WEBVTT - ETFs are having a record year 0:00:00.560 --> 0:00:04.320 Exchange traded funds are a trillion dollar story. A trillion 0:00:04.400 --> 0:00:06.960 dollars flowing into them in the year to May in 0:00:07.000 --> 0:00:10.760 the US so far twenty three trillion dollars all together. 0:00:11.440 --> 0:00:13.520 How do you get a handle on numbers that big? 0:00:13.800 --> 0:00:17.000 What's driving them? Tom Bentley from Smart joins me to 0:00:17.040 --> 0:00:19.520 get to grips with the numbers and who is investing 0:00:19.600 --> 0:00:22.960 in ETFs? I'm Garth Bray. This is shared. 0:00:22.800 --> 0:00:26.160 Lunch investing involves the risk you might lose the money 0:00:26.160 --> 0:00:29.600 you start with. We recommend talking to a licensed financial advisor. 0:00:30.320 --> 0:00:34.080 We also recommend reading product disclosure documents before deciding to invest. 0:00:34.400 --> 0:00:36.800 Everything you're about to see and here is current at 0:00:36.800 --> 0:00:37.680 the time of recording. 0:00:37.760 --> 0:00:40.800 Tommy, start with that trillion dollar figure. It's a huge 0:00:40.800 --> 0:00:44.960 amount of money moving into a particular sector of the market. 0:00:45.120 --> 0:00:46.400 What is behind that? 0:00:46.960 --> 0:00:49.720 It's really a continuation of a story that's been going 0:00:49.760 --> 0:00:52.720 on for a number of years now. You know ETF 0:00:52.920 --> 0:00:56.400 funds and management's been growing rapidly for a long time, 0:00:56.640 --> 0:00:59.320 and the numbers just keep getting bigger. I think it 0:00:59.360 --> 0:01:02.160 comes down to a couple of key things. What is 0:01:02.280 --> 0:01:07.120 I think investors increasingly just looking for simple, transparent investments 0:01:07.560 --> 0:01:11.199 ETF certainly fit the bill there, and increasingly we've seen 0:01:11.280 --> 0:01:15.880 investors moving into online platforms where they can essentially pick 0:01:15.920 --> 0:01:19.120 their own investments, and ETFs are really a great way 0:01:19.319 --> 0:01:21.720 of enabling people to do that because you get instant 0:01:21.720 --> 0:01:25.280 diversification in a single trade. You know, you can pick 0:01:25.319 --> 0:01:30.040 across all sorts of different markets, asset classes, thematic opportunities, 0:01:30.800 --> 0:01:33.920 and it's a great, simple, transparent and low cost way 0:01:33.920 --> 0:01:36.400 to create portfolio. So I really think that's a big 0:01:36.480 --> 0:01:37.360 driver of the story. 0:01:37.720 --> 0:01:40.240 It's hard to go past the AI theme in investing 0:01:40.280 --> 0:01:43.639 at the moment. Has that fueled a lot of extra 0:01:43.680 --> 0:01:46.959 flow into the menic ETFC obviously. 0:01:47.800 --> 0:01:51.760 Yeah, I think it has. At the margin again, you know, 0:01:51.000 --> 0:01:54.760 if you break down that trillion dollars this year, I 0:01:54.760 --> 0:01:56.880 think you'll probably find there's still a huge amount of 0:01:56.880 --> 0:01:59.800 that flow going into what we would call core x 0:02:00.400 --> 0:02:03.200 like SP five hundred, then as that one hundred, you know, 0:02:03.560 --> 0:02:06.720 global MSCI type strategies. I think at the margin you're 0:02:06.760 --> 0:02:09.280 seeing more interest and more flow into some of those 0:02:09.320 --> 0:02:12.079 thematic areas like AI. But bear in mind with AI, 0:02:12.280 --> 0:02:14.240 I mean some of the big AI companies aren't even 0:02:14.280 --> 0:02:17.639 listed yet, so you're sort of scrabbling around for things 0:02:17.720 --> 0:02:22.120 like you know, AI adjacent strategies like chip chips and 0:02:22.200 --> 0:02:25.519 memory and data centers and that kind of thing. Most 0:02:25.520 --> 0:02:27.520 of those flows, as I say, are still going into 0:02:27.560 --> 0:02:31.280 the really the core sort of you know, basic sm 0:02:31.280 --> 0:02:35.440 P five hundred type strategies. And in fact, you know, 0:02:35.480 --> 0:02:38.160 you may have seen last month, I think the Vanguard 0:02:38.400 --> 0:02:42.320 US five hundred ETF went through a trillion US dollars 0:02:42.360 --> 0:02:44.320 just on its own. So that's one ETF now that's 0:02:44.639 --> 0:02:48.279 trillion US dollars. So still seeing huge flows into those strategies. 