Speaker 1: This is mesters in business with very results on Bloomberg Radio.
Speaker 1: This week. On the podcast, I have an extra special guest.
Speaker 1: Luis Paruga, has a fascinating career as both a tech
Speaker 1: wizard and investment banker before becoming CEO of global X
Speaker 1: e t f s. They are a forty billion dollar
Speaker 1: thematic E t F shop that have some of the
Speaker 1: most interesting E t F s UH that are out there. Sure,
Speaker 1: most of the industry are passive giant UH e t
Speaker 1: f s from the likes of Vanguard and Black Rock
Speaker 1: and State Street, but the space that those shops don't
Speaker 1: play in are coming up with ideas for themes that
Speaker 1: allow investors to focus on a very specific idea within
Speaker 1: the world of investor thing and we discuss everything from
Speaker 1: their founder run company E t F. I love the
Speaker 1: stock symbol BOSS to lithium two covered coal writing within
Speaker 1: NASDAK and SNP wind Power, just on and on. They
Speaker 1: have uranium, just really fascinating ideas that allow investors to
Speaker 1: express their investment themes in a very specific, fairly low cost,
Speaker 1: professionally managed e t F. I found the conversation fascinating
Speaker 1: and I think you will also if you're at all
Speaker 1: interested in E t F s and thematic investing in
Speaker 1: looking at the world through a somewhat different perspective than
Speaker 1: what we assume is standard from the giant E t
Speaker 1: F companies. I think you'll find this to be really
Speaker 1: an intriguing conversation. With no further ado. My interview of
Speaker 1: global X CEO Louise Baruga. Thank you for having me Berry.
Speaker 1: So let's talk a little bit about your background. Before
Speaker 1: you joined Global Acts, you were an investment banker at Jefferies.
Speaker 1: You advised on M and A and investures and capital raises,
Speaker 1: and before that, Morgan Stanley doing technology and operations planning
Speaker 1: for the Wealth and Asset Management Group discussed that background
Speaker 1: and how does that lead up to a career in
Speaker 1: E t S? You know, great questions. So, yeah, I
Speaker 1: had a career in investment banking with Jeffries and it
Speaker 1: was a really good professional experience because I did have
Speaker 1: the opportunity to work in M and A, equity and
Speaker 1: dead financing. I had a chance to be part of
Speaker 1: somebody interesting transactions in the banking space. I did in
Speaker 1: two thousand thirteen banking transaction that the market had seen
Speaker 1: since the Financial crisis. It was at two point four
Speaker 1: billion dollar deal, and that was a very interesting experience
Speaker 1: because it really allowed me Berry to understand this like
Speaker 1: cology behind MNE, which it came in very, very handy
Speaker 1: later on in the context of of Global lex Um.
Speaker 1: From the standpoint of Morgan Stanley was the earlier part
Speaker 1: of my career and it's a great company, a great
Speaker 1: group of people. I I would be forever thankful to
Speaker 1: to the guys that Morgan Stanley because they gave me
Speaker 1: the first opportunity to work to get a full time
Speaker 1: job in the U S when I first moved from
Speaker 1: from Spain, and I learned alot because I spent a
Speaker 1: lot of time with financial advisors, which as you know,
Speaker 1: is a key segment of our client base today. So
Speaker 1: phenomenal learning experience with both Jefferis and Morgan Stanley. So
Speaker 1: you move here from Spain. What is the financial advice
Speaker 1: world like in Europe? What's it like in Spain? It
Speaker 1: has to be such a different set of the retirement
Speaker 1: planning is different, the safety and that that it's different. What's
Speaker 1: the finance industry like in Spain? It's fundamentally different. First
Speaker 1: of all, I think the amount of investors and participate
Speaker 1: in the financial markets is much smaller than it is
Speaker 1: in the US, and I think that the financial advisors
Speaker 1: are used, but not as widely used as they are
Speaker 1: in the US. And definitely the retail market participation is
Speaker 1: significantly lower than you can see in the in the
Speaker 1: U S. But I think it's definitely changing very because
Speaker 1: you know, you say, more and more fintech platforms and
Speaker 1: robo advisors that in a way are making access in
Speaker 1: financial markets easier for more and more investors in Spain.
Speaker 1: And also I think there are a few dynamics specifically
Speaker 1: in Spain where people are really concerned about the sustainability
Speaker 1: of the traditional pension plans. People in Spain when I
Speaker 1: was growing up in the eighties and nineties, they expect
Speaker 1: to just retire and and have the government give them
Speaker 1: like a pay check every month. And I think people
Speaker 1: are realizing that it's becoming more and more challenging over time.
Speaker 1: So that's incentivizing more and more investors in Spain to
Speaker 1: participate in the financial markets, which I think is really positive.
Speaker 1: So you joined Global Accent What led you to them?
Speaker 1: From Jefferies great questions? So I guess a couple of
Speaker 1: things up until that point, Berry, I was I had
Speaker 1: worked only for really big companies Morgan Instantly and Jeffrey,
Speaker 1: so I was definitely looking for something more entrepreneurial. One
Speaker 1: of my biggest frustrations with working at a big company
Speaker 1: is that they tend to be very bureaucratic. It takes
Speaker 1: a lot to get things done. So I was definitely
Speaker 1: looking for something more entrepreneurial where I could see more
Speaker 1: of an impact of my contributions in the actual output
Speaker 1: of of the business. So I was definitely one of
Speaker 1: the key drivers. And then the other driver Berry was
Speaker 1: that I I saw the potential of the ETF industry.
Speaker 1: Quite frankly, I was already an investor in e t
Speaker 1: f s at that point in time. I remember telling myself,
Speaker 1: why would anyone invest in mutual funds when you can
Speaker 1: buy an e t F instead. You have deliquently did
Speaker 1: the tax efficiency, the transparency, and I did the math,
Speaker 1: and I think at that point in time, roughly speaking,
Speaker 1: assets in it t s were roughly just ten T
Speaker 1: of assets in mutual funds, and I was pretty convinced
Speaker 1: that number was increased significantly. So I saw the opportunity
Speaker 1: and that when global X came along and where are
Speaker 1: we know what percentage of the assets are in e
Speaker 1: t F relative to mutual funds right now? I think
Speaker 1: around thirty three or thirty four percent, so tripled since
Speaker 1: you joined global and I think that trend, quite frankly
Speaker 1: berry is accelerating, and my view is that it's going
Speaker 1: to continue to to increase even faster. I think there
Speaker 1: are many catalysts, lots of mutual funds to e t
Speaker 1: s that we're seeing in the market. I think for
Speaker 1: the one K plans are starting to use it t
Speaker 1: F more more broadly, and then some of the new
Speaker 1: changes around you know how you can do actively manage
Speaker 1: the strategies in the context of an ETF. I think
Speaker 1: that's going to accelerate the adoption of a d F significantly.
