Latest / What the Flux / NextDC's 100-year loan (for a 15 year old company) | SafetyCulture goes on the offensive | AI giants team up against Chinese competitors

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NextDC's 100-year loan (for a 15 year old company) | SafetyCulture goes on the offensive | AI giants team up against Chinese competitors · What the Flux

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  Speaker 1: This is what the fluck.
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  Speaker 2: I'm Brett and I'm Justin and it's Wednesday, the eighth
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  Speaker 2: of April.
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  Speaker 1: Juseyboy. COVID might be old news, but Australian CBDs clearly
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  Speaker 1: did not get the memo. Get this. The vacancy rate
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  Speaker 1: in the CBD markets across Australia is fifteen point nine percent,
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  Speaker 1: which is the highest level since nineteen ninety five according
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  Speaker 1: to the Property Council of Australia and the gold medal
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  Speaker 1: for the most vacant CBD that would be Humble Old
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  Speaker 1: Melbourne at nineteen percent. It's the ghost town around nor
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  Speaker 1: one c Yeah, fox an. A new month means a
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  Speaker 1: new chance to check your credit score and see you
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  Speaker 1: winner it went down or what's changed. So if you
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  Speaker 1: want to say where the banks can see about you
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  Speaker 1: before you apply for a loan, make sure to download
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  Speaker 1: the Flux app and check out your credit score through
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  Speaker 1: riveting Stories today, jussy boy, let's do it for our
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  Speaker 1: first Australian data center operator, next DC is issuing a
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  Speaker 1: one hundred year, one billion dollar bond to fund its
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  Speaker 1: data center expansion company.
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  Speaker 2: It's been around for fifteen years, lockxing debt for a century.
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  Speaker 1: Wowee, tell me more so. Next DC is Australia's largest
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  Speaker 1: listed data center operator.
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  Speaker 2: Think of it as the landlord of the Internet.
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  Speaker 1: It owns seventeen data centers across Australia and Asia, with
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  Speaker 1: another eleven in the pipeline. And be man data centers
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  Speaker 1: are having a moment right now. Yeah, forget beachfront property.
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  Speaker 1: The hottest real estate right now is windowless warehouses full
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  Speaker 1: of servers and air conditioners.
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  Speaker 2: Yeah, we've seen demand boom because of AI platforms like Chutch,
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  Speaker 2: Avert and big tech companies needing more processing power. But
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  Speaker 2: to expand quickly, NEXTDC needs more more art to build
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  Speaker 2: those data centers.
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  Speaker 1: So now, NEXTDC has just locked in a one billion
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  Speaker 1: dollar debt deal, but not your average one. We're talking
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  Speaker 1: one hundred year bond back by a Canadian pension giant
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  Speaker 1: and this new deal gives them the capital they need
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  Speaker 1: to push ahead with a massive two point seven billion
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  Speaker 1: dollar data center build out.
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  Speaker 2: Next minute, next DC share price spikes twelve percent on
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  Speaker 2: the news because investors like this long term loan.
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  Speaker 1: Do they really?
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  Speaker 3: So?
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  Speaker 1: What is the key learning here?
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  Speaker 2: A bond is essentially a loan from investors to a
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  Speaker 2: company or government Instead of going to a bank.
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  Speaker 1: Companies can raise money by issuing bonds to the public
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  Speaker 1: or large institutions.
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  Speaker 2: It's how it works. Investors lend money up front.
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  Speaker 1: And in return, the company greats to pay regular interests,
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  Speaker 1: call the coupon and repay the full.
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  Speaker 2: Amount later, like one hundred years later.
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  Speaker 1: Companies like NEXTDC use bonds because they can raise large
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  Speaker 1: amounts of capital quickly.
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  Speaker 2: And they can avoid giving up ownership unlike isseran shares, and.
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  Speaker 1: They can lock in funding for long term projects, and.
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  Speaker 2: They man for investors. Bonds are typically seen as more
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  Speaker 2: stable than shares because they provide predictable income in Jazwei.
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  Speaker 1: While one hundred year bonds sound a little bit crazy,
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  Speaker 1: NEXTDC is not the only one who has done it.