0:02:48.440 --> 0:02:49.919 It feels to me like they're a little bit new, 0:02:50.320 --> 0:02:52.200 but they've been around for a long time. Can you 0:02:52.280 --> 0:02:53.720 tell me a bit about the history and how long 0:02:53.760 --> 0:02:55.799 Smart's been involved. Sure. 0:02:55.960 --> 0:02:59.519 So the original ETF or the very first ETF, I 0:02:59.560 --> 0:03:03.280 think was lunch in the early nineties. That was a 0:03:03.320 --> 0:03:07.520 SMP SPDR it was called, and that was a US 0:03:07.560 --> 0:03:09.600 equity ETF, and that really came out of the market 0:03:09.600 --> 0:03:13.600 crash in nineteen eighty seven where the regulators have identified 0:03:13.600 --> 0:03:16.280 a need for sort of a very large liquid pool 0:03:16.320 --> 0:03:21.160 of money the US equities and Smart was actually surprisingly 0:03:22.240 --> 0:03:24.280 quite hard on the heels of the first TTF. We 0:03:24.360 --> 0:03:27.200 launched our first ETF in New Zealand in nineteen ninety six, 0:03:27.280 --> 0:03:32.040 and depending on which version of your favorite AI you use, 0:03:32.200 --> 0:03:34.160 were either the third or the fourth market in the 0:03:34.200 --> 0:03:36.840 world to launch GTF in New Zealand. So we've been 0:03:36.880 --> 0:03:39.920 at it for just over thirty years now. We celebrated 0:03:39.960 --> 0:03:42.160 our thirtieth anniversary in June this year. 0:03:42.920 --> 0:03:44.880 And what has thirty years taught you about how to 0:03:45.520 --> 0:03:46.119 prepare them? 0:03:46.320 --> 0:03:48.920 But we started very small. I guess we had one 0:03:49.000 --> 0:03:52.880 ETF just tracking the top ten stocks in New Zealand. 0:03:53.560 --> 0:03:56.600 And you know, we now offer forty four different funds 0:03:56.640 --> 0:04:00.680 across multiple markets and asset classes. I think what, you know, 0:04:00.720 --> 0:04:04.000 what we've learned along the way is, you know, don't 0:04:04.120 --> 0:04:06.560 try and be all things to all people. You know, 0:04:06.600 --> 0:04:09.640 we haven't launched hundreds of ets. You know, we believe 0:04:09.680 --> 0:04:14.480 that there are some pretty good, low cost core exposures 0:04:14.480 --> 0:04:16.839 that most investors need, and then that you can add 0:04:16.839 --> 0:04:21.240 around that core sort of satellite exposures. But yeah, keep 0:04:21.279 --> 0:04:24.559 it simple, make sure that you're launching products that people 0:04:24.600 --> 0:04:29.320 actually want and are interested in, and yeah, just keep 0:04:29.360 --> 0:04:31.160 going out there and telling the story. You know, it's 0:04:31.160 --> 0:04:34.599 been a pretty slow burn for US's it took probably 0:04:34.600 --> 0:04:37.680 twenty five years odd twenty years to get to a 0:04:37.680 --> 0:04:41.280 billion dollars and five years to go from a billion 0:04:41.320 --> 0:04:44.120 to almost six billions, So it's been a pretty slow burn, 0:04:44.200 --> 0:04:46.279 but you know, we just keep telling the story and 0:04:46.920 --> 0:04:48.040 it's starting to resonate. 0:04:48.080 --> 0:04:50.760 Now, what do you think has amplified things so much 0:04:50.760 --> 0:04:52.599 in those last sort of five or sixty years. 0:04:52.720 --> 0:04:55.760 I think a big part of it, honestly is the 0:04:55.839 --> 0:04:59.240 role of platforms like chairs E's, which have just enabled 0:04:59.760 --> 0:05:02.920 a lot more investors to get into ETFs with much 0:05:02.920 --> 0:05:06.600 smaller amounts of money. I think the big game changer 0:05:06.640 --> 0:05:10.200 was COVID, where people had the time to sit and 0:05:10.480 --> 0:05:16.520 think and research and learn about investing. And I think, 0:05:16.680 --> 0:05:19.640 you know, certainly shares He's had a lot of success 0:05:19.680 --> 0:05:23.800 through that period. So it's really been a story of 0:05:23.839 --> 0:05:27.600 the I guess the democratization of investing just enabling more 0:05:27.640 --> 0:05:31.040 and more people to get involved, to try out different 0:05:31.040 --> 0:05:33.680 things and using ets. You know, it's a lower risk 0:05:33.720 --> 0:05:35.240 way of doing it than trying to pick one or 0:05:35.240 --> 0:05:36.800 two individual companies. 