WEBVTT - A Bunch of Really Important Questions for BlackRock 0:00:05.519 --> 0:00:11.920 We are Trillions. I'm Joel Webber and I'm America Tunis. 0:00:11.960 --> 0:00:14.320 We have a lot of people join us on trillions, 0:00:14.840 --> 0:00:18.360 But in the e t F world, there's very few 0:00:18.360 --> 0:00:21.360 players as big as black Rock. Yeah, you know, we 0:00:21.560 --> 0:00:23.640 dive into these little corners of the e t F 0:00:23.680 --> 0:00:26.479 area and there's such great stories in some of the 0:00:26.520 --> 0:00:29.639 smaller areas and issues. But sometimes you just got to 0:00:29.640 --> 0:00:32.519 talk to King Kong or Godzilla and really, you know, 0:00:32.600 --> 0:00:35.680 touch base with them because they are so dominant. And 0:00:36.240 --> 0:00:38.479 black Rock is you know, the king of the hill, 0:00:39.200 --> 0:00:43.280 that's right, and the others being uh, Vanguard's also very big, 0:00:43.320 --> 0:00:46.440 state streets, really big. But Eric, what what is it 0:00:46.479 --> 0:00:50.400 about black rock and their approach to the ETF business? 0:00:51.280 --> 0:00:54.560 So one time I wrote an article that never got published, 0:00:54.640 --> 0:00:57.960 probably for the best. I sometimes write stuff that editors like, 0:00:58.040 --> 0:01:00.920 you can't put this out um where I compared every 0:01:00.920 --> 0:01:03.760 e t F fisher er to like a classic rock band, 0:01:04.520 --> 0:01:07.319 and I gave I shares to me or black rock 0:01:07.400 --> 0:01:10.000 was the Beatles, because you know how they covered every 0:01:10.000 --> 0:01:15.119 single genre. You know, they covered folk, rockabilly, they even 0:01:15.120 --> 0:01:19.000 had a little heavy metal blues. The Beatles would basically 0:01:20.240 --> 0:01:23.200 listen to anything and be able to recreate that sound 0:01:23.319 --> 0:01:25.840 and make it great. And so they had such an 0:01:25.840 --> 0:01:30.039 eclectic sound across their ten years of existence or twelve years. 0:01:30.520 --> 0:01:33.120 To me, that's I Shares. They are trying to be 0:01:33.160 --> 0:01:35.560 everything to everybody. They have a T F S that 0:01:35.640 --> 0:01:39.800 cover just about every single thing out there. They are 0:01:39.800 --> 0:01:43.840 looking to be a completely full service, full product shop. 0:01:44.200 --> 0:01:46.120 They've got thirty eight percent market share in the U 0:01:46.160 --> 0:01:50.240 S E. T F space and Vanguard is although climbing fast, 0:01:50.280 --> 0:01:53.280 so they're constantly battling with Vanguard. But then you take 0:01:53.320 --> 0:01:55.280 a bigger step back in black Rock is the biggest 0:01:55.280 --> 0:01:58.160 asset manager in the world with seven point four trillion. 0:01:58.520 --> 0:02:00.960 Now you said something in there that UM for the 0:02:01.040 --> 0:02:04.360 uninitiated can be a little confusing. There's black Rock and 0:02:04.400 --> 0:02:09.200 there's ICE Shares. What what the difference between those two brands? Right, 0:02:09.240 --> 0:02:11.720 So black Rock has a lot going on UM I 0:02:11.800 --> 0:02:15.120 forget the percentages, but I Shares is UM you know, 0:02:15.440 --> 0:02:20.679 below fifty of their UM revenue and assets. But it's 0:02:20.840 --> 0:02:24.000 I believe one of the fastest growing areas. Vanguard is 0:02:24.040 --> 0:02:26.160 the same way UM E T S. If if you're 0:02:26.720 --> 0:02:28.880 successful et f ISHO are guaranteed. That's one of the 0:02:28.880 --> 0:02:32.400 fastest growing areas for assets. But black Rock is a 0:02:32.480 --> 0:02:36.440 much bigger company. They serve, they have institutional management things 0:02:36.440 --> 0:02:38.680 like separate accounts that you don't even hear of. They 0:02:38.680 --> 0:02:41.760 have mutual funds UM, they even are starting to build 0:02:41.800 --> 0:02:46.040 up tech solutions. There are very creative, dynamic company, and 0:02:46.080 --> 0:02:49.800 what I always say about them is that they're the 0:02:49.840 --> 0:02:51.919 one company I feel that is able to go tote 0:02:51.919 --> 0:02:54.520 to tote to