Insights on investment markets and where the opportunities are for investors

Our final speaker, also the guest speaker this evening, is someone you are probably familiar with, Roger Montgomery, founder and chairman of Montgomery Investment Management, an Australian boutique investment manager, which he established in 2010.

Roger has over three decades of experience in funds management, cementing his status as an industry expert with his best-selling investment book, Value.able.

He's a well-known media personality with regular appearances on television, radio and in the press, including the ABC, The Australian and Auspice.

For those who attended our past investment events, Roger is no stranger to you.

Today, Roger will share his insight on the outlook for investment markets and where he sees opportunities for investors.

After a 10-minute presentation, we'll have a Q&A session with him.

Welcome to the presentation, Roger.

Thank you very much, Angelina.

Lovely to be with you and thank you everyone for watching this presentation.

So my presentation today will be brief and then we'll open up to questions later on.

I'm going to talk about two things today, but before I do, I just want to mention that

Everything that I say is general in nature.

It's not specific advice.

You need to seek personal, professional financial advice before you engage in the trading of any securities.

We will mention some securities.

I'll talk specifically about a company that our funds own.

Therefore, it's a company that we like.

but that is not a recommendation for you to go out and buy that particular stock or securities in that company.

So just keep that in mind, general in nature.

I don't know your personal financial circumstances and needs.

Okay, so in terms of market observations, I believe we're in a period since the market bottomed at the end of 2022, I believe we're in a period that is very, very supportive for equities.

Specifically, the period that we're in is supportive for innovative companies with pricing power.

And I'll talk a little bit about that in a moment.

Where we're at is that we've got positive economic growth, albeit anemic, but positive economic growth combined with disinflation.

So inflation is coming down.

It's not coming down at the pace everyone would like, but nevertheless, it's not going up at a great rate of knots.

It's declining ever so slightly.

And so,

Since the 1970s, when you have that combination of positive economic growth, along with disinflation, you have what Gavicle called in 1978, a disinflationary boom.

And since the 1970s, whenever you've had that set up, it's been very, very good for innovative companies with pricing power.

Now, innovation is important for growth.

And by pricing power, what we mean is the ability of companies to pass on any inflation in their costs to be able to pass those on to their customers.

That's pricing power.

Now, I've held this view that small companies would do very well because there's a lot of innovative companies with pricing power amongst small caps.

And in fact, that hasn't worked out quite right.

In fact, what's happened is all of the money going into innovative companies with pricing power has been concentrated amongst the mega caps.

So this leads us into opportunity one.

You can see in this chart on the left hand side that the mega cap tech stocks or what are called the magnificent seven at the moment have really scooped up all of the money

that's gone into innovative growth companies with pricing power, hasn't gone into small caps, hasn't gone into the remaining 493 companies in the S&P 500.

It's really all gone into those top seven companies.

Part of the reason for that is that there's been fear of recession and amid fear of recession investors are worried about safety.

So they go with the biggest and what they perceive as the safest companies.

The consequence of the rally in these magnificent seven

is they now represent more than a quarter of the S&P 500, and you can see that over on the right hand side.

So they are now not only expensive potentially, but they also are incredibly large.

On this particular chart here, what we've done is we've split out the tech component of the S&P 500, the information technology section of the S&P 500 or subsection,

sub sector rather, and the S&P 500 proper.

And what you can see is the PE ratios for technology stocks now are back at their pandemic and post pandemic highs.

So technology stocks are back to being as expensive as they've been in a very, very long time or most expensive that they've been in a very long time.

Whereas the rest of the market remains reasonably priced compared to past booms.

But if we look at small caps, small caps have not recovered, they virtually recovered none of the losses since the pandemic.

So the PE compression that's occurred, in other words, PEs, by the way, is the price earnings ratio.

That's the multiple of earnings people wanna pay for a stock.

So for example, if a company's earning $15 and the shares are trading at $150, well, the PE ratio is 10, 10 times the earnings, the prices.

10 times higher than the earnings.

So in other words, people are willing to pay 10 times the earnings for one share.

And this PE ratio chart is really a pulse of popularity of the stock market.

The more popular the stock market is, the higher the PE ratio, the less popular the stock market is, or the less popular one sector of the stock market is, the less popular that is.

And at the moment,

what the S&P 600 small cap PE index is showing is that small caps are not popular.

This is despite the fact that there's a lot of innovative growth companies amongst small caps and many that are growing their earnings at double digit rates.