0:05:37.600 --> 0:05:40.440 And yet there are some ETFs that are quite kind 0:05:40.480 --> 0:05:42.680 of highly concentrated. So I'd like to sort of break 0:05:42.680 --> 0:05:44.760 it open a little bit. To what extent are they 0:05:44.800 --> 0:05:49.120 being used still traditionally to get easy diversification. To what 0:05:49.240 --> 0:05:53.600 extent are they almost like incredibly targeted approaches to a 0:05:53.680 --> 0:05:57.120 theme or even just a small number of trades. 0:05:57.560 --> 0:05:59.599 I'd really sort of look at the market in two ways. 0:05:59.640 --> 0:06:02.320 One one is, you know a lot of investors still 0:06:02.400 --> 0:06:05.839 use those very low cost core exposures for most of 0:06:05.880 --> 0:06:09.719 their portfolios. And then you know, where people are interested 0:06:09.839 --> 0:06:12.560 in a particular theme or asset class, you know, or 0:06:12.640 --> 0:06:15.200 they believe that that will have, you know, will go 0:06:15.279 --> 0:06:18.160 well over the next few years. Ets just enable them 0:06:18.200 --> 0:06:21.160 to access those types of opportunities in a sort of 0:06:21.839 --> 0:06:24.560 reasonably well diversified way without having to pick the winners 0:06:24.560 --> 0:06:28.839 and losers in a sector. So if you take US Technology, 0:06:28.839 --> 0:06:31.839 for example, you could try and pick one or two 0:06:31.839 --> 0:06:33.840 stocks in the US Tech or you can just buy 0:06:33.839 --> 0:06:36.520 an ETF that has all of them. So we are 0:06:36.560 --> 0:06:41.760 seeing investors, even in those more concentrated, more targeted opportunities, 0:06:41.800 --> 0:06:45.080 still using ETFs to get diversified exposure to a particular 0:06:45.120 --> 0:06:45.840 sector or theme. 0:06:46.160 --> 0:06:48.200 There's one particular one floating around at the moment that 0:06:48.279 --> 0:06:52.000 the Memory ETF that picked up something like ten billion 0:06:52.200 --> 0:06:55.360 dollars worth of funds I think in fifty days that yeah, 0:06:55.440 --> 0:06:57.479 I mean that almost sounds like a meme coin to 0:06:57.520 --> 0:06:59.760 me at this point, or a meme stock, rather than 0:07:00.440 --> 0:07:02.320 like a sensible bet. Is there a little bit of 0:07:02.400 --> 0:07:05.440 marketing in this as well as some fundamentals about where 0:07:05.480 --> 0:07:08.760 the company's underlying that ETFs. 0:07:08.320 --> 0:07:11.120 It, I guess one of my great actions in life 0:07:11.160 --> 0:07:13.280 has shown me the incentive and I'll show you the outcome. 0:07:13.360 --> 0:07:15.720 And you know, if people think there's money's we made 0:07:15.720 --> 0:07:19.280 in a particular sector, then you're more or less guarantee 0:07:19.280 --> 0:07:22.840 a ETF we'll be launched in that sector, you know. 0:07:22.880 --> 0:07:24.920 I would I would caution investors that if you want 0:07:24.920 --> 0:07:28.440 to play some of those themes and opportunities, it still 0:07:28.440 --> 0:07:30.640 pays to be diversified, you know, just take a more 0:07:30.680 --> 0:07:33.240 measured approach to some of those thematic opportunities. 0:07:33.640 --> 0:07:36.320 And I suppose if you're looking at some of the 0:07:36.800 --> 0:07:40.080 more rarefied ETFs that are sitting around out there, there's 0:07:40.080 --> 0:07:42.680 been a lot of interest in quite highly leveraged ones 0:07:42.720 --> 0:07:45.640 as well. Can you explain a little bit about what 0:07:45.720 --> 0:07:47.880 might be the attraction there, what might be some of 0:07:47.920 --> 0:07:50.800 the risks that are involved in getting into that kind 0:07:50.840 --> 0:07:51.680 of financial product. 