Vanguard, and Vanguard with that mutual innerstive 0:02:54.520 --> 0:02:58.200 structure is very difficult to compete with UM. That structure 0:02:58.200 --> 0:03:01.680 makes them lethal. But Rock, to me, has made a 0:03:01.720 --> 0:03:04.960 commitment to get into playing shape for what I call 0:03:05.040 --> 0:03:07.280 the Vanguardian future, and they've done a great job and 0:03:07.320 --> 0:03:11.200 they're able to really hold their own against Vanguard. And 0:03:11.240 --> 0:03:15.079 of course, black Rock acquired I Shares from Barkley more 0:03:15.080 --> 0:03:17.400 than a decade ago now, and that was sort of 0:03:17.480 --> 0:03:21.160 the firm's entry into the et F space. I always 0:03:21.200 --> 0:03:23.800 thought that when black Rock bought the I Shares brand 0:03:23.800 --> 0:03:26.520 from Barkley's back then, it was like the Louisiana purchase 0:03:27.080 --> 0:03:30.720 of asset Management. I'm still stunned that Barkley's would sell 0:03:30.720 --> 0:03:34.520 it like that, But then again, Barkley's I believe bought 0:03:34.560 --> 0:03:37.400 it back in the day for a ridiculously low amount 0:03:37.440 --> 0:03:40.200 from I think Morgan Stanley, which I believe they were 0:03:40.200 --> 0:03:43.120 called Webbs before that. And this is the early nineties, 0:03:43.200 --> 0:03:45.240 the really frontier era of e t F. So I 0:03:45.360 --> 0:03:47.760 shares has a long history going all the way back. 0:03:48.080 --> 0:03:50.600 But what made the black Rock purchase of I shares 0:03:50.680 --> 0:03:53.240 so good in my opinion, is they bought a lot 0:03:53.280 --> 0:03:56.200 of the most liquid ETFs in every category. So black 0:03:56.280 --> 0:03:59.080 Rock has a ton of the most liquid ETFs in 0:03:59.160 --> 0:04:02.160 certain category is and that gives them huge advantage, a 0:04:02.160 --> 0:04:05.120 little pricing power, and again it makes him a formidable 0:04:05.160 --> 0:04:09.040 competitor to Vanguard or anybody else. Joining us from black 0:04:09.120 --> 0:04:13.520 Rock Armando Senra, he's the managing director of black Rock, 0:04:14.120 --> 0:04:18.800 as well as Annie Massa, who's a asset management reporter 0:04:19.040 --> 0:04:26.000 with Bloomberg. This time on Trillion, a bunch of really 0:04:26.040 --> 0:04:31.080 important questions for black Rock. Armando, thanks so much for 0:04:31.160 --> 0:04:34.120 joining us on trillions. Great to be here. You guys 0:04:34.120 --> 0:04:35.920 are the biggest tt F fishure and I want to 0:04:36.200 --> 0:04:38.920 I want to start this going back to the month 0:04:38.960 --> 0:04:43.200 of March pre fed right when there's no bids on 0:04:43.240 --> 0:04:47.760 some treasuries. The market is completely in haywire mode. UM 0:04:47.880 --> 0:04:50.919 E t f s traded five point five trillion in March. 0:04:51.080 --> 0:04:53.960 That's normally what they trade in a quarter, right, so 0:04:54.240 --> 0:04:56.960 they were really put through the ringer. You had some 0:04:57.240 --> 0:05:01.040 bond price, bondy t F prices eating from the navy. 0:05:01.800 --> 0:05:04.800 I could imagine that your your phone was ringing off 0:05:04.839 --> 0:05:07.560 the hook. Talk to us about what it was like 0:05:07.600 --> 0:05:11.200 in March for you as the issuer of the E 0:05:11.279 --> 0:05:13.360 t f s, a lot of which were the most 0:05:13.400 --> 0:05:15.960 traded at the time. Yeah, thank you, Right, that's a 0:05:16.080 --> 0:05:18.800 that's a great question. It seems like March was a 0:05:18.880 --> 0:05:21.720 million years ago, but it's it's not that long ago, 0:05:21.880 --> 0:05:24.880 right that I've been in the industry for twenty six years, 0:05:24.920 --> 0:05:26.279 and I thought that I had seen a lot of 0:05:26.320 --> 0:05:30.320 different market events, but I've never seen anything like what 0:05:30.480 --> 0:05:32.880 we went through in March. And you know, beyond just 0:05:32.960 --> 0:05:36.440 what was happening in the financial markets, just the the 0:05:36.520 --> 0:05:39.760 human tragedy of everything that was happening around the world, 0:05:39.800 --> 0:05:43.120 