1 00:00:03,420 --> 00:00:06,080 Sean Aylmer: Welcome to the Fear and Greed Daily Interview. I'm Sean 2 00:00:06,080 --> 00:00:11,440 Sean Aylmer: Aylmer. There's a huge amount of investor interest in cryptocurrencies. But, 3 00:00:11,440 --> 00:00:14,620 Sean Aylmer: how do you invest in the crypto space without holding the 4 00:00:14,620 --> 00:00:20,170 Sean Aylmer: currency itself? We've spoken previously to ETF (Exchange Traded Fund) manager, BetaShares. Last week, 5 00:00:20,170 --> 00:00:24,029 Sean Aylmer: they announced plans to launch a crypto- focused equities ETF. 6 00:00:24,030 --> 00:00:29,060 Sean Aylmer: The BetaShares Crypto Innovators ETF aims to give investors access 7 00:00:29,060 --> 00:00:33,710 Sean Aylmer: to the companies in technology underlying cryptocurrency assets. Alex Vynokur 8 00:00:34,100 --> 00:00:36,870 Sean Aylmer: is the CEO of BetaShares and my guest this morning. Alex, 9 00:00:36,870 --> 00:00:37,590 Sean Aylmer: welcome to Fear and Greed. 10 00:00:38,130 --> 00:00:39,470 Alex Vynokur: Great to talk to you, Sean. 11 00:00:39,810 --> 00:00:43,809 Sean Aylmer: First, a quick 101 on ETFs for anybody not familiar 12 00:00:43,810 --> 00:00:46,559 Sean Aylmer: with ETFs. Can you just take me through how an 13 00:00:46,560 --> 00:00:48,050 Sean Aylmer: exchange traded fund works? 14 00:00:48,650 --> 00:00:52,270 Alex Vynokur: Absolutely. It's still the most popular question we get asked. 15 00:00:52,270 --> 00:00:56,630 Alex Vynokur: So our business BetaShares, was formed just over a decade ago, 16 00:00:56,630 --> 00:01:02,120 Alex Vynokur: to focus on developing the ETF infrastructure and the ETF 17 00:01:02,120 --> 00:01:06,940 Alex Vynokur: ecosystem in Australia. Exchange Traded Funds are pretty simple. They 18 00:01:07,000 --> 00:01:12,300 Alex Vynokur: combine the diversification and the cost effectiveness of index funds 19 00:01:12,360 --> 00:01:18,010 Alex Vynokur: with the convenience and accessibility of share trading. So exchange 20 00:01:18,010 --> 00:01:21,520 Alex Vynokur: traded funds can be bought and sold on the ASX, 21 00:01:21,790 --> 00:01:24,959 Alex Vynokur: just like any other share, but they tend to provide 22 00:01:24,959 --> 00:01:28,160 Alex Vynokur: access to a variety of indices. If I was to 23 00:01:28,160 --> 00:01:33,949 Alex Vynokur: give some examples, NDQ is a NASDAQ 100 ETF. So when you, 24 00:01:34,030 --> 00:01:37,270 Alex Vynokur: as an Australian investor go into the ASX through one 25 00:01:37,270 --> 00:01:39,870 Alex Vynokur: of the online brokers, or if you're using a financial advisor 26 00:01:40,069 --> 00:01:43,970 Alex Vynokur: and you talk in NDQ and if you buy it, 27 00:01:44,180 --> 00:01:48,770 Alex Vynokur: you will have exposure to a hundred companies, which form 28 00:01:48,770 --> 00:01:52,340 Alex Vynokur: part of NASDAQ 100. So we're talking about Apple, Google, Amazon, 29 00:01:52,340 --> 00:01:57,510 Alex Vynokur: et cetera. So ETFs effectively give an investor very convenient 30 00:01:57,560 --> 00:02:03,060 Alex Vynokur: access to diversified portfolios at a cost- effective price point. 