Matthew Goodson, CFA
Managing Director, Salt Funds Management

What are some of your career highlights so far?
Firstly, getting a job in the industry in the first place. I began as a fixed interest economist at Garlick & Co straight from university and doing a Masters thesis. I’d been a financial markets tragic since I was a kid in the early 1980’s but I was well out of my depth to start with but gradually began to get the hang of it and do some well-received work.
Working in New York for 7 years in Australia/NZ research sales was a key highlight. I met many outstanding investors who viewed investments with a wide range of different perspectives and it’s been great to remain friends with a number since then. I’d earlier said no to a job in Hong Kong for reasons that in retrospect still don’t make any sense, so when I was approached about New York, I snapped it up. I actually did a lot of my CFA study sitting on a plane flying from New York to Texas and to the West Coast.
Moving from the sell-side to the buy-side was another highlight especially as I managed to time it particularly well at the beginning of 2009. One was spoilt for choice with really good businesses trading at very low multiples. The trick then was analysing the balance sheet and avoiding those companies that had overextended themselves in the heady bull market that preceded the GFC.
The final and perhaps major highlight was starting Salt Funds Management with Paul Harrison in 2013. We were thrilled to deliver for those who had backed us by being INFINZ Fund Manager of the year in 2016. Our focus on free cashflows and valuation relative to share price has made navigating the last couple of years of this bull market a little more challenging as a 40x PE has become the new 20x. However, if there is one thing I have learned over 26 years, it’s that the wheel inevitably turns. Having survived 1999, it seems remarkable that price/revenue has made a comeback as a “valuation” technique even for businesses that aren’t hugely scalable.

What do you like most about your job/industry?
It’s hard to think of a career that’s more challenging and interesting. There is always another piece of information out there to be found and there is always another perspective to consider in how you bring disparate information together and how you think about companies in constructing a portfolio. Valuing a business is not so much the hard part, the difficult thing is being right 60% of the time about what is going to happen next and how the market will respond to that marginal piece of information. It’s that which is the never-ending challenge which makes the industry so interesting.
The other thing I like are the wide range of very smart people at clients, companies and investment banks that you constantly debate ideas with.

What are your interests outside work?
I’m married with two boys aged 15 and 12, so family is first.
I caught the thoroughbred racing bug as a kid when I picked horses to keep my grandmother company. This has morphed into a small racing and breeding enterprise, where I pay tax some years and get distressingly large refunds in others! It’s like being a kid looking forward to Christmas when you have a horse running in a big race and it’s an amazing buzz on the very rare occasions that you do win, especially given the bills and disappointment along the way. Breeding horses is like running your own little sports team. I was Chair of NZ Thoroughbred Racing for 4.5 years. That was a really challenging task in that offshore bookies siphoned off most of the large punters without paying us anything for our product and our small population struggles to generate enough revenue to cover the fixed costs of running the wagering system and then have enough left over to fund good prize money. Thankfully, change is finally happening with the NZ Racing Board which runs the TAB.
I used to play cricket and badminton but have taken up squash in my late 40’s to keep my boys company. I’ve definitely left it a bit late to learn that sport but it’s fun trying!

Make a prediction for 2024
At some point between now and then we will have a major equity market correction. Right now we have this “goldilocks” scenario of virtually zero interest rates, very low inflation and just enough economic growth to deliver a modicum of earnings growth. At the same time, some investors, companies and countries have geared up against these very low rates and will look rather sick when either their earnings disappoint or interest rates rise or both. The NZ market is at valuation multiples that set new all-time records on a daily basis but earnings forecasts overall are too optimistic and are being downgraded. I’ve been very bullish at times in the past but I think NZ equity returns from now until 2024 will be far below the mid-teens outcomes that we’ve become used to.

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