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The Right Way to Use ETFs for Success · Views from 6,230

• 0:11
  Ryan Nauman Host Adjusted for Risk: Hello, everyone, and welcome to Adjusted for Risk podcast from the shores of Lake Tahoe.
• 0:16
  Ryan Nauman Host Adjusted for Risk: Investors often try to learn from and emulate the best investors in the world, like Warren Buffett.
• 0:23
  Ryan Nauman Host Adjusted for Risk: It can be easier said than done, but recent innovation within the ETF space has brought these types of investment strategies to the retail investor.
• 0:35
  Ryan Nauman Host Adjusted for Risk: My next guest is an industry expert in the ETF space and is going to shed some light onto the topic and talk about how ETFs are transforming portfolio construction.
• 0:47
  Ryan Nauman Host Adjusted for Risk: Right, enough from me.
• 0:49
  Ryan Nauman Host Adjusted for Risk: I've already talked enough.
• 0:50
  Ryan Nauman Host Adjusted for Risk: Let's go ahead and bring on the star of the show.
• 0:54
  Ryan Nauman Host Adjusted for Risk: I am very honored and excited to welcome back for a second time Adam Patti.
• 1:00
  Ryan Nauman Host Adjusted for Risk: Adam is the CEO at Vista Shares.
• 1:04
  Ryan Nauman Host Adjusted for Risk: Adam, thank you so much for coming on the show.
• 1:07
  Ryan Nauman Host Adjusted for Risk: It's an honor to have you on for a second time.
• 1:09
  Ryan Nauman Host Adjusted for Risk: I'm glad I didn't scare you away after the first one.
• 1:13
  Ryan Nauman Host Adjusted for Risk: Can you please tell us a little bit more about yourself and Vista Shares?
• 1:16
  Adam Patti CEO VistaShares: I'm thrilled to be here.
• 1:17
  Adam Patti CEO VistaShares: Thank you very much.
• 1:18
  Adam Patti CEO VistaShares: It's always a pleasure.
• 1:19
  Adam Patti CEO VistaShares: Yeah, Vista Shares, we got...
• 1:21
  Adam Patti CEO VistaShares: We're, we're a young company.
• 1:22
  Adam Patti CEO VistaShares: We launched our first ETF in December of 2024.
• 1:26
  Adam Patti CEO VistaShares: We're already above 2 billion in assets, so we've we've done quite well and very fortunate to be involved with this initiative.
• 1:32
  Adam Patti CEO VistaShares: What we're trying to do is really just build better products.
• 1:35
  Adam Patti CEO VistaShares: We- we're never gonna be everything to everybody.
• 1:37
  Adam Patti CEO VistaShares: We're never gonna have hundreds of products.
• 1:39
  Adam Patti CEO VistaShares: We're trying to really create solutions for investors to improve their portfolio results.
• 1:44
  Adam Patti CEO VistaShares: It's, maybe a little old-fashioned, but that's our goal.
• 1:47
  Adam Patti CEO VistaShares: And we put a lot of work into the types of strategies we bring to the to, to market
• 1:53
  Ryan: And that's fantastic.
• 1:54
  Ryan: That's great growth.
• 1:55
  Adam Patti, CEO VistaShares: Yeah
• 1:56
  Ryan: in two years?
• 1:57
  Ryan: That's pretty fantastic.
• 1:58
  Ryan: Doing
• 1:59
  Adam Patti, CEO VistaShares: even,
• 1:59
  Ryan: great things.
• 2:00
  Adam Patti, CEO VistaShares: Like a year and a half.
• 2:01
  Adam Patti, CEO VistaShares: I don't know, a year and a half.
• 2:02
  Adam Patti, CEO VistaShares: Yeah, no, really, it's r- really fortunate.
• 2:05
  Adam Patti, CEO VistaShares: And look it's about having good products.
• 2:06
  Adam Patti, CEO VistaShares: When you have good products, it, you gotta get the word out, but it takes a long time to do that.
• 2:10
  Adam Patti, CEO VistaShares: But once you do, hopefully you see the uptick, and that's what we're seeing
• 2:14
  Ryan: Yeah, that's fantastic.
• 2:15
  Ryan: And I like what you said is you're not trying to do anything, reinvent the wheel.
• 2:20
  Ryan: You're not trying to do it...
• 2:21
  Ryan: You're just trying to do what's worked and bring product that helps the end investor build better portfolios, investment portfolios.
• 2:30
  Ryan: Because at the end of the day, Adam, that's what it's all about, right?
• 2:34
  Ryan: So I love that.
• 2:36
  Ryan: I talked about Warren Buffett.
• 2:38
  Ryan: People are always trying to emulate his investment strategy, learn from him, and he's consistently emphasized buying great businesses at reasonable prices and holding them for the long term.
• 2:51
  Ryan: Do you think if Buffett were starting his career today, how do you think he'd view the modern ETF landscape where there's so many new ETFs?