31 00:02:03,600 --> 00:02:05,850 Sean Aylmer: Right, now we're not a financial advice show, but what 32 00:02:05,850 --> 00:02:08,269 Sean Aylmer: I like about ETFs, is the fact that if I 33 00:02:08,270 --> 00:02:10,930 Sean Aylmer: want to buy tech stocks, I don't know which one 34 00:02:10,930 --> 00:02:13,800 Sean Aylmer: to buy. And what you've just said, then you buy 35 00:02:13,800 --> 00:02:17,100 Sean Aylmer: the NASDAQ 100. You've suddenly got a little bit of everything, 36 00:02:17,350 --> 00:02:21,269 Sean Aylmer: which unless you're a true expert, I think, diversification's the way 37 00:02:21,270 --> 00:02:21,590 Sean Aylmer: to go. 38 00:02:22,010 --> 00:02:26,419 Alex Vynokur: I absolutely love talking about diversification, Sean. The interesting thing is 39 00:02:26,419 --> 00:02:30,720 Alex Vynokur: that amongst financial professionals, if you look at the statistics 40 00:02:30,960 --> 00:02:33,740 Alex Vynokur: over one- year, three- year or five- year ten- year period, 41 00:02:34,060 --> 00:02:37,590 Alex Vynokur: active fund managers, in other words, people who specialize in 42 00:02:37,590 --> 00:02:43,360 Alex Vynokur: picking stocks. Amongst active fund managers on average, 75% tend 43 00:02:43,360 --> 00:02:47,610 Alex Vynokur: to underperform the index after fees. What it really shows 44 00:02:47,610 --> 00:02:51,350 Alex Vynokur: you is that even professionals are not able to pick 45 00:02:51,350 --> 00:02:55,660 Alex Vynokur: stocks consistently. And that theory has been proven out in practice, 46 00:02:55,660 --> 00:02:58,639 Alex Vynokur: as I was saying, over long periods of time, diversification 47 00:02:58,639 --> 00:03:01,889 Alex Vynokur: makes sense. And I think what really makes sense is 48 00:03:01,889 --> 00:03:05,010 Alex Vynokur: really focusing on the big picture. I often talk to 49 00:03:05,010 --> 00:03:09,410 Alex Vynokur: experienced investors and often talk to inexperienced, sort of younger 50 00:03:09,410 --> 00:03:13,810 Alex Vynokur: investors who are getting started. And the one thing that always rings true 51 00:03:14,060 --> 00:03:17,070 Alex Vynokur: is the fact that you've really got to focus on 52 00:03:17,070 --> 00:03:20,970 Alex Vynokur: time in the market as opposed to timing the market. 53 00:03:21,370 --> 00:03:23,829 Alex Vynokur: And timing the market is really hard. Picking stocks is 54 00:03:23,830 --> 00:03:28,280 Alex Vynokur: really hard, but getting the big picture right, absolutely makes sense. 55 00:03:28,490 --> 00:03:32,059 Alex Vynokur: And I think where the ETF industry has evolved over 56 00:03:32,130 --> 00:03:36,000 Alex Vynokur: time is that, we now have a range of what 57 00:03:36,000 --> 00:03:41,119 Alex Vynokur: I would call thematic exposures, which really resonate with clients 58 00:03:41,250 --> 00:03:44,140 Alex Vynokur: because you do not need to be an expert in 59 00:03:44,140 --> 00:03:46,690 Alex Vynokur: picking out individual stocks in that theme. So if I 60 00:03:46,690 --> 00:03:49,790 Alex Vynokur: was to use just for a second cyber security. Cyber 61 00:03:49,790 --> 00:03:53,220 Alex Vynokur: security is a phenomenal long- term megatrend. And if you 62 00:03:53,220 --> 00:03:56,650 Alex Vynokur: talk to most investors that would voluntary agree that it's 63 00:03:56,650 --> 00:04:00,480 Alex Vynokur: a great long- term space to be invested in. And 64 00:04:00,480 --> 00:04:02,380 Alex Vynokur: if you don't know which stocks to pick and very 65 00:04:02,380 --> 00:04:05,930 Alex Vynokur: few people would, and ETF can provide a very convenient 66 00:04:05,930 --> 00:04:07,790 Alex Vynokur: access for instance, to that thematic. 67 00:04:08,100 --> 00:04:12,290 Sean Aylmer: I think that's a good segue into crypto focused ETFs. 68 00:04:12,290 --> 00:04:16,510 Sean Aylmer: So the BetaShares Crypto Innovators ETF, explain it to us. What's 69 00:04:16,510 --> 00:04:19,850 Sean Aylmer: quite interesting now is, it's not about the cryptos, it's about 70 00:04:19,850 --> 00:04:21,549 Sean Aylmer: the mechanics behind the cryptos. 