Speaker 1: Our mutual friend Dave Nodded has joked that if mutual
Speaker 1: funds came out today, they would never be approved by
Speaker 1: the SEC. What do you mean you share capital gains
Speaker 1: with people who haven't sold. That's a terrible idea, and
Speaker 1: clearly E t F s UH cleaned that up. Um. So,
Speaker 1: not only has the E t F industry been gaining momentum,
Speaker 1: but global X has really grown. You're now just about
Speaker 1: forty billion dollars in a very challenging year. Tell us
Speaker 1: what led to this growth? What what's made you guys
Speaker 1: as successful as you've become from a much smaller base
Speaker 1: a decade ago. Yeah, I mean, it's been a beautiful ride,
Speaker 1: to be honest. I joined Global Eggs in two thousand
Speaker 1: and fourteen and we have, if I remember correctly, approximately
Speaker 1: one and a half billion dollars in au M. I
Speaker 1: was employee number ten and for all intents and purposes,
Speaker 1: Bury we were to startup. I mean when I joined,
Speaker 1: I didn't have a computer for ten days, so you
Speaker 1: had a limit of that link. So fast forward to
Speaker 1: where we are today. We have over forty billion dollars
Speaker 1: in assets under management, we have two hundred employees, and
Speaker 1: we have a local presence in all of the major
Speaker 1: markets around the world. And and to your point, I
Speaker 1: think there are two main drivers of that growth. One
Speaker 1: is our leadership in thematic investing is an area that
Speaker 1: we've been very focused on. And the second aspect of
Speaker 1: our strategy that has been very very helpful is our
Speaker 1: global expression. We do believe the growth of the ATF
Speaker 1: industry is not just an U s phenomenon is a
Speaker 1: global phenomenon, and we want to be able to service
Speaker 1: our kinds in all regions of the world. So let's
Speaker 1: talk about the thematic side of it. When it comes
Speaker 1: to passive, there are obviously three giants. It's Vanguard, Black
Speaker 1: Rock and State Street, and then there's everybody else. But
Speaker 1: the thematic side seems to be wide open. Is that
Speaker 1: the thinking, Hey, here's here's some open fields. Let's let's
Speaker 1: see what we can do here and leave the behemoth
Speaker 1: to charge four bibs on a SMP five or a
Speaker 1: total market funds. Yeah. I mean that's a great point.
Speaker 1: And I give you a little bit of the history
Speaker 1: of global legs because I think it's very relevant. Think
Speaker 1: about the two founders of global Lex, Bruno and Jose
Speaker 1: They set up global Lex in two thousand eight, and
Speaker 1: from my tandpoint, you have to be a little bit
Speaker 1: crazy to start in the sure business, and they didn't
Speaker 1: have much capital and enter the e F industry to
Speaker 1: compete with the large, the largest ASSEM managers in the world.
Speaker 1: But I think they did something very well. From the
Speaker 1: very beginning, they realized that the most effective way to
Speaker 1: compete was through innovation and That's why very early on
Speaker 1: they focused on on thematic investing and they launched which
Speaker 1: I believe is the first thematic e t F in
Speaker 1: the U S which was our Global Lex Lithium and
Speaker 1: battery technology exactly exactly, And and that's a big fun
Speaker 1: that's a three or four billion dollars something like that. Yeah,
Speaker 1: I mean twelve years later. It wasn't like that at
Speaker 1: the beginning, but twelve years later it's now going to
Speaker 1: be yet roughly speaking, around four billion dollars in assets
Speaker 1: and a very successful strategy. So what I told the
Speaker 1: friend I was interviewing you, He says, why does the
Speaker 1: world really need another e t F provider? And my
Speaker 1: answer was, Hey, not everybody wants to buy a passive
Speaker 1: index around the satellite of a core portfolio, or even
Speaker 1: just hey I have an idea. I think this is
Speaker 1: going to change the world. Is that the clients you're
Speaker 1: aiming for? Is that who the global X investor is? Yeah,
Speaker 1: I mean gad Franco. We have institutional investor, we have
Speaker 1: financial advancetors, we have retail clients. But I think the
Speaker 1: main reason behind the success and the growth of amatic
Speaker 1: investing is I think it's pretty straightforward, and the world
Speaker 1: very is changing at the fastest space that we have
Speaker 1: seen at any point in history. And what I see
Speaker 1: from more investors is that they don't think the traditional
Speaker 1: and traditional investment approach of looking at historical data to
Speaker 1: predict future returns is no longer enough. Many financial advisors
Speaker 1: and clients are telling us that an investment approach that
Speaker 1: looks into the future is needed, and that's where thematic
Speaker 1: investing comes into play. And I always use the exact
Speaker 1: same example. How you invest in in Google or in
Speaker 1: Facebook in two thousand three. You only invest in those
Speaker 1: companies if you are taking an investment approach that is
Speaker 1: looking into the future, because those business models, those products,
Speaker 1: those services simply didn't exist. And I think for our standpoint,
Speaker 1: thematic investing is the approach that allows investors to do
Speaker 1: just that makes sense to me. Let's talk about some
Speaker 1: of your more popular e t f s. But before
Speaker 1: we drill down on to some of my favorites, I
Speaker 1: have to ask where these ideas come from. Some of
Speaker 1: these are really unusual, different, innovative. How do you guys
Speaker 1: come up with the theme for a new ETF? Great question,
Speaker 1: and I mean I guess it comes down to our
Speaker 1: proud development and our research team. Right now, we have
Speaker 1: a team very of over thirty research analysts located all
Speaker 1: over the world, and basically all they do is looking
Speaker 1: at these trends, talking to industry consultants, industry participants, and
Speaker 1: CEOs to really try to get a sense of where
Speaker 1: like the most relevant emerging trends are. And once we
Speaker 1: have at any point in time, we can have anywhere
Speaker 1: between twenty two thirty things that we're looking at. And
Speaker 1: then in terms of how we decide what things we
Speaker 1: eventually bring to market, we apply like a very simple
Speaker 1: but it's still robust framework that we have developed over
Speaker 1: the last fourteen years. We look at three things. We
Speaker 1: look at conviction, we look at investability, and we look
Speaker 1: at a time horizon. And let me explain that a
Speaker 1: little bit. Conviction, so we look at, you know, whether
Speaker 1: or not a specific theme is something that we have
Speaker 1: a high degree of conviction that will be a trend
Speaker 1: that will definitely have an impact in the economy over
Speaker 1: the next two or three decades. We look at decades,
Speaker 1: two or three decades, so we're not interesting interested in
Speaker 1: any that is kind of like popular for a couple
Speaker 1: of years, and I'll get to that in just one second.
Speaker 1: We're literally looking for the structural shifts in the economy.
Speaker 1: Think of robotics and artificial intelligence, cyber security, cloud competing.
Speaker 1: So that's the first step that we as a group
Speaker 1: try to assess our level of conviction about a given theme.
Speaker 1: Then the second step, which is very important, is investability.
Speaker 1: We need at least twenty five to thirty companies to
Speaker 1: be able to launch an e t F, so that's
Speaker 1: a minimum thirty count from a diversification standpoint, I think
Speaker 1: that's that's the recommended ex sense minimum amount of companies.
Speaker 1: And then finally we look at time horizon to your
Speaker 1: earlier point. Very we are not interested in trends that
Speaker 1: will be popular for a couple of of years. We
Speaker 1: are literally looking at disruptive and structural shifts in the
Speaker 1: economy that in some cases can take decades to play out.
Speaker 1: That's how we think about thematic investing. So one of
Speaker 1: my pet theories is that half the battle for e
Speaker 1: t S attracting assets is the ticker. If you have
Speaker 1: a catchy ticker, you halfway there. Am I out in
Speaker 1: a by myself with that, or do you think there's
Speaker 1: any truth to that, I mean, I would say I
Speaker 1: think that's I partially agree with that. I think obviously
Speaker 1: the ticket is very is very important particlely for the
Speaker 1: self detected retail client base. Catchy ticker can definitely increase
Speaker 1: the chances of a product to be successful. But I
Speaker 1: couldn't discount how much work goes into the proud development
Speaker 1: part of it has to be a good product. It
Speaker 1: has to be properly designed, and there are lots of
Speaker 1: decisions that go into creating an e t F berry.