• 2:59
  Ryan: Some of them, sorry Adam, there's some ETFs out there that go way over my head, like I don't know what's going on here, these single stock leverage ETFs.
• 3:09
  Ryan: he still build a portfolio stock by stock or would ETFs be part of that toolkit, do you think?
• 3:18
  Adam Patti, CEO VistaShares: I think ETFs would certainly be there to provide exposure to sectors or themes that perhaps he wants to gain exposure to before he finds his next acquisition or investment.
• 3:29
  Adam Patti, CEO VistaShares: But certainly Warren Buffett is known for, being an incredibly talented value investor who has very severe metrics that he follows before making an investment in a company.
• 3:38
  Adam Patti, CEO VistaShares: So I don't see that changing.
• 3:40
  Adam Patti, CEO VistaShares: But certainly ETFs are great exposure vehicles for him or anybody.
• 3:44
  Adam Patti, CEO VistaShares: And so I think that's, And look, ETF market is y- it's complicated, right?
• 3:49
  Adam Patti, CEO VistaShares: There's many different flavors like you just mentioned.
• 3:51
  Adam Patti, CEO VistaShares: There's trading strategies or investment strategies, and within each one of those categories there are many flavors.
• 3:57
  Adam Patti, CEO VistaShares: So the most important thing for investors is to really look under the hood.
• 4:00
  Adam Patti, CEO VistaShares: Don't look at the name of the fund.
• 4:02
  Adam Patti, CEO VistaShares: Look what's in the portfolio, and that's really why we started Vistashares.
• 4:05
  Adam Patti, CEO VistaShares: My partner, John McNeil who was a former president of Tesla, he was trying to get exposure to AI, and he looked at all the AI ETFs out there and said, "Wait a minute, this is not AI.
• 4:14
  Adam Patti, CEO VistaShares: This is Mag 7, or it's consumer-facing software companies that may be implementing AI.
• 4:19
  Adam Patti, CEO VistaShares: But that's not how you get exposure to AI."
• 4:21
  Adam Patti, CEO VistaShares: So that's really how Vistashares really started.
• 4:23
  Adam Patti, CEO VistaShares: It's about looking under the hood and building portfolios that actually represent what we're trying to achieve
• 4:30
  Ryan: I'm glad you brought that up, Adam, bec- I say it a lot on this show and in content is you gotta look beyond the name or even the description, the investment objective, and really look into what, what's in
• 4:43
  Ryan: that portfolio.
• 4:44
  Ryan: And that's what's great about ETFs more so than mutual funds.
• 4:47
  Ryan: You can...
• 4:48
  Ryan: That transparency is there, right?
• 4:50
  Adam Patti, CEO VistaShares: Transparency is the key.
• 4:51
  Ryan: diligence
• 4:52
  Adam Patti, CEO VistaShares: Yes, absolutely.
• 4:53
  Adam Patti, CEO VistaShares: Read the prospectus.
• 4:54
  Adam Patti, CEO VistaShares: Just dig in.
• 4:56
  Adam Patti, CEO VistaShares: Dig in.
• 4:56
  Adam Patti, CEO VistaShares: Do your d- do your research
• 4:57
  Ryan: Yeah.
• 4:58
  Ryan: Because I feel as, especially now, and we're gonna get into it shortly, p- some of these firms are very creative in their marketing, very creative to help distinguish their products from others.
• 5:09
  Ryan: So you gotta get through that marketing and those terms to find out, okay what are they doing?
• 5:16
  Ryan: Are they doing what they say they're doing?
• 5:18
  Ryan: And what are they holding?
• 5:20
  Ryan: Are we really getting exposure to AI, like you said?
• 5:23
  Adam Patti, CEO VistaShares: Yeah.
• 5:23
  Adam Patti, CEO VistaShares: And does it fit into your long-term plan as, in, in your portfolio?
• 5:27
  Adam Patti, CEO VistaShares: Because some of the products are very hyper concentrated.
• 5:30
  Adam Patti, CEO VistaShares: You just gotta, again, going back to it just do your research.
• 5:33
  Adam Patti, CEO VistaShares: Look under the hood
• 5:34
  Ryan: Yep.
• 5:35
  Ryan: So going back to Warren Buffett, let's say Warren came to you and Adam you to design a ETF portfolio for the next decade, and it's not just outperform, but to withstand multiple market cycles.
• 5:49
  Ryan: What core charac- characteristics would that portfolio have and what lessons should advisors take from that exercise, do you think?
• 5:59
  Adam Patti, CEO VistaShares: That's a great question.
• 6:00
  Adam Patti, CEO VistaShares: What an honor that would be for him to ask me.
• 6:03
  Adam Patti, CEO VistaShares: So that's an unlikely scenario for sure.
• 6:05
  Adam Patti, CEO VistaShares: But look, again, I'm old-fashioned, so I think you gotta start with a well-constructed portfolio that provides diversification in different market cycles.