71 00:04:22,500 --> 00:04:26,580 Alex Vynokur: We've been spending a significant amount of time at BetaShares thinking 72 00:04:26,580 --> 00:04:29,510 Alex Vynokur: about the world of crypto. And one thing that is 73 00:04:29,510 --> 00:04:34,560 Alex Vynokur: very clear to me is that the blockchain technology and 74 00:04:34,560 --> 00:04:39,469 Alex Vynokur: the innovation that's powering the world of crypto is a truly, 75 00:04:39,520 --> 00:04:45,320 Alex Vynokur: truly disruptive technology. Arguably the most significant piece of technological 76 00:04:45,320 --> 00:04:50,369 Alex Vynokur: innovation since the internet itself. But in everyday language, and 77 00:04:50,370 --> 00:04:52,950 Alex Vynokur: in terms of what's making the headlines, of course, it's 78 00:04:52,950 --> 00:04:57,409 Alex Vynokur: mostly the cryptocurrencies. People talk about Bitcoin, and that's probably 79 00:04:57,750 --> 00:05:00,120 Alex Vynokur: one of the most talked about topics on social media, 80 00:05:00,120 --> 00:05:02,229 Alex Vynokur: on Reddit, et cetera. And of course there is a 81 00:05:02,360 --> 00:05:07,430 Alex Vynokur: large array of cryptocurrencies. There are non- fungible tokens, NFTs, 82 00:05:07,779 --> 00:05:11,610 Alex Vynokur: which are on many people's minds now, but the technology 83 00:05:11,670 --> 00:05:14,900 Alex Vynokur: that underlies it is truly interesting. And from our perspective, 84 00:05:15,490 --> 00:05:18,530 Alex Vynokur: one of the things that we've found quite attractive, because again, 85 00:05:18,710 --> 00:05:23,020 Alex Vynokur: we as a firm think about investment. We don't necessarily 86 00:05:23,020 --> 00:05:25,990 Alex Vynokur: think about trading and a lot of people who invest 87 00:05:25,990 --> 00:05:30,050 Alex Vynokur: "in cryptocurrencies", they tend to try it quite often. And 88 00:05:30,050 --> 00:05:34,110 Alex Vynokur: the approach that we have taken in developing this new ETF, 89 00:05:34,110 --> 00:05:37,359 Alex Vynokur: the BetaShares Crypto Innovators ETF, is really that picks and 90 00:05:37,360 --> 00:05:41,349 Alex Vynokur: shovels approach, which is to say, yes, there's arguably a 91 00:05:41,350 --> 00:05:45,839 Alex Vynokur: real gold rush in NFTs and in crypto mining of cryptocurrencies. 92 00:05:46,170 --> 00:05:49,350 Alex Vynokur: And we know, that in times of gold rush, yes, 93 00:05:49,350 --> 00:05:52,620 Alex Vynokur: you can absolutely strike it lucky. You can find a 94 00:05:52,620 --> 00:05:55,740 Alex Vynokur: significant deposit of gold, but a proven way to make 95 00:05:55,740 --> 00:05:59,560 Alex Vynokur: money in gold rush times is to actually sell the 96 00:05:59,560 --> 00:06:03,700 Alex Vynokur: picks and shovels, supply the infrastructure and essentially this is 97 00:06:03,700 --> 00:06:07,981 Alex Vynokur: what we are focused on with the new CRYP ETF. 98 00:06:07,981 --> 00:06:12,210 Sean Aylmer: So that blockchain technology, totally appreciate what you're saying. What a 99 00:06:12,210 --> 00:06:16,219 Sean Aylmer: leap forward it is. I presume that's nowhere near as 100 00:06:16,220 --> 00:06:22,510 Sean Aylmer: volatile either as cryptocurrencies themselves. Bitcoin's at 58, 000 US, but 101 00:06:22,510 --> 00:06:25,349 Sean Aylmer: it could be 30, 000 US in six months time. It 102 00:06:25,350 --> 00:06:27,250 Sean Aylmer: could be 30,000 US in six weeks time to be 103 00:06:27,250 --> 00:06:31,360 Sean Aylmer: perfectly honest. Presumably the companies behind the cryptos, are nowhere near as volatile. 