Shani Jayamanne: My name is Shani Jayamanne, I'm a senior investment specialist, at Morningstar Australia. We're here at the Morningstar Investment Conference for Individual Investors, and I'm here with Gemma Dale. She's the Director of SMSF and Investor Behavior at nabtrade. Thank you so much for joining us, Gemma. Just saw a little bit of your presentation, it was awesome. So you presented on thematics. So could you start with maybe what a thematic is?

Gemma Dale: So what I was talking about was the trends that our investors like to take a punt on. That's a bit harsh, that they like to have a piece of in their portfolio with the idea that that is going to be the next big thing, right. And it tends not to be a stock, it tends to be a story, a theme, a trend that is going to change the world in some way, change the market and grow a whole new market that people didn't know about before. That's what our investors get really excited about.

Jayamanne: Amazing. And so one of the really interesting points you made during the presentation was that there's this stereotype of the types of people that invest in thematics and we know the stereotypical thematics like lithium, but could you talk a little bit about the story about milk. Because you spoke about milk, so something we don't really necessarily categorize as a thematic.

Dale: So we looked at the big trends over the last five years, the things that people were really willing to put some money behind because they were very excited about where that was going to go. And the China milk story was big thing a few years back. There had been horrendous reports out of China of poor quality infant formula in particular and babies were dying due to the quality of the product and so the Chinese were looking offshore for high quality milk products for their babies. And Australia was considered to be a high quality producer. So a lot of our investors were buying into a2 Milk, into Bellamy's and Bubs Australia with the intention of getting these really great products that suddenly had a new market. The biggest market in the world, let's be frank. China milk that was the thing.

Jayamanne: Awesome. So how have these more popular thematics performed compared to the broader market? So you know, we know a lot of these investments are bought because their graphs look like hockey sticks to the sky, and people really want to get into this story. But is there as much volatility on the downside, how do they normally behave?

Dale: The three or four that we looked at had very much a peak and then a massive fall away. What was most important though, was not the fact they fell away. If you had bought at the beginning and sold at the top, you did really well. If you bought at the top and sold at the bottom, you did really poorly. What we were finding was mostly people would buy relatively early and then they would sell once they felt that it was topping out. Now they often sold too early, sometimes they sold a bit too late, but very few people held right the way through that whole period. Very few people are still holding those things unless they believe the company's got some potential to come back. They weren't buying stuff that was absolute rubbish, riding it to the moon and then watching it collapse, they were buying it somewhere across that spectacle.

Jayamanne: And so we know the story of how a long term investment is, what you need for success. So what do we see with the holding periods with thematic ETFs? Do we, you know obviously long term investing has rewarded investors, but do we -- do investors treat these as long term holdings? Are they holding them for a very long time?

Dale: They're much, much shorter, much shorter. But they will hold what they believe to be quality for longer, right? So, lithium at the moment, they will buy Pilbara Minerals and they will hold that. Whereas the more speculative plays are they're going to be actively traded or held for short period, if they haven't already (indiscernible), people are going to sell it really hard, and they can take profits, which is great. We saw the same thing with buy now, pay later, which was just incredibly hot for a while. They thought Afterpay was a great long term story, and it was going to stick around. Zip and some of the others there were trading opportunity and then you get out. You don't hang on to that for a long time.

Jayamanne: And so, we saw a period of where – with investments from 2020 until now or even longer than that from the GFC till now. Where you could throw a dart at a dartboard and your investment would go up and we've obviously seen an end to that quite recently. Has this impacted the behavior you see from investors' and you know the uptake of these thematic ETFs. These stories, these investments and stories behind them.

Dale: One of the interesting things is our guys don't tend to chase thematic ETFs. There might be a tiny allocation, but they're not huge values or huge volumes going into those. They tend to kind of pick a sector get, excited and then just walk away from the rest of it. At the moment we're seeing really low volumes, the whole market is very quiet. That's really true of our investors as well. They're not actively trading. It's certainly not selling. This is not a capitulation, it's just a quiet period in the market. People are holding on to stuff they think is quality. They don't want to sell it, and they're not seeing anything cheap enough to buy, so just watching and waiting hoping something interesting is going to happen.