• 6:12
  Adam Patti, CEO VistaShares: So you know you don't wanna load the boat in any one theme or sector or equity sleeve.
• 6:16
  Adam Patti, CEO VistaShares: You wanna have equities, you wanna have fixed income, you wanna have commodities, you wanna have real estate.
• 6:20
  Adam Patti, CEO VistaShares: You wanna have everything in there to build the portfolio that's durable and that hopefully withstands market corrections in certain sectors, right?
• 6:28
  Adam Patti, CEO VistaShares: If something's going down, hopefully something's staying stable.
• 6:31
  Adam Patti, CEO VistaShares: You wanna have ballast in your portfolio, right?
• 6:33
  Adam Patti, CEO VistaShares: So that's where the fixed income is or some downside protection.
• 6:36
  Adam Patti, CEO VistaShares: So I, I think the start for anybody, Warren Buffett or anybody, would be to put together that long-term, well-diversified portfolio.
• 6:45
  Adam Patti, CEO VistaShares: And, have some cash as well to, deploy against opportunities that you find along the way.
• 6:51
  Adam Patti, CEO VistaShares: So for a Warren Buffett, obviously he's gonna be buying companies or investing in solid value-oriented companies.
• 6:57
  Adam Patti, CEO VistaShares: But for an average advisor or investor, you wanna be-- you know, have a certain portion set aside where you can capitalize on a theme, aI is an incredible growth opportunity.
• 7:07
  Adam Patti, CEO VistaShares: We launched today robotic space and defense super cycle ETFs.
• 7:11
  Adam Patti, CEO VistaShares: All of those represent incredible growth opportunities.
• 7:13
  Adam Patti, CEO VistaShares: Those are not majority holders for your portfolio.
• 7:16
  Adam Patti, CEO VistaShares: Those are minority holders, right?
• 7:18
  Adam Patti, CEO VistaShares: So you know, you just gotta design your portfolio for what you're wanting to achieve over time.
• 7:25
  Ryan: And that's why I feel great about ETFs.
• 7:27
  Ryan: Like you said, there's a...
• 7:28
  Ryan: You can do a lot of different thematic plays there, like you said, with the new ETFs you just launched and the other you offer.
• 7:36
  Ryan: A lot of options for different thematic plays, whether it's long-term or shorter term.
• 7:42
  Ryan: I'm really glad you brought up just diversification and how important it is.
• 7:46
  Ryan: I think sometimes we forget about the importance of diversification, especially when are ripping higher.
• 7:54
  Ryan: You've got the Mag Sevens.
• 7:55
  Ryan: Like, why invest overseas or in mid caps when you can just go Ma- Mag Seven or mega tech caps?
• 8:02
  Ryan: Bill Ackman, he's built his reputation on making high conviction concentrated investments.
• 8:08
  Ryan: Most advisors, however, like you said, are trained to broadly.
• 8:13
  Ryan: How should advisors think about balancing concentration versus diversification?
• 8:18
  Ryan: And can ETFs provide an effective way to express high conviction ideas without taking uncompensated risks?
• 8:27
  Adam Patti, CEO VistaShares: That's a great question.
• 8:28
  Adam Patti, CEO VistaShares: First of all, diversification benefits, run out after a certain amount, number of holdings, right?
• 8:33
  Adam Patti, CEO VistaShares: Having five hundred holdings, across your portfolio versus having fifty is not necessarily helping.
• 8:39
  Adam Patti, CEO VistaShares: And there's been a lot of research on that, so I'm not gonna rehash that 'cause that's not really my expertise.
• 8:43
  Adam Patti, CEO VistaShares: But I think ETFs are exceptional opportunity-- provide exceptional opportunities for different exposures that, that don't cause the d- the concentration risk that you're talking about.
• 8:53
  Adam Patti, CEO VistaShares: Look, if you have, equities, there's nothing wrong with having, a concentrated equity single stock position, right?
• 8:59
  Adam Patti, CEO VistaShares: Having, fifteen, twenty, twenty-five different securities that you have high conviction around as part of your equity sleeve.
• 9:06
  Adam Patti, CEO VistaShares: But if you're looking at the AI or electrification or robotics or whatever it is, certainly if you have the skill and time and-- to do the research, which most pe-people don't pick some stocks, sure.
• 9:16
  Adam Patti, CEO VistaShares: But most people don't have that expertise and the time to monitor it and really understand the companies.
• 9:21
  Adam Patti, CEO VistaShares: So ETFs provide, a great way to get that exposure.
• 9:25
  Adam Patti, CEO VistaShares: But again, even there, you wanna look under the hood and make sure that they hold the types of securities that you're trying to get exposure to.
• 9:31
  Ryan: Yeah, that's a great point.
• 9:33
  Ryan: And Adam, stock picking's really hard.
• 9:37
  Ryan: It's really hard.
