Latest / Trillions / Invesco's ETF Playbook

Transcript

Invesco's ETF Playbook · Trillions

• 0:02
  Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
• 0:13
  Speaker 2: I'm Juel Webber and I'm Eric Belchunas Eric.
• 0:18
  Speaker 3: We have a special guest today from Investco, Brian Hartigan.
• 0:21
  Speaker 3: He's the global head of ETFs and index Investments. Why
• 0:26
  Speaker 3: is Invesco so interesting?
• 0:28
  Speaker 2: Yeah, you know, they're in the terrordome with there in
• 0:31
  Speaker 2: the upper echelon, but not in the big two, and
• 0:35
  Speaker 2: so they're in that sort of like level with First
• 0:37
  Speaker 2: Trust and Schwab and other sort of like i'd say
• 0:41
  Speaker 2: big dogs but not quite Blank Vanguard and black Rock,
• 0:43
  Speaker 2: And it's an interesting spot. If you look at their funds,
• 0:46
  Speaker 2: they have a ton of hits, a lot of people
• 0:47
  Speaker 2: like a lot of ones people love and know, and
• 0:50
  Speaker 2: one big one, one big one, Yeah, one super stud
• 0:53
  Speaker 2: The q's QQQ and QQQ and perhaps you've heard talk
• 0:57
  Speaker 2: about Yeah, perhaps you've heard of it, and but it's
• 0:59
  Speaker 2: interest company obviously used to be Power Shares purchased by Invesco.
• 1:03
  Speaker 2: And we have had a couple episodes we talked to
• 1:05
  Speaker 2: analysts and reporters, but this is sort of like, hey,
• 1:08
  Speaker 2: let's wrap the euroup talking to somebody who's in the
• 1:11
  Speaker 2: terror dome every day, fighting for every dollar. It is
• 1:15
  Speaker 2: hard in this industry, and there's a lot of things
• 1:19
  Speaker 2: going on in their products. They have a diversified product line,
• 1:21
  Speaker 2: so we can touch on a bunch of different themes
• 1:23
  Speaker 2: here and just sort of get the perspective from inside
• 1:26
  Speaker 2: that competitive healthcape.
• 1:27
  Speaker 3: Again joining us Brian Hartigan of Investco, this time on
• 1:32
  Speaker 3: Trillions investcos etf playbook.
• 1:36
  Speaker 4: Brian Wegan a trillions Warnow guys, great to bear.
• 1:40
  Speaker 3: Just so that we have a disclaimer, Investco is a
• 1:43
  Speaker 3: Bloomberg sponsor. Okay, so I want to talk to you
• 1:45
  Speaker 3: about Invesco. What's the secret sauce at Invesco that strategically
• 1:50
  Speaker 3: distinguishes you, guys from all those other players in Eric's
• 1:53
  Speaker 3: thunderdome Terrordome.
• 1:55
  Speaker 4: Sure, yeah, the Terroodome. I love it. It brings out
• 1:57
  Speaker 4: some of the grittiness. But we've been in the game
• 2:00
  Speaker 4: for quite some time, right, So we just recently hit
• 2:03
  Speaker 4: a trillion dollars in assets shameless plug trillion, but it's
• 2:07
  Speaker 4: through a see what you did there?
• 2:08
  Speaker 2: Well, you know we always say the name we gave
• 2:11
  Speaker 2: this podcast podcast aged really well.
• 2:13
  Speaker 4: Yes, number go, so trillion, trillion, keep hitting the trillion flows.
• 2:18
  Speaker 4: Investco has been in the ETF market for quite some
• 2:21
  Speaker 4: time early days, pioneer through power shares, expansion into factors,
• 2:26
  Speaker 4: fixed income, commodities, and global in terms of our overall reach,
• 2:30
  Speaker 4: so we've been in the tero doome. We've been fighting, competing,
• 2:32
  Speaker 4: We understand the landscape and it takes, you know, that
• 2:37
  Speaker 4: level of focus really to compete and reach investors within
• 2:40
  Speaker 4: the ETF landscape. So it's been a testament of a
• 2:44
  Speaker 4: really understanding investors, understanding needs and evolving as we've gone.
• 2:48
  Speaker 3: What about this year? What have you learned this year
• 2:52
  Speaker 3: that you know is a timely insight for our listeners. Sure.
• 2:56
  Speaker 4: Yeah, it's been a great year of returns. Many folks
• 2:59
  Speaker 4: kind of forget that at first February March cell down,
• 3:03
  Speaker 4: sell off, right, And what was interesting about the market
• 3:06
  Speaker 4: correction is it it really opened the door for more diversification.
• 3:10
  Speaker 4: From our view, there was a lot of US equity
• 3:12
  Speaker 4: dominance and that was great for ourselves for our lineup,
• 3:17
  Speaker 4: but I think you started to see investors look at
• 3:19
  Speaker 4: more opportunities for diversification. Factors, international commodities came back into play.
• 3:25
  Speaker 4: So it's a new world for investors to look at.
• 3:29
  Speaker 4: How do they want to diversify through ETFs.
• 3:32
  Speaker 2: One of the things that was interesting to me. So
• 3:34
  Speaker 2: if I look at your ETFs by flows this year,
• 3:37
  Speaker 2: the QQQM and qqq are at the top, So let's
• 3:40
  Speaker 2: move those aside because I think everybody knows them. But
• 3:43
  Speaker 2: number two is kind of a chakra or three rather
• 3:46
  Speaker 2: is a chaker role SPMO. Most people probably don't know
• 3:48
  Speaker 2: what that is. That's the investco S and P five
• 3:50
  Speaker 2: hundred momentum ETF. You also have an international momentum in there.
• 3:55
  Speaker 2: We call that smart beta. We used to have a
• 3:57
  Speaker 2: bunch of episodes on beta kind of like went away
• 4:01
  Speaker 2: because it's not like the hot topic anymore, but it
• 4:04
  Speaker 2: took in I don't know, five hundred billion ish this year.
• 4:07
  Speaker 2: So smart beta, obviously, for those who don't know, is
• 4:09
  Speaker 2: basically when you take an index and you tweak it
• 4:12
  Speaker 2: a little like some Instead of the S and P,
• 4:14
  Speaker 2: you tweak it so it has a momentum tilt and
• 4:16
  Speaker 2: so it's active but passive at the same time. And
• 4:19
  Speaker 2: that sort of smart beta is like twenty five percent
• 4:21
  Speaker 2: of the assets. People don't talk about it. It's still
• 4:22
  Speaker 2: taking a bunch of cash. How would you do you?
• 4:25
  Speaker 2: Obviously you're still talking about with clients. What are those
• 4:28
  Speaker 2: conversations like and how did this one particular ETF get
• 4:31
  Speaker 2: so high on the list?
• 4:32
  Speaker 4: Sure? For us, smart beta is a it's a mechanism
• 4:35
  Speaker 4: of factors, right, what is explaining market returns? And when
• 4:39
  Speaker 4: you look at it this year, concentration mag seven, those
• 4:42
  Speaker 4: are all momentum names. So momentum clearly is driving returns
• 4:47
  Speaker 4: and it's driving flows. The beauty of smart beta is
• 4:50
  Speaker 4: that it's emotionless, so you don't have to say, hey,
• 4:53
  Speaker 4: are these getting too big? Are they becoming too large
• 4:56
  Speaker 4: in my portfolio? So that creates that force discipline, and
• 4:59
  Speaker 4: I think in vestors are showing that they want to
• 5:02
  Speaker 4: know what the potential outcomes are going to be of
• 5:04
  Speaker 4: the ETF.
