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Roger Mortimer Drive to Close

Bloomberg - Watch as Roger Mortimer, Portfolio Manager at KraneShares, discusses the markets and investing with Carol Massar and Tim Stenovec.


Transcript:

0:02 Alright everybody just about 10 minutes left in today's trading session, and we are hovering near our best levels of the session. You heard Charlie breaking it down really some outperformance when it comes to the tech tray, the NASDAQ in particular up more than 2.2%. We're going to hear from some big tech earnings after the close. I'm thinking about Alphabet. I'm thinking about Microsoft. We've got Texas Instruments. So, curious what our next guest has to say. Chipotle too, a lot to come.

0:35 Let's get to Roger Mortimer. He's Portfolio Manager at KraneShares. He joins us this afternoon on the phone from San Francisco. Roger question that I've been asking Carol, pretty much every break today was so as the bottom man, because we've seen quite a rally from our lows over the last week.

0:51 Well, it's been a pretty good day today, that's for sure. You know, we're all kind of sitting in a circle looking at each other. Right? There's a feedback loop between the Feds actions and the market effect. And we're a quarter of the way through earnings season that earnings generally so far have gone pretty well but half of companies have beat and really the Fed is trying to gauge its actions and its words you know, to see kind of when the when the market has started to price that in and today the markets feeling okay about it.

1:20 One thing I wanted to ask you, we're live at New Jersey Institute of Technology, we're in front of an audience, folks are listening a lot of students here and we've been talking about sustainability, we've been talking about climate, this is something that you think about and that's such, you know, really the core of what you're doing at KraneShares, and we just talked about BlackRock just doing another infrastructure fund. 1:21 More than $7 billion dollars, 4.5 of which has already been raised.

1:49 Right and thinking about kind of alternative energy and different things. So how do you see it? What do you think are the smart investment plays? Where is money flowing in at this point?

1:58 Well, Carol, I think your audience is sitting in exactly the right place, you know that the energy transition is going to be all about using existing resources more efficiently. And that means digitization. That means control systems that leverage things and enable you to get the maximum out of your existing installed infrastructure. You know, I read somewhere earlier today that the United States is going to need more than a million new electricians by 2030. But it's very clear that digital skills and the use of data are going to be extremely important in managing energy infrastructure in the future. And you know, just yesterday, Schlumberger rebranded itself as a technology company and talked about the substantial growth that they see looking forward in these energy transition areas. So, it's going to be a convergence of technology and energy. And I think that's going to be one of the biggest job creation areas of the next 25 years, this is going to be the place that everybody wants to work.

3:01 Well, that's what I was going to ask you is, what's the time horizon here? And Roger, when we spoke just a couple of months ago, we talked a little bit about how this year has shown us that we are a lot further at the beginning, I guess, are further away from having that energy transition be complete here. So, you say 25 years, what does it look like 25 years from now? What are the companies that are owning the space?

3:26 Well, I think what you know, one thing I'd like to say, Tim, is that these are big, big industries, right? And so, you don't need to make much of an inroad into a big industry to build a very, very large business and create a lot of value. The first LNG cargo in the world was shipped in 1959. You know, now that's 25% of global energy, natural gas. So, hydrogen may be the new area that looks like natural gas, but it took natural gas 50 years to get to 25% of the global infrastructure. But the magnitude of these opportunities is very, very large, right? If people tend to think of Tesla as a company that is an electrification play. And if you look at the amount of global emissions that Tesla would be displacing by its existing size, it's almost too small to measure. So, the opportunities in these areas tend to be in big, heavy iron, the utility industries, you know, we like a company called AES, which is a US utility that is getting greener all the time. It has a very big renewable pipeline. It's pipeline, its development portfolio is about three times the size of the New Jersey grid. And everything that they build is green and they are closing coal-fired and gas-fired, generating assets at the same time. And you know, what we know about investors is that there is a growing number of green investors and that green companies trade at higher valuations, they have a lower cost of capital. And they're often more profitable than dirty companies. And so, our focus is on identifying those companies that are transitioning from dirty to clean, and their valuation expands. And so, what's really interesting about that is that the social objective of reducing admissions and the financial objective of growing value is aligned. And that that's extremely unusual. So, we think that companies like AES, a company like Quanta Services, the ticker is PWR, they are, essentially the picks and shovels of the global utility industry. They build capacity and provide specialty infrastructure solutions for companies in that industry. This is where there's going to be very, very significant growth over the careers of your audience today.

5:53 Well, Roger, I want to ask you, and maybe I'll ask the audience, it's really hard. I know you're on radio can't see this, but show of hands, how many think that nuclear is part of the future? 6:04 About a third of people think nuclear is part of the future.

6:06 Pretty substantial. And we had a great conversation with the Professor of Civil and Environmental Engineering here at NJIT. And he talked about how nuclear is really important to the future? Roger, let me ask you, because investment dollars, right, this can make or break in terms of some of the trends to come? How do you think about something like nuclear, which can be such a kind of hot button when it comes to people who like it, or people who don't?

6:32 Well, nuclear is an acquired taste, Carol has kind of the I'm not sure what the analogy would be, it would be the olive of the food plate. And, you know some countries are predisposed to embracing nuclear, and others are not. And so, the way that I would look at it is that nuclear will be a viable option in those countries where policymakers want to pursue that, you know Japan had one of the worst nuclear accidents of the modern age, but they are prepared to go back to nuclear because it's one of the really the only ways that you can add large zero-emission, baseload capacity. And then other countries, the people will voice their opinion and, and reject the use of nuclear and that, you know, ultimately, that's going to be kind of a policy decision that gets made in individual countries, but at a macro level, nuclear is going to grow substantially. And it's going to be a big part of the future energy mix.

7:34 Do you invest that way, then?

7:36 Or can you or is there too much focus on policymakers here Roger?

7:41 Well, we have investments in companies that are transitional, and we have some investments in the value chain. And so, one of the companies that we own in the value chain is related to the nuclear business, and that is a Canadian producer called Cameco. That is one of the largest uranium producers in the world and also owns other parts of the value chain, you know, and we see both that commodity going higher, and the demand for the services and technologies that this company makes it you know, being in growing demand over the next coming years. 8:15 I wonder if you have another message for our students who are gathered in front of us here, and you talked about, I think electricians. Is there another thing that when you think about what you're seeing in the investment space, and the interest and where investors want to be or just how things are developing? What would you say to them?

8:35 You know, I'd say that addressing climate change is going to be the challenge of this generation. And that, you know, what's really interesting is here in the United States, the Inflation Reduction Act is absolutely game-changing in terms of creating economic opportunity in these areas. It provides uncapped incentives, tax credits, that are going to drive huge investment into areas like green hydrogen production. In parts of the country like Texas, which already generates the most wind power, has the largest pipeline network is the gateway for exporting LNG and ammonia to the rest of the world. These places are going to see tremendous economic boom over the next decade.

9:22 All right, we're going to leave it on that always fun to talk with you and get some insight and especially because you got such a very specific investment space. Thanks to Roger Mortimer, a portfolio manager at KraneShares and among its investing strategies includes a climate suite of options. So great to catch up with him. Joining us on the phone from San Francisco.


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