104 00:06:31,620 --> 00:06:36,460 Alex Vynokur: Significantly less volatile, which is not to say there is 105 00:06:36,460 --> 00:06:38,870 Alex Vynokur: no risk and there's no volatility. Of course, there is 106 00:06:38,870 --> 00:06:43,480 Alex Vynokur: risk. All equities, and we're talking about here, a portfolio of 107 00:06:43,550 --> 00:06:49,640 Alex Vynokur: 30 global companies, which are powering basically the crypto ecosystem 108 00:06:49,890 --> 00:06:53,730 Alex Vynokur: that this particular ETF provides exposure to. So of course, 109 00:06:53,730 --> 00:06:57,440 Alex Vynokur: all equities have volatility and risk, but you're absolutely right 110 00:06:57,440 --> 00:07:04,190 Alex Vynokur: Sean. It's significantly lower volatility, that investing in cryptocurrencies directly 111 00:07:04,640 --> 00:07:07,229 Alex Vynokur: and the sort of companies that we are talking about and 112 00:07:07,330 --> 00:07:10,450 Alex Vynokur: the sort of businesses that we are talking about are 113 00:07:10,490 --> 00:07:15,580 Alex Vynokur: companies that are operating across a range of industries. Be 114 00:07:15,580 --> 00:07:20,300 Alex Vynokur: it exchanges, be it custodians, be it manufacturers of equipment 115 00:07:20,520 --> 00:07:23,920 Alex Vynokur: that is used in crypto mining or in the digital 116 00:07:23,920 --> 00:07:27,880 Alex Vynokur: asset ecosystem. So they tend to be businesses which have 117 00:07:27,880 --> 00:07:31,620 Alex Vynokur: a lot more going on than simply investing in the cryptocurrency directly. 118 00:07:33,100 --> 00:07:35,239 Sean Aylmer: Okay, stay with me. Alex, we'll be back in a 119 00:07:35,240 --> 00:07:35,590 Sean Aylmer: minute. 120 00:07:40,670 --> 00:07:44,140 Sean Aylmer: I'm speaking to Alex Vynokur, Chief Executive Officer of BetaShares. 121 00:07:44,950 --> 00:07:47,750 Sean Aylmer: So are these mostly US- based companies? You said, there's 122 00:07:47,890 --> 00:07:51,220 Sean Aylmer: 30 of them there. Are any of them household names? 123 00:07:51,860 --> 00:07:55,210 Alex Vynokur: Yes, some of them might be familiar. Coinbase is a 124 00:07:55,210 --> 00:08:00,240 Alex Vynokur: good example. Coinbase is an exchange. It also provides institutional 125 00:08:00,240 --> 00:08:04,610 Alex Vynokur: custody services, prime brokerage, and is essentially regarded often as the 126 00:08:04,610 --> 00:08:08,300 Alex Vynokur: Google of crypto and it's a significant publicly listed company, 127 00:08:08,530 --> 00:08:11,920 Alex Vynokur: which is listed in the US. So that's one example, 128 00:08:12,170 --> 00:08:17,690 Alex Vynokur: some of the other names that might be familiar is Galaxy Digital. Galaxy Digital, 129 00:08:17,690 --> 00:08:21,830 Alex Vynokur: is a multi- service organization that is focused on investing 130 00:08:21,880 --> 00:08:26,400 Alex Vynokur: in digital assets and blockchain technology industries. They provide trading 131 00:08:26,400 --> 00:08:30,530 Alex Vynokur: and asset management services and advisory services. So again, those 132 00:08:30,530 --> 00:08:34,610 Alex Vynokur: sorts of businesses are one step removed from owning cryptocurrency directly. 