• 5:05
  Speaker 3: So let's talk a little bit more about smart beta
• 5:07
  Speaker 3: and how smart beta works because it is unemotional, right,
• 5:11
  Speaker 3: It's just detached from that, and it's got a little
• 5:13
  Speaker 3: bot that basically tells it what to do, and it's
• 5:15
  Speaker 3: going to rebalance that set period of time. There's been
• 5:18
  Speaker 3: some pretty noteworthy ones that Eric and I have discussed before,
• 5:20
  Speaker 3: but I'm curious from your perspective, when was a moment
• 5:23
  Speaker 3: in time that you were like, Wow, that was exactly
• 5:25
  Speaker 3: what smart beta is supposed to do.
• 5:26
  Speaker 4: Sure. Yeah, as you said, it's an index, right, and
• 5:29
  Speaker 4: it's smart in that it is more than just buying
• 5:32
  Speaker 4: the entire market, so it has a pre programmed discipline
• 5:35
  Speaker 4: to it that gets you to an exact factor. So
• 5:38
  Speaker 4: for us, it's seeing some of the leadership change. So
• 5:41
  Speaker 4: when we looked at our flows as you do on
• 5:44
  Speaker 4: the show, last year, quality was one of our biggest
• 5:47
  Speaker 4: in terms of garnering attention investors not sure where the
• 5:51
  Speaker 4: market was going, and quality tends to take on kind
• 5:54
  Speaker 4: of a best of breed. It's not your biggest momentum,
• 5:57
  Speaker 4: it's not your cheapest, but it brings in fundamental and
• 6:00
  Speaker 4: we saw much of that last year. Then you saw
• 6:02
  Speaker 4: kind of the election change, sentiment change quite a bit
• 6:05
  Speaker 4: in the market, and momentum took off, right. That was
• 6:08
  Speaker 4: investors getting back into the market, and you saw leadership change.
• 6:11
  Speaker 4: And that's what we tend to look at, not only
• 6:13
  Speaker 4: on flows, but also on market returns through factors.
• 6:16
  Speaker 2: Yeah, and let me give you this SPMO is up
• 6:18
  Speaker 2: twenty seven percent. That's even better than the queues and
• 6:21
  Speaker 2: it's way better than the SMP which is eighteen percent. Oh,
• 6:23
  Speaker 2: that's a good year considering what you said about the
• 6:25
  Speaker 2: negativity earlier. One thing about spmo is and momentum is
• 6:30
  Speaker 2: what we found. We looked at active funds a lot
• 6:32
  Speaker 2: of active managers this year they did that thing where
• 6:35
  Speaker 2: they they are all full of the CFA, you know,
• 6:38
  Speaker 2: like fundamentals and I get it, and they shifted into
• 6:42
  Speaker 2: like non tech names. Momentum meanwhile, saw that tech names
• 6:46
  Speaker 2: were actually going better and tried to ride that and
• 6:50
  Speaker 2: it worked. So not having the mag seven is what
• 6:53
  Speaker 2: caused more active to underperform this year. They keep taking
• 6:56
  Speaker 2: the bait of biting on these like other fundament like
• 7:00
  Speaker 2: more fundamentally sound or low lower valuation sectors, and they're
• 7:04
  Speaker 2: like tech is just too expensive and ends up. Tech
• 7:07
  Speaker 2: just goes up again.
• 7:08
  Speaker 3: But this is kind of where smart beta is distinguished,
• 7:11
  Speaker 3: right because it can just look at it from the
• 7:12
  Speaker 3: numbers and just be like, absolutely.
• 7:14
  Speaker 2: We know exactly what to do now except like a
• 7:17
  Speaker 2: value ETF that they have probably didn't perform as well,
• 7:20
  Speaker 2: but it's just doing what the robot says. But momentum
• 7:23
  Speaker 2: obviously went into the tech names and the rest is
• 7:25
  Speaker 2: you know, that's why it's number three on the list.
• 7:27
  Speaker 2: So obviously those factors, there's regimes, right, yeah.
• 7:31
  Speaker 4: Yeah, so the regimes and I think Eric you said
• 7:34
  Speaker 4: it best, right, it creates a challenge in the market,
• 7:36
  Speaker 4: not only for active but for managers. Right, where do
• 7:39
  Speaker 4: I allocate because you have such a systematic bias towards
• 7:44
  Speaker 4: towards price returns, momentum size and exposure. Right, So the
• 7:49
  Speaker 4: momentum factor creates a bit of a decision for investors.
• 7:52
  Speaker 4: Is it going to revert or do I want to
• 7:54
  Speaker 4: continue to maintain the trend? And we're seeing people really
• 7:57
  Speaker 4: use this as an allocation right to hedge some of
• 7:59
  Speaker 4: those those decisions.
• 8:01
  Speaker 3: So why does this base get talked about less now
• 8:04
  Speaker 3: than say, ten years ago, when it was like it
• 8:07
  Speaker 3: was a little spicier, I think. But yet, you know,
• 8:09
  Speaker 3: active is sort of having a moment, So why isn't
• 8:11
  Speaker 3: smart beta a little bit more part of the conversation.
• 8:14
  Speaker 4: Yeah, I've lived through quite a bit of it, and
• 8:16
  Speaker 4: you have written about it, you know, the active passive debate. Right,
• 8:20
  Speaker 4: Smart beta was trying not to be just cheap and
• 8:24
  Speaker 4: market exposure.
• 8:25
  Speaker 3: Right.
• 8:25
  Speaker 4: It was smarter, it was differentiated, and in every way
• 8:28
  Speaker 4: it was active. We talk about our SMP equal weight
• 8:31
  Speaker 4: fund RSP. It is one of the highest active shares
• 8:36
  Speaker 4: that you can get compared to the S and P
• 8:37
  Speaker 4: five hundred. Right, active means trying to be different than
• 8:40
  Speaker 4: the index so that you generate differentiated returns. So there
• 8:44
  Speaker 4: was it was kind of caught up in this What
• 8:46
  Speaker 4: are ETF's passive active? And now active is having its
• 8:50
  Speaker 4: new moment in its term. But the definition of active
• 8:54
  Speaker 4: is really evolving. Right, It's not just stockpicking anymore. It's
• 8:57
  Speaker 4: outcome based, it's active allocation, it's smart beta, it's factors,
• 9:02
  Speaker 4: and it's investors saying I want active, I value the
• 9:08
  Speaker 4: opportunities and active. But there are so many different ways
• 9:12
  Speaker 4: by which I can outperform, be it manager or very
• 9:15
  Speaker 4: pinpointed exposure that I can get through fixed income, equity
• 9:19
  Speaker 4: and even asset classes. Right, themes and the.
• 9:22
  Speaker 2: Like I would say RSP, they're equal weighted. One is
• 9:25
  Speaker 2: the one I get asked a lot about, especially the
• 9:26
  Speaker 2: Money Show. You know, I go to the Money show.
• 9:28
  Speaker 2: That's like direct retail investors. They always ask me that
• 9:30
  Speaker 2: equal weighting. People are fascinated about equal waiting. It almost
• 9:32
  Speaker 2: seems like more fair, Like, yeah, I would like some
• 9:35
  Speaker 2: of the stocks that are a little less loved. But
• 9:37
  Speaker 2: it doesn't always work. But clearly as someone who has
• 9:41
  Speaker 2: a product, if you do want that, like I want
• 9:44
  Speaker 2: the market, but with a little less mag seven, this
• 9:46
  Speaker 2: one seems to be the first thing people reach for
• 9:50
  Speaker 2: when they want that, versus say going full value or
• 9:53
  Speaker 2: some of these new products which are like hey, let
• 9:55
  Speaker 2: me give you the SMP minus the top one hundred.
• 9:57
  Speaker 2: They're getting really very specific. But I think equal wait
• 10:01
  Speaker 2: it sort of like covers that feeling of like yeah,
• 10:04
  Speaker 2: I want the market, but not with the mag seven,
• 10:06
  Speaker 2: Like dominating seventy five billion dollars is the equal weight.