• 9:38
  Ryan: It's hard, like you said, you have to have time, you have to know what you're looking for, you wanna know what you're investing in.
• 9:46
  Ryan: That's why I don't hold any individual stocks.
• 9:49
  Ryan: I just let the pros, like you, all the smart people, invest- pick the stocks and what they're good at, and I'll invest it, in them, versus the individual.
• 10:00
  Ryan: Because it's hard
• 10:01
  Adam Patti, CEO VistaShares: It is
• 10:03
  Ryan: time-consuming
• 10:04
  Adam Patti, CEO VistaShares: And even if you know what stock to buy, it there's an entry point and an exit point.
• 10:08
  Adam Patti, CEO VistaShares: When I used to trade stocks, and I'm not a stock trader at all I'm very bad at it I always seemed to know how to get in, but I never knew how to get out.
• 10:16
  Adam Patti, CEO VistaShares: Oh, it's gonna keep...
• 10:16
  Adam Patti, CEO VistaShares: It's down, but it's gonna keep going.
• 10:18
  Adam Patti, CEO VistaShares: It's just not a game that I can play.
• 10:21
  Adam Patti, CEO VistaShares: Certainly, some people can.
• 10:22
  Adam Patti, CEO VistaShares: I prefer well-diversified portfolios and, looking at what the experts do.
• 10:27
  Adam Patti, CEO VistaShares: Like you mentioned Bill Ackman.
• 10:28
  Adam Patti, CEO VistaShares: We're big fans of Bill Ackman, as and Stanley Druckenmiller, and David Tepper.
• 10:33
  Adam Patti, CEO VistaShares: These are some of the best stock pickers in the world.
• 10:34
  Adam Patti, CEO VistaShares: And when you go into a more of a stock picker's market like we're in now it's, it makes sense to try to, harness their intellect
• 10:43
  Ryan: Yeah, I completely agree.
• 10:44
  Ryan: Let them do it.
• 10:45
  Ryan: Let them do it.
• 10:46
  Ryan: I'll pay that extra fee
• 10:48
  Adam Patti, CEO VistaShares: Yeah.
• 10:48
  Ryan: their professional experience
• 10:50
  Adam Patti, CEO VistaShares: Sure
• 10:50
  Ryan: S- and once you buy a stock, I don't think people realize how hard it is.
• 10:54
  Ryan: Like you said, that getting out of it removing that position, be emotional, right?
• 11:00
  Ryan: You'd be like I bought this one, this..."
• 11:02
  Ryan: And do I really wanna sell it?
• 11:04
  Adam Patti, CEO VistaShares: That's the killer.
• 11:05
  Adam Patti, CEO VistaShares: The emo- the best traders, investors always talk about not having that emotion, but they f- you know, they have it as well in some cases.
• 11:12
  Adam Patti, CEO VistaShares: Stanley Druckenmiller, there was something on X I saw, he was talking exactly about that topic, about how hard it is to divorce yourself from the emotion to be able to, be a great investor
• 11:25
  Ryan: Yep, exactly.
• 11:26
  Ryan: So we know the wealth management space advisor, it's very competitive right now, just like in the ETF space.
• 11:34
  Ryan: Very competitive.
• 11:36
  Ryan: Advisors, they're increasingly expected to deliver institutional quality portfolios while also managing taxes, fees, and client behavior.
• 11:45
  Ryan: They've got a lot to manage just on the investment management side.
• 11:49
  Ryan: Where do you believe ETFs provide the greatest competitive advantage in helping advisors improve client outcomes?
• 11:58
  Adam Patti, CEO VistaShares: Look, going back to, what ETFs have always been great at, right?
• 12:02
  Adam Patti, CEO VistaShares: Low fees, transparency, intraday trading, right?
• 12:05
  Adam Patti, CEO VistaShares: Tax efficiency, right?
• 12:06
  Adam Patti, CEO VistaShares: ETFs just have certain structural benefits above mutual funds, which is why ETFs have, usurped mutual funds as the preferred vehicle for most investors at this point.
• 12:17
  Adam Patti, CEO VistaShares: I think ETFs should be a core part of anyone's portfolio, look, why not?
• 12:20
  Adam Patti, CEO VistaShares: If you're buying the S&P 500, buy VOO, right?
• 12:23
  Adam Patti, CEO VistaShares: It bought, what is it, three bips, five bips?
• 12:25
  Adam Patti, CEO VistaShares: I don't even know what it is now.
• 12:26
  Adam Patti, CEO VistaShares: It, it gives you that exposure and so in, so inexpensively and in a tax efficient manner that it's silly not to build your portfolio using these building blocks and then, you use other types of ETFs to round out
• 12:41
  Adam Patti, CEO VistaShares: your exposure.
• 12:42
  Adam Patti, CEO VistaShares: Provide exposure to places or corners of the market that you want e- exposure to again, inexpensively.