Speaker 1: You have to define the theme that you have to
Speaker 1: define the different pockets within the theme. Look at liquidity
Speaker 1: market cup wedding virtues, equal weight rebalancing frequencies. So the
Speaker 1: product has to be very well designed to be successful.
Speaker 1: But yes, if you, on top of up have an
Speaker 1: attractive ticker, it can definitely increase the chances of being successful.
Speaker 1: So let me talk about some of my favorites of
Speaker 1: your e t F s we already mentioned the lithium
Speaker 1: will come back to that when we talk about some
Speaker 1: other related a t F. I love this founder run companies.
Speaker 1: What's the ticker for that bus? How great is that
Speaker 1: boss for an e t F of companies? That are
Speaker 1: still run by the founders. So the first question is
Speaker 1: why does that matter? Why does founder run companies make
Speaker 1: a difference. I mean, our analysis was that the companies
Speaker 1: that are run by their founders tend to make long
Speaker 1: term investment decisions in the business and versus having the
Speaker 1: pressure of having to report quarterly earnings and like the
Speaker 1: earnings targets that research analysts and you know tend to
Speaker 1: assign to every single company. So we do think these
Speaker 1: companies over the long run could perform better than the
Speaker 1: broader market. And also it's an interesting play in the
Speaker 1: sense that founder rank companies tend to take a more
Speaker 1: cautious approach to business than maybe other type of of companies.
Speaker 1: That was the main value proposition behind the founder run companies.
Speaker 1: And to your point that it was a very interesting tacker.
Speaker 1: We spend our problem and teams spent literally weeks to
Speaker 1: come up with with that one. Well, it's brilliant. Let's
Speaker 1: do another one. The interest rate hedge at F stock
Speaker 1: symbol rate. That's another a great ticker. How do you
Speaker 1: hedge interest rate risk in an e t F. Well,
Speaker 1: in this part of our case, we're doing that through
Speaker 1: like TSE the Revatives is a fairly complex product. We
Speaker 1: tried for the most part, we tried to follow like
Speaker 1: a passively managed approach to all of ours. In this
Speaker 1: part of our case, it was very difficult to provide
Speaker 1: that structure through like a passively managed strategy. So we
Speaker 1: take a more tactical and active managed approach to that
Speaker 1: particular product, and we were very lucky because we were
Speaker 1: able to secure this ticker red, which is definitely it's
Speaker 1: a very it's a very young product. We just launched
Speaker 1: a few months ago, but we have a high degree
Speaker 1: of confidence that it will be very successful over the
Speaker 1: aron run. The timing is pretty good. You you have
Speaker 1: an interest rate hedge as rates start to spike up.
Speaker 1: You literally launched within a month of the first FED increase,
Speaker 1: so that's pretty timely. Let's talk about cybersecurity. Ticker bug Bug,
Speaker 1: tell us what's in the cybersecurity? I mean, cyber security
Speaker 1: is one of our highest conviction things right now for
Speaker 1: a number of of reasons. Very First of all, there
Speaker 1: are fourteen point four billion devices connected to the Internet
Speaker 1: right now, which is great, but you know the day
Speaker 1: you know, the more devices that you have connected to
Speaker 1: the Internet, the more points of vulnerability there are, so
Speaker 1: the need for cybersecurity is very obviously we have seen
Speaker 1: that also in the context of the conflict between Russia
Speaker 1: and Ukraine, were like the narrative over the first few
Speaker 1: weeks was all around cybersecurity and and those types of things,
Speaker 1: And the analysis that we've been doing in our research team,
Speaker 1: we expect global cybersecurity is spending over the next five
Speaker 1: years to be around one point five trillion dollars. So
Speaker 1: we have a high degree of conviction in that theme.
Speaker 1: And even in the context of a very volatal environment
Speaker 1: that we have seen over the last four quarters, we
Speaker 1: continue to see consistent influence coming into that DF. And
Speaker 1: let's talk about what I think is your biggest fund
Speaker 1: with about six billion dollars is the NASTAC one hundred
Speaker 1: covered Quality t F. You also have an SMP fire
Speaker 1: covered call. Why covered calls? What what does that create
Speaker 1: within the t F. We think it's a great solution
Speaker 1: for for clients that are looking for two things, either
Speaker 1: income or a risk management tool to play the volatile
Speaker 1: environment that we have seen in the markets. Our flagship
Speaker 1: product q I l leviaches and as that one one
Speaker 1: covered called ETF with six point six billion dollars in
Speaker 1: a u M it's right now roughly offering a dividend
Speaker 1: yield of around twelve percent, So you are an income
Speaker 1: oriented investor. Particularly vary in the context of right now.
Speaker 1: Things have changed recently, but we have been for an
Speaker 1: extended period of time going through like a historically low
Speaker 1: interest rate environment. So many of our clients were struggling
Speaker 1: to find alternative sources income for their p all us,
Speaker 1: and this product paying over the twelve dividen dive then
Speaker 1: yield and monthly distributions was very, very attractive for many
Speaker 1: of our our clients. So so how do you manage
Speaker 1: the risk that, hey, if the nastack starts going higher
Speaker 1: and from the lows in October Town, now we're up
Speaker 1: i don't know, ten percent almost in the in the nastac.
Speaker 1: How do you manage having the stock called away from you?
Speaker 1: When you're writing dividends, you're giving someone the right to
Speaker 1: purchase that stock at a higher price if you run
Speaker 1: up to that price. How do you hedge that exposure
Speaker 1: to make sure the underlying doesn't get called away? There's
Speaker 1: a good question what happens there is the volatility that
Speaker 1: you see in the market That's why. That's another way
Speaker 1: in which we are seeing clients using this covered college
Speaker 1: strategies is almost as a risk management tool because in
Speaker 1: this environment of high levels of volatility, the option premium
Speaker 1: that you get on that when you write the option
Speaker 1: goes app so effectively when there is more volatility, you
Speaker 1: get like a higher dividen yield of them one. So
Speaker 1: that's why more and more clients in the contract the
Speaker 1: last for course, have been using this strategy as a
Speaker 1: way to monetize that volatility. So that one is your
Speaker 1: flagship at six billion dollars, you have some et fs
Speaker 1: with you know a handful of millions of dollars. At
Speaker 1: what point are these break even? What is the self
Speaker 1: funding level for any t F? I've heard some people
Speaker 1: say million, fifty million, a hundred million. How much assets
Speaker 1: doesn't e t F have to attract before your confident? Hey,
Speaker 1: this is at least a break even and it can
Speaker 1: change quite a bit based on the exposure of the
Speaker 1: of the a t F, particularly the geographic exposure in
Speaker 1: our case. Roughly speaking, they break even point is anywhere
Speaker 1: between five fifty to a hundred million dollars in a
Speaker 1: u M, which is really a pretty big number. It
Speaker 1: shows you how challenging it is for some of the
Speaker 1: smaller e t F companies that you know they have
Speaker 1: ten million dollars in in an e t F, you're
Speaker 1: suggesting that's the money loser for that company. I mean
Speaker 1: it always. It depends on the economies of the scale
Speaker 1: of the business that you are you are considering. But
Speaker 1: when you factor in you know, legal costs, compliance, portfolio management, trading,
Speaker 1: there is a lot that goes into launching and and
Speaker 1: e t F. So yeah, I mean, I do think
Speaker 1: of fifties around the sweet spot in terms of break even.