• 10:10
  Speaker 2: But can I ask you a story about this Goldman
• 10:13
  Speaker 2: filed for an equal waiting wait at ETF back like
• 10:15
  Speaker 2: ten years ago, and this one was forty forty BIPs,
• 10:20
  Speaker 2: and before Goldman can even make it to market, they
• 10:23
  Speaker 2: cut to twenty and just killed Goldman right there and
• 10:27
  Speaker 2: ended up just taking all the money. And that said,
• 10:31
  Speaker 2: that's why I called the Tarrodome roll. They looked at
• 10:34
  Speaker 2: the Goldman come in, there's like, okay, we have to
• 10:36
  Speaker 2: sever our own arm to survive, right, this is like castaway. Okay,
• 10:41
  Speaker 2: they did it, and they they more than made up
• 10:44
  Speaker 2: for it. In dollars since then. But I don't know
• 10:46
  Speaker 2: if you were part of that decision, But can you
• 10:48
  Speaker 2: go through that mentality, because if you're from the mutual
• 10:50
  Speaker 2: fun world, that's never even nothing even close to that exists.
• 10:54
  Speaker 2: If anything, you just start charging more.
• 10:56
  Speaker 3: Brian, did you look at your arm and say I
• 10:57
  Speaker 3: don't need that anymore?
• 10:58
  Speaker 4: Welling on how much we broadcast on this one for
• 11:02
  Speaker 4: the show it actually happened, I'll give you something of
• 11:05
  Speaker 4: a nugget. You know, the price cut was actually just
• 11:08
  Speaker 4: prior to the acquisition of Investco to Gougenheims, so certainly
• 11:13
  Speaker 4: the numbers were were recognized in the final deal terms.
• 11:17
  Speaker 4: So for us, you know, competitive pricing gave us an opportunity.
• 11:20
  Speaker 4: But equal weight maybe i'll pivot to some comments on that,
• 11:25
  Speaker 4: So equal weight for us, right, it's it's understandable. It's
• 11:29
  Speaker 4: S and P five hundred equal weight. It's predictable. Investors
• 11:32
  Speaker 4: know that when you know the mag seven is not performing,
• 11:36
  Speaker 4: being underweight, those names are going to likely generate outperformance.
• 11:41
  Speaker 4: So one of the downfalls or challenges that Active has
• 11:45
  Speaker 4: is unpredictability. Investors don't want to be surprised by Active.
• 11:48
  Speaker 4: They don't want to get a different return than what
• 11:51
  Speaker 4: they expected. So last year, if you look at our flows,
• 11:54
  Speaker 4: we had this diconomy of QQQ, which is concentrated large
• 11:58
  Speaker 4: names being one of our leaders, but RSP also being
• 12:02
  Speaker 4: one of the leaders in terms of flows. And that
• 12:04
  Speaker 4: just told us that investors are trying to understand where
• 12:07
  Speaker 4: the market's gonna pivot, and if it goes one way
• 12:09
  Speaker 4: continues to run, QQQ will outperform, and if it goes
• 12:13
  Speaker 4: another way, you know, and reverts, then something like RSP
• 12:17
  Speaker 4: will have different bets. So that's the understanding and that
• 12:19
  Speaker 4: the market is getting more sophisticated, that they want some
• 12:22
  Speaker 4: predictability and where they allocate.
• 12:25
  Speaker 3: Do you think the Terroodome has gotten more intimidating?
• 12:29
  Speaker 4: The tarodome is pretty full with is it roller skaters
• 12:32
  Speaker 4: or is that a different no.
• 12:33
  Speaker 2: By the way, the metaphor people do throw in thunder Thunderdome.
• 12:37
  Speaker 2: Now that's Mad Max Beyond Thunderdome. That was the third
• 12:40
  Speaker 2: Mad Max movie, I believe where Tina turned to this
• 12:42
  Speaker 2: theme song, whatever we don't need another hero, that's Thunderdome.
• 12:45
  Speaker 2: It works. Terrordome is based on a Public Enemy song
• 12:48
  Speaker 2: called Welcome to the Tterodome a whole album. In fact,
• 12:51
  Speaker 2: listen to it. In my opinion, that sound and the
• 12:55
  Speaker 2: lyrics are what it would feel like if you launched
• 12:57
  Speaker 2: an ETF.
• 12:59
  Speaker 4: So I have my playlist on the way out, you
• 13:02
  Speaker 4: got to add that one. Yes, for sure, that's big
• 13:04
  Speaker 4: public enement.
• 13:05
  Speaker 2: They should play when you walk into the office at
• 13:07
  Speaker 2: every issue where it's like the frame of mind you
• 13:08
  Speaker 2: got to get into, you know, it's total survival.
• 13:11
  Speaker 3: Space, like today was a good day. It's like it's
• 13:13
  Speaker 3: stereo dumb okay.
• 13:14
  Speaker 4: But competition is certainly increasing right that active passive mutual
• 13:19
  Speaker 4: fund ETF. I will say ETFs are clearly becoming or
• 13:24
  Speaker 4: have become, the rapper of choice, and the competition is
• 13:28
  Speaker 4: trying to understand how how can they compete in that game,
• 13:31
  Speaker 4: and it makes it very difficult for new entrants, makes
• 13:34
  Speaker 4: it difficult for you know, legacy large providers trying to
• 13:38
  Speaker 4: pivot not only the rapper but their active content. And
• 13:41
  Speaker 4: there's a whole ecosystem from capital markets to product innovation
• 13:46
  Speaker 4: through index provider relationships and the like that really make
• 13:49
  Speaker 4: a strong ETF what it is. And that's that's through
• 13:52
  Speaker 4: that that knowledge of investors and opportunities that you can
• 13:55
  Speaker 4: create that outcome.
• 14:04
  Speaker 2: The big three in ETFs, which would be Vanguard, Black Rockets,
• 14:07
  Speaker 2: the Street, their market sharees are roading because there's so
• 14:10
  Speaker 2: many competitors. I think sixty new issuers this year, three
• 14:13
  Speaker 2: hundred total, six hundred brands. There's just too many people
• 14:16
  Speaker 2: nibbling at their market share for them to grow it. However,
• 14:19
  Speaker 2: in the mutual fund space, they're big three growing market
• 14:22
  Speaker 2: share by a lot because there's just no energy, there's
• 14:26
  Speaker 2: no hungry newcomers, and I think that's what makes the
• 14:29
  Speaker 2: ETF industry so dynamic and endlessly interesting for us obviously.
• 14:33
  Speaker 2: But one thing on this there's been a couple i'll
• 14:36
  Speaker 2: call them like chirping. Every year or so, somebody writes
• 14:39
  Speaker 2: something about how ETFs are ruining the market. Lately it
• 14:42
  Speaker 2: was how they're ruining capitalism, And I just want to say, like,
• 14:46
  Speaker 2: I find that ETFs are probably a shining example of
• 14:49
  Speaker 2: capitalism because it's so brutal, it's very competitive. In the end,
• 14:55
  Speaker 2: the customers are choosing, it's natural, there's no kickbacks, the
• 14:59
  Speaker 2: best products win. And would you argue that or is
• 15:03
  Speaker 2: there something we're missing about how there is potentially a
• 15:07
  Speaker 2: problem in terms of ETFs. I know part of that
• 15:10
  Speaker 2: argument isn't the industry itself, although it's about the number
• 15:13
  Speaker 2: of ETFs, although there's way more mutual funds still, but
• 15:15
  Speaker 2: it's also about fundamentals, and like, oh, if all this
• 15:18
  Speaker 2: money is going into passive fundamentals, don't matter anymore. I
• 15:22
  Speaker 2: don't know you have anything about all that, because they
• 15:24
  Speaker 2: once a year this stuff comes up. I call it
• 15:26
  Speaker 2: the some worry articles, and a few of them just
• 15:28
  Speaker 2: came up over the past week.