0:07:52.200 --> 0:07:56.160 Yeah, so leverage dutfs essentially enable you to take a 0:07:56.240 --> 0:07:59.600 sort of two to three times exposure to a market 0:07:59.720 --> 0:08:02.520 or a thing or an individual stock. Even so you know, 0:08:02.520 --> 0:08:04.160 if you think about the S and P five hundred, 0:08:04.280 --> 0:08:06.960 you might get a two or three times leveraged ETF 0:08:07.000 --> 0:08:09.640 that essentially, if the market goes up ten, you go 0:08:09.760 --> 0:08:13.160 up thirty percent, give or take. But it does work 0:08:13.200 --> 0:08:16.080 both ways, so you know, if the market goes down ten, 0:08:16.160 --> 0:08:19.760 you go down thirty. So you know, leverage gts basically 0:08:19.840 --> 0:08:24.360 enable investors to take a very high conviction bet directional 0:08:24.360 --> 0:08:28.840 bet on a market or a stock. So not for 0:08:28.840 --> 0:08:32.800 the faint hearted, you know that Again, I'd say they 0:08:32.840 --> 0:08:34.559 have a place in portfolio as if you have a 0:08:35.760 --> 0:08:39.319 more high risk approach or we like a more high 0:08:39.400 --> 0:08:41.680 risk approach. But again I would certainly not put all 0:08:41.760 --> 0:08:44.880 your eggs in one basket in leverage gtfs. And then 0:08:45.000 --> 0:08:47.520 the other type of levi ETF is on the other side, 0:08:47.559 --> 0:08:51.440 so they make money when the market goes down. So 0:08:51.679 --> 0:08:55.000 you know, you can choose directional bets either way on 0:08:55.040 --> 0:08:57.640 the market, but you know there are risks if you 0:08:57.679 --> 0:09:00.400 choose an ETF which goes up when the market goes down. 0:09:00.520 --> 0:09:02.560 Obviously it goes down when the market goes up, so 0:09:03.320 --> 0:09:04.480 it kind of works both ways. 0:09:05.200 --> 0:09:08.680 Are there any kind of I suppose different market interpretations 0:09:08.720 --> 0:09:11.000 around what kind of leverage is allowed to be offered 0:09:11.040 --> 0:09:14.040 for those products? Is there as there are they specifics 0:09:14.040 --> 0:09:15.640 that then investors need to look out for. 0:09:16.160 --> 0:09:19.600 I'm not aware of any particular guidelines or boundaries around it. 0:09:19.640 --> 0:09:21.920 I mean, I think most leathered ETFs tend to be 0:09:21.960 --> 0:09:26.680 in the two to three times range. I think any 0:09:26.800 --> 0:09:28.679 any more than that, you know, it starts to get 0:09:28.679 --> 0:09:32.679 a little bit a little bit scary on the downside. 0:09:32.840 --> 0:09:34.720 You know, if you had a five times levit ETF 0:09:34.760 --> 0:09:38.959 and the markets down fifty, that's basically zero. 0:09:39.200 --> 0:09:42.040 Look if we look into those a little more deeply, 0:09:42.200 --> 0:09:45.199 what what are the mechanics of them that you can explain? 0:09:46.480 --> 0:09:49.800 Yeah, So essentially, what leverage tfs are doing is using 0:09:50.720 --> 0:09:55.080 financial instruments called options, futures and options. So these are 0:09:55.120 --> 0:09:57.679 ways to gain exposure to markets by putting down a 0:09:57.760 --> 0:10:00.640 very small amount to get a very larger exposure. So 0:10:01.360 --> 0:10:05.240 you know, if you think about the mortgage world, you know, 0:10:05.280 --> 0:10:07.400 you put a ten percent deposit down on the house, 0:10:08.440 --> 0:10:10.200 so you borrow a ten percent and then you've got 0:10:10.200 --> 0:10:13.360 one hundred percent exposure to the property. Right, it's the 0:10:13.400 --> 0:10:15.920 same in the future's options world. You know, essentially you're 0:10:15.960 --> 0:10:18.680 putting ten percent down beginning one hundred percent exposure. So 0:10:18.679 --> 0:10:23.080 if the market goes up, you know your your return 0:10:23.160 --> 0:10:27.880 is amplified quite sharply at the same to the same point, 0:10:27.880 --> 0:10:30.600 if the market goes down, your return is umplified as well. 0:10:30.880 --> 0:10:33.840 If we're talking about who's using them, I mean I 0:10:33.880 --> 0:10:36.840 saw some research out of the UK that said that 0:10:37.000 --> 0:10:40.640 anyone over fifty five, you ask three of them about atfs, 0:10:40.760 --> 0:10:42.320 only one of them is going to have heard of those. 