2019 Knowledge Brokers

Fiona Trafford-Walker

Title: Director
Firm: Frontier Advisors
Assets under advisement: $AU330 billion ($223.6 billion)
Number of consultants at firm: 74 staff members, 54 of which are in the consulting practice  
Client type: Superannuation funds, insurers, charities, university endowments, and a range of other investors

Fiona Trafford-Walker is a career veteran of 27 years who calls today’s market one of the toughest times to be an investor. Relatively high valuations that don’t leave much in the bargain basket for hungry investors are fostering a difficult environment for many consultants to find pockets of opportunistic profits for their clients.

“Navigating and helping our clients through that is particularly difficult but it’s something good consultants love to do—we thrive on challenges and finding solutions, all of it really exercises the mind,” Trafford-Walker says.

Part of that difficulty not only stems from market valuations, but also from various disruptive themes hitting economies, markets, and companies, such as technological developments and climate change. Companies could be much more profitable and productive as a result of oncoming automation, but the consequences for social issues such as individual employment in particular, but also the flow-on effects on areas, regions, and industries need to be acknowledged and understood, she says.

“Technological change offers incredibly empowering opportunities for businesses and hence markets but will also impact key aspects of our current social structures. Automation will be potentially life-changing for many people in terms of the impact on their work. Some of this will be positive, but for many people, it won’t. This is a topic that stretches the minds of many asset owners and consultants who are thinking increasingly about what it means to be a responsible long-term investor,” she says.

The challenge is what it means for companies and society, “and the extent to which we change some of those long-held ideologies about the role of people and work. These present significant ethical dilemmas for businesses, asset owners, and consultants.”

She sees a major question for businesses in the near future being how to balance their ethical responsibilities while remaining competitive and utilizing the latest technology.

Keeping a Competitive Edge

There’s a variety of concerns businesses must address to remain competitive and attractive to investors. “There’s always pressure on costs, and share prices and reporting, and so companies are always looking to how they can run their businesses better,” Trafford-Walker says.

One concern is investors’ transitions to a lower-carbon economy, she explains. “There will be expense involved in that, and there will be some winners and some losers, but it’s fundamentally that process of adjustment, and recognizing that the longer that not enough is done, the harder that process will get.”

Trafford-Walker is based in Melbourne, Australia, which is traditionally a large exporter of coal, so she’s had a chance to experience first-hand how the looming “green” economy has been shaking the foundations of large successful companies whose profits, in large part, come from coal exports.

“The response by many of the asset owners here has been to reduce their exposure to thermal coal, and some have divested out of companies that do that. Others have taken a view that companies need time to adjust and to develop new technology, and so rather than negatively screening, they’re remaining invested and supporting companies that are looking to change their business.”

“It’s tied up in political issues [in Australia]. There are no real signs that the current government thinks it’s a big issue, and so a number of asset owners have taken matters into their own hands. There are lobbying groups that advocate for total divestment, but the preference here generally is to help companies adjust, and the way you do that Is by staying an owner, so you can actually influence what they do.”

She explains that if a company refuses to change their business model and intends to remain carbon-intensive, then that’s a case for divestment. If they’ve indicated they are willing to change it’s worth pursuing changes in the company’s business model through the influence of ownership.

Trafford-Walker also explains that investors need look at current market trends and anomalies through a long-term perspective and not to react so quickly. The day before her conversation with CIO, US markets shrunk unexpectedly.

“We try to look through the noise, and look through to determine what’s real. It’s very easy to be spooked by some of the noise that comes out—these are real things that occur but the important question is are they a sign of something fundamentally changing, and so we try to test that.”

In recent years, research conducted into key secular trends by the firm’s capital markets team has led to the reduction in the expected long-term returns from key asset classes from a combination of climate change impacts, inequality, and demographics. “It is clear that these factors are significant and likely to have real impacts on expected future returns,” she says.

From a consulting perspective, Trafford-Walker notes that “the opportunity to embed and then leverage technology-driven solutions such as artificial intelligence and machine learning into the advisory process will help firms continue to develop market-leading investment ideas for their clients.”

The firm has just celebrated its 25th anniversary and Trafford-Walker and the team pride themselves in their ability to consistently generate high-quality investment ideas that they have turned into practical advice for clients.

“I am very proud of the long-term track record we have in helping clients meet their investment objectives on behalf of their members and beneficiaries,” she says. Another big differentiator is Frontier’s maintenance of its independence in the consulting industry. “It’s a relatively tough way to run a business in consulting, but we think it’s the right thing to do,” she says.

By Steffan Navedo-Perez

E_DEPRECATED Error in file nav-menu-template.php at line 533: Creation of dynamic property WP_Post::$current_item_parent is deprecated