If we look at one of the funds that we distribute in Australia, which is the Poland Capital Global Small and Midsize Companies Fund or mid cap fund, it has

really, really underperformed because the PE ratio of its portfolio, you can see here in blue, has collapsed.

Back in October 21, when the market was booming, the PE ratio of the portfolio was 45.

It's now dropped to between 20 and 25 times earnings.

This is despite the fact that the earnings growth, which you can see in the orange line there,

still remains at about 15% and the return on invested capital hasn't collapsed very much.

In fact, it's recently ticked up again and return on invested capital is sitting at about that 12 to 13 and a half percent level.

So we've had this collapse in PE ratios, as you can see in this chart here and this chart here, we've seen a collapse in PE ratios, not only for the market more broadly, but also for the really high quality

growing small caps that we like to own in the Poland Capital Global Small and Mid Cap Fund.

And that's been despite the fact that the earnings growth and the return on invested capital remain solid.

And in fact, free cash flow growth is very, very strong.

and debt is relatively low compared to other stocks in the index, in the small cap index.

And so we think now, given that we've still got innovative growers, we've still got companies generating good earnings growth,

They're much, much cheaper than they were before.

And we've still got, by the way, economic growth as well as disinflation.

We think opportunity one is this set up that small companies are going to catch up to some of those big cap growers, those big cap innovative mega caps and catch up to them in terms of premium.

Now, the process could take a year or 18 months because that's how long it takes for people to start to get the drift, if you like.

They start to,

get out of their inertia, they start to take on more risk because they realise, hey, we're probably not going to have a recession.

We're probably not going to see interest rates go up much more.

And then they start to take on more risk.

That adoption of risk can take up to two years.

And so it'll take some time.

But that's what we think is going to happen.

You can see in Australia, the story remains true as well.

And you can see that small caps, in fact, this gap, this 25% gap between small caps and the ASX 100 is the biggest that we've seen since the global financial crisis.

That's a long time ago.

So small caps have severely underperformed big caps, and that is unusual.

The extent of the underperformance is unusual.

And remember, I think the setup remains very good for small high quality, small cap growth companies that are innovative with pricing power.

You can see when we look at our small companies fund, the Montgomery Small Companies Fund portfolio, you can see that the earnings growth rate of small, over in the left hand column in the table at the bottom there, you can see that small ordinaries, the small ordinaries has very strong 17.5% expected growth over the next two years in earnings.

compared to the ASX 100, which only has 3.4% expected growth.

The small companies fund, the Montgomery Small Companies Fund portfolio, the estimated growth in earnings for those companies is 25% per year over the next two years.

And when you compare the PEs of the ASX 100, the small ordinaries and our fund, you can see that the PE ratios are roughly the same.

So on a growth adjusted basis, the peg ratio over on the right hand side, you can see that the Montgomery Small Companies Fund portfolio is actually very, very cheap for the extra growth that you're getting.

And remember the background, the setup at the moment, that disinflation and positive economic growth setup, which should be good for the types of high quality innovative growth companies that we own in the Montgomery Small Companies Fund.

So to summarise the first opportunity over the next 12 months, we've got a long runway for growth in small companies.

And remember they're disruptive in terms of their innovation.

So long runway for growth and you're getting exposure to disruptive innovation.

We think the market is inefficient and that's why they're being underpriced at the moment.

And we think there's a great range of outcomes amongst small caps.

There's some bad small caps out there

But we don't want to own those.

We want to own the high quality growers and I'll talk about one in a moment.

You're getting diversification by owning small caps and you're getting exposure to things like AI.

You don't get much exposure to AI in the ASX 100.

You get exposure to cloud.

and the migration to the cloud computing, which is growing at a phenomenal double digit rate.

In small caps, you get exposure to that.

You don't in the ASX 100 unless you maybe go for Goodman Group and some of their warehouses.

I mentioned earlier, small and mid-cap companies, both globally, the small, the Poland SMID Fund and the domestic Montgomery Small Companies Fund have both performed relatively well.

Well, sorry, the Australian fund has performed relatively well compared to the small cap index, but small companies haven't performed relatively well to large caps over the last few years.

And we think that that will eventually change.

We know that their performance is cyclical compared to the big cap index.

And we also think valuations are very, very attractive at the moment.

So if we look at one of the companies that we've got in our portfolio that we really like, now remember we bought this, this is a day one stock for the Montgomery Small Companies Fund, the Quarry Technology Group.

And all I'll say, because we haven't got much time, all I'll say is we think this company is worth between $100 and $115 a share on an expected earnings basis.