and obviously the impact that was having on our employees, 0:05:43.400 --> 0:05:47.760 our clients, and so many people in the globe. UM. 0:05:47.800 --> 0:05:51.599 You know, definitely that was from a market's perspective, There 0:05:51.680 --> 0:05:55.919 was a tremendous amount of activity and that included, you know, 0:05:56.040 --> 0:05:59.279 just the volumes, like the way you describe them, were 0:05:59.360 --> 0:06:01.800 off the chart. And if you just look at the 0:06:01.920 --> 0:06:04.720 equity trading volumes whereas high as for you one percent, 0:06:04.920 --> 0:06:07.240 I mean, then then they ended up normalizing back to 0:06:07.279 --> 0:06:09.960 the twenties. But that there was a tremendous amount of 0:06:10.000 --> 0:06:13.000 outreach two clients. There was a tremendous amount of effort 0:06:13.160 --> 0:06:16.240 in within the portfolio engineering which is how we call 0:06:16.320 --> 0:06:20.479 our portfolio managers for UM, for our A t f S, 0:06:21.000 --> 0:06:23.760 really making sure that everything works and that we were 0:06:23.800 --> 0:06:27.000 able to deliver to clients the quality that they come 0:06:27.040 --> 0:06:30.039 to expect from I Suresh. And also you know, you 0:06:30.040 --> 0:06:32.120 you started we were talking about the discounts to an 0:06:32.120 --> 0:06:36.880 ad A tremendous amount of outreached two clients, both institutional clients, 0:06:36.960 --> 0:06:41.280 wealth clients, really working with them and helping them understand 0:06:41.400 --> 0:06:44.800 exactly what it is that was happening, what they we're 0:06:44.800 --> 0:06:47.640 seeing in the screens. And I think that you referred 0:06:47.680 --> 0:06:50.360 to an event that for us it was actually proved. 0:06:51.120 --> 0:06:53.680 It was kind of like the ultimate proof point of 0:06:54.360 --> 0:06:56.400 in this case. I think that you're probably referring to 0:06:56.440 --> 0:07:00.000 fixing committ as of the fact that fixing commydas were 0:07:00.040 --> 0:07:04.080 passing the past that we're working uh, and they were 0:07:04.120 --> 0:07:08.400 providing two investors the utility UH that that we always 0:07:08.440 --> 0:07:12.440 talked about, that we're providing liquidity that we're provided providing 0:07:12.480 --> 0:07:17.040 transparency in pricing. So all that was happening now the experience, 0:07:17.720 --> 0:07:19.440 depending on what you were sitting, you were all of 0:07:19.520 --> 0:07:22.920 a sudden seeing a big discount to Enevy that was 0:07:23.040 --> 0:07:26.120 ultimately the result of the A t F providing a 0:07:26.280 --> 0:07:31.320 glimpse to the actual pricing of the underlying securities because 0:07:31.360 --> 0:07:33.520 the the E t F was trading a lot more 0:07:33.760 --> 0:07:37.920 than the underlying box Amonda. One thing that really helped 0:07:38.080 --> 0:07:40.720 calm the nerves fixed in kind of E t F 0:07:40.920 --> 0:07:44.520 markets in that very tribulent period was knowing that the 0:07:44.520 --> 0:07:49.400 FED was stepping into backstop credit markets. And I wonder 0:07:49.440 --> 0:07:51.800 what do you think if you re around the clock 0:07:51.920 --> 0:07:55.559 and the FED hadn't stepped in, maybe as fast or 0:07:55.640 --> 0:07:58.560 with as much force as it did. What do you 0:07:58.560 --> 0:08:02.720 think might have happened with authorized participants and market participants? 0:08:02.720 --> 0:08:04.640 How do you think things might have gone if the 0:08:04.720 --> 0:08:07.880 FED hadn't acted as quickly as it did. Sure, Annie, 0:08:08.400 --> 0:08:10.240 I think that Look, if I think that what is 0:08:10.280 --> 0:08:12.360 most important to me is when you think about the 0:08:12.400 --> 0:08:15.760 events in March UH and when you think about what 0:08:15.880 --> 0:08:20.080 was happening with with credit markets. Ultimately e t f 0:08:20.200 --> 0:08:24.040 s were delivering the performance, They were delivering the liquidity, 0:08:24.080 --> 0:08:27.480 and I think that that was validating the instrument as 0:08:27.520 --> 0:08:30.400 a great way to gain exposure to the bond market. 