• 12:48
  Adam Patti, CEO VistaShares: Even 75, 95 bips, people say, "Oh, that's expensive," but not really.
• 12:52
  Adam Patti, CEO VistaShares: If you're getting, y- a special exposure or a special outcome it costs money to build those exposures.
• 12:57
  Adam Patti, CEO VistaShares: It's a lot cheaper than mutual funds for sure.
• 13:00
  Ryan: Yeah, and Adam, I remember back, dating myself here, aging myself, back when I started, 75 bps isn't very expensive compared to what it was 20 years ago to get good investment management.
• 13:14
  Adam Patti, CEO VistaShares: Absolutely.
• 13:15
  Adam Patti, CEO VistaShares: Yeah, and there's a lot of sophisticated strategies out there that investors can now get exposure to in an ETF structure for not much in the fee realm.
• 13:22
  Adam Patti, CEO VistaShares: Like our income products, right?
• 13:23
  Adam Patti, CEO VistaShares: These are sophisticated option strategies run by experts actively on a daily basis.
• 13:30
  Adam Patti, CEO VistaShares: It's an expensive infrastructure hit to build that type of team and to be able to run that kind of strategy.
• 13:36
  Adam Patti, CEO VistaShares: But hopefully you're paying for something good and you're getting what you expect.
• 13:41
  Ryan: Yeah, exactly.
• 13:42
  Ryan: And years ago when I started, those strategies weren't available.
• 13:45
  Ryan: They were only available for the ultra-high net worth institutions, endowments
• 13:49
  Adam Patti, CEO VistaShares: Absolutely
• 13:50
  Ryan: on.
• 13:51
  Ryan: So let's go there for a second.
• 13:53
  Ryan: You- there are a lot of new strategies out there, like you said, income strategies, option overlay strategies, you name it.
• 14:01
  Ryan: A lot of new innovation there, a lot of great innovation.
• 14:05
  Ryan: There are now more ETFs available than there are publicly traded companies.
• 14:11
  Ryan: Let that sink in.
• 14:12
  Ryan: I know we've mentioned it a lot, but that's crazy to me.
• 14:16
  Ryan: Each with, like we said, very compelling marketing stories.
• 14:19
  Ryan: Marketing pitches are getting very creative now.
• 14:22
  Ryan: How should advisors distinguish between products built around lasting investment philosophy and those designed primarily just to capitalize on short-term trends?
• 14:33
  Ryan: "Hey, this is trending.
• 14:35
  Ryan: Let's go ahead and offer a product," versus really thinking about, that lasting investment philosophy like you said at the beginning
• 14:44
  Adam Patti, CEO VistaShares: Look, the ETF issuers, yeah, ETF issuers are notoriously good marketers for sure.
• 14:48
  Adam Patti, CEO VistaShares: The whole industry is.
• 14:49
  Adam Patti, CEO VistaShares: And, you, it's hard to differentiate yourself.
• 14:52
  Adam Patti, CEO VistaShares: So you kinda have to figure out a way to get in front of people and build buzz around your products.
• 14:57
  Adam Patti, CEO VistaShares: But the key for us is education.
• 14:58
  Adam Patti, CEO VistaShares: So if your ETF issuer that you're buying products from is not providing you deep education on every one of their strategies what it is, how it runs, how to use it, what it does to your portfolio, then you
• 15:10
  Adam Patti, CEO VistaShares: shouldn't be buying that product.
• 15:11
  Adam Patti, CEO VistaShares: Because, the issuer of the ETF should be spending the time and the money to build out a very robust educational platform for advisors.
• 15:19
  Adam Patti, CEO VistaShares: And it's just, that's how you get smart on the strategies, right?
• 15:23
  Adam Patti, CEO VistaShares: Do use their research, but then also do your own just to make sure you're, again, you're getting what you expect.
• 15:30
  Ryan: I'm a big fan of education and it's transparency too.
• 15:34
  Ryan: If the ETF issuer is not willing to help you and get into the weeds and educate you on some of these new, then do you really want to, invest with that firm?
• 15:44
  Ryan: Because the key is transparency also.
• 15:48
  Adam Patti, CEO VistaShares: Absolutely.
• 15:48
  Adam Patti, CEO VistaShares: It's critical, absolutely critical.
• 15:51
  Adam Patti, CEO VistaShares: They should have people that can get on the phone and talk about the investment strategy, get down into the portfolio.
• 15:55
  Adam Patti, CEO VistaShares: And look, most people, most firms have that, but many don't.
• 15:59
  Adam Patti, CEO VistaShares: They just throw a fling.
• 16:00
  Adam Patti, CEO VistaShares: I call it the fling and pray strategy, right?
• 16:02
  Adam Patti, CEO VistaShares: Just you fling a bunch of stuff out and that, as an issuer and you're praying that it works.
• 16:06
  Adam Patti, CEO VistaShares: That's not our strategy.