0:10:42.400 --> 0:10:46.840 You ask anyone under thirty four, and probably like ninety 0:10:46.880 --> 0:10:48.840 percent or more will be able to tell you what 0:10:48.880 --> 0:10:52.880 an ETF is. Is that a consistent picture that you 0:10:53.040 --> 0:10:55.040 find and your practice and around the world. 0:10:55.679 --> 0:10:57.880 Yeah, I think so. Yeah, Yeah, I think that's pretty 0:10:57.880 --> 0:11:02.920 consistent globally, And honestly, I think it's driven by one 0:11:03.320 --> 0:11:06.400 really key thing in particular, and that is the demographics 0:11:06.440 --> 0:11:09.480 around those different age groups. So you know, it's quite 0:11:09.559 --> 0:11:12.080 likely for anyone over fifty five that they've been pretty 0:11:12.160 --> 0:11:15.120 lucky to be a property owner in a period where 0:11:15.240 --> 0:11:18.680 property has done extremely well for people under thirty five. 0:11:20.200 --> 0:11:23.000 It's very hard to get on the property ladder in 0:11:23.000 --> 0:11:26.720 in most property markets globally because prices has gone up 0:11:26.760 --> 0:11:29.640 so much. Lending has got harder, or borrowing's got harder, 0:11:29.640 --> 0:11:33.120 I should say. And so you know, there is a 0:11:33.120 --> 0:11:36.880 whole cohort of people now coming through in that age group, 0:11:36.960 --> 0:11:39.040 under a thirty five age group, who are really looking 0:11:39.040 --> 0:11:43.160 for other ways to grow their wealth, and ETFs play 0:11:43.200 --> 0:11:44.320 a big role in that. 0:11:45.080 --> 0:11:48.400 The research that I sort of suggested that the kinds 0:11:48.440 --> 0:11:50.360 of people I mean literally see that it's like a 0:11:50.360 --> 0:11:54.280 young guy's game, overwhelming the demographic in the UK, younger 0:11:54.400 --> 0:11:57.199 males eighteen to thirty four are kind of strongly using it. 0:11:57.280 --> 0:12:00.640 They're using it a lot, They're making some quite trades. 0:12:00.679 --> 0:12:03.080 But some other research I saw out a morning Star 0:12:03.240 --> 0:12:05.360 suggested that a lot of the times people investing in 0:12:05.400 --> 0:12:08.440 ETFs are kind of buying late and missing the market. 0:12:08.520 --> 0:12:12.240 They're trading them quite quite quickly. I mean, is there 0:12:12.240 --> 0:12:16.320 a lesson there just about general investment hygiene? I suppose 0:12:16.400 --> 0:12:18.160 no matter what financial product you're using. 0:12:18.440 --> 0:12:21.080 Were certainly we know that people that there are there 0:12:21.080 --> 0:12:23.680 are investors that are using eats more as trading tools 0:12:23.720 --> 0:12:27.760 than investing tools. The key difference being a trading tool 0:12:27.840 --> 0:12:29.559 is basically you just buy and hold it for a 0:12:29.640 --> 0:12:32.360 very short period of time. An investing tool you buy 0:12:32.400 --> 0:12:34.800 and hold for a long period of time. Key difference. 0:12:35.960 --> 0:12:38.920 So we do see a bit of that encouragingly, certainly 0:12:38.920 --> 0:12:41.240 in New Zealand. You know, if we look back to 0:12:41.400 --> 0:12:44.200 for example, COVID and some of the other more volatile 0:12:44.240 --> 0:12:48.800 market periods, we've actually seen investors holding through those periods 0:12:49.120 --> 0:12:51.800 and if anything, actually continuing to buy through those periods. 