0:08:30.880 --> 0:08:33.679 And I think that whether it's the FED, whether it's 0:08:33.679 --> 0:08:36.840 central banks in all the places around the world, whether 0:08:36.840 --> 0:08:40.640 it's institutional investors, whether it's wealth investors, I think that, 0:08:40.800 --> 0:08:42.880 you know, the performance that e t f s, that 0:08:43.000 --> 0:08:46.840 fixing committee s were delivering is what gives the ultimate 0:08:46.880 --> 0:08:49.760 validity to the instrument. So I think that we can 0:08:49.840 --> 0:08:51.920 speculate what would have happened if they fed that I 0:08:51.960 --> 0:08:54.040 don't know. What I can tell you is that it 0:08:54.120 --> 0:08:55.880 was not. I think that e t f s were 0:08:55.920 --> 0:08:59.600 performing before the FED step in UH and I think 0:08:59.640 --> 0:09:01.760 all theo at me, Yes, the father step in, and 0:09:01.800 --> 0:09:04.920 obviously that added validity due to the instrument. But they 0:09:05.520 --> 0:09:09.679 ultimately investors, both institutional investors and wealth investors that were 0:09:09.760 --> 0:09:12.520 getting the benefit that we have been talking about for 0:09:12.559 --> 0:09:16.600 many years around fixing commuts. The mutual fund world is 0:09:16.800 --> 0:09:20.720 was I felt wasn't covered as much. But active fixed 0:09:20.720 --> 0:09:25.080 income mutual funds it's seen ninety billion dollars and outflows 0:09:25.120 --> 0:09:28.480 two straight weeks. Everybody thinks e t f s would 0:09:29.040 --> 0:09:31.880 will freeze up in this kind of situation, but we 0:09:32.000 --> 0:09:34.760 speculated that if these fixed income mutual funds, which are 0:09:34.800 --> 0:09:38.040 much bigger, had to sell bonds into an a liquid 0:09:38.040 --> 0:09:41.480 market and then had more outflows, it would create a 0:09:41.480 --> 0:09:45.200 downward spiral where you might actually have mutual funds freezing up, 0:09:45.200 --> 0:09:49.360 halting redemptions, and it could have just gotten really nasty 0:09:49.440 --> 0:09:53.079 for a while before it got better. We can spend 0:09:53.080 --> 0:09:55.400 a lot of time speculating many things that could have 0:09:55.440 --> 0:09:58.160 happened on how they could have been I think ultimately, 0:09:58.240 --> 0:10:03.480 I think, look, March was a moment of like stress 0:10:03.520 --> 0:10:06.560 that we have never seen before March. Whenever I was 0:10:06.600 --> 0:10:09.480 in similar forms like this one, I was talking about 0:10:09.480 --> 0:10:12.679 what happened in December of two thousand nineteen, or we 0:10:12.679 --> 0:10:15.599 were talking about what was happening in different crisis is 0:10:15.760 --> 0:10:20.120 in the last ten years, UH and throughout all of those. Ultimately, 0:10:20.360 --> 0:10:23.559 these instruments work and if you're an investor and you 0:10:23.600 --> 0:10:26.400 were looking for liquidity, and all of a sudden, you 0:10:26.400 --> 0:10:30.440 look at instruments like l QD was trading was changing 0:10:30.520 --> 0:10:35.080 hands ninety thousand times. On March twelve, the five top 0:10:35.120 --> 0:10:39.240 holdings inside the LQUV traded hands thirty seven times. You 0:10:39.280 --> 0:10:41.680 look at h y G, that was a hundred and 0:10:41.720 --> 0:10:45.360 sixty eight thousand times each day, uh, during the months 0:10:45.360 --> 0:10:47.360 of March. So again you know, like you look at 0:10:47.360 --> 0:10:50.760 the utility that thep have provided to the investor and 0:10:50.840 --> 0:10:54.079 ultimately provided that liquidity when they were looking for liquidity. 0:10:54.160 --> 0:10:56.440 Now the discount to n a V. Look, if you 0:10:56.480 --> 0:10:59.080 needed the liquidity, you could have it. It was giving 0:10:59.120 --> 0:11:01.280 you the pricing that you can get at that point. 