• 15:30
  Speaker 4: Sure, yeah, so I would agree there are pockets of
• 15:35
  Speaker 4: opportunity when you look at the ETF ecosystem. Right, So
• 15:38
  Speaker 4: capitalism as a whole, if there's an opportunity for gain,
• 15:42
  Speaker 4: if you can set up a system to generate profits
• 15:45
  Speaker 4: that will create that outcome for you. There's no excess
• 15:50
  Speaker 4: limits or there's no limitless there's no limitless capital in
• 15:56
  Speaker 4: the market. So I think what you've seen is a
• 15:59
  Speaker 4: bit of a shift of where some of that liquidity
• 16:02
  Speaker 4: has come from, and it's driving towards the ETF. The
• 16:05
  Speaker 4: ETF creates more liquidity. You've seen it in digital coin, right,
• 16:11
  Speaker 4: very simple wrapper, but it's creating liquidity, it's creating a
• 16:14
  Speaker 4: different way to access and otherwise liquid market. You see
• 16:18
  Speaker 4: it in options. The outcome of all of these buffer
• 16:22
  Speaker 4: and option income income advantage strategies are creating more liquid
• 16:27
  Speaker 4: liquidity in the underlying and fixed income.
• 16:29
  Speaker 3: Right.
• 16:29
  Speaker 4: Fixed income used to be a trade by appointment type
• 16:32
  Speaker 4: of market, and ETFs have created better liquidity in the underlying.
• 16:38
  Speaker 4: So it's not a guarantee, but I think through that
• 16:40
  Speaker 4: ecosystem of trading of market making, you're getting better pricing
• 16:46
  Speaker 4: and better liquidity within the rapper and within the markets.
• 16:50
  Speaker 3: Is there a version of the world that becomes too liquid?
• 16:53
  Speaker 3: That was some of the worry.
• 16:56
  Speaker 4: Sure, and I think there's you know, there's value in
• 16:59
  Speaker 4: private markets, private credits that you know, create solid you know,
• 17:04
  Speaker 4: access to issuers, differentiated return streams that that the market
• 17:10
  Speaker 4: is looking for. Will ETFs become the save all for
• 17:14
  Speaker 4: for private markets private equity? Not sure. I struggle with
• 17:18
  Speaker 4: the point we touched on of liquidity and transparency is
• 17:21
  Speaker 4: what an ETF thrives on. And I think you're trying
• 17:24
  Speaker 4: to create something different with private markets. So having that difference,
• 17:29
  Speaker 4: I think is important because you're going to get different
• 17:32
  Speaker 4: return profiles from those.
• 17:33
  Speaker 2: Two You mentioned digital coins, you have a bitcoin etf
• 17:36
  Speaker 2: BTCo I believe is the ticker. You were one of
• 17:39
  Speaker 2: the original ten who launched two years ago. Huge deal.
• 17:43
  Speaker 2: They got to one fifty billion in assets total. Since
• 17:46
  Speaker 2: this sell off, this has been the worst. There's been
• 17:48
  Speaker 2: a couple pullbacks, but this is the worst one. I
• 17:50
  Speaker 2: think at the peak it was forty percent down from
• 17:53
  Speaker 2: the peak. I mean, I think it's now it's thirty,
• 17:55
  Speaker 2: but it was pretty bad. Now only four percent of
• 18:00
  Speaker 2: the assets left. The flows are pretty solid. As the
• 18:03
  Speaker 2: crypto Twitter crowd calls anybody investigating to have as a boomer.
• 18:06
  Speaker 2: Apparently the boomers have stronger hands, I think than people thought.
• 18:10
  Speaker 2: But I want to talk about from your perspective, this
• 18:13
  Speaker 2: is a different asset class, it's new, it's we call
• 18:16
  Speaker 2: it hot sauce. How are these investors that you have
• 18:21
  Speaker 2: thinking about it? Are they talking about it? Have they
• 18:24
  Speaker 2: committed to like a four or five year holding period
• 18:26
  Speaker 2: and they don't care? What's going through their minds? And
• 18:29
  Speaker 2: what do you make behind them holding up stronger than
• 18:32
  Speaker 2: most people thought?
• 18:33
  Speaker 3: Sure?
• 18:34
  Speaker 4: Yeah, I think I touched on the evolution and how
• 18:37
  Speaker 4: ETFs can help create accessibility to new asset classes like
• 18:42
  Speaker 4: digital and others. For us, this is a long game.
• 18:46
  Speaker 4: This is how do I access it, how do I
• 18:49
  Speaker 4: model it, how do I own it in a portfolio?
• 18:52
  Speaker 4: And we're seeing that with clients too, from wealth channels
• 18:54
  Speaker 4: among advisors, right there's limitations on how are where they
• 18:58
  Speaker 4: can allocate, So I think the due diligence process has
• 19:01
  Speaker 4: taken some time to get that into a variety of
• 19:04
  Speaker 4: outlets for investors. So definitely a long game. I think
• 19:08
  Speaker 4: you're seeing some short term technicals which shows you that
• 19:11
  Speaker 4: it's it's behaving like an asset. There are investors that
• 19:14
  Speaker 4: might have gotten in late and are now sitting on
• 19:16
  Speaker 4: losses that they don't have elsewhere, whether it's equities or
• 19:20
  Speaker 4: other asset classes. So you have some short term selloffs
• 19:23
  Speaker 4: maybe tax loss that that investors are taking. But I
• 19:27
  Speaker 4: think having kind of this this evolution into what we
• 19:30
  Speaker 4: would all know in terms of kind of technical technical markets,
• 19:35
  Speaker 4: you're starting to see that within the asset class.
• 19:39
  Speaker 3: What do you think their appetite for a risk asset
• 19:43
  Speaker 3: like this is, because you know, down down thirty percent,
• 19:48
  Speaker 3: like it's asking a lot of a boomer specifically to
• 19:53
  Speaker 3: hang in there, right, Like how how you know, like,
• 19:56
  Speaker 3: what's what's the appetite the real appetite to take a
• 19:59
  Speaker 3: loss or write it.
• 20:02
  Speaker 4: Yeah, the key is education, Right, how much did you
• 20:05
  Speaker 4: allocate and why was it cocktail party discussion or was
• 20:09
  Speaker 4: it true fundamental asset allocation that you said, Look, this
• 20:12
  Speaker 4: is new, it's volatile, I should own it and a
• 20:15
  Speaker 4: certain percentage you know that is either market cap weighted
• 20:18
  Speaker 4: benchmark weighted. But if you're over allocated and you see
• 20:22
  Speaker 4: this volatility, people should understand what those risks are going
• 20:26
  Speaker 4: to lead to. Right.
• 20:27
  Speaker 2: We looked I just finished a book project on this.
• 20:30
  Speaker 2: We looked into this. If you held bitcoin for four
• 20:33
  Speaker 2: years at any time of its life, you made money
• 20:37
  Speaker 2: if you had a four year holding period, But once
• 20:39
  Speaker 2: you get below four years, it's up in the air.
• 20:41
  Speaker 2: You might have made a lot of money or lost
• 20:42
  Speaker 2: a lot of money. So it seems like a four
• 20:45
  Speaker 2: year holding period would be like, if you can't commit
• 20:48
  Speaker 2: to four years, don't buy it. That would be my advice.
