
12:00 But does the market capitalisation method work in fixed income, where you skew to the most in debt entity?
14:00 Over time, markets have become more efficient, compared to the 1980s.
15:00 Did Jack Boggle cut his holiday short to find out why you were adopting ETFs?
16:00 Jack disagreed on ETFs
17:00 The crisis of 1987, and the subsequent redemptions from mutual funds, shaped my thinking on ETFs
19:30 Is there more institutional takeup of ETFs in the US, than there is in Australia?
20:00 ETFs are not a product; they are a way to distribute index funds.
21:00 Not a fan of smart beta
27:00 You don’t think there is necessarily a correlation between GDP growth and stock market returns?
28:30 You can take a great firm and make it a lousy investment by overpaying for it and visa versa
31:30 Working with Sunsuper
33:00 Do you see a lot of similarities or differences between the issues that investors in the US and Australia grapple with?
35:00 Should pension funds in Australia be more dynamic in their asset allocation?
37:30 What have you learned from past crises?
42:00 Jack said: “One day indexing is going to be really big and we’ll have US$ 10bn in assets” We now have US$ 4 trillion.