0:11:01.320 --> 0:11:05.000 It was providing pricing and it was providing liquidity. And 0:11:05.040 --> 0:11:07.480 I think, look, that's why we've seen the tremendous flows 0:11:07.520 --> 0:11:09.640 and no, Eric, you follow it closely, we've seen the 0:11:09.640 --> 0:11:13.560 tremendous influence into fixing comedias globally. Right. So I'm not 0:11:13.559 --> 0:11:16.559 going to speculate what would have happened at this Ultimately, 0:11:16.600 --> 0:11:19.320 I leave it up to you to write that. Okay, 0:11:19.360 --> 0:11:23.840 fair Um, So one difference about sort of this crisis 0:11:23.840 --> 0:11:27.880 and and moment of stress has been black Rock has 0:11:27.960 --> 0:11:31.200 actually become very close with the FED in terms of 0:11:31.360 --> 0:11:35.840 facilitating UM some of the nuances of what's happening in 0:11:35.840 --> 0:11:38.520 the et F marketplace. You know, any wrote about that 0:11:38.640 --> 0:11:41.680 for for us at Business weekn We actually created a 0:11:41.720 --> 0:11:44.880 piece of art that looks like a government seal, excepted 0:11:44.880 --> 0:11:48.240 it as Department of black Rock on it. And I'm curious, Armando, like, 0:11:48.280 --> 0:11:50.920 what do you guys think of that? Look. I think 0:11:50.920 --> 0:11:54.400 that you know as Matt about the FED program as 0:11:54.440 --> 0:11:57.959 I do. I think that you know very well that 0:11:58.040 --> 0:12:01.800 our financial markets advisory group in within black Rock is 0:12:01.800 --> 0:12:05.920 a completely independent group separated. They have their own traders, 0:12:05.920 --> 0:12:10.120 their own portfolio managers, is completely independent from from the 0:12:10.160 --> 0:12:12.480 rest of black Rocks. So I mean, like, I know 0:12:12.559 --> 0:12:15.160 as much about it as you do. I think that ultimately, 0:12:15.160 --> 0:12:17.160 when you look at the flows, I think that sometimes 0:12:17.200 --> 0:12:21.600 that gets lost. Uh. They have been obviously, you know, 0:12:21.640 --> 0:12:24.840 there's a FED purchase program. Uh some of the dfs 0:12:24.840 --> 0:12:28.000 that they have thought have been black Rock UM. But 0:12:28.360 --> 0:12:32.000 ultimately that's just a small piece compared to the overall 0:12:32.080 --> 0:12:36.000 flow that we have seen coming in into fixing communts. Yeah, 0:12:36.080 --> 0:12:38.560 and you know it's interesting. I look at the FEDS 0:12:38.559 --> 0:12:41.520 E t F portfolio and to me, it looks like 0:12:41.720 --> 0:12:45.920 an E t F strategists portfolio, not what you typically 0:12:45.920 --> 0:12:49.320 see from a large institution. So there's an E t 0:12:49.480 --> 0:12:52.400 F no how because you've got like twelve thirteen ETFs 0:12:52.440 --> 0:12:55.080 in here, including stuff like U, S, H, y A, 0:12:55.280 --> 0:12:57.680 n g L, stuff that's deeper in the toolbox that 0:12:57.720 --> 0:13:00.160 we we like, but like a Yale universe, so you 0:13:00.200 --> 0:13:03.080 would never go that deep. So it's interesting to see 0:13:03.080 --> 0:13:06.560 the FED do this, and they they didn't really create 0:13:06.880 --> 0:13:11.200 any disruptions in trading, so I thought it was pretty 0:13:11.280 --> 0:13:15.000 much Scalpel level precision in how they did this. I'll 0:13:15.000 --> 0:13:19.640 pass it off to Annie to talk for flows. Yeah, unflows, Armando, 0:13:19.840 --> 0:13:22.520 So I think that, Um, I'm sure GTFS took in 0:13:22.600 --> 0:13:26.640 about fifty one billion UM in that flows last quarter. 0:13:27.400 --> 0:13:31.160 What was driving that? Like underneath that broader figure, what 0:13:31.320 --> 0:13:34.240 kinds of products were driving those? Yeah? I mean, look, 0:13:34.320 --> 0:13:36.960 it's um the last couple of months, it's been great 0:13:37.000 --> 0:13:38.840 to see the flows back. I mean now you're to 0:13:38.920 --> 0:13:43.280 date were close to sixty UM. Just the last month, 0:13:43.559 --> 0:13:46.719 it's been close to twenty billion in flows. Uh. If 0:13:46.840 --> 0:13:49.440 if you see the beginning of the year. Obviously there 0:13:49.559 --> 0:13:52.440 was well, the beginning of the year started as what 0:13:52.520 --> 0:13:55.040 could have been a record year of flows, and then 0:13:55.040 --> 0:13:58.880 obviously you know, market events derail that, especially you know 0:13:59.000 --> 0:14:02.120 like market driven instruments, right, the type of instruments that 0:14:02.160 --> 0:14:04.880 when investors are trying to take risk of the table 0:14:04.960 --> 0:14:07.480 they use and you know, we have the breadth of 0:14:07.559 --> 0:14:11.960 our product really provides the utility to investors. I think 0:14:12.000 --> 0:14:16.200 that you've seen tremendous growth in fixing committeeps. That is 0:14:16.280 --> 0:14:18.160 we already talk a lot about it, but that that 0:14:18.240 --> 0:14:21.200 has been one of the the key areas of flows. 