Speaker 1: So let's talk about some more of these e t fs.
Speaker 1: But I really want to start by asking how much
Speaker 1: horsepower goes into running these funds. You know you have
Speaker 1: a pre sizeable workforce. Is this mostly data and operations
Speaker 1: people or research or trading? What's the underlying human resources
Speaker 1: that you have to pour into launching a new ETF?
Speaker 1: Great question. It's a combination of both, and I'd like
Speaker 1: to think about it in two different ways. One is,
Speaker 1: when the the a t F is already in the
Speaker 1: market and it's already trading on exchange, then you need
Speaker 1: a fer amount of resources. You know portfolio management, trading resources,
Speaker 1: profile administration, compliance, risk management, and products management people just
Speaker 1: to make sure that the product is behaving exactly how
Speaker 1: it's supposed to behave and right now we have close
Speaker 1: to a hundred at F. Obviously, it takes a for
Speaker 1: amount of resources, and then before you actually launch the
Speaker 1: product to market, that's when the work is more heavy
Speaker 1: on the proud development and research part of the process,
Speaker 1: and particularly around thematic investing. Verry, I wouldn't underestimate the
Speaker 1: amount of resources that you need to bring a thematic
Speaker 1: e t F to market. Right now, we have over
Speaker 1: three research analysts located all over the world because, like
Speaker 1: I mentioned earlier, the wall is changing at the fastest
Speaker 1: space that we have ever seence, so there are trends
Speaker 1: coming up constantly. But also in mind that is innovation
Speaker 1: happening everywhere. So in many cases, some of these very
Speaker 1: disruptive companies are not in the US, and they may
Speaker 1: be in China, they maybe in Vietnam, they maybe in
Speaker 1: South Korea, they may be in Japan. So it's important
Speaker 1: that you have a very robust team of research analyst
Speaker 1: that covered all of these companies well Asia, nothing in
Speaker 1: Europe where you're from. Great question. Great question. I mean,
Speaker 1: there is definitely also interesting companies in the in the
Speaker 1: European market, but it is too a lot of the
Speaker 1: new trends that we are seeing at a commune from
Speaker 1: some of the largest markets in Asia interesting. When global
Speaker 1: x creates an e t F, are you also creating
Speaker 1: the underlying index? Are you working with outside index providers?
Speaker 1: Tell us a little bit about what that process is like. Again,
Speaker 1: it depends a little bit on the strategy. So if it's,
Speaker 1: for example, a strategy tracking ANASTA index or an SMP
Speaker 1: or an MSCI, typically you leverage an index that is
Speaker 1: already available through the index problem, I mean, you make
Speaker 1: a couple of little tweaks to make it more relevant
Speaker 1: to the context of the exposure that you are trying
Speaker 1: to to achieve. But in thematic investing and for the
Speaker 1: most part of the intellectual property that goes into developing
Speaker 1: the index we do internally with our own research and
Speaker 1: pro development team because the reality, you know, I'll tell
Speaker 1: you like a quick anecdote, in two thousand and ten,
Speaker 1: when we wanted to launch the first it t F,
Speaker 1: the Global Lithium and Battery Tech ITTF, we actually went
Speaker 1: through the process of calling all of the index providers
Speaker 1: to see if they wanted to work with us on
Speaker 1: the development of this idea, and pretty much they laughed
Speaker 1: at us, like, what are you guys trying to do?
Speaker 1: Like a lithiumf what is that? So because of that,
Speaker 1: we actually had to pretty much do a lot of
Speaker 1: that heavy lifting in the house, which back in the
Speaker 1: day we saw us a challenge, but where frankly was
Speaker 1: the best thing that ever happened to us because it
Speaker 1: forced us to develop our own product and research ap
Speaker 1: aabilities that right now we're still benefiting from fourteen years later.
Speaker 1: All Right, So you mentioned lithium and battery tech, which
Speaker 1: is about four billion dollars symbol l I T. Let's
Speaker 1: talk about two others that are sort of sustainable investing
Speaker 1: related again, back to the ticker clean water aqua a
Speaker 1: q w A obviously coming from Spain, Agua is that
Speaker 1: I think a lot of Americans might not have thought
Speaker 1: that up on themselves. Um, how is the clean water
Speaker 1: e t F doing and what sort of companies do
Speaker 1: you hold in in a clean water I think it's
Speaker 1: it's one of our newer things and what we're seeing,
Speaker 1: particularly with a clean water or think about a clean tech,
Speaker 1: renewable energy producers. There's a significant shift towards a more
Speaker 1: sustainable world and I think many of these things are
Speaker 1: benefiting from that transition. And clean water is definitely is
Speaker 1: definitely And we've seen massive war supply issues in the
Speaker 1: United States, not just having available water. California is going
Speaker 1: through a drought, a lot of the West is. But
Speaker 1: when you look at what took place in Flint, Michigan,
Speaker 1: and a whole bunch of other cities whose water infrastructure
Speaker 1: has fallen apart, there has to be an immense demand
Speaker 1: for clean water going forward. We have seen already some
Speaker 1: policy coming from the White House in the last you
Speaker 1: know quarter where we do think many of these companies
Speaker 1: are basically dedicated to, like, you know, a process of
Speaker 1: water in more effective ways are definitely gonna be benefiting
Speaker 1: from this trend. And uh, how about wind energy or
Speaker 1: windy w n D Y Uh what sort of companies
Speaker 1: that do you hold in that sort of etes all
Speaker 1: companies that are basically involved in the production of the
Speaker 1: in the production of of wind energy. Are there that
Speaker 1: many public companies in that space? I know, geed stuff
Speaker 1: like I'd be hard pressed the named forty companies in
Speaker 1: that space. I mean, obviously it's it goes back to
Speaker 1: the process that mentioned before of like looking at conviction,
Speaker 1: looking at you know, investability and type RI and that
Speaker 1: second component is extremely important. The thing is, I guess
Speaker 1: a good reminder there, Berry is that when we think
Speaker 1: about our thematic its like this, some of the names
Speaker 1: that we just we just discussed, like clean water or
Speaker 1: wind energy, our thematic dfs are global in nature. So
Speaker 1: we're not just looking at the U S companies. We're
Speaker 1: looking at the entire worlds. From that standpoint, there are
Speaker 1: actually many more companies that you may think and initially
Speaker 1: so so I know, there are some British companies and
Speaker 1: wind energy, there are some Dutch and Norwegian companies. So
Speaker 1: this is a global it t F and it's filled
Speaker 1: with anybody in that space that that you think is
Speaker 1: in that correct you were talking about, you know before.