But we think that if it got, if it was ever taken over by a pension fund,

or a superannuation fund, when all of the data centres are fully tenanted and it's throwing off rent, rental income, we think that it could be worth as much as $180 a share.

So we own this stock, we bought it when we launched the fund, Gary and Dom who run the fund, it was a day one stock for them.

I think we bought it in the $20, around the 20, between 20 and $30 a share initially, it's now trading

Well over $80, I think it might be trading over $90 at the moment, but we think it's worth more than $100 a share at the moment.

Okay, opportunity two, complete change of pace now.

Last year, I wrote that 2024 would be a very, very big year for an asset class that a lot of people haven't heard about.

And this is an asset class that I think is going to increase in importance.

You're gonna hear more financial planners talking about this asset class,

being a critical part of everyone's portfolios or for many investors portfolios.

And that is private credit.

Now, let me just say this.

If this is a hypothetical example, the light blue line, the most volatile line that you can see there is the S&P ASX 200 index, not the accumulation index, just the price index.

Now you can see how that's performed since July 17.

The blue line at the very top is the performance of a fund.

It's a private credit fund with its income, the monthly income that generates reinvested back into the fund.

Now, a couple of things that this is a hypothetical example, couple of things you'll notice about this hypothetical private credit fund is that it's outperformed

the ASX S&P 200, but it's done it with very little or no volatility.

Now, you know, that would seem, I would have thought very, very attractive for a lot of investors.

And that's part of the reason why private credit is becoming increasingly popular this year.

Now what is private credit?

Well in the example of one of the funds that we distribute in Australia, which is a wholesale fund for sophisticated investors or wholesale investors only, it's called the AURA High Yield SME Fund, what happens is that investors pool their money in the fund, the fund then invests

with non-bank lenders, businesses that are called originators.

Those originators, those non-bank lenders, they source businesses to lend money to, they conduct due diligence on the business, they then accept the application forms for the loans and then provided the collateral is acceptable, provided the quality of the borrower is acceptable and so forth.

Provided all that happens, they then lend the money to a small or medium sized corporate in Australia.

In return for that loan, the borrower, the Australian small and medium sized corporate, they then pay interest on that loan.

Each month, that interest goes back to the non-bank lender who passes it through as an interest payment to the fund, which is then received by investors in the fund.

Now, let me say this.

If before the GFC, you had said to me, Roger, I'm going to lend some money to a small or medium sized corporate in Australia, I would have said, you've got rocks in your head.

Because the only businesses that you would have been able to lend to back then would have been businesses that the banks

didn't want to lend to simply because they were not creditworthy or credit grade, investment grade borrowers and so they were the bottom of the barrel and it would be an incredibly risky thing to do.

That's all changed since legislation and regulation following the global financial crisis in Europe, in the United States and in Australia has meant that a lot of

a lot of borrowing types, a lot of loan types are no longer profitable or efficient for banks to engage in.

And that's left a 200, circa $200 billion gap between what small and medium sized corporates would like to borrow for growth in Australia versus what the big banks are willing to lend.

So now you can lend to investment grade investment quality borrowers.

You can lend to them through non-bank lenders.

and this is a growing area and a growing asset class in Australia.

Now, a couple of things to say is the Ora High Yield SME Fund only lends to higher quality borrowers, businesses with an Equifax credit score of over 600, which means that they have a very low, less than 2% probability, according to Equifax, based on historical data, a very low, less than 2% probability of an adverse event.

We're not lending or it doesn't lend to distress companies, for example.

And we'll talk about some of the other safety features of funds like the Aura high yield SME fund, other credit funds.

So there's, when you're analysing investing in these funds, when you're conducting due diligence, one of the things that you need to know is what types of borrowing does the fund engage in?

What due diligence is done on those businesses?

Does the fund lend to property developers?

that might be a higher risk.

The Ora High Yield SME Fund doesn't lend to property developers.

What's the duration of the loans?

Are they long-term?

For example, if a fund is offering monthly liquidity, in other words, you can come and go every month, but the loans are two or three year minimum terms.

Well, that could prove to be a liquidity problem if everyone decided to get out of the fund all at the same time.

So we prefer to match, or we think it's wiser to match the liquidity of the fund, for example, monthly liquidity with shorter duration loans.

And so, you know, the average term of a loan in the Ora High Yule SME fund is much less than a year.

And then what's the collateral?

What's the collateral behind the borrowings?

What is the, you know, if there are farm loans, for example, if there are loans for farming equipment,

or loans to buy cattle to fatten them up and then sell them at a profit?