0:14:22.000 --> 0:14:25.760 You've seen tremendous growth, also sustainable just in the in 0:14:25.800 --> 0:14:28.920 the first quarter more than the whole year of last year, 0:14:29.360 --> 0:14:33.680 and we are in record flows. Our Factors franchise was 0:14:33.720 --> 0:14:37.520 pretty stable given the the outlaws that we saw overall 0:14:37.560 --> 0:14:40.160 in Factors. So I would say when when you think 0:14:40.160 --> 0:14:43.280 of the strategic segments, that that what we call is 0:14:43.360 --> 0:14:46.400 to the segments of black Rock, a lot of strength 0:14:46.520 --> 0:14:52.040 beginning with fixing committees. Since then is beginning to change, right, 0:14:52.040 --> 0:14:55.520 You're beginning to see more equity flows, You're beginning to 0:14:55.560 --> 0:14:58.520 see what would be the beginning of flows back into 0:14:58.560 --> 0:15:02.800 international markets, primarily developed markets, Like you're beginning to see 0:15:02.800 --> 0:15:08.960 investors putting money back on international um. You know, specific 0:15:09.120 --> 0:15:13.120 countries at times, like you're beginning to see how investors 0:15:13.120 --> 0:15:15.880 are more some of the flows are more specific as 0:15:15.880 --> 0:15:18.200 to the country that they are going in as supposed 0:15:18.240 --> 0:15:24.040 to broad UH international exposure, Like we had significant flows 0:15:24.080 --> 0:15:28.520 into Germany our Black Rock Investment Institute UH started turning 0:15:28.560 --> 0:15:32.160 positive to UH to Europe on the back of a 0:15:32.200 --> 0:15:35.600 better response from COVID and the beginning of restarting of 0:15:35.720 --> 0:15:38.880 the economy. So you're beginning to see those flows coming 0:15:38.880 --> 0:15:42.400 in in the last few weeks as well. So Armando, UM, 0:15:42.440 --> 0:15:44.840 I want to ask a little bit about competition. UM. 0:15:44.880 --> 0:15:48.040 You know, I Shares such a story brand in the 0:15:48.080 --> 0:15:50.760 e t F space, but not the only one UM. 0:15:50.840 --> 0:15:54.640 And you know Vanguard in particular has become Between I 0:15:54.760 --> 0:15:59.560 Shares and Vanguard. That's something like Eric says, seventy two 0:15:59.600 --> 0:16:02.760 percent of e t F flows in the past three years. 0:16:03.160 --> 0:16:06.640 You guys have really just become these these behemoths really 0:16:06.640 --> 0:16:10.120 in the space. And I'm wondering who's King Kong and 0:16:10.120 --> 0:16:15.480 Who's Godzilla. That's up to you to decide. There there there. 0:16:16.200 --> 0:16:19.680 They're both big, So what's the difference. Look, I mean 0:16:19.720 --> 0:16:22.600 I think that our we have a very differentiated business model. 0:16:22.680 --> 0:16:24.200 I mean I think that I'll go back to what 0:16:24.280 --> 0:16:27.000 I said at the beginning. You know, I shares is 0:16:27.000 --> 0:16:30.320 not one thing ultimately. Uh. You know, when you look 0:16:30.360 --> 0:16:34.080 at how we think of product segments, we have breath 0:16:34.080 --> 0:16:38.240 of product, different uses for different investors. We have a 0:16:38.360 --> 0:16:44.280 very strong institutional um client base. Uh, and doesn't take difference. 0:16:44.320 --> 0:16:47.240 And you know, you clearly see that volatility when you 0:16:47.280 --> 0:16:51.480 have moments where is a risk on or risk off. 0:16:52.080 --> 0:16:53.720 But again, you know, like I think that is our 0:16:53.800 --> 0:16:57.840 differentiative business model to provide a breath of product across 0:16:58.040 --> 0:17:02.200 different investors and different uses. Uh. That's that's what we do. 0:17:02.400 --> 0:17:05.199 And you can ask bangor about what they do, but 0:17:05.320 --> 0:17:07.399 that's at the core of what we're intending to do 0:17:07.560 --> 0:17:11.800 is really facilitate better portfolio construction through our thrower outprea. 