Speaker 1: For example, there's a good Spanish company called Acton's part
Speaker 1: of that of that index, and you know you're speaking
Speaker 1: this energy transition component Berry is becoming more and more
Speaker 1: popular in many of the commerce sations that we are
Speaker 1: having more recently. One of the ets that we're having
Speaker 1: lots of conversations about is our uranium et F, which
Speaker 1: is also one of our largest symbol. You are a
Speaker 1: and it's become extremely a top of mind for many
Speaker 1: of our clients, not just in the US, but quite
Speaker 1: frankly all over the world because of the energy crisis
Speaker 1: that we are seeing in Europe as a direct result
Speaker 1: of the conflict between Ukraine and Rush. I think more
Speaker 1: and more investors and more and more market participants are
Speaker 1: realizing that there is a very significant need for greater
Speaker 1: energy diversification, and nuclear energy is becoming, you know, widely
Speaker 1: considered as a very emerging as a very viable solution
Speaker 1: in that space because of of the lower cast, the reliability,
Speaker 1: and quite frankly, because it's it's clean from a greenhouse
Speaker 1: emissions and stand on. And that's why there's no surprise
Speaker 1: that I like right now over the fifty nuclear plans
Speaker 1: being built in nineteen different countries. Really, I know, France
Speaker 1: gets more than half of their electrical power from nukes,
Speaker 1: and the US used to be ten or fifteen percent,
Speaker 1: but a lot of those have been mothballed. Are We're
Speaker 1: going to see a surge of new nuclear powered electrical
Speaker 1: generation over the next decade. In my opinion, yes, absolutely so.
Speaker 1: Many of these and nuclear plants that are being built
Speaker 1: right now are mostly in the emerging markets. You can
Speaker 1: think of South Korea, India, China, but we are seeing
Speaker 1: that shift already in other markets, specifically Europe that was
Speaker 1: kind of like shifting away from nuclear energy for many years.
Speaker 1: I think right now they are rethinking that approach to
Speaker 1: their energy mix again, as I did have consequence of
Speaker 1: some of the challenges that they are facing with a
Speaker 1: conflict between Russia and Ukraine. Right when your biggest supplier
Speaker 1: of natural gas suddenly becomes hostile, you start looking at
Speaker 1: other energy sources again. When I think of nuclear power,
Speaker 1: I think of traditional fission plants, but I know there's
Speaker 1: been three big innovations recently. One has been the micro plants.
Speaker 1: Instead of having a giant plant, you can have a
Speaker 1: small plant. The second are things like thorium powered plants,
Speaker 1: and then there are the fusion plants. What sort of
Speaker 1: innovation are we seeing in nuclear power production? You just
Speaker 1: don't read about it or hear about it in very
Speaker 1: many places. I think the number one that comes up,
Speaker 1: quite frankly is safety. The technology around making these nuclear
Speaker 1: plants a lot safer than maybe was the case in
Speaker 1: the past, because I think, like a nuclear energy and
Speaker 1: uranium has historically had a bad reputation because some of
Speaker 1: the accidents. You've had accidents, you have storage issues, you
Speaker 1: have waste disposal issues. How do you deal with them today?
Speaker 1: But based on you know, the conversation that we're having
Speaker 1: with research analyze and practitioners in this space, the technology
Speaker 1: around the development of nuclear energy is a lot safer
Speaker 1: than it's ever been. So that's why we expect more
Speaker 1: and more kind increase adopted nuclear energy. Yes, have primary
Speaker 1: source of energy. I recall post Fukushima there was a
Speaker 1: company that I think lux Capital was the VC behind it,
Speaker 1: that came up with a way to take nuclear waste
Speaker 1: and embedded in certain types of glass or plastic rods
Speaker 1: and you just didn't have the same radioactivity. So that
Speaker 1: was the way they dealt with it. Anyway, it's fascinating
Speaker 1: that that is such a under the radar, fast growing
Speaker 1: space that I think the average investor is wholly unaware of.
Speaker 1: I mean, the data is that I think we've seen
Speaker 1: that fund. I mean speaking from memory very but I
Speaker 1: think it's roughly six million dollar assets in that DF.
Speaker 1: It on quite fascinating. So let's talk a little bit
Speaker 1: about some of the opportunistic thematic ETFs we've seen in
Speaker 1: the recent h environment. We've seen inflation hedges, inverse fund,
Speaker 1: interest rate funds. What are the challenges for being opportunistic when,
Speaker 1: as you said, you're looking out a decade or two
Speaker 1: on on some of these ideas. I mean, one of
Speaker 1: the challenges I guess points of clarification when we talk
Speaker 1: around thematic investing is that, in a way, very thematic
Speaker 1: has almost become a catch all category. So when market
Speaker 1: participants or investors don't know exactly how to categorize and
Speaker 1: E t F, they automatically refer to id F as
Speaker 1: um as a theematic idea. But we do think and
Speaker 1: theematic investing is a very robust investment approach that consists
Speaker 1: on two very simple but powerful steps. One is, we
Speaker 1: look at very powerful, disruptive macro level trends that we
Speaker 1: think will shave the economy over the coming decades. And
Speaker 1: so we look at the companies that has tend to
Speaker 1: benefit from the materialization of those trends. And that's a
Speaker 1: very very clear definition. So many of these ideas like
Speaker 1: inflation hege or interest rate hedge, they couldn't really fall
Speaker 1: within our definition of thematic investing because they are cyclical
Speaker 1: in nature. They will be like a reversal to them.
Speaker 1: And and and I think it's very very important that we
Speaker 1: think of thematic investing in as a as a forward
Speaker 1: looking investment approach. And I think there is some confusion
Speaker 1: in the marketplace from that standpoint. By going back to
Speaker 1: your point about like kind of being opportunistic and I'm
Speaker 1: being able to react to market conditions. Typically you can
Speaker 1: expect for any DF issue to take anywhere between six
Speaker 1: to nine months to launch. Annuity have to market six
Speaker 1: to nine months. Wow, that's actually faster than I thought.
Speaker 1: Go back a couple of years. You want to create
Speaker 1: a mutual fund, you used to take a year or
Speaker 1: two to get everything had to be approved. And now
Speaker 1: as long as you have everything lined up, the process
Speaker 1: seems to be pretty streamlined. Yeah, I think so. I mean,
Speaker 1: I think if you start a form at scrutch and
Speaker 1: you have to setubt your own trust and look for
Speaker 1: a new new independent board and applied to the SEC
Speaker 1: for the proper approvals, then it may take a little
Speaker 1: bit longer than that. But for a business that is
Speaker 1: already up and round, where you already have your trust,
Speaker 1: you already have your registered investoral advice, or you have
Speaker 1: your board, is a much more extremeline process that maybe
Speaker 1: it was a few years ago. You know, a lot
Speaker 1: of the thematics we've seen they run seventy even hundred
Speaker 1: basis points global X averages between fifty and sixty. How
Speaker 1: have you managed to keep your fees competitive versus some
Speaker 1: of the other thematic e t F funds. I think
Speaker 1: it's all relative. I don't think fees are high or
Speaker 1: low in absolute terms, is rightly right. It's it's a
Speaker 1: function of the complexity of the product and the value
Speaker 1: that you get from the e d F sponsor in
Speaker 1: our case for example, like think about SPF for the
Speaker 1: three or four basis points for free practice exactly because
Speaker 1: in that particular case, you know, developing an index like
Speaker 1: that is pretty straightforward. You can pull some data from
Speaker 1: your Bloomberg terminal and then you are pretty much good
Speaker 1: to go. But when you think of thematic it T s,
Speaker 1: for example, it's a much more complicated process because you
Speaker 1: have to make lots of decisions. You know, developing a
Speaker 1: thematic ITTs is a pretty complex process. You have to
Speaker 1: first identify the theme. Then you have to identify the
Speaker 1: different categories within that theme and make important decisions around
Speaker 1: liquidity market cup wearing versus equal weight liquidity filters. And remember,
Speaker 1: for thematic investing, our approach is global. So we look
Speaker 1: at any company in the world that could have exposure
Speaker 1: to cybersecurity, for example for cloud computing, and that requires
Speaker 1: a fair amount of manpower to bring that product to market.