What's the collateral?

Is it just the livestock or is it also a director's guarantee?

Is it also the farm itself?

What other collateral is being provided behind those loans?

So they're the sort of questions that you wanna ask and have satisfactory answers to before deciding which private credit fund you should invest in.

And then of course,

There's the structure of the relationship between the fund and the fund manager as well and between those two and the originators.

For example, with the Ora High Yield S&E fund, the originators are putting equity, their own equity up as a first loss piece if any of the loans that they make go bad.

they have to cover the losses initially with their own equity before it affects the income or the capital of the investors in the Aura High Yield SME Fund.

And this table here shows you why private credit is becoming so attractive.

This relates specifically to the returns, the monthly returns since inception in 2017 of the Aura High Yield SME Fund.

So you can see that there's been monthly income

are every month since inception, and there's never been a negative month.

And that's why there's been very little volatility in the fund.

If we look globally, we think this is going to be an enormous asset class.

We think this is going to be incredibly powerful.

What we know is that private credit has long been the domain of global family offices and ultra high net worth individuals.

But even if we look at the UBS report, their global family office report from 2024, this year's report, we can see private credit over there at about 10 a.m. or 10, 10 o'clock over on the upper left hand side, you can see private credit in global family offices still only represents 2% of family office portfolios.

And we think for the reasons that I've just explained, mainly the returns and the lower volatility,

Remember, you do have to conduct your due diligence and seek advice.

We think because of those characteristics, those appealing and attractive factors, we think this is going to grow enormously.

And this is a slide from the AURA High Yield SME Fund presentation to advisors and investors.

And you can see over on the left hand side, the key numbers, the net returns since the inception of the fund,

the compounded annual net return since inception, that's after fees.

And then you can also compare the return, the bright blue line at the top, which is the compounded return compared to the S&P ASX 200 accumulation index in red.

And then the return of the fund in the teal colour, the 1.631 million line there, that's the return of the fund since inception

with the investor taking their monthly income as cash.

And that would compare to the benchmark just below it, the dash line, and also the price index of the S&P ASX 200.

So in summary, they are the two asset classes where I believe investors could do very, very well over the next 12 to 18 months.

And number one being small cap, global small cap,

and we have the Poland Global SMID Fund, domestic small caps, and we have the Montgomery Small Companies Fund, and then also private credit.

There are a lot of private credit funds out there, and ours is the one that we distribute is now seven years old, and you saw its returns, and that's for wholesale investors specifically, or sophisticated investors, and that is the AURA High Yield SME Fund.

So with that, I'll hand back over to Angelina,

for some Q&A.

Hi Roger, thanks for the presentation and the insight on the small companies and the private credit funds.

So I've got some questions around both topics.

I'll start with the private credit.

What are some top misconceptions of private credit funds?

Yeah, look, I've just drafted an article on this very subject for the Australian newspaper.

So for those of you who want to Google, you'll be able to Google Roger Montgomery, the Australian private credit, and you'll be able to find the article.

And I answered those questions in that article, but let me save you some time and some money.

You don't have to subscribe.

The common misconception is that this is an incredibly risky asset class.

And yes,

All asset classes have some risk, but to write this asset class off as risky is to treat all the funds exactly the same.

I mentioned earlier, some funds lend exclusively to property developers.

We don't.

Some funds have a very small number of very large loans that are very long-term.

The Eora High Yield SME Fund doesn't.

It has thousands, over 11,000

very small loans spread over 30 or 40 different sub-sectors of the economy.

The other criticism or myth, if you like, is that these funds haven't been through an economic cycle.

But remember, for example, the Ora High Yield SME Fund has a seven year track record.

It has lent money through the pandemic, through COVID, and through all of that disruption.

And as I mentioned a moment ago, as you saw on that table, it's produced monthly income with no disruption, no negative months.

So it's important to distinguish the different styles of lending that each of the funds undertake, the different terms of those loans,

They've all got different profiles.

You know, there are funds out there that lend to distressed companies looking to help them turn around.

That's a different risk proposition to a fund that only lends to growing high quality, small and medium sized corporates.

So it's true there are risks, but it's important to understand the different risks.

And you wouldn't put all of your money into one of these funds.

That's the reality.

You know, you put maybe a proportion of your cash based on what your advisor tells you is appropriate.

You might put a proportion of your cash into one of these funds to enhance the overall yield of that cash component of your portfolio.

So not all credit funds are created the same.

Indeed, just like not all stocks are the same on the stock market.