0:12:51.840 --> 0:12:53.920 So we're starting to see more of a buy the 0:12:53.960 --> 0:12:56.840 dirt mentality here, which I think is fantastic. That's the 0:12:56.920 --> 0:12:59.480 right way to think about it. You know, you invest 0:12:59.520 --> 0:13:01.959 in share you're invest in or you buy most things 0:13:02.000 --> 0:13:04.679 when they're on sale. You know, why not by shares 0:13:04.679 --> 0:13:07.640 when they're on sale as well. So yeah, I think 0:13:07.640 --> 0:13:10.480 it's slightly different here. Definitely at the margin you see 0:13:10.520 --> 0:13:13.760 more trading. But again the more you trade, the more 0:13:13.760 --> 0:13:16.080 it costs you, and the more likelihood there is of 0:13:16.160 --> 0:13:16.880 making a mistake. 0:13:17.720 --> 0:13:19.960 Just looking more broadly and more globally, I suppose have 0:13:20.040 --> 0:13:22.920 we seen any evidence or have you come across any 0:13:22.960 --> 0:13:26.000 suggestion that ETFs are kind of inherently adding to the 0:13:26.000 --> 0:13:29.160 amount of liquidity or volatility in the market. 0:13:30.640 --> 0:13:34.720 They certainly added liquidity. Yeah. You know, if you think about, 0:13:36.720 --> 0:13:40.320 you know, wanting to exit a particular investment, if you 0:13:40.360 --> 0:13:42.520 have a single stock, you know, it might be quite difficult. 0:13:42.600 --> 0:13:44.480 Part could if it's sort of a smaller company or 0:13:44.480 --> 0:13:47.160 that type of thing, Whereas in ETFs, you know, because 0:13:47.160 --> 0:13:52.120 they're broadly diversified. There were sort of get a little 0:13:52.160 --> 0:13:53.760 technical here, but there are kind of three levels of 0:13:53.800 --> 0:13:57.079 liquidity with ETFs. So you know, essentially, if you think 0:13:57.080 --> 0:14:00.560 about going into a grocery a dairy grocery store, you know, 0:14:00.559 --> 0:14:03.200 and there's a fridge of coke on the floor, that's 0:14:03.280 --> 0:14:06.560 that's your sort of on market liquidity. And then you 0:14:06.559 --> 0:14:09.640 know the dairy's probably got a palette of coke sort 0:14:09.679 --> 0:14:12.000 around the back somewhere in the warehouse, so that's your 0:14:12.880 --> 0:14:16.200 market maker inventory. So you know, market makers in ETF 0:14:16.280 --> 0:14:20.400 always holding inventory to meet demand. And then you know, 0:14:20.400 --> 0:14:22.560 if you really need to go big and do a 0:14:22.640 --> 0:14:26.160 very large trade, you've got the individual stocks underlying the UTF, 0:14:26.280 --> 0:14:29.400 which is the factory essentially, so you know, you've got 0:14:29.440 --> 0:14:31.880 these multiple layers of liquidity and ETFs which just don't 0:14:31.880 --> 0:14:33.760 exist in individual shares for example. 0:14:34.480 --> 0:14:36.280 That's a great analogy. It's a great way to think 0:14:36.320 --> 0:14:38.280 about it and how people can understand that you can 0:14:38.280 --> 0:14:40.640 sort of trade in and trade out. I guess with that, 0:14:40.800 --> 0:14:44.920 I wonder because you're talking about an exchange traded fund 0:14:45.160 --> 0:14:47.320 rather than a mutual fund, which is almost kind of 0:14:47.360 --> 0:14:50.400 what it would have replaced. To some extent, those funds 0:14:50.440 --> 0:14:53.520 would have been like, you know, call the broker, arranged things, 0:14:53.560 --> 0:14:55.840 get them in, get them out. It's like a process 0:14:55.880 --> 0:14:58.040 that happens maybe once a day, once a week or whatever. 0:14:58.080 --> 0:14:59.560 It's not something you can sort of flick in and 0:14:59.600 --> 0:15:03.080 out of quite rapidly. Has that changed the game? Has 0:15:03.120 --> 0:15:05.560 that changed the global markets and how they move a 0:15:05.600 --> 0:15:05.960 little bit? 0:15:06.720 --> 0:15:08.760 Yeah? Yeah, But you know, I think I think it's 0:15:08.760 --> 0:15:11.080 important to note that for the most part, you know, 0:15:11.120 --> 0:15:12.680 if you're if you if you want to sell your 0:15:12.680 --> 0:15:16.840 et F units, you're essentially selling the units to another investor. 