• 16:07
  Adam Patti, CEO VistaShares: Never been.
• 16:08
  Adam Patti, CEO VistaShares: But, look, it works for some what are you gonna say about it?
• 16:12
  Ryan: Yeah, exactly.
• 16:13
  Ryan: You're exactly right.
• 16:14
  Ryan: It goes back to that marketing, I don't know.
• 16:17
  Adam Patti, CEO VistaShares: Sure, sure
• 16:18
  Ryan: we, the ETF space we've talked about has evolved greatly over the years.
• 16:23
  Ryan: We've gone from passive index f- VO, SPDRs, very vanilla index ETFs, to smart beta, active management.
• 16:32
  Ryan: Now, those increasingly sophisticated ETF strategies that you've mentioned.
• 16:37
  Ryan: What do you believe is the next major evolution in ETFs over the next five years, and how should advisors prepare their portfolios today for this evolution?
• 16:51
  Adam Patti, CEO VistaShares: Watch us and I think the products that we're bringing out are really in that realm.
• 16:55
  Adam Patti, CEO VistaShares: But, the way we look at it is pretty simple.
• 16:58
  Adam Patti, CEO VistaShares: If you look from an advisor's perspective, from a portfolio construction perspective, it really comes down to three categories.
• 17:04
  Adam Patti, CEO VistaShares: There's growth equity, there's income, and downside protection.
• 17:08
  Adam Patti, CEO VistaShares: Those are the three categories that, at least I believe, are the most important for portfolio construction.
• 17:14
  Adam Patti, CEO VistaShares: And that's where we're gonna be focusing our time and, we'll be bringing out a s- again, not a lot of products, but several products to address, make sure that we are firmly committed to each one of those three
• 17:25
  Adam Patti, CEO VistaShares: leg, three legs of the stool.
• 17:27
  Adam Patti, CEO VistaShares: Because, that's what you need in different market cycles, particularly when the volatility has been like it is, right?
• 17:32
  Adam Patti, CEO VistaShares: You can't all be in growth equity.
• 17:33
  Adam Patti, CEO VistaShares: You wanna have balance in your portfolio.
• 17:35
  Adam Patti, CEO VistaShares: You wanna have downside protection.
• 17:36
  Adam Patti, CEO VistaShares: And, and income is no longer a retiree's game, right?
• 17:40
  Adam Patti, CEO VistaShares: It's young investors looking to stack dividends and build up a nest egg over time.
• 17:45
  Adam Patti, CEO VistaShares: So income has become very important to a very broad set of investors and you need to have products that appeal to them and that they understand
• 17:53
  Ryan: Yeah, it's fantastic.
• 17:54
  Ryan: I'm really glad you brought up downside protection.
• 17:57
  Ryan: We do a lot of research here.
• 17:59
  Ryan: I do...
• 17:59
  Ryan: i'm a firm believer in that's a true risk of investing, is losing your money.
• 18:05
  Ryan: Give me all the upside volatility you want, Adam.
• 18:08
  Ryan: Standard deviation, give me the upside volatility.
• 18:11
  Ryan: It's protecting the downside.
• 18:13
  Ryan: hearing more and more products that are focusing on limiting downside protection.
• 18:19
  Ryan: I love that you guys are doing the same thing because at the end of the day, to me, that's a real risk of investing, is losing my money.
• 18:27
  Adam Patti, CEO VistaShares: Absolutely.
• 18:28
  Adam Patti, CEO VistaShares: Y- and people, a lot of times they'll lock in their gains and then, or lock in their losses, I'm sorry, by panic selling, and you never can make that back.
• 18:36
  Adam Patti, CEO VistaShares: So it's better to have a well-diversified portfolio and have that downside protection as a feature within the portfolio to protect you, I think
• 18:43
  Ryan: Y- yep.
• 18:44
  Ryan: You mentioned those three pillars that you and your team at Vistashare are really focusing on.
• 18:50
  Ryan: How do you...
• 18:52
  Ryan: we see so much innovation.
• 18:54
  Ryan: How do you and the vet- Vistashare's team determine what types of strategies have staying power are worth offering in that ETF wrapper than just chasing a trend and be like, "You know what?
• 19:07
  Ryan: Let's go here.
• 19:07
  Ryan: That's what the industry's going."
• 19:09
  Ryan: How do you determine what has staying power?
• 19:12
  Adam Patti, CEO VistaShares: We're a little boring and old-fashioned, frankly.
• 19:14
  Adam Patti, CEO VistaShares: We, we talk to advisors, we talk to investors.
• 19:17
  Adam Patti, CEO VistaShares: It's really n- not any more complicated than that.
• 19:20
  Adam Patti, CEO VistaShares: We talk to a lot of advisors and investors, and we try to understand what their needs are, where the holes are in the market.
• 19:26
  Adam Patti, CEO VistaShares: What would help them get better portfolio outcomes?