So what do investors need to look at when choosing a private credit fund or manage that private credit fund?

Well, those things that we've just talked about, Angelina.

So priority number one, what types of lending does the fund engage in?

Number two, what is the average term of those loans?

Does it match the liquidity that's on offer?

So some funds, for example, they have lockups.

So you're locked in.

So once you invest your money, you might be locked in for one year.

You might be locked in for a year and a half.

And you won't be able to get your money out for that period of time.

the Ora High Yield SME Fund has monthly liquidity.

So you give a month's notice that you can get out.

But if a fund is offering monthly liquidity, but it's lending it money over three years, for example, well, how does it wind up those, how does it get the capital back if everybody wanted to get out their money all at once?

That's a different risk proposition that you need to understand.

So first I said, what types of lending?

Second, I said the terms of the loan.

Third, obviously,

what you want to know is the types of, sorry, rather the fees, the fees of the fund, and also the track record of the fund.

How long has the fund been running?

And what types of markets or economic environments has the fund been working through in the past and what's its track record?

Yeah, yeah, indeed, indeed.

And what do you investors say they like about investing in private credit?

Well, I think we've got a lot of investors who are seeking lower volatility and monthly cash income.

And that's becoming more appealing in this very volatile world that we live in.

And that's why I was saying in my presentation that I think private credit

is going to be a very, very important part of portfolios over the next few years.

We're gonna see more and more press on this particular subject.

So I like to invest ahead of the wave because I think the best returns are often when you get into something early.

And so I think it's particularly appealing.

Yeah, yep.

So moving our conversation towards small caps.

So to summarise, what are the benefits of investing in small companies?

Well, look, you're going to, whether you're investing in an Australian small company fund or a global small company fund, you're going to gain exposure to a much wider range of industries and exposure to more themes than you would if you invested just in the big caps.

The other thing that I'll point out is that in Australia at least, small cap fund managers

they beat the market, they beat the index.

You know, you hear lots Angelina, you would have heard this so many times, active funds management doesn't beat the index.

You may as well just invest in a low cost index fund.

Well, that's not true for Australian small cap managers.

The median Australian small cap manager has beaten the small ordinaries index over various time periods.

And it's certainly true that the Montgomery small cap companies fund managed by

Gary Rollo and Dominic Rose has beaten that index.

So over a long period of time, we've seen small cap managers beat the index.

And I think they're two of the greatest advantages.

But right now in terms of timing, the fact that small companies are relatively cheap compared to their big cap brothers and sisters, and they're offering more growth,

I think, and remember in the background, we've got that disinflation and positive economic growth.

I think the setup right now is really good for having some exposure to small company funds.

It's the right macro environment.

So what do you look at when you assess a small-care company?

How do you look at the quality or the growth potential?

What do you look at to assess those things?

Track record, track record, track record and consistency and consistency of the implementation of the philosophy.

What you want is a fund manager that who has developed a philosophy that's been successful and that they're not changing that philosophy because the market's changing.

They're sticking to their philosophy and they're following their process.

That's all that matters.

A great track record and a consistent implementation of the process.

And that's the right things to look at, but what are the common mistakes do you see the investors make when selecting stocks?

Look, I've been doing this, Angelina, for 33 years.

And, you know, over three decades now.

And I'll tell you what, let me tell you, let me share a story with you.

In the 1990s, I started giving presentations on a Saturday for the Australian Stock Exchange.

at their conference centre underground on Bridge Street in Sydney.

In 1999, I was working for Merrill Lynch and I was asked to speak for the ASX on Saturdays.

And I gave a course on how to invest in the stock market.

In 1999, when the market was booming, the room was full.

In fact, it was so full, people were sitting cross-legged on the floor at the front and they were sitting in the aisles.

I remember one Saturday we had the fire department, the Sydney city fire department.

They came in and they had to clear the aisles of people because it was so crowded.

Then in 2000, the market crashed.

We had the tech wreck of, it was about March, 2000.

I was still giving those Saturday presentations in 2000.

And there would have been, instead of where in 1999 there might have been 300 or 400 people in that room, in 2000 after the crash, there were 30 people in the room.

No one was interested when the market was cheap.

Everyone was interested when the market was expensive.

And that is the mistake that I see being repeated all the time.

People invest in funds after they've done really well.

and they sell after they've done badly instead of doing the reverse.

You want to invest in them when the performance hasn't been great because the market performance hasn't been great and stocks are cheap.

And that's when you want to invest.

That's not what most people do.

They invest when, you know, it's too expensive.