Speaker 1: And on top of our we use our research, our
Speaker 1: model portfolio business to really explain to our clients how
Speaker 1: to invest in those it so I think the value
Speaker 1: that we provide to our clients is very significant. So
Speaker 1: you mentioned market cap waiting versus et F waiting. Tell
Speaker 1: us about the thought process. How do you decide one
Speaker 1: way or another? What is global access preference? In most
Speaker 1: cases we follow what we call it modified market cap
Speaker 1: wearing approach, particularly around thematic investing. We do think that's
Speaker 1: the optimal approach for for a couple of reasons. So
Speaker 1: first and from our standpoint, you want to for this theematics.
Speaker 1: These are younger industries where you still don't really know
Speaker 1: who the winners and losers will be right. So you
Speaker 1: want to have as much exposure to the theme as
Speaker 1: a whole rioland trying to pick the winners or or
Speaker 1: the losers. And we do think like a modified market
Speaker 1: cap approach is the most relevant. When you say modified,
Speaker 1: so it's not straight market cap. There are probably ceilings
Speaker 1: and floors exactly. So basically bigger companies are a bigger
Speaker 1: part of the index, but we have caps of like
Speaker 1: eight percent, two percent or two alve percent of the
Speaker 1: company based on the index. And the classical example here
Speaker 1: to bury is, for example, our e commerce ETF. We
Speaker 1: fall follow like a market approach, but you don't want
Speaker 1: to be in a situation in which Amazon becomes forty
Speaker 1: five percent of the index. That's why we have the
Speaker 1: weight of each company anyway between eight percent to twelve
Speaker 1: percent as a way to mitigate that idiosyncratic risk. What
Speaker 1: are your thoughts on some of the inverse funds that
Speaker 1: are out there. Last year we saw the introduction of
Speaker 1: the inverse arc. This year we saw the inverse Streamer.
Speaker 1: There's some really wacky e t F ideas. Do you
Speaker 1: guys ever consider that or you just look at those
Speaker 1: as you know, novelties not really, that's not part of
Speaker 1: our our business very I think like the large majority
Speaker 1: of our clients are long term oriented in investors, and
Speaker 1: that's what we typically try to focus on. I mean,
Speaker 1: I do think there is a market for leverage and
Speaker 1: inverse a t s out there, but from my way standpoint,
Speaker 1: we try to stay away from those types of strategies
Speaker 1: because we don't think they incentivize the right type of
Speaker 1: investor behavior. It's it's more speculative than it is investment. Yeah,
Speaker 1: I think it's like obviously that some sophisticated institutional clients
Speaker 1: that they really know what they are doing and may
Speaker 1: they use those et f s as very useful trading tools.
Speaker 1: But I think anything that can potentially have can be
Speaker 1: accessible by retail clients. I think we have a responsibility
Speaker 1: as an industry to be very careful about that makes
Speaker 1: a lot of sense. So let's talk about managing through volatility.
Speaker 1: Was a huge year. We were upteen percent and I
Speaker 1: think it was like up sixty eight percent from the
Speaker 1: pandemic lows one, we're up twenty eight percent. Then this
Speaker 1: year where everything falls out of bed market down, bonds down,
Speaker 1: how do you manage through volatility like we've seen in
Speaker 1: two you know, great question. I mean, without a doubt,
Speaker 1: has been a very challenging market environment. We've had geopolitical issues,
Speaker 1: the highest level of inflation that we have seen in
Speaker 1: the US in forty years, and still supply chain issues
Speaker 1: due to to COVID nineteen. So it's been a very
Speaker 1: challenging year. But you know, our business continues to do well.
Speaker 1: I mean, we've seen this year roughly between three and
Speaker 1: four billion dollars in a new assets, and we're having
Speaker 1: very good conversations with clients that I think at corerent
Speaker 1: valuation levels, they remain very interesting in the market and
Speaker 1: they see some some opportunities. But to be done with
Speaker 1: you bury, from our standpoint, we don't really make any
Speaker 1: material changes in how we think about the business because
Speaker 1: of of the market environment. You know, we we had
Speaker 1: a really good twenty twenty. We had a really good
Speaker 1: twenty twenty one in terms of influence. This year has
Speaker 1: not been as good in terms of influence. But from
Speaker 1: my standpoint, i'd been a phenomenal year because we continue
Speaker 1: to execute on our strategy. We continue to large interesting powers,
Speaker 1: we continue to take out of our clients, and I
Speaker 1: think over the long run. That's what really matters. If
Speaker 1: you can execute and attract clients and keep clients in
Speaker 1: a year like this, you're doing great. It's hard to
Speaker 1: argue with this sort of baptism of fire. I think
Speaker 1: I think a lot of people were genuinely surprised by
Speaker 1: two wait markets go down. I thought they only went up.
Speaker 1: It's been eye opening for a lot of the younger traders,
Speaker 1: younger investors who I know you go back to since
Speaker 1: two thousand and nine, they've only seen up markets a
Speaker 1: hundred percent. And I think, and I actually do have
Speaker 1: that very conversation with the junior members of our team,
Speaker 1: because if you're just starting the industry four or five
Speaker 1: years ago, you think the markets only go up, right,
Speaker 1: And I think it's is when you've gone through their
Speaker 1: financial crisis in two thousand eight when I was working
Speaker 1: with Morgan Stanley or or even later on, you know,
Speaker 1: December fourth quarter was down, was a big drop starting one.
Speaker 1: We had just been acquired by Media Asset, and there
Speaker 1: was a lot of like I see the performance of
Speaker 1: our business, and it was a challenging a quarter or
Speaker 1: March of twenty with COVID COVID nineteen. But I think
Speaker 1: when you've done this long enough. Quite frankly, that doesn't
Speaker 1: really matter in the long termship. I always told the team,
Speaker 1: they's do the right things with the right team at
Speaker 1: the right time, and let's focus on the long term,
Speaker 1: and if we do that, we'll just be fine. You know,
Speaker 1: I haven't asked you about China. You have a handful
Speaker 1: of smaller funds that have been China focused. What's it
Speaker 1: like investing there, especially with the local versus overseas investors.
Speaker 1: It seems like they've been an unusually challenging region to
Speaker 1: put money to work in. I mean, of course, of
Speaker 1: course we've seen a lot of volatility coming out of China,
Speaker 1: but very We have a ton of experience dealing with
Speaker 1: with China, and one of our first it s was
Speaker 1: our China Consumer it TF that we launched in two
Speaker 1: thousand nine, and then we launch in the Scember of eighteen,
Speaker 1: we launch a full suite of China sector ETFs tracking
Speaker 1: MSCI in this and it was a direct reaction to
Speaker 1: client the man I think and enough the day is
Speaker 1: the second largest economy in the world, and it's an
Speaker 1: increasingly diversified economy. So we were getting questions from clients
Speaker 1: that they wanted to play China, but they didn't want
Speaker 1: to just buy the China large crap product. They wanted
Speaker 1: to invest in China healthcare, or China technology or China energy.