• 19:29
  Adam Patti, CEO VistaShares: What products out there they are interested in but are n- not constructed properly.
• 19:34
  Adam Patti, CEO VistaShares: We're never gonna be first to market in anything.
• 19:36
  Adam Patti, CEO VistaShares: And that's okay.
• 19:37
  Adam Patti, CEO VistaShares: In the old game in ETFs was you had to be first to market, you get all the assets.
• 19:41
  Adam Patti, CEO VistaShares: We're in it for the long term.
• 19:42
  Adam Patti, CEO VistaShares: So look, when we launched AIS, our first ETF, in December '24, we, we were probably the 23rd AI ETF out there.
• 19:49
  Adam Patti, CEO VistaShares: And everyone said, "What are you doing launching an AI ETF?"
• 19:51
  Adam Patti, CEO VistaShares: I said, just watch.
• 19:52
  Adam Patti, CEO VistaShares: Ours is very different.
• 19:53
  Adam Patti, CEO VistaShares: It's constructed differently.
• 19:54
  Adam Patti, CEO VistaShares: It's managed differently.
• 19:55
  Adam Patti, CEO VistaShares: It performs differently.
• 19:57
  Adam Patti, CEO VistaShares: And it's almost $1 billion now."
• 19:58
  Adam Patti, CEO VistaShares: It's, that's...
• 19:59
  Adam Patti, CEO VistaShares: Y- and look, we, I'm not gonna say we're gonna replicate that success across every product, but it succeeded because it is di- completely differentiated from what is currently out there.
• 20:10
  Adam Patti, CEO VistaShares: And bec- the reason why it's differentiated is because we designed it to the needs of investors.
• 20:15
  Adam Patti, CEO VistaShares: We're not just in a back room saying, "Let's put together an index using SIC codes and slap it together and call it something and bring it out."
• 20:22
  Adam Patti, CEO VistaShares: It's, we talk to people, we construct something, we bring it out to people, we get feedback on it, we come back, and that's a long process.
• 20:29
  Adam Patti, CEO VistaShares: It could take us a year to develop a product.
• 20:31
  Adam Patti, CEO VistaShares: Look, the products we launched today, space, robotics, and defense ETFs, three of them, none of them are even close to first to market, but they all use our proprietary, patent-pending bill of materials process.
• 20:41
  Adam Patti, CEO VistaShares: It's all managed by our investment committee made up of some of the global luminaries in technology and those technologies.
• 20:48
  Adam Patti, CEO VistaShares: And that is what we believe differentiates.
• 20:52
  Ryan: Yeah, it's fantastic.
• 20:53
  Ryan: And like you said, can you tell us more about that strategy real quickly, your investment strategy and building it you built that you've used across all your ETFs?
• 21:02
  Adam Patti, CEO VistaShares: Yeah, so we have different...
• 21:03
  Adam Patti, CEO VistaShares: So what I'm referring to is our Super Cycle ETF.
• 21:05
  Adam Patti, CEO VistaShares: So we use something called our build materials process.
• 21:09
  Adam Patti, CEO VistaShares: So instead of creating a cap-weighted, SIC code-driven i- index, what we're doing is when we attack a, what we call a super cycle, which is a, what we believe is a long-term, technology-driven, fundamental disruptive trend that's gonna last
• 21:23
  Adam Patti, CEO VistaShares: decades we will go into the market, we will talk to experts in the field, and map out the supply chain in great exhausting detail.
• 21:33
  Adam Patti, CEO VistaShares: Once we map out the supply chain, then what we do is we actually create a build of materials for that product.
• 21:39
  Adam Patti, CEO VistaShares: But using AIS, our AI ETFs.
• 21:41
  Adam Patti, CEO VistaShares: We're mapping out the supply chain for AI data centers and semiconductors.
• 21:45
  Adam Patti, CEO VistaShares: And then what we do is we l- overlay the bill of materials to try to determine how important each segment of the supply chain is a- from an economic perspective.
• 21:53
  Adam Patti, CEO VistaShares: Cooling in an AI data center, how much of a, how much of every dollar is going into cooling systems, and that's how we weight them.
• 22:00
  Adam Patti, CEO VistaShares: Then we go in and we look at all, all the companies, and we scrub through their financials to make sure that they're getting a significant portion of their revenue from the actual theme.
• 22:10
  Adam Patti, CEO VistaShares: For cooling for instance, we don't care about cooling companies, we don't care about c- cooling companies that are in data centers.
• 22:15
  Adam Patti, CEO VistaShares: We only care about cooling companies that are serving AI data centers.
• 22:19
  Adam Patti, CEO VistaShares: So it's an exhausting analysis.
• 22:23
  Adam Patti, CEO VistaShares: High value.
• 22:23
  Adam Patti, CEO VistaShares: Hedge funds have done stuff like this for many years.
• 22:26
  Adam Patti, CEO VistaShares: Nobody in the ETF market does it.