• 20:51
  Speaker 2: The other thing is we have this thing called the
• 20:53
  Speaker 2: modern portfolio where we have found that a lot of
• 20:55
  Speaker 2: portfolios have gone to the core is you know, low
• 20:59
  Speaker 2: cost probably cheap beta or cheap smart beta, or even
• 21:02
  Speaker 2: cheap active. But it's like that's the vanilla stocks and
• 21:04
  Speaker 2: bonds usually now that's below twenty BIPs. But then that's boring, right,
• 21:09
  Speaker 2: you gotta wait thirty years for compounding, So people want
• 21:12
  Speaker 2: some fun in speculation, So we call it the hot
• 21:14
  Speaker 2: sauce bucket. It seems like if you put some of
• 21:16
  Speaker 2: this in your hot sauce bucket at two three percent,
• 21:19
  Speaker 2: then if it goes down, it's not the end of
• 21:21
  Speaker 2: the world because it's not really your nest egg, and
• 21:23
  Speaker 2: so there might be more intestinal fortitude you can get
• 21:27
  Speaker 2: because it's only a little tiny part and it's not
• 21:31
  Speaker 2: your nest egg. That's my thesis on how like this
• 21:35
  Speaker 2: ETF thing has lowered fees and made it very easy
• 21:39
  Speaker 2: and education is there that it's like, oh, I can
• 21:41
  Speaker 2: marry this low cost ETF like pebus, which is like
• 21:44
  Speaker 2: cheap beta, and I can just like wait thirty years
• 21:46
  Speaker 2: while it like compounds, and then I can do this
• 21:49
  Speaker 2: other stuff. And like the fact is like people can
• 21:52
  Speaker 2: get real committed to a portfolio now versus back in
• 21:56
  Speaker 2: the eighties when you had a five star manager. They
• 21:58
  Speaker 2: charged the lot, then they underperform it, like you had
• 22:00
  Speaker 2: to dump them and you just dump them at the bottom.
• 22:02
  Speaker 2: Then you've got the next one after they had already
• 22:04
  Speaker 2: had their good run. So people were constantly buying high
• 22:06
  Speaker 2: and selling low. I feel as though ETFs and low
• 22:10
  Speaker 2: cost investing in particular have in a way solved behavior
• 22:13
  Speaker 2: and allowed not only for holding long term vanilla, but
• 22:17
  Speaker 2: even having more stomach for the hot sauce because it's
• 22:20
  Speaker 2: only a tiny part of the whole meal. Does that
• 22:24
  Speaker 2: make sense? Am I onto something there? Or just am
• 22:26
  Speaker 2: I losing it? No?
• 22:27
  Speaker 4: I'm I'm right with you. I think I would shake
• 22:30
  Speaker 4: that into kind of this this evolution of creating active
• 22:34
  Speaker 4: or putting active decisions further down the advice chain. Right,
• 22:39
  Speaker 4: it's not just the manager, it's the advisor, it's the investor,
• 22:43
  Speaker 4: and the ETF is creating more liquid, more accessible tools
• 22:47
  Speaker 4: for you to express those active bets, whether it's new
• 22:50
  Speaker 4: emerging asset classes or even fixed income. Right, fixed income,
• 22:55
  Speaker 4: you have pretty good success on the active side of
• 22:57
  Speaker 4: active managers, somewhere above fifty percent on a near term basis.
• 23:03
  Speaker 4: But investors now have the ability to overweight or underweight duration.
• 23:07
  Speaker 4: They could overweight or underweight credit. They can take a
• 23:10
  Speaker 4: core like an ad aggregate, you know type strategy, and
• 23:14
  Speaker 4: they can play around the edges, and that's what the
• 23:16
  Speaker 4: ETF does, and through the underlying gives you better execution,
• 23:20
  Speaker 4: better liquidity, better pricing to sourcing those those exposures.
• 23:25
  Speaker 3: But how do you feel about Eric's hot sauce metaphor.
• 23:28
  Speaker 4: I've always loved the hot sauce and we always want
• 23:30
  Speaker 4: to get more more tickers in the hot sauce category.
• 23:33
  Speaker 2: That's why I roll with it. I've gotten pretty good
• 23:35
  Speaker 2: feedback on it. Like I also think you can't mess
• 23:39
  Speaker 2: with it. Like everybody knows what hot sauce is. Everybody
• 23:42
  Speaker 2: knows using small doses. Not everybody loves it. It just
• 23:45
  Speaker 2: like it's really it's a it's solid ol.
• 23:49
  Speaker 3: Sorry, as you just said, though I love more tickers
• 23:52
  Speaker 3: in the hot sauce category. Is that where the white
• 23:54
  Speaker 3: space is? And how do you distinguish yourself in that
• 23:57
  Speaker 3: hot sauce category?
• 23:58
  Speaker 4: Sure, I let er stick with the hot sauce, but
• 24:01
  Speaker 4: for us, it's emerging trends, right, so.
• 24:03
  Speaker 2: They have hot sauce.
• 24:04
  Speaker 4: We level on a minute.
• 24:06
  Speaker 2: Ten is hot sauce. I'm sorry, it's like twenty solar stocks.
• 24:08
  Speaker 2: I'm sorry, that's gonna be like two three XCSMP. Thematic
• 24:12
  Speaker 2: is hot sauce. It's mild hot sauce. It's not like
• 24:15
  Speaker 2: ghost pepper, but it's still hot sauce.
• 24:18
  Speaker 4: So totally agree. Hot sauce had been thematic right first
• 24:22
  Speaker 4: to market new ideas AI for us, you know, blockchain technology.
• 24:28
  Speaker 4: Even banks recently have been called it hot sauce or
• 24:32
  Speaker 4: emerging trends. And we've seen that again investors not looking
• 24:36
  Speaker 4: at thematic to get in and run returns, but starting
• 24:39
  Speaker 4: to allocate and using thematic as ways to differentiate their portfolios,
• 24:45
  Speaker 4: ways to generate active returns because you've got some of
• 24:48
  Speaker 4: that differentiated profile. So thematic, which used to be hey,
• 24:52
  Speaker 4: let's be first to market, let's raise the biggest etf
• 24:56
  Speaker 4: has started to compete to again a more mature market
• 24:59
  Speaker 4: where investors are using it for for hot sauce eric
• 25:03
  Speaker 4: or for for outsized returns.
• 25:05
  Speaker 2: By the way, can I fun fact here? I believe
• 25:08
  Speaker 2: power shares started the first thematic etf ever. Can you
• 25:11
  Speaker 2: name it? Can you name it? You might not know.
• 25:16
  Speaker 2: This is going way back before you investment even acquired them.
• 25:19
  Speaker 4: If I grab a drink of water, would I be around?
• 25:21
  Speaker 3: Yes? Wow? Water.
• 25:24
  Speaker 2: It came out in like two thousand and five or so,
• 25:26
  Speaker 2: get this, it's p h O. But they should have
• 25:30
  Speaker 2: the Vietnam ETF should trade you. You should be just
• 25:34
  Speaker 2: h O or something and give foe to them. Anyway,
• 25:37
  Speaker 2: that's just something that I always though.
• 25:39
  Speaker 4: We evolved to numbers H two oh at some point, yeah,
• 25:42
  Speaker 4: that's it.
• 25:42
  Speaker 2: That would be perfect. But the water ETF, get this
• 25:45
  Speaker 2: has two billion dollars. You know why because at some point, Joel,
• 25:50
  Speaker 2: water is going to be a big deal. Hopefully it's
• 25:53
  Speaker 2: after we're gone. They're going to be fighting wars over water.
• 25:55
  Speaker 2: This thing could go to the moon. But it's just
• 25:57
  Speaker 2: that when.
• 25:58
  Speaker 3: It's like the graduate, I've got one more for you,
• 26:00
  Speaker 3: only it's not plastic.
• 26:01
  Speaker 2: It's it's water. Well that's what they call it. Blue gold. Yeah,
• 26:05
  Speaker 2: I've I did a lot of research on water. I thought,
• 26:07
  Speaker 2: oh my god, this is the big thing. I wrote
• 26:09
  Speaker 2: all these articles and it's like you could get that.