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  Speaker 2: The World Disney Company issued one hundred year bond back
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  Speaker 2: in nineteen ninety three.
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  Speaker 1: Also, Coca Cola followed Disney in selling a one hundred
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  Speaker 1: year bond, which is where, given how fast AI has
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  Speaker 1: moved in the last two years, who even knows, because
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  Speaker 1: the world looks like in one hundred years whole century
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  Speaker 1: Fox Sam, We're excited to be joined by someone who
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  Speaker 1: spends his days thinking about where global markets are heading
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  Speaker 1: and where the real opportunities are hiding. Ben Arnold is
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  Speaker 1: the Investment director for Global Equities at Schroders, where he
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  Speaker 1: works across global portfolios and sits alongside some of the
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  Speaker 1: world's top investors. He's also spent the last decade watching
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  Speaker 1: how the best in the game actually make investment decisions.
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  Speaker 1: So Ben, welcome to what the plaques.
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  Speaker 3: Thanks so much for having me.
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  Speaker 2: Okay, I'm keen to know because we have seen the
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  Speaker 2: A six and the nazeg wobble big time off the
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  Speaker 2: back of the Iran conflict. So I want to know
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  Speaker 2: do you think this is just a short term scire
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  Speaker 2: or is this something that investors should be taking seriously
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  Speaker 2: for the long term.
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  Speaker 3: Well, that's the question on the market's lips at the minute.
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  Speaker 3: And given the news flow and things are so volatile
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  Speaker 3: and changing every day that the market is really trying
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  Speaker 3: to work out how long is this thing going to last?
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  Speaker 3: Is Trump going to be able to meet his objectives
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  Speaker 3: in a very short time a matter of days and weeks,
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  Speaker 3: or is it going to be a much more prolonged
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  Speaker 3: period of conflict and then all the consequences of that
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  Speaker 3: to both you know, his popularity in the US, and
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  Speaker 3: then obviously the investment consequences, which has fundamental investors is
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  Speaker 3: what is what we think about, you know, I think
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  Speaker 3: for investors it's very very important to acknowledge where you
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  Speaker 3: think you have an edge as an active investor. You know,
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  Speaker 3: we have access to lots and lots of amazing resource tanks, experts,
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  Speaker 3: political specialists, and so we try to proceed with a
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  Speaker 3: kind of milestone approach, looking at evidence of what is
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  Speaker 3: happening on the ground rather than the noise in the media. So,
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  Speaker 3: for example, if there was evidence of a civil war
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  Speaker 3: developing internal fractions or some kind of data point to
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  Speaker 3: say that there may be boots on the ground, for instance,
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  Speaker 3: that would suggest this conflict is going to last a
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  Speaker 3: lot longer. So we want to be data driven and
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  Speaker 3: milestone driven, but it is very difficult. We would always
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  Speaker 3: kind of encourage people to think about investing and with
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  Speaker 3: a long term view. Very few people in history have
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  Speaker 3: been able to trade around these short events, you know,
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  Speaker 3: successfully time and time again, So we always try and
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  Speaker 3: kind of focus on the long term and separate that
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  Speaker 3: from the noise. Every day.
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  Speaker 2: You obviously speak a lot about long term investing and
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  Speaker 2: schro this is an active ATF manager. So what does
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  Speaker 2: that actually mean and how does that contribute towards the
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  Speaker 2: Schroeder's investment philosophy.
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  Speaker 3: Yeah, so we have a couple of active ETFs and
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  Speaker 3: those are kind of products that are easily accessible to
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  Speaker 3: lots of lots of retail investors. In Australia, we have too,
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  Speaker 3: is called Global Equity Alpha. It's under the ticker ALP
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  Speaker 3: ALPH and that's what you call a fundamental stockpicking fund.
