Joining me now is Bevan Graham. Bevan is the Managing Director and the Chief Economist of AMP Capital. Welcome along to the show.

Thanks, Phil.

How's things going?

Yeah, look, pretty good. Pretty busy. Lots to be thinking about at the moment.

Yeah. So tell me, we've got interest rates being cut at the moment, we've got coronavirus, we've got elections coming up in the US and here. How are you feeling about the markets at the moment?

Great question. Look, it's take it as it comes at the moment, really, isn't it? I guess the key thing is, we went into 2020 expecting some improvement in global economic growth and for central banks to be largely on hold. There would then be some political uncertainty as we approached the US election and our own election here. But, of course, the big news since then that's derailed just about everything has obviously been the spread, increasing spread, of coronavirus.

You're taking the view that it's going to be a longer impact than a shorter one?

Well, look, when we first started to see some of the news and the numbers coming out about it, we thought that there were two ways that this could play out, and the first one was that it was a, you know, disruptive for a short period of time, containment measures would be effective, and then you'd see a bounce back in activity. But, of course, as it's now spread beyond China, containment methods may or may not be as effective in some of the developed markets as they have been in China, so it just seems likely now that this is going to take longer to get under control and that the human economic and financial cost is going to be greater than we initially thought.

Yeah, I'm really interested around the interest rate cutting and how much impact that can really have, and I guess we're running out of room with a lot of these central banks about how far they can go. What are your thoughts there?

Well, we certainly are running out of room, because seems to be that whenever anything bad happens we turn to the central banks to initially respond first. Look, it's a good question because when you think about it, there is very little that a central bank can do about the spread of a virus or what is fundamentally the problem, which is broken supply chains around the global economy.

Now, of course, monetary policy can't fix any of those things but what it can do is take some of the rough edges off some of the financial pressure that firms might be starting to feel. But, look, if the virus continues to spread, becomes more entrenched, this won't just be a central bank issue. This will be a full-on government intervention into sectors, regions.

We're already seeing news about the extent to which export earnings are being damaged in New Zealand because of not being able to export to China and other markets. So there is going to be an economic cost. The question then is, to what extent does the government pick up those issues?

Do investors have to be aware that, or be prepared that there's going to be some impact on the returns for their funds?

Well, absolutely because, and we're already seeing that.

We're not hearing much talk about, though.

No, we're not hearing much talk about it, and maybe that's a maturing of the market, because we can all check our KiwiSaver balances on our apps today, so we're seeing them going up and down. But, look, I think there is a maturing in the market about understanding that these are longterm investments and that there are going to be disruptions from time to ...

We've already seen a few already. I mean, we went into this year thinking that there was a high likelihood that we would see another correction of some magnitude.

But not like this, yeah.

We just, at that stage, didn't know what it was going to be, and that it would be as serious as this, and potentially last longer than we've seen previous corrections.

But the question for us as investors is still what are the signals to look for that this is maybe starting to be contained, and that will be the extent to which numbers of new infections start that to flatten off and then trend down, and then for us it becomes a buying opportunity again.

Well, I was just going to say, is this becoming a buying opportunity now?

It will become a buying opportunity. Now, is the question, and I think not yet.

Not yet.

I think we will see more downside, and as I say, it's only when you start to see signals that it is being contained that I think it will be a buying opportunity. We're just not there yet.

Okay. Just, something a little bit different, what do you think is going to be the big investment theme for this decade?

Well, look, interesting you asked. We've just done our roadshow around the country, and we were thinking, and wanting to talk about what we thought some of the ... took the advantage of it being a new decade as well, Phil, to think about what some of the key themes are going to be, economic, political, investment themes over the next decade.

Look, if I was to pick one, you'd have to say climate change. I think the groundswell of increasing acceptance of the need to have to do something meaningful around climate change is going to be the defining theme of this decade.

So it really changes your thinking as investment managers in terms of what stock you're buying and where you're investing and ...

Well, yes and no, in that, well, with the government following ... announcing that

Banning fossil fuels, yeah.

... fossil fuel production, obviously, yes, that imposes changes on us. But, look, in a lot of circumstances, a lot of our funds are managed in line with a lot of those, not specifically full exclusion of fossil fuel production, but are increasingly moving in that direction.

If you look at the Global Companies Fund that we launched in New Zealand just last year, that doesn't have an ESG label, but by the very nature of its investment philosophy that the investments that it makes, it holds for a minimum of five years, means that it has to have sustainability criteria built into it anyway. So I think you're going to see increasingly the gap between ESG responsible investment funds and the broader range of funds actually ... that gap continuing to close.

Yeah. What are your thoughts on the government's proposal to ban fossil fuels in KiwiSaver funds?

Look, it's entirely consistent with their policy position, in that if you want to be zero carbon by 2050, then it's a logical step to take. Look, we don't have a lot of the detail yet, and the devil is always in the detail, but look, I think it's a bold move, and I think it's a positive move, and if you're worried about those longer-term themes, the planet, resource depletion, population growth, all of those sorts of things, then it just makes sense.

Makes sense. And finally, Bevan, AMP Capital, life will change I guess for you soon, when AMP Financial Services is sold. What's the future look like for you guys?

Well, I guess it's another one of those uncertainties we're dealing with, isn't it? Look, we are well-positioned for the future at AMP Capital, regardless of what happens to AMP Wealth. I guess you look at the fact that we have some very longterm, loyal institutional relationships. We've got great relationships with a number of the advisor businesses, and look, I think fundamentally too, as we've just seen on our roadshow, that there is high level of interest and indeed demand for high quality active investment propositions, so that makes us quite excited about the opportunities in the New Zealand market.

Yes, I'm sure it's going to be an interesting time for you. All the best, and thank you very much for coming into the studio. It's great to have you here.

Cool. Thanks, Phil.