• 26:11
  Speaker 2: This is one of those calls you can get right,
• 26:13
  Speaker 2: but be like fifty years early. Remember you know the
• 26:16
  Speaker 2: movie water World. That's what that was kind of all about. Anyway,
• 26:19
  Speaker 2: we could have water could be the best performing ETF
• 26:22
  Speaker 2: in history at some point in the future. We just
• 26:25
  Speaker 2: don't know when I.
• 26:27
  Speaker 3: Could say that about a few other things, probably, but
• 26:29
  Speaker 3: I like it. I like your enthusiasm. Yeah, okay. So
• 26:40
  Speaker 3: one thing that we've touched on but we haven't actually
• 26:42
  Speaker 3: really spent some time talking about it yet. It is
• 26:46
  Speaker 3: an ETF that probably needs no introduction, but the cues
• 26:50
  Speaker 3: Eric calls it the eighth wonder of the world. Yes,
• 26:53
  Speaker 3: it has it gone up at all? Can it be
• 26:55
  Speaker 3: like seven through six? Yeh? Or does it have to
• 26:57
  Speaker 3: be eight? Still?
• 26:57
  Speaker 2: Well there's seven one? Yeah? You yeah, come on, you
• 27:00
  Speaker 2: definitely know that. Okay. The reason we call it that
• 27:04
  Speaker 2: is also because it's like an unusual specimen like the
• 27:07
  Speaker 2: you know, typically you have an index since market cap waited,
• 27:10
  Speaker 2: and it's like, okay, that's beta. Beta does really well.
• 27:13
  Speaker 2: Then you have like the tech sector. Okay, great, tech
• 27:16
  Speaker 2: is good. Ques is neither one of those. It just
• 27:18
  Speaker 2: stocks the list on NASDAK. So it's like, what's so
• 27:21
  Speaker 2: great about that? Well? I thought I pondered this more
• 27:26
  Speaker 2: than most, like more than an rural person should. My
• 27:29
  Speaker 2: thesis on the why que job? Actually yeah, it is
• 27:31
  Speaker 2: my job, but this is I went real deep my
• 27:36
  Speaker 2: thesis on why the ques kick so much butt and
• 27:39
  Speaker 2: it's not tech and it's not beta and it's just
• 27:41
  Speaker 2: these stocks that listens on NASAK. Is the Steve Jobs effect.
• 27:45
  Speaker 2: When Steve Jobs in nineteen eighty called you guys, I
• 27:48
  Speaker 2: asked your PR person, Stephanie, if I could even find
• 27:51
  Speaker 2: the person who took this call, but they said they're
• 27:54
  Speaker 2: probably retired at this point, like or even worse. But
• 27:57
  Speaker 2: in nineteen eighty somebody took a call from Steve Jobs.
• 28:00
  Speaker 2: He said, I want to listen to NASDAK and they
• 28:03
  Speaker 2: were like, sure and appen. Nobody who appened. Steve Jabs
• 28:05
  Speaker 2: is twenty seven years old and he wanted to list
• 28:07
  Speaker 2: there because all the dorks from IBM were unicy, so
• 28:10
  Speaker 2: he wanted to go to NASDAC, just like Michael Jordan
• 28:13
  Speaker 2: went to Nike instead of Converse and Adidas. This was
• 28:16
  Speaker 2: the Jordan Nike moment of this market. Once Steve Jobs
• 28:21
  Speaker 2: went there, people were like, ooh, that must be the
• 28:23
  Speaker 2: place to be. So of course Bill Gates, who worshiped
• 28:26
  Speaker 2: Steve Jobs, he went there when Microsoft went public in
• 28:29
  Speaker 2: ninety three. Then he got those two guys there. It's
• 28:32
  Speaker 2: over since then, especially when Steve Jobs came back for
• 28:34
  Speaker 2: his third act, that has been the place to be.
• 28:37
  Speaker 2: Amazon Tesla. If you are a visionary founder, CEO who
• 28:42
  Speaker 2: works seven days a week, that's where you go. Steve
• 28:45
  Speaker 2: Jobs set that he was the mold of this tech
• 28:49
  Speaker 2: revolution and to me, that's why the cues kicked so much.
• 28:52
  Speaker 2: But it's the Steve Jobs follow effect thoughts.
• 28:59
  Speaker 4: Fully green the NASZAQ one hundred, as we've talked about
• 29:02
  Speaker 4: smart Beta, it is an index, but for us, we
• 29:05
  Speaker 4: track it based on innovation and innovation as a factor
• 29:09
  Speaker 4: that we track is on R and D research and development.
• 29:12
  Speaker 4: And if you looked at those hundred names, each of
• 29:15
  Speaker 4: those companies commit more to research and development than any
• 29:18
  Speaker 4: other peer group. So it's founded in innovation, it's founded
• 29:21
  Speaker 4: in differentiation, and I think going back to original days
• 29:25
  Speaker 4: of Apple to Microsoft to what we see today, it's
• 29:28
  Speaker 4: truly evolved with the modernizing economy, right, so going from
• 29:32
  Speaker 4: PCs to servers, to telecom bandwidth to having a PC
• 29:39
  Speaker 4: in your hand that's mobile and getting into AI that
• 29:42
  Speaker 4: you speak to on your phone for twenty five years,
• 29:45
  Speaker 4: it's evolved with not only personal consumption, but the evolution
• 29:49
  Speaker 4: of our modern economy, and the leaders that are driving
• 29:53
  Speaker 4: that tend to be listed on nasdek.
• 29:56
  Speaker 2: Can you pull some strings and get us this person
• 29:58
  Speaker 2: who took the call in nineteen. If we can get them,
• 30:02
  Speaker 2: Joel said, he will do a whole podcast Ken Burns
• 30:05
  Speaker 2: type documentary on this. But we need that person. Can
• 30:08
  Speaker 2: you pull some strings for me, some digging? Yeah, I
• 30:10
  Speaker 2: mean yeah, or reach out? If you're like, did they
• 30:13
  Speaker 2: know the importance of that call?
• 30:15
  Speaker 3: No, I'm guessing not. You know, like I think it's
• 30:18
  Speaker 3: just another phone call where you're like, yeah, sure, whatever,
• 30:20
  Speaker 3: and then everything else that follows you're like, oh, I
• 30:22
  Speaker 3: love you that stuff. Though, we'd love to find and
• 30:25
  Speaker 3: interview that person. As long as we're talking about QUES,
• 30:28
  Speaker 3: probably can't talk about that without talking about the Unit
• 30:31
  Speaker 3: Investment Trust, the u I T, which is basically the
• 30:34
  Speaker 3: framework that QQQ is built on, and not that many
• 30:38
  Speaker 3: others like one. That's right, Uh, if you could have
• 30:42
  Speaker 3: a redo, is there anything more in your life that
• 30:44
  Speaker 3: you would rather have a redo on than Q being
• 30:46
  Speaker 3: a u I T.
• 30:47
  Speaker 4: Sure? Well, of course you want the ETF market to
• 30:50
  Speaker 4: be started, right, So thank you for the pioneers in
• 30:52
  Speaker 4: that regard. But like many things, markets evolve, structures evolve,
• 30:57
  Speaker 4: regulations evolve, and we've seen that through route the last
• 31:01
  Speaker 4: twenty five years in the ETF market to get to
• 31:03
  Speaker 4: some level of standards standardization. There was a time at
• 31:06
  Speaker 4: which some had exemptive relief and some didn't. So early
• 31:09
  Speaker 4: entrants that had that relief were able to launch ETFs,
• 31:13
  Speaker 4: others were not. So evolution is is great, and you
• 31:17
  Speaker 4: know that's that's an opportunity for some of these unit
• 31:20
  Speaker 4: investment trusts to modernize their structure and and and you know,
• 31:25
  Speaker 4: bring bring the structure and the ETF ecosysm ecosystem into
• 31:30
  Speaker 4: that investor base.