0:17:12.640 --> 0:17:14.520 I call the E T F industry the terro dome. 0:17:14.760 --> 0:17:17.560 It is not for the faint of heart. And you know, 0:17:17.600 --> 0:17:20.040 this year, Vanguard has a little bit of a lead 0:17:20.040 --> 0:17:22.920 and flows although they've been doing some shifting from their 0:17:23.040 --> 0:17:25.080 mutual fund to their e t F, So I'd say 0:17:25.119 --> 0:17:28.560 maybe thirty billion ish might be that maneuver the rest natural. 0:17:28.560 --> 0:17:30.600 But anyway, you guys are always neck and neck, right, 0:17:31.320 --> 0:17:33.359 Um you cut the fee in I VV which is 0:17:33.359 --> 0:17:35.960 your smp f F I think a month ago to 0:17:36.119 --> 0:17:39.080 three basis points to tayvoo, I guess just talk a 0:17:39.080 --> 0:17:41.640 little bit about what's behind that, and just more generally 0:17:42.040 --> 0:17:46.040 the idea of competing against the vanguard or competing against 0:17:46.040 --> 0:17:49.919 you guys and getting into this playing shape where you 0:17:50.000 --> 0:17:53.520 have to sort of cannibalize yourself to survive, and how 0:17:53.600 --> 0:17:56.679 useful that might be in ten years when you know, 0:17:56.920 --> 0:18:00.439 post a bear market where a lot of consolidation, Do 0:18:00.480 --> 0:18:02.000 you look at it that way? Do you look at 0:18:02.000 --> 0:18:05.520 it is like getting yourself into the best possible shape 0:18:05.560 --> 0:18:09.360 for a rougher future for asset management. When you think 0:18:09.359 --> 0:18:13.200 about our pricing, we've been really consistent. We have been 0:18:13.359 --> 0:18:16.159 very vocal around we're going to invest in pricing somewhere 0:18:16.160 --> 0:18:17.560 around one and a half to two and a half 0:18:17.560 --> 0:18:20.560 per center of revenue. But we invest for growth. So 0:18:20.640 --> 0:18:24.560 when we invest in pricing is for the potential of 0:18:24.600 --> 0:18:28.080 growth more than will overcome the loss of revenue of 0:18:28.160 --> 0:18:30.119 the cat so when you look at what we did 0:18:30.160 --> 0:18:32.600 in IVV a few years ago, we tripled the size 0:18:32.640 --> 0:18:35.280 of the fund since then. When you look at what 0:18:35.320 --> 0:18:37.840 we are doing in IVV now, again, we're doing it 0:18:37.880 --> 0:18:40.800 because we want as UM the IVV a spl if 0:18:40.800 --> 0:18:43.439 I founder the exposure to be the largest one in 0:18:43.480 --> 0:18:46.840 the world. So we do it for growth. UM. So 0:18:46.920 --> 0:18:49.120 I think that every you know, ultimately, when you look 0:18:49.160 --> 0:18:53.439 at the industry is extremely competitive, all IPPs. When you 0:18:53.480 --> 0:18:56.560 look at the alternatives in the active world, epps are 0:18:56.600 --> 0:18:59.359 extremely competitive. So again, you know, I think that you've 0:18:59.359 --> 0:19:03.119 gotta be thinking about our pricing right now. Whenever we 0:19:03.280 --> 0:19:06.160 cat is because we want to grow. Over the last 0:19:06.200 --> 0:19:09.200 few years, we have returned back to the investors somewhere 0:19:09.240 --> 0:19:12.399 around six d million dollars in UM and fed cats 0:19:12.800 --> 0:19:16.200 in voluntary ficcats that we have introduced, and every single 0:19:16.240 --> 0:19:18.960 one of those moves was intended to grow our asset 0:19:19.040 --> 0:19:29.120 dates and our revenue base. Armando. One thing that has 0:19:29.160 --> 0:19:31.840 been highlighted in the past couple of quarters are flows 0:19:31.880 --> 0:19:34.480 into E S G E T s and in particular 0:19:34.480 --> 0:19:38.240 in the sustainable suite of products at black Rock, and 0:19:38.359 --> 0:19:40.280 it's something where I think mentioned in his letter at 0:19:40.320 --> 0:19:42.840 the top of the year about