• 22:28
  Adam Patti, CEO VistaShares: It's too, i- it's too time-consuming and expensive.
• 22:31
  Adam Patti, CEO VistaShares: But that's how we build our products.
• 22:34
  Ryan: And it distinguishes your products from others, like you said, which is very important in this space.
• 22:39
  Ryan: Like you said, nobody else does it because of the resources, but that's what makes you guys special in your products.
• 22:46
  Ryan: And otherwise you don't have that like you said, it just goes back to marketing probably when getting your products out there
• 22:54
  Adam Patti, CEO VistaShares: Yes, agree
• 22:55
  Ryan: Adam, the last question here real quickly.
• 22:58
  Ryan: Who's next on your list after Buffett and Ackman?
• 23:02
  Adam Patti, CEO VistaShares: Oh, we've got Druckenmiller.
• 23:03
  Adam Patti, CEO VistaShares: We've got Druckenmiller, D-R-K-Y.
• 23:06
  Adam Patti, CEO VistaShares: We've got Tepper, T-P-R-Y.
• 23:08
  Adam Patti, CEO VistaShares: We've got quite a few on the on the shelf ready to come.
• 23:12
  Adam Patti, CEO VistaShares: We've covered off...
• 23:13
  Adam Patti, CEO VistaShares: We didn't cover off all the major hedge fund guys or investors.
• 23:16
  Adam Patti, CEO VistaShares: What we do is we identify those that, to your point earlier, take long-term, high-conviction, concentrated positions and hold, long holding periods.
• 23:25
  Adam Patti, CEO VistaShares: So those are very suitable to the ETF structure 'cause we don't want a lot of trading daily.
• 23:30
  Adam Patti, CEO VistaShares: We also don't want offsetting positions in the portfolio where it looks like they're heavy into security, but, they're actually hedged.
• 23:36
  Adam Patti, CEO VistaShares: Druckenmiller, Tepper, Ackman, of course Buffett, and, we'll see what else we bring out in the future.
• 23:43
  Ryan: Maybe an adjusted for risk
• 23:45
  Adam Patti, CEO VistaShares: Yeah.
• 23:46
  Adam Patti, CEO VistaShares: We, yeah.
• 23:47
  Adam Patti, CEO VistaShares: Why not?
• 23:47
  Adam Patti, CEO VistaShares: Let's do it.
• 23:48
  Adam Patti, CEO VistaShares: Let's do it
• 23:49
  Ryan: we go.
• 23:49
  Ryan: Awesome.
• 23:50
  Ryan: Sign me up.
• 23:51
  Adam Patti, CEO VistaShares: I love it.
• 23:52
  Adam Patti, CEO VistaShares: Love it
• 23:53
  Ryan: Adam, awesome conversation.
• 23:55
  Ryan: I knew it would be really fun.
• 23:56
  Ryan: I love your insights into the ETF space, what you guys are doing at Vistashares really exciting stuff, and just helping financial advisors create better investment portfolios for their clients.
• 24:09
  Ryan: Very important.
• 24:10
  Ryan: So thank you so much for coming on the show again, and it's always an honor and privilege.
• 24:16
  Ryan: Where can our audience get more information about Vistashares?
• 24:20
  Adam Patti, CEO VistaShares: please go to w- our website, vistashares.com.
• 24:23
  Adam Patti, CEO VistaShares: We have got a research section with a ton of different research reports, really well done and very heavy duty stuff.
• 24:29
  Adam Patti, CEO VistaShares: We're upgrading our website this summer, which is gonna have a real, a n- renewed emphasis on research.
• 24:34
  Adam Patti, CEO VistaShares: That's probably in the next month or two we'll have that launched.
• 24:37
  Adam Patti, CEO VistaShares: Check us out on X, VistasharesX is our handle.
• 24:40
  Adam Patti, CEO VistaShares: We try to put up real research where, we do product marketing of course as well, but if you look at what we put up, we're pretty, we're putting up some serious deep research on X, like six, eight-thread type
• 24:51
  Adam Patti, CEO VistaShares: things with a lot of sourcing and things like that to get you smart on some of these themes quickly
• 24:58
  Ryan: Yeah, that's great, Adam.
• 24:59
  Ryan: And hey, listeners may not agree with this, but I do actually do research before coming on these calls, and you guys do a lot of great research education on your website.
• 25:09
  Ryan: Kudos to you because I learned a lot just going there too.
• 25:13
  Adam Patti, CEO VistaShares: Thank you
• 25:14
  Ryan: thank you, Adam, and thank you everyone for listening to this episode of Adjusted for Risk podcast.
• 25:20
  Ryan: You can watch all of our other episodes on YouTube, and wherever else you catch your podcasts.
• 25:25
  Ryan: Lastly, p- please be sure to like and subscribe to those channels and give us a follow on LinkedIn.
• 25:32
  Ryan: you very much and have a great rest of your week