• 31:32
  Speaker 2: So our outlook, which we published this month, basically is
• 31:36
  Speaker 2: ETFs are living the dream, but reality checks await. So
• 31:41
  Speaker 2: we don't think this big movement is going to be
• 31:44
  Speaker 2: dampered much. Market going down a little, maybe it's like
• 31:47
  Speaker 2: a little less record breaking. But there's a couple of
• 31:51
  Speaker 2: things out there, like, for example, some stocks are real
• 31:55
  Speaker 2: volatile and they get two XD and one of those
• 31:57
  Speaker 2: probably will blow up. There could be something there the
• 32:00
  Speaker 2: mutual fund share classes that are adding ETF share classes.
• 32:03
  Speaker 2: There could be some tax contagion there where the ETF
• 32:06
  Speaker 2: gets capital gains because of the mutual fund. There's a
• 32:09
  Speaker 2: couple of things that I think are maybe possible stories
• 32:12
  Speaker 2: Also just the paradox of choice, so many products that
• 32:17
  Speaker 2: it's just hard to pick.
• 32:18
  Speaker 3: I call it the breadee, the bread ale. What what
• 32:20
  Speaker 3: am I going to do? Which which type of bread
• 32:22
  Speaker 3: is am I going to use?
• 32:23
  Speaker 2: So those are some of the things we're looking at
• 32:26
  Speaker 2: as like what could be some hiccups. We don't see
• 32:28
  Speaker 2: anything derailing it. But what do you make of that?
• 32:31
  Speaker 2: Like what keeps you up at night? What are you
• 32:32
  Speaker 2: looking at, whether it's your own firm or the industry
• 32:34
  Speaker 2: as a whole.
• 32:35
  Speaker 4: Sure, I think ETF share class is a is a
• 32:37
  Speaker 4: great opportunity to uh to integrate, you know, structures and
• 32:42
  Speaker 4: bring some of the advantages that ETFs offer into mutual funds.
• 32:46
  Speaker 4: But I've I've been out there saying that there's pure
• 32:49
  Speaker 4: and less pure. Right, So an ETF that only has
• 32:51
  Speaker 4: its own not share class, but trades as an ETF
• 32:55
  Speaker 4: will take advantages of all the tax ability, all the liquidity,
• 33:00
  Speaker 4: the track record and the like. Pivoting into the share
• 33:03
  Speaker 4: class is complex, and that's why you've seen some of
• 33:06
  Speaker 4: the reviews. The industry come together to identify what the
• 33:11
  Speaker 4: solution is and what would look like a preferred outcome
• 33:15
  Speaker 4: for investors. And there's still quite a bit of uncertainty
• 33:19
  Speaker 4: there from not only wealth channels, but issuers as well.
• 33:23
  Speaker 4: Because you have to be transparent. Some managers don't want
• 33:25
  Speaker 4: to be transparent. We've seen that. We've tried that, and
• 33:28
  Speaker 4: non transparent the market didn't really respond to it. You
• 33:32
  Speaker 4: have to have the right pricing. You don't have to
• 33:34
  Speaker 4: be the lowest cost, but there could be price impacts,
• 33:37
  Speaker 4: so you need to look at economics and the impact
• 33:40
  Speaker 4: of that overall, and you still need to provide returns.
• 33:43
  Speaker 4: Just moving it into an ETF doesn't guarantee success, so
• 33:47
  Speaker 4: differentiated active strong managers quality investment performance is still going
• 33:52
  Speaker 4: to drive the day.
• 33:54
  Speaker 2: Yeah, you got it tough enough. I always say you
• 33:55
  Speaker 2: have to come to the ETF industry on it's terms,
• 33:58
  Speaker 2: not yours, and not everybody wants to do that. Said,
• 34:01
  Speaker 2: we could be. We did the math. There's about three
• 34:03
  Speaker 2: thousand mutual funds that currently don't have any ETF where
• 34:08
  Speaker 2: the issuer has no ETFs at all that have filed
• 34:11
  Speaker 2: for the share class. So there's potentially three thousand new
• 34:14
  Speaker 2: ETFs that could just be bolted onto a mutual fund.
• 34:16
  Speaker 2: Probably won't be that many. That's a big deal, Joel,
• 34:21
  Speaker 2: I mean it just might take a couple of years
• 34:23
  Speaker 2: to play out.
• 34:23
  Speaker 3: Though how much of twenty twenty six are we going
• 34:25
  Speaker 3: to be talking about.
• 34:26
  Speaker 2: This a lot? I think DFA is going to be
• 34:28
  Speaker 2: the guinea pig. They're really pushing it. It fits their
• 34:31
  Speaker 2: whole business and plumbing perfectly this particular thing. But if
• 34:35
  Speaker 2: they see success, look out especially you know, it's tricky.
• 34:41
  Speaker 2: There's one caveats all this. And I'm not sure if
• 34:43
  Speaker 2: you thought about this, but Capitol Group, they were on
• 34:45
  Speaker 2: ETFIQ they said, we're not doing anything. We don't believe
• 34:48
  Speaker 2: in this, and they're the biggest active manager on Earth.
• 34:51
  Speaker 2: I mean, they're the number one, So what they say matters.
• 34:55
  Speaker 2: And if they look at this and said we're just
• 34:56
  Speaker 2: going to put ETFs out there separate from the mutual fund,
• 35:00
  Speaker 2: that's also Capital Groups of why non transparent active I
• 35:02
  Speaker 2: think didn't take off because when they finally came in,
• 35:05
  Speaker 2: they went transparent, and so that's also interesting. So I
• 35:09
  Speaker 2: don't know, but all I know is if cope you
• 35:11
  Speaker 2: will find success, the rest will rush in. But that
• 35:14
  Speaker 2: the first part is we don't totally know.
• 35:16
  Speaker 3: What does success look like, Brian.
• 35:18
  Speaker 4: So I think success is bringing more quality investment capabilities
• 35:22
  Speaker 4: to investors through the optimal wrapper, and that's what we're
• 35:26
  Speaker 4: looking at. We're on a very focused pace in our
• 35:31
  Speaker 4: own path of share class, and that's looking at it
• 35:34
  Speaker 4: very opportunistically, not ETF share class for all type of approach,
• 35:38
  Speaker 4: but bringing you know, where it makes sense, where we
• 35:41
  Speaker 4: think we can have the liquidity and where the managers
• 35:43
  Speaker 4: can operate within the structure. So I think you're going
• 35:47
  Speaker 4: to see and each each manager has a different strategy, right,
• 35:50
  Speaker 4: they have a different path and they've come down a
• 35:53
  Speaker 4: different road. Some have large active and they might say, hey,
• 35:56
  Speaker 4: we're just going to cannibalize ourselves. We're going to try
• 35:58
  Speaker 4: to get pivots into to somewhat similar but differentiated strategies,
• 36:02
  Speaker 4: not cloned, and that's our best path forward to avoid
• 36:06
  Speaker 4: maybe a difficult decision. Others just want to get into
• 36:09
  Speaker 4: the ETF space, right, so they want to launch and
• 36:12
  Speaker 4: find a way to get into that market. But not
• 36:15
  Speaker 4: all will succeed because there are again i'll speak to
• 36:18
  Speaker 4: the ecosystem, they're trading implications, cost implications, liquidity implications that
• 36:24
  Speaker 4: managers need to weigh trod them.