0:15:16.960 --> 0:15:18.680 So you're selling your bottle of coke oud of the 0:15:18.720 --> 0:15:21.400 fridge on the dairy floor, to use my previous analogy, 0:15:21.440 --> 0:15:26.000 You're not you're not selling the underlying share, so there's 0:15:26.040 --> 0:15:28.800 no impact on the underlying market at all. In most cases, 0:15:28.800 --> 0:15:32.000 when ets trade, you're just selling units from one investor 0:15:32.040 --> 0:15:36.960 to another, not the underlying shares themselves, So you know, 0:15:37.040 --> 0:15:39.480 that's important to note. But I do think where where 0:15:39.480 --> 0:15:42.440 ETS would change the game in liquidity terms is yeah, 0:15:42.560 --> 0:15:45.520 it just enables investors to switch very quickly from one 0:15:46.600 --> 0:15:48.520 approach to another. So for example, if you want to 0:15:48.520 --> 0:15:51.960 switch from equities into fixed income, in the ETF world, 0:15:52.000 --> 0:15:54.840 you sell your equity ETF and buy your fixed income UTF. 0:15:55.560 --> 0:15:58.760 Your economic exposure changes instantly, and then you just settle 0:15:58.800 --> 0:16:02.680 the trade two days later. In the unlisted managed fund world, 0:16:03.560 --> 0:16:06.280 you know, you put in your cell request, it gets 0:16:06.360 --> 0:16:08.400 processed the next day. You might get the money a 0:16:08.440 --> 0:16:11.200 dayly day after that, so you're talking, you know, three 0:16:11.280 --> 0:16:13.360 days later, and then you've got to apply for the 0:16:13.360 --> 0:16:15.240 new fund and then get that invested. So it can 0:16:15.280 --> 0:16:16.720 be you can be up to a week out of 0:16:16.760 --> 0:16:20.040 the market, and you know, as as we know, markets 0:16:20.080 --> 0:16:22.800 move pretty quickly these days. If it takes a week 0:16:22.880 --> 0:16:24.760 to get out of equities and into bonds, if that's 0:16:24.760 --> 0:16:26.400 what you want to do, things can change a hell 0:16:26.400 --> 0:16:28.160 of a lot in that period of time. 0:16:28.720 --> 0:16:30.560 Have et IF's because you can get in and out 0:16:30.600 --> 0:16:33.360 of them more quickly, enabled a more kind of rapid 0:16:33.360 --> 0:16:37.240 fire decision making. Does that change your approach to investing 0:16:37.280 --> 0:16:37.920 in a way. 0:16:38.040 --> 0:16:40.960 I'm not sure that it does. I think I think, 0:16:41.560 --> 0:16:43.240 you know, if you've made a decision to switch out 0:16:43.240 --> 0:16:45.480 of one thing and into another, you know, if you're 0:16:45.480 --> 0:16:48.120 in the unlisted world, you can't. You don't get a 0:16:48.120 --> 0:16:50.960 cooling off period as such. It just takes longer. So 0:16:51.040 --> 0:16:53.280 you put your cell order in, it still gets process. 0:16:53.400 --> 0:16:55.440 You don't get the opportunity to then go back and say, oh, 0:16:55.440 --> 0:16:59.880 I've changed my mind. Maybe only a couple of hours 0:17:00.440 --> 0:17:02.880 where you might be able to do that. So I 0:17:02.920 --> 0:17:07.200 think it's just enabled, you know, where people do want 0:17:07.240 --> 0:17:10.119 to be more tactical about their investing. It's just enabled 0:17:10.160 --> 0:17:13.000 that to happen in a lot more seamless way than 0:17:13.200 --> 0:17:15.000 used to be the case pre ETFs. 0:17:16.040 --> 0:17:18.479 I guess we've also seen it open up a whole 0:17:19.119 --> 0:17:21.480 different range of markets as well as themes, like we've 0:17:21.480 --> 0:17:24.879 talked about AI, but also I'm thinking about emerging markets 0:17:24.920 --> 0:17:28.520 places like you know, you know, South Korea or China 0:17:28.720 --> 0:17:31.800 where maybe it's not as easy to get broker access 0:17:31.840 --> 0:17:35.320 and so on. You don't have the the the equities 0:17:35.320 --> 0:17:38.320 listed on the NAREST deck, necessarily we can get at them. 0:17:38.880 --> 0:17:42.320 So these ETFs are providing a reach into those markets too, 0:17:42.359 --> 0:17:44.400 are they? How many people are reaching in there. 