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 Bogle’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 Bogle 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.
About the [i3] Podcast
The [i3] Podcast is a conversation with some of the leading institutional investors around the world, discussing their philosophy towards investing, in particular towards portfolio construction and investment strategy. The [i3] podcast is available on iTunes, Google Podcast, Spotify, Stitcher or your favourite podcast platform.