wanting to double the 0:19:42.920 --> 0:19:45.640 number of I shares M E s G, E T S. 0:19:46.000 --> 0:19:50.000 So what do you think is behind those flows? Is 0:19:50.000 --> 0:19:53.160 there anything more than meets the I with just customer 0:19:53.640 --> 0:19:56.919 preferences shifting and then as you think about what to 0:19:57.000 --> 0:19:59.800 develop and what hasn't already been picked over as far 0:20:00.000 --> 0:20:04.520 as new products in the sustainable space, you know where 0:20:04.600 --> 0:20:09.520 is your head up sustainable and E s G we're 0:20:09.560 --> 0:20:12.960 extremely excited about at the firm and also in within 0:20:13.040 --> 0:20:16.800 ashres um. You mentioned flows. I think that this year 0:20:16.840 --> 0:20:20.919 alone as it flows were around eleven billion. If you 0:20:20.960 --> 0:20:22.960 look at the whole year of two thousand and nineteen 0:20:23.119 --> 0:20:26.040 were around five billion for the full year UH. And 0:20:26.080 --> 0:20:28.879 we already thought that Lazio was an inflection point and 0:20:28.920 --> 0:20:31.240 all the point that that I think it's interesting is 0:20:31.280 --> 0:20:35.080 when you look at this year, Europe was heading flows 0:20:35.280 --> 0:20:40.479 into sustainable investing overall, not just TPFs UH. This year 0:20:40.560 --> 0:20:44.320 actually in within a hears we're seeing more flows coming 0:20:44.320 --> 0:20:48.840 into E s G from US investors. Why is that happening? 0:20:48.920 --> 0:20:52.440 I think that they change in the narrative and they've 0:20:52.600 --> 0:20:56.480 been more clear around investing and sustainable investing in E 0:20:56.600 --> 0:21:01.080 s G is not about values. Uh about value, is 0:21:01.119 --> 0:21:05.439 about the recognition that ultimately E s G related risks 0:21:05.920 --> 0:21:08.600 in a portfolio will have a significant impact in asset 0:21:08.680 --> 0:21:12.240 pricing in capital ocasions. I think that it's also interesting 0:21:12.640 --> 0:21:14.800 some of the things that we've seen this year. There 0:21:14.840 --> 0:21:17.840 was a lot of emphasis on on the E on climate. 0:21:18.320 --> 0:21:21.119 I think that this year that has also expanded to 0:21:21.320 --> 0:21:25.720 more focused from investors, both institutional and wealth investors on 0:21:25.800 --> 0:21:31.240 the S and the G, society and governance, and especially 0:21:31.240 --> 0:21:33.760 on the back of some of the events that you've 0:21:33.800 --> 0:21:37.560 seen this year, how companies treat their employees, the composition 0:21:37.600 --> 0:21:42.119 of their of their boards, the diversity in the firm. 0:21:42.240 --> 0:21:45.000 I think that there's these are factors that more and 0:21:45.080 --> 0:21:48.439 more investors will focused on. Okay, Ormando, I am the 0:21:48.680 --> 0:21:50.880 s G skeptic. The three things I would push back 0:21:50.920 --> 0:21:53.720 on s G in general are with the flows. I 0:21:53.720 --> 0:21:56.960 think the media characterizes it as like millennials have E 0:21:57.119 --> 0:22:00.119 s G fever, But half of the flows are our 0:22:00.560 --> 0:22:04.280 model portfolios, which they still count. But it's one hand 0:22:04.320 --> 0:22:08.240 moving the money there, and the institutional seating again still counts. 0:22:08.280 --> 0:22:12.200 Everything counts in the terra dome, but half his grassroots organic, 0:22:12.320 --> 0:22:15.000 and that's not a ton given the hype. Second point, 0:22:15.560 --> 0:22:17.720 E s G largely is a bet on tech and 0:22:17.760 --> 0:22:20.199 against the energy. So it's almost like the mouth of 0:22:20.200 --> 0:22:23.280 an alligator. If energy has a supply shock, E s 0:22:23.280 --> 0:22:26.880 G could be heard and will people be disappointed by that? 0:22:27.520 --> 0:22:29.600 And then the third issue is E s G U, 0:22:29.720 --> 0:22:31.960 which is the biggest one, that's your I think it's 0:22:31.960 --> 0:22:34.359 like seven billion at this point. Um you know it 0:22:34.400 --> 0:22:36.800 owns Facebook and Exon. It's sort of like diet E 0:22:37.000 --> 0:22:39.560