133 00:08:35,000 --> 00:08:37,510 Alex Vynokur: And what we're finding, I would say, Sean, is that there 134 00:08:37,510 --> 00:08:42,059 Alex Vynokur: are really two types of investors that are attracted to 135 00:08:42,059 --> 00:08:46,010 Alex Vynokur: this type of ETF. One is a traditional equities investor, 136 00:08:46,520 --> 00:08:49,610 Alex Vynokur: who does not feel confident enough and does not feel 137 00:08:49,610 --> 00:08:53,610 Alex Vynokur: that it's appropriate to invest in cryptocurrencies directly. And this 138 00:08:53,610 --> 00:08:58,370 Alex Vynokur: ETF can provide a really convenient way and also a 139 00:08:58,370 --> 00:09:02,070 Alex Vynokur: compelling way for people to obtain exposure to the space 140 00:09:02,090 --> 00:09:05,670 Alex Vynokur: without investing in crypto directly. And at the same time, 141 00:09:05,910 --> 00:09:08,080 Alex Vynokur: there are a lot of investors who are interested in 142 00:09:08,080 --> 00:09:12,510 Alex Vynokur: this ETF who actually own Bitcoin or Ethereum or Dogecoin. 143 00:09:12,750 --> 00:09:15,890 Alex Vynokur: They already own cryptocurrency, but for them, this is a 144 00:09:15,890 --> 00:09:22,130 Alex Vynokur: way to diversify from the risk of holding cryptocurrencies directly 145 00:09:22,350 --> 00:09:26,610 Alex Vynokur: into equities. So those are really the two key categories of investors 146 00:09:26,760 --> 00:09:28,890 Alex Vynokur: that so far have found us of interest. 147 00:09:29,100 --> 00:09:31,640 Sean Aylmer: Okay, and I suppose, the way I look at cryptos, 148 00:09:31,760 --> 00:09:35,710 Sean Aylmer: is still not clear. Obviously, they're volatile, you've got China 149 00:09:35,710 --> 00:09:38,790 Sean Aylmer: cracking down on it and that's the biggest market. It 150 00:09:38,800 --> 00:09:42,580 Sean Aylmer: hasn't been accepted by Central Banks, et cetera. The technology 151 00:09:42,580 --> 00:09:45,319 Sean Aylmer: behind it though, The Central Banks, for example, they all 152 00:09:45,320 --> 00:09:49,630 Sean Aylmer: accept blockchain technology is a leap forward. And so the 153 00:09:49,630 --> 00:09:53,069 Sean Aylmer: thing which is sort of interesting is even if cryptos 154 00:09:53,070 --> 00:09:54,920 Sean Aylmer: don't work out, they're still an asset there. 155 00:09:54,920 --> 00:09:58,000 Alex Vynokur: Now, this is a key point you've just made Sean. 156 00:09:58,270 --> 00:10:03,240 Alex Vynokur: I would say, in this particular ETF, investors in these companies 157 00:10:03,490 --> 00:10:06,620 Alex Vynokur: do not necessarily have to be bullish on Bitcoin or 158 00:10:06,790 --> 00:10:12,130 Alex Vynokur: Ethereum or any single cryptocurrency. And I'll give an example. 159 00:10:12,130 --> 00:10:15,569 Alex Vynokur: If we just take for a second, a company like Coinbase, 160 00:10:15,760 --> 00:10:17,740 Alex Vynokur: as we mentioned is really sort of the Google of the 161 00:10:17,890 --> 00:10:22,880 Alex Vynokur: crypto world. If you draw a parallel between that and 162 00:10:22,880 --> 00:10:26,699 Alex Vynokur: say the ASX itself, The Australian Stock Exchange, you would say, 163 00:10:26,750 --> 00:10:30,079 Alex Vynokur: we have companies like BHP, like Woolies, like the Big 164 00:10:30,170 --> 00:10:34,040 Alex Vynokur: Banks listed on the ASX. You do not necessarily say 165 00:10:34,179 --> 00:10:37,190 Alex Vynokur: that if one of those companies lose a significant amount 166 00:10:37,190 --> 00:10:41,340 Alex Vynokur: of value or even if the market overall, falls in value, 167 00:10:41,550 --> 00:10:43,880 Alex Vynokur: such as what we've seen during the GFC, you wouldn't 168 00:10:43,880 --> 00:10:47,199 