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  Speaker 3: So you have a far manager making decisions. They're supported
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  Speaker 3: by a bank of analysts around the world in lots
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  Speaker 3: of different Troders' offices, speaking to management teams, building models
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  Speaker 3: of each company and proposing stocks to buy for the
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  Speaker 3: portfolio manager. So he then brings that together. It's forty
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  Speaker 3: to sixty stocks and the idea is that that can
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  Speaker 3: outperform by between two and three percent above the market
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  Speaker 3: over the medium and long term per year. And that's
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  Speaker 3: very much a stockpicking fund. And then the other flagship
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  Speaker 3: strategy is the Schroder Global Core Strategy. The ticker for
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  Speaker 3: that is Core CEORE and that's a very different approach,
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  Speaker 3: managed by very different team, but still within Troders, and
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  Speaker 3: that's what we call a quantitative strategy or enhanced index.
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  Speaker 3: So the portfolio has a lot more names in it,
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  Speaker 3: So instead of forty to sixty, we're thinking more sort
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  Speaker 3: of four to five hundred.
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  Speaker 1: Wow.
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  Speaker 3: And the starting point is looking at the universe and
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  Speaker 3: then basically applying some quantitative methods to say, well, which
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  Speaker 3: stops within that universe do I want to be slightly
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  Speaker 3: overweight versus the market or slightly underweight, and then using
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  Speaker 3: our tools to kind of scale that up. And the
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  Speaker 3: whole idea is that that portfolio will outperform the market
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  Speaker 3: by roughly a percent a year before fees, and so
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  Speaker 3: that's very much more of an enhanced index strategy. So
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  Speaker 3: those are the two strategies that we were the traders.
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  Speaker 3: Traders are huge supporters of active management. We've always been
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  Speaker 3: active investors. We believe that markets are inefficient over the
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  Speaker 3: long term, and we have a very strong pedigree in
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  Speaker 3: terms of generating consistent out performance for our clients.
• 6:44
  Speaker 1: beIN.
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  Speaker 2: Thanks so much for joining us on what the Flux.
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  Speaker 2: Always great to hear your insights, so looking forward to
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  Speaker 2: checking in soon.
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  Speaker 3: Thanks so much for.
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  Speaker 2: Our second story. Safety culture has kicked off an acquisition spree,
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  Speaker 2: buying a Sydney based AI startup called Twine as it
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  Speaker 2: gets ready with a scary AI.
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  Speaker 1: Era Safety Culture, making workplace safety checklist sexy since two
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  Speaker 1: thousand and four, tell me more so.
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  Speaker 2: Safety Culture started in two thousand and four as a
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  Speaker 2: workplace safety checklist act, the.
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  Speaker 1: Kind of thing that makes sure no one forgets to
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  Speaker 1: wear a hard.
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  Speaker 2: Hatch, and since then it's grown into a global workplace
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  Speaker 2: operations platform.
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  Speaker 1: Which has valued at about two and a half billion
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  Speaker 1: dollars at its last rays in September twenty twenty four.
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  Speaker 2: But the mean, here's the thing, Even a company built
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  Speaker 2: on safety is feeling a little unsafe in this world
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  Speaker 2: of AI right now.
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  Speaker 1: So now Safety Culture is aggressively acquiring smaller companies to
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  Speaker 1: build out its AI capabilities and stay competitive.
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  Speaker 2: Yep, it's just acquired a Sydney based AI startup called Twine,
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  Speaker 2: which uses AI to analyze sales and customer service calls.
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  Speaker 1: And this isn't a one off. They've already got another
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  Speaker 1: acquisition lined up and are in late stage talks for
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  Speaker 1: a third.
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  Speaker 2: And the Safety Culture is clearly going on the offensive
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  Speaker 2: as AI begins to reshape the global software as a
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  Speaker 2: service industry and plot twist. Twine and Safety Culture share
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  Speaker 2: the same key investor, air Tree.
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  Speaker 1: Who world's colliding? So what's the key learning here?
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  Speaker 2: In venture capital, it's actually quite common for companies backed
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  Speaker 2: by the same investors to end up doing deals with
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  Speaker 2: each other. Example, Canvas has acquired companies like Leonardo AI
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  Speaker 2: for three hundred and twenty million bucks. It also acquired
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  Speaker 2: Magic Brief over twenty two million US bucks.
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  Speaker 1: Both of those companies were backed by Blackbird, like Canva,
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  Speaker 1: who also is well backed by Blackbird.