Speaker 1: So we came to market with what I think is
Speaker 1: that only a family of China sector E T s
Speaker 1: offers all of the A T s and it's been
Speaker 1: challenging at times very but going back to the point
Speaker 1: of proud development, if you are following a robust product
Speaker 1: development process, you should not experience any challenges in dealing
Speaker 1: with these markets for a number of reasons, because it's
Speaker 1: part of the index methodology that you are accounting for
Speaker 1: some of these potential challenges. For example, you include filters
Speaker 1: around average daily trading volume for liquidity for liquidity, or
Speaker 1: for example, you don't include companies that have less than
Speaker 1: a hundred million dollars in market caps, so if a
Speaker 1: company drops below that level, is automatically removed from the
Speaker 1: index at the next rebalance, and by doing so, you
Speaker 1: eliminate the challenge of having to trade in some of
Speaker 1: those liquid names. And again, we've been trading our China
Speaker 1: consumer it TF for almost thirteen years and we haven't
Speaker 1: faced any significant challenges because you can. Our portfolio management
Speaker 1: team and our product team have plenty of experience dealing
Speaker 1: with these markets. So how much marketing goes into rolling
Speaker 1: out a new e t F? You know when we
Speaker 1: see every day I see a list of new ETFs
Speaker 1: that come out every week, and some of them are
Speaker 1: always kind of surprise me. I don't understand why anybody
Speaker 1: is rolling that out. And every now and then something
Speaker 1: will come out and like, oh, clean water, of course
Speaker 1: that makes perfect sense. How do you market this to
Speaker 1: the advisor community? How do you market this to the
Speaker 1: investing public? Great question? I mean, I think without a
Speaker 1: doubt in the a t F industrting marketing is extremely
Speaker 1: important particle for a company like Global ex that is
Speaker 1: still like an up and coming at F player, because
Speaker 1: it's important. Brand awareness is critical. People will not come
Speaker 1: to buy our it t F s if they don't
Speaker 1: know that Global ETFs exists. So so we have been
Speaker 1: investing in marketing for several years purely from a brand
Speaker 1: awareness standpoint. But that aside. The way we actually market
Speaker 1: our ITTs for retail clients and financial advisors is mostly
Speaker 1: through our research, right, I think ever since we started
Speaker 1: the business, because we were very, very small. We realized
Speaker 1: that we needed to give ourselves the credibility in the
Speaker 1: space that we didn't have because of our size, and
Speaker 1: we did that through research. So we have what, in
Speaker 1: my opinion, of course, very I'm biased, but I think
Speaker 1: we have the most robust research platform in the A
Speaker 1: t F industry, and I think our clients appreciate that
Speaker 1: because when they invest in a global e CDF, they're
Speaker 1: not just buying uh an E t F products. There
Speaker 1: they have access to all research analysts, they can come
Speaker 1: to our website and pretty much on a daily basis,
Speaker 1: we are providing content to our clients so they can
Speaker 1: really understand the dynamics behind the products in which they
Speaker 1: are investing, and that's very powerful. So I know, you
Speaker 1: obviously think thematics have a lot of room to grow.
Speaker 1: What sort of directions do you think thematic ETFs are
Speaker 1: going to head into. What's next for the E t
Speaker 1: F space? I mean, I think in terms of going
Speaker 1: back to the common time made earlier, very innovations just
Speaker 1: happening anywhere in the world and at the fastest space
Speaker 1: that we have ever seen in history. So it will
Speaker 1: be surprised, how you know, we have right now there
Speaker 1: is six thematic it as well. There is no shortage
Speaker 1: of ideas, and there are lots of different areas in
Speaker 1: which we're looking as you can think things like quantum computing.
Speaker 1: There is a lot of activity in the detailed assets
Speaker 1: spacemen though right now there is a lot of like
Speaker 1: noise in the market around that particular thing. But we
Speaker 1: continue to see plenty of opportunity. And again it's not
Speaker 1: just a US phenomenon. We've seen this growth in other
Speaker 1: markets around the world. I mean just in the US.
Speaker 1: If you look at assets in thematic ITFS five years ago,
Speaker 1: the number was roughly five billion dollars and at the
Speaker 1: end of one we're talking about a hundred and twenty
Speaker 1: billion dollars in a um very significant pattern, kind of
Speaker 1: out of Europe as well. So take us through the process. Somebody,
Speaker 1: one of the researchers comes to you, Louise, I have
Speaker 1: this great idea for thematic investment it's X. What is
Speaker 1: the process like from turning that idea into an actual
Speaker 1: E t F. So the first thing is we challenge
Speaker 1: ourselves does it DA makes sense? So let me use
Speaker 1: an example. Let's say electric vehicles, which obviously is an
Speaker 1: idea that we already have. But let's say it's a
Speaker 1: symbol on that d R I V drive drive hopefully
Speaker 1: like that ticket to Yeah, no, it's very I picked
Speaker 1: that one. So that's quite particular, particularly proud so um
Speaker 1: So this idea comes in from one of our research
Speaker 1: or product analysts, and we have a proud Development committee
Speaker 1: meeting in which someone should just electric vehicles. Of course,
Speaker 1: they put forward a very robust analysis where they look
Speaker 1: at target addressible market penetration rate and they're more like
Speaker 1: industry dynamics. And in this part of work, case is
Speaker 1: very obvious that it is a significant shift towards a
Speaker 1: more sustainable world. Right, you have lots of catalysts towards
Speaker 1: more adoption of electric vehicles and government support incentivizing clients
Speaker 1: to buy electric vehicles. US. The cause of electric batteries
Speaker 1: has gone down significantly because of the cause of lithium
Speaker 1: batteries coming down significantly, and even the charging infrastructure behind um.
Speaker 1: The adoption of electric vehicles is getting better and better.
Speaker 1: And on top of that, it's still very early because
Speaker 1: electric vehicles cells double in one and that is still
Speaker 1: nine of torouct ourselves. So the potential is very, very significant.
Speaker 1: So we look at all of these data and we
Speaker 1: make the assessment that is an a part of it
Speaker 1: is a thing that could be very powerful over the
Speaker 1: coming decades. So the next step is we look at, okay,
Speaker 1: are the enough public companies whose products and services are
Speaker 1: dedicated to provide exposure to electric vehicles And that's when
Speaker 1: our research and product teams working COSSE with index providers,
Speaker 1: come up with them companies that typically it at least
Speaker 1: fifty of their revenues from the electric vehicles space. And
Speaker 1: then once we have like a universe of like forty
Speaker 1: fifty companies as when we start refinding that process with
Speaker 1: our portfolio management team, our PORTFOLI administration team, just to
Speaker 1: make sure the internsal liquidity capacity of their strategy and
Speaker 1: makes sense. And once we have a preliminary index, that's
Speaker 1: when we start the process of bringing that e t
Speaker 1: F to market. So I could see clearly Tesla, Lucid,
Speaker 1: Rivan some clear purity tfs. You have the battery companies,
Speaker 1: which is Panasonic to everybody else, Um, there's Electrify America.
Speaker 1: They're all these network charging What do you do with
Speaker 1: companies like Ford, for example, which has been very aggressive
Speaker 1: in rolling out A t F s. Clearly it's not
Speaker 1: half of their business, but they're moving in that direction.
Speaker 1: We look at Volkswagen Autie Porsche just a huge run
Speaker 1: of E t f s, and then we see the
Speaker 1: Korean companies Undai Kia also very aggressively pushing in t tfs.