• 36:27
  Speaker 2: And another thing is the transparency thing is a big
• 36:30
  Speaker 2: deal for some because they spend their whole life picking
• 36:33
  Speaker 2: these stocks and they feel like it's their ip. But
• 36:36
  Speaker 2: I have found that I don't think anybody cares. I mean,
• 36:40
  Speaker 2: I give ARC a lot of credit. They came out transparent.
• 36:43
  Speaker 2: She even shows you what the trades were that day.
• 36:45
  Speaker 2: I mean, it's full transparency, and I just think that's
• 36:48
  Speaker 2: sort of what people demand in their ETFs. It's sort
• 36:50
  Speaker 2: of like an attribute of an ETF. They're used to,
• 36:52
  Speaker 2: so they don't want it to be different. But some
• 36:54
  Speaker 2: managers just I think it's hard for them to get
• 36:58
  Speaker 2: over that, but I think they should. Nobody cares. Nobody
• 37:01
  Speaker 2: cares if you have Amazon at three percent and the
• 37:03
  Speaker 2: market has like the S and P's at like six percent,
• 37:05
  Speaker 2: like nobody cares. It's like they're just gonna look at
• 37:08
  Speaker 2: the returns. So I just think it doesn't matter anymore.
• 37:11
  Speaker 2: There's so many portfolios. Back in the day, it was
• 37:15
  Speaker 2: like Jeff Finnick managed the Filly Magellan and it was
• 37:17
  Speaker 2: like that was like so big and if he if
• 37:19
  Speaker 2: he showed his holdings, you could get ahead of it.
• 37:21
  Speaker 2: Like there was some legit issues. I don't really see
• 37:24
  Speaker 2: that those days are over, so I think they should
• 37:27
  Speaker 2: just come in try it. This is the technology. Everybody
• 37:31
  Speaker 2: wants to use it. It's the equivalent of Spotify. It'd
• 37:34
  Speaker 2: be like being in a band and like refusing to
• 37:36
  Speaker 2: take your music from compact disc and putting it on Spotify,
• 37:38
  Speaker 2: Like why would you do that?
• 37:40
  Speaker 3: Still some people to do it.
• 37:42
  Speaker 2: I know, well no, Like Neil Young is like, listen
• 37:44
  Speaker 2: to my music on analog. It's like, okay, fine, Harvest
• 37:47
  Speaker 2: Moon sounds two percent better on analog, but like, I'm.
• 37:50
  Speaker 3: Sorry more than two percent, but I hear you.
• 37:53
  Speaker 2: By the way, Harvest Harvest is the better album. That's
• 37:56
  Speaker 2: the one from nineteen seventy three with Old Man. That's
• 38:00
  Speaker 2: a good album and it does sound good on vinyl, all.
• 38:02
  Speaker 3: Right, Brian, Final question, favorite ticker other than any of Invesco's.
• 38:09
  Speaker 2: Wow, I take your time?
• 38:11
  Speaker 4: I need a ten second count?
• 38:13
  Speaker 2: No, where did it take your time?
• 38:16
  Speaker 3: I'll motion with my hand to just like pretend that
• 38:19
  Speaker 3: it's a shot clock. Well, you like the ref and
• 38:22
  Speaker 3: the it's like five seconds.
• 38:25
  Speaker 4: You know, I'm going to bring it back to Invesco.
• 38:27
  Speaker 4: But it's your favorite too. What so most creative ticker?
• 38:32
  Speaker 4: I can't give too much credit outside of our own
• 38:35
  Speaker 4: our own home cooking PBJ.
• 38:38
  Speaker 2: Wait a second, that's your ticker.
• 38:40
  Speaker 3: Right, oh, favorite other than yours?
• 38:42
  Speaker 4: I know I pivoted.
• 38:43
  Speaker 3: Yeah, he can't do it, so PBJ.
• 38:45
  Speaker 2: Matt Kaufman, who's from Wheaton, which is where the Power
• 38:48
  Speaker 2: Shares people grew up. He picked PBJ, which I thought
• 38:52
  Speaker 2: it was a good one.
• 38:53
  Speaker 3: But I'll give it to you if you can answer.
• 38:56
  Speaker 3: Do you prefer the crunchy or the creamy version of
• 38:58
  Speaker 3: peanut butter?
• 39:00
  Speaker 4: You always gotta go creamy. Yeah, that's how crunchy is interesting.
• 39:03
  Speaker 4: The real question is strawberry or great and then jelly
• 39:07
  Speaker 4: or jam? So many decisions. Maybe there's an analyst.
• 39:10
  Speaker 3: Yeah, PVJ.
• 39:11
  Speaker 2: Just wrap it up in it or that that stuff
• 39:14
  Speaker 2: that comes where you you suppress it and both come
• 39:16
  Speaker 2: out at the same time.
• 39:17
  Speaker 3: Its gross.
• 39:18
  Speaker 2: Not for me. I'm fine with that. Well, you have
• 39:21
  Speaker 2: another thing. When you get the jelly and the peanut butter,
• 39:24
  Speaker 2: do you use two different knives or do you like
• 39:26
  Speaker 2: how do you deal with that peanut butter?
• 39:28
  Speaker 3: First, take the peanut butter all the way off on
• 39:30
  Speaker 3: the bread, and then you do the jam.
• 39:31
  Speaker 2: You cannot possibly get all the peanut butter off without
• 39:33
  Speaker 2: breaking the bread.
• 39:34
  Speaker 3: And you can watch me, okay, give you a tutorial.
• 39:37
  Speaker 2: That's That's what that thing solves, is having to use
• 39:39
  Speaker 2: two knives. It's annoying.
• 39:40
  Speaker 3: But because I do.
• 39:42
  Speaker 2: Peanut butter and jelly like probably once a week, and
• 39:45
  Speaker 2: I watched the whole knife off and I'm like, they
• 39:49
  Speaker 2: that's where the guy who came up with that one
• 39:51
  Speaker 2: you pour both together, That's what he was.
• 39:52
  Speaker 3: There's a paper towel that you can also do. But
• 39:56
  Speaker 3: by the way, this is the cutting room floor for
• 39:58
  Speaker 3: this episode is going to be well.
• 40:00
  Speaker 2: But there is a metaphor there which sometimes ETFs make
• 40:03
  Speaker 2: something like the two x ETFs. They make something just
• 40:06
  Speaker 2: a little bit easier, and that's sort of similar, like
• 40:10
  Speaker 2: because we always tell people like why is this so popular,
• 40:12
  Speaker 2: I'm like, honestly, dude, people are lazy. If you can
• 40:14
  Speaker 2: make something just a touch easier, like, you're gonna get
• 40:17
  Speaker 2: some buyers. You know who said that? And Dorsey, right,
• 40:21
  Speaker 2: Tom Dorsey, he was like he was talking.
• 40:24
  Speaker 3: About how what are you bringing back to smart Beta?
• 40:27
  Speaker 2: Yeah, Tom Dorsey from my book, he was like, he
• 40:30
  Speaker 2: really highlighted the convenience aspect of ETFs big time. He's great,
• 40:35
  Speaker 2: He's got a hope. Following Yeah, he's part of their stable.
• 40:38
  Speaker 3: Yeah, Brian, thanks for joining us some Trucks, Thanks, Guess,
• 40:48
  Speaker 3: Thanks for listening to trucks. Until next time. You can
• 40:50
  Speaker 3: find us on the Bloomberg Terminal, Bloomberg dot com, Apple Podcasts, Spotify,
• 40:55
  Speaker 3: or wherever else do you like to listen. We'd love
• 40:57
  Speaker 3: to hear from you. Hit us up on Social. Trillions
• 41:00
  Speaker 3: is produced by Magnus Hendrickson and Ryan Kessler. Amy Keene
• 41:04
  Speaker 3: is our executive producer. Sage Bauman is the head of
• 41:07
  Speaker 3: Bloomberg Podcast. Bye b