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  Speaker 2: And now Safety Culture, backed by Airtree, has acquired Twine,
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  Speaker 2: which also had capital raises led by Airtree.
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  Speaker 1: Even back in the day, we saw Facebook, which was
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  Speaker 1: backed by Axcel, acquire Instagram for one billion US dollars,
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  Speaker 1: which was also backed by Xcel. So be man, tell
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  Speaker 1: me why does this happen? Well, vcs are actively connecting
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  Speaker 1: their portfolio companies, and when one company needs capability, the
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  Speaker 1: first place of VC well look is inside their own
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  Speaker 1: portfolio and jasboy, it makes sense that it increases the
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  Speaker 1: chances of successful outcome between the two.
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  Speaker 2: The investors understand both businesses, they trust the founders, and
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  Speaker 2: they can help facilitate the deal.
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  Speaker 1: And when capital is tight or competition is heating up.
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  Speaker 1: Like with AI, these within network acquisitions can happen even
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  Speaker 1: more frequently. For our third and final story, AI rivals
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  Speaker 1: Open Ai, Anthropic and alsbed's Google have begun working together
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  Speaker 1: to clamp down on Chinese competitors stealing their models. Alrighty,
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  Speaker 1: this is giving tech cold war energy. I am listening, so.
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  Speaker 2: We know that AI chatbots are kind of taking over
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  Speaker 2: our lives.
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  Speaker 1: Yeah, Between chat GBT and Claude and Gemini and co pilot,
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  Speaker 1: we're talking more than one billion monthly active users.
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  Speaker 2: And back in twenty twenty three, Open Ai, Anthropy, Google,
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  Speaker 2: and Microsoft founded a group called the Frontier Model Forum.
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  Speaker 2: Very Avengers coded yeah, But instead of holding hands and
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  Speaker 2: singing Kumbaya, these tech companies mostly just competed with each
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  Speaker 2: other until now Forum is back baby yep. Open Ai, Google,
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  Speaker 2: and Anthropic have started to work together to crack down
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  Speaker 2: on competitors, particularly in China, from copying their AI model.
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  Speaker 2: But beyond the money, these companies have concerns that this
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  Speaker 2: free writing could become a national security risk in the US,
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  Speaker 2: So the big tech and AI companies are working together
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  Speaker 2: and sharing data to try and crack down on these copycats.
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  Speaker 1: And crack down on their distillation. So what's the key
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  Speaker 1: learning here? AI distillation is a technique where a smaller
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  Speaker 1: or newer model called the student, learns from a larger,
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  Speaker 1: more advanced model called the teacher.
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  Speaker 2: So instead of building a model from scratch, which can
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  Speaker 2: cost billions, developers use outputs from an existing model to
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  Speaker 2: replicate its capabilities. And in some cases, distillation is completely legit.
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  Speaker 2: Ye like when companies use it internally to create faster
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  Speaker 2: and cheaper versions of their older models.
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  Speaker 1: That makes sense that they man.
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  Speaker 2: It becomes pretty controversial when third parties use these models
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  Speaker 2: without permission.
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  Speaker 1: How do they do this? Well?
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  Speaker 2: They do this by repeatedly queering a powerful a model
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  Speaker 2: and collecting all of the responses.
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  Speaker 1: Let me just keep asking questions until I figure out
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  Speaker 1: how your brain.
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  Speaker 2: Works and boom, they built something similar at a fraction
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  Speaker 2: of the cost.
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  Speaker 1: And just boy. US officials estimate this kind of activity
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  Speaker 1: is costing AI companies billions in lost profits each year.
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  Speaker 1: So be man.
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  Speaker 2: Even the biggest competitors will collaborate when the threat is
• 10:35
  Speaker 2: big enough. Flux Sam, your credit score could be between
• 10:38
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  Speaker 2: and you kind of want to know where you stand,
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  Speaker 2: so if you haven't checked your credit score for a
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  Speaker 1: Up or down and why it's changed.
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• 10:51
  Speaker 2: your credit score.
• 10:51
  Speaker 1: Thanks for listening, and we'll see you on Friday.