So are there any specific industries or sectors that in your analysis that's presently very promising?

Yes, we think that there's some great tailwinds, particularly amongst domestic companies.

We think there's some great tailwinds for businesses exposed to the cloud and to AI.

And I mentioned one of those companies earlier, Macquarie Technology Group.

Another one would be Megaport, for example.

Again, don't go out and buy it, we own it.

So if you go out and buy it and push the share price up, you're helping us.

Go get advice before you go out and buy anything.

So companies with structural tailwinds like the migration to the cloud are going to do very, very well.

Yeah, very good.

So on your blog, you've written a great article about how the baby boomers won the genetic lottery.

How do demographics such as the growing influence of Generation Z affect where the best investment opportunities are located at present?

Yes.

So, you know, we've made a lot of money and I've made a lot of money investing in where the baby boomers are going to start buying stuff next.

So I can remember, you know, that I was talking a moment ago about that, the Australian Stock Exchange seminars that I used to run.

And back in

Back in 1999, I remember saying, look in the 2010s, you're gonna see lots of baby boomers retiring.

They're all going to wanna go cruising.

They're all gonna wanna go on holidays around the world.

And you're going to see massive investment in bigger and bigger cruise ships.

We've seen that come to pass.

The next boom will be retirement villages.

It's already starting to boom, but you haven't seen anything yet.

There's going to be massive takeovers, mergers and acquisitions in that space because more and more baby boomers are going to be retiring and going into palliative care eventually and high needs care and that sort of thing.

So that's something that's going to boom in the future.

But what then?

What's going to happen after that?

Well, I think Gen Z is a unique demographic to follow.

because there's a lot of Gen Zers.

I've got three children who are all Gen Zers.

They're moving into the workforce.

The oldest Gen Z is now 27 years of age.

The rest behind them are all leaving university and moving into the workforce.

But here's the thing, rent is too expensive and buying a house is too expensive in Australia.

So they're living at home.

but they work.

So they've got disposable income because they don't pay Mum and Dad to do the dishes or do the washing or they're living at home and they've got disposable income.

And the other thing is they're socially connected like no generation before them.

And so when

when the, you know, when the Kardashians or the Hadads or, you know, some other influencer or some other celebrity buys a particular handbag or a pair of runners, you know, it might be a pair of dad sneakers from Asics or Onitsuku Tiger, you know, or a pair of Crocs, you know, have a look at the Crocs share price, have a look at the Asics share price.

They're up six, 700% because Gen Z saw a celebrity online

rocking these crocs at a red carpet somewhere and crocs sold out of that particular shoe and the share price went bananas.

And that's unique about Gen Z.

They are socially connected like no one before them.

And when they get together on a particular fad or a particular trend, the business that sells that product is going to see massive revenue growth, massive profit growth and its share price is going to reflect that as well.

That's interesting.

I never understand the Crocs, but apparently they're popular.

Now, beyond equity, beyond which other asset classes are you more cautious about?

Yeah, look, I think one to be cautious about at the moment is private equity.

So that's where you invest in an unlisted business with the prospect that it might be sold in the future at a higher price to a trade buyer or it might IPO.

Now, I think the next two years, the next one to two years could be very, very lucrative for private equity.

The problem is if you're investing in a private equity fund today, you might be locked in for five years plus.

And after, you know, the last two years of that five year period,

could be a little bit more volatile, could be a higher risk period, I think, for the world and for the economy, for geopolitical reasons, as well as for, you know, sort of equity market risk.

So I think the next two years and three years looks quite good, but the next five years, that scenario I'm less certain about or less comfortable about.

So if you're investing private equity today, I'd be a bit more cautious.

Certainly the duration of the risk.

Yeah.

So Roger, in conclusion, do you have any final words of advice for our investors who are navigating the complexity of markets in 2024?

Always ask yourself when you're making an investment, is this a high quality asset?

And by high quality, I mean, does it generate a high rate of return on the equity that you're going to put in it?

And is it going to be able to do that consistently?

Don't worry about market timing.

The opportunity to invest at cheap prices will come and it will go.

And when it comes, it's really obvious, but stick to quality.

At Montgomery, that's all we do, whether it's private credit lending, small company lending, large company lending, everything that we do is about investing in a higher quality businesses.

Stick to high quality and you'll do very, very well in the long run.

stick to quality and don't try to time the market.

Well, thank you Roger for the wonderful presentation and the Q&A with me.

We look forward to seeing you next time.

Thanks for your patience and your time Angelina and thank you everyone for joining me today.