0:17:44.800 --> 0:17:49.840 We've seen quite a significant uptick in investing into our 0:17:49.920 --> 0:17:53.920 Asia Pacific and Emerging markets CTFs recently, and I think 0:17:53.960 --> 0:17:57.800 that it speaks to exactly that process, you know, with 0:17:57.840 --> 0:18:00.879 the ets enabled people to get into those markets without 0:18:01.119 --> 0:18:03.720 having to think about researching a whole bunch of individual 0:18:03.760 --> 0:18:06.639 companies and decide which ones to invest in. You know, 0:18:06.720 --> 0:18:09.359 you can buy the whole region with an ETF and 0:18:09.440 --> 0:18:13.240 get the exposure that way. And so yeah, we've definitely 0:18:13.320 --> 0:18:18.680 seen Asia Pacific, Emerging Markets, Japan, Europe, they've all become 0:18:18.760 --> 0:18:21.600 much more popular recently. And I think part of that, 0:18:21.680 --> 0:18:26.160 honestly is the you know, the acknowledgment that the US 0:18:26.240 --> 0:18:29.320 equity market's quite concentrated now in very small range of 0:18:29.359 --> 0:18:32.760 companies they're so called Magnificent seven, and people are looking for, 0:18:33.520 --> 0:18:35.520 you know, where else could we invest outside of that 0:18:36.200 --> 0:18:39.119 very narrow range of businesses, And there's plenty of opportunities 0:18:39.160 --> 0:18:42.920 out there in the UTF world to diversify that exposure 0:18:42.920 --> 0:18:43.640 a bit more. 0:18:43.840 --> 0:18:47.200 The funds have just really accelerated massively in ETF since 0:18:47.240 --> 0:18:50.560 twenty twenty. Are you we thinking that that pattern is 0:18:50.640 --> 0:18:53.160 likely to be repeated in the back half of this decade. 0:18:53.200 --> 0:18:56.040 Is there way more money to flow into them? Or 0:18:56.119 --> 0:18:57.200 is that just too hard to pick? 0:18:59.320 --> 0:19:03.280 I don't see any is why wouldn't continue honestly, I mean, 0:19:03.600 --> 0:19:06.840 you know, certainly, as far as we're concerned in New Zealand, 0:19:06.880 --> 0:19:09.320 we've seen growth pick up very sharply in the last 0:19:09.359 --> 0:19:13.440 couple of years. In particular, so coming out of COVID, 0:19:13.920 --> 0:19:16.080 you know, we saw strong growth, but the last couple 0:19:16.080 --> 0:19:18.200 of years we've been growing at sort of over forty 0:19:18.200 --> 0:19:20.919 percent a year in terms of funds under management, and 0:19:20.960 --> 0:19:24.320 we see that continuing because you know, we've been relatively 0:19:24.359 --> 0:19:27.840 slow adopters in the ETF world here, but thanks to 0:19:28.080 --> 0:19:31.000 businesses like Charese's, you know, we're now catching up very quickly, 0:19:31.080 --> 0:19:32.960 and in fact, we're growing a little bit faster here 0:19:33.000 --> 0:19:37.280 than we are than ETFs are globally now. But yeah, 0:19:37.480 --> 0:19:39.840 I mean, I still think we're we've got a long 0:19:39.840 --> 0:19:44.040 way to go on that journey with ETFs, and you know, 0:19:44.119 --> 0:19:47.120 I think it's important to note that when we talk 0:19:47.119 --> 0:19:50.320 about ETFs, and ETF is a structure. It's an investment 0:19:50.400 --> 0:19:54.840 wrapper around an investment strategy. You know, ETFs. Not all 0:19:54.920 --> 0:19:58.960 ETFs are index tracking and not all index trackers are ETFs. 0:19:59.000 --> 0:20:01.280 It's important to note that. So a big part of 0:20:01.320 --> 0:20:03.400 the growth in ets in the last couple of years 0:20:03.400 --> 0:20:06.639 has been active fund managers launching utfs. So you know, 0:20:06.680 --> 0:20:08.840 you just are not just for index tracking. You know, 0:20:08.880 --> 0:20:11.000 you can use them for any type of asset pretty much. 0:20:11.280 --> 0:20:12.880 That's just their way of I guess trying to get 0:20:12.880 --> 0:20:15.640 back some of that drift to pessive maybe. 0:20:15.920 --> 0:20:18.800 Yeah, yeah, but also acknowledging that you know, there are 0:20:18.840 --> 0:20:22.600 some benefits to ETFs, which we've discussed previously, things like 0:20:22.600 --> 0:20:25.480 liquidity and transparency that you just don't get in the 0:20:25.560 --> 0:20:26.720 unlisted manage from the world. 0:20:27.080 --> 0:20:28.919 Tom Bentley, I feel like we've covered an awful lot 0:20:28.920 --> 0:20:30.919