Alex Vynokur: necessarily say that the ASX itself, the exchange is going to 169 00:10:47,200 --> 00:10:49,189 Alex Vynokur: go out of business. There's always going to be a 170 00:10:49,190 --> 00:10:53,380 Alex Vynokur: business in the exchange, basically, no matter how volatile, whether 171 00:10:53,380 --> 00:10:56,400 Alex Vynokur: the individual companies go up and down, so that's just 172 00:10:56,400 --> 00:10:58,959 Alex Vynokur: a very small example. Say in the context of something like Coinbase, 173 00:11:00,090 --> 00:11:04,740 Alex Vynokur: that business is much broader than simply about any individual 174 00:11:04,750 --> 00:11:08,660 Alex Vynokur: cryptocurrency and the same parallel, you would basically be able to 175 00:11:08,660 --> 00:11:12,000 Alex Vynokur: draw in relation to a significant number of constituents of 176 00:11:12,000 --> 00:11:15,910 Alex Vynokur: this particular ETF. And in going back to the technology point, Sean, 177 00:11:16,190 --> 00:11:20,679 Alex Vynokur: what we're seeing today is that the blockchain technology is really 178 00:11:20,679 --> 00:11:26,150 Alex Vynokur: making significant inroads across a very wide spectrum of industries. 179 00:11:26,309 --> 00:11:28,860 Alex Vynokur: So again, just going back to the ASX itself for 180 00:11:28,860 --> 00:11:31,720 Alex Vynokur: a second, you may have seen that ASX is now 181 00:11:31,720 --> 00:11:36,880 Alex Vynokur: embarking on a significant project of replacing the chess system, 182 00:11:37,170 --> 00:11:40,410 Alex Vynokur: which is basically the clearing system that allows our stock 183 00:11:40,410 --> 00:11:43,960 Alex Vynokur: trades to clear. Now, they are replacing that with the 184 00:11:43,960 --> 00:11:48,250 Alex Vynokur: blockchain technology. The German Exchange, Deutsche Börse, had actually just 185 00:11:48,250 --> 00:11:50,559 Alex Vynokur: announced that they're going down the same path. We are 186 00:11:50,559 --> 00:11:56,420 Alex Vynokur: seeing global trade and logistics move from paper- based onto blockchain, 187 00:11:56,480 --> 00:11:59,620 Alex Vynokur: more and more. We're now seeing initiatives in foreign exchange 188 00:11:59,800 --> 00:12:04,030 Alex Vynokur: to consider using blockchain technology to enable transactions. So what's 189 00:12:04,030 --> 00:12:08,170 Alex Vynokur: really exciting from our perspective, is the technology that underlines 190 00:12:08,170 --> 00:12:12,630 Alex Vynokur: the digital asset economy. And that has potential arguably, which 191 00:12:13,929 --> 00:12:17,160 Alex Vynokur: is going to be more impactful than the cryptocurrencies themselves. 192 00:12:17,480 --> 00:12:20,630 Sean Aylmer: So when does BetaShares Crypto Innovators ETF launch? 193 00:12:20,809 --> 00:12:24,770 Alex Vynokur: We are expecting this ETF, to hit the market over 194 00:12:24,770 --> 00:12:28,699 Alex Vynokur: the next couple of weeks, Sean. So watch that space. 195 00:12:29,220 --> 00:12:30,960 Sean Aylmer: Alex, thank you for talking to Fear and Greed. 196 00:12:31,200 --> 00:12:32,340 Alex Vynokur: Terrific. Good to talk to you. 197 00:12:32,600 --> 00:12:36,410 Sean Aylmer: That was Alex Vynokur, CEO of BetaShares. This is the 198 00:12:36,410 --> 00:12:38,700 Sean Aylmer: Fear and Greed Daily Interview. Join me every morning for 199 00:12:38,700 --> 00:12:41,179 Sean Aylmer: the full Fear and Greed podcast with all the business 200 00:12:41,179 --> 00:12:44,300 Sean Aylmer: news you need to know. I'm Sean Aylmer, enjoy your day.