Speaker 1: At what point do the legacy automakers become electric fight
Speaker 1: enough that you would think about putting them into that
Speaker 1: E t F that's a great question, very and it's
Speaker 1: and it's a very very important part of our product
Speaker 1: development process. And that's something that we've been very careful
Speaker 1: over the years because I did know that day when
Speaker 1: a claim by is one of our thematictives, we want
Speaker 1: to make sure they get the exposure that they are
Speaker 1: looking for. And to your point, do you want to
Speaker 1: include a company like four in an electric vehicle c
Speaker 1: TF if maybe like five percent of the revenues is
Speaker 1: coming from electric vehicles, then is that really the explosion
Speaker 1: of our clients are looking for. Probably not, So it
Speaker 1: may change on the product or the theme, but typically
Speaker 1: we apply a fifty revenue threshold for inclusion in the theme.
Speaker 1: In this particular case for for companies is relatively straightforward.
Speaker 1: That may be a little bit more challenging in other
Speaker 1: areas like genomics and biotechnology because many of these companies
Speaker 1: don't have revenue to begin with, so it's a challenging.
Speaker 1: But then we look at things like research and development,
Speaker 1: the type of problems that they offer to really make
Speaker 1: sure that we as a as a group, as I
Speaker 1: would probably development team, it feels strongly that that company
Speaker 1: should be included in the thing that we're trying to
Speaker 1: provide exposure to. So it'll be interesting to see how
Speaker 1: long it will be before Mercedes, BMW, Ford, even GM
Speaker 1: hit that fifty number, because I don't think that's twenty
Speaker 1: or ten years off in the future, that that could
Speaker 1: be five years off in the future. Ford is electric
Speaker 1: or electric hybrid. Yeah, I mean, from from the information
Speaker 1: that we are right now reviewing, all of these companies
Speaker 1: have a very aggressive just strategy towards the production of
Speaker 1: electric vehicles or hybrids. But they are all active looking
Speaker 1: into the space because they can clearly see the trend.
Speaker 1: If anything, quite frankly, governments around the world and this
Speaker 1: and focus towards a more sustainable economy is very very clear.
Speaker 1: So I think many of these car manufacturers can see
Speaker 1: the writing on the wall. So let me throw you
Speaker 1: a curveball before we get to our favorite questions. And
Speaker 1: that's how often you get back to uh Spain? Every
Speaker 1: time I've been to Spain and I've left just delighted
Speaker 1: and I'm looking forward to going back. When was the
Speaker 1: last time you went back? There's the answer is the answers.
Speaker 1: I don't go back enough, to be honest with you,
Speaker 1: but I usually go there every single Christmas because my family,
Speaker 1: I mean, I've been now in the US for twenty
Speaker 1: years and I have my own family here in in
Speaker 1: New York in Brooklyn, but the rest of my family
Speaker 1: is still in Spain. So I go there always for
Speaker 1: Christmas because it's a very special part of the year
Speaker 1: for for Spanish people and our and our culture. Where
Speaker 1: in Spain it's a very small town called I would
Speaker 1: be very surprised if you know about it, because people
Speaker 1: from Spain don't know about it. It's two hours if
Speaker 1: you go from Madrid towards Valencia. He's approximately right in
Speaker 1: the middle, two hours away. So the Spain parts of
Speaker 1: Spain that I'm familiar with, Bill Boo where the Google
Speaker 1: Him Museum is, which is lovely um San Sebastian, which
Speaker 1: is one of the most lovely spots in the world.
Speaker 1: And then of course Barcelona. The last time I was
Speaker 1: in Barcelona was in the midst of the Catalonian uprising,
Speaker 1: so everything was closed. People were a million people marching
Speaker 1: in the streets. It was. It was very um, peaceful
Speaker 1: and well organized. But when you see him, literally a
Speaker 1: million people marching past the police headquarters, which is across
Speaker 1: the street from our hotel, I've never experienced anything like
Speaker 1: that in my life. It was amazing. Yeah, It's definitely
Speaker 1: been a very very big part of the political conversation
Speaker 1: in Spain now for for many years, and unfortunately, for
Speaker 1: the last five or six years, those types of conversations
Speaker 1: around the independence of Catalonia from Spain seemed to escalate,
Speaker 1: but unfortunately the conversation seems to have one down a
Speaker 1: little bit, which I think is good. I think there
Speaker 1: were more Michelin star rated restaurants in Barcelona than I
Speaker 1: think in Paris, I think than any other city. You
Speaker 1: google Michelan star rated restaurants and up comes a list
Speaker 1: of like forty places. It was. It was really It's
Speaker 1: an amazing city. It's beautiful, The one thing that whenever
Speaker 1: I visit Europe and I come back home is Wow,
Speaker 1: those folks really know how to kick back, relax a
Speaker 1: little bit, and enjoy life. It feels like in New
Speaker 1: York it's just go, go, go, work, work work. The
Speaker 1: Europeans have a much more chill approach to dealing with life.
Speaker 1: Do you miss that at all here in New York?
Speaker 1: I certainly, I certainly do. There's definitely a different pace
Speaker 1: to life when you go to euro particle in Spain,
Speaker 1: I mean, if you go to southern Europe is even
Speaker 1: more different from you know, with respect to for example,
Speaker 1: New York, and I definitely, I definitely am miss that.
Speaker 1: I think one of the the biggest benefits of a
Speaker 1: country like Spain is that you can live very comfortably
Speaker 1: with not a lot of money. And I think quality
Speaker 1: of life is is overall like better than what you
Speaker 1: can see in in for example, New York. It's less stressful,
Speaker 1: to say the very least. They now to eat, they
Speaker 1: to drink wine, They now to just kick back and relax.
Speaker 1: I think we can all learn a little bit, at
Speaker 1: least I feel like I would like to learn how
Speaker 1: to throttle back a little bit. They have it down
Speaker 1: to every time I'm there, I'm like, God, this it's beautiful.
Speaker 1: Everybody seems to be very happy and chill. It's really
Speaker 1: a wonderful part of the world, you know. And things
Speaker 1: have definitely changed. But I've been growing up. I mean
Speaker 1: my parents, my mom and my dad, they were both teachers,
Speaker 1: like middle school teachers, and we used to go to
Speaker 1: school in the morning and then go back home. We
Speaker 1: will have lunch as a family, we would take a nap,
Speaker 1: and then we will go back to to to school.
Speaker 1: So it was definitely a different pace. And even today,
Speaker 1: like I'm texting with with my friends and they're getting
Speaker 1: ready for the holidays and they're having dinner at eleven pm.
Speaker 1: So it's definitely a different, different place. And I think
Speaker 1: that is but it goes both ways. For example, when
Speaker 1: I'm so used now to the New York lifestyle that
Speaker 1: speed speed, and when I go back to Spain and
Speaker 1: I have to go to the bank to do some
Speaker 1: sort of transaction and it texts forever, I do get
Speaker 1: very frustrassed. I guess it's like a double edged sword.
Speaker 1: You have to learn how to leave the New Yorker behind.
Speaker 1: Like when I go on the k s, it's twenty
Speaker 1: four hours before my walking pace begin to slow down.
Speaker 1: Although I can tell you I can very much embrace
Speaker 1: the idea of midday siesta. I can. If I could
Speaker 1: work that into my routine, I think my my level
Speaker 1: of chill will be much better than it is currently.
Speaker 1: It's a It's something that we very much can learn
Speaker 1: here from from Europe. Absolutely, I think that you should
Speaker 1: definitely look into that. So let's jump to my favorite
Speaker 1: questions that I asked all of my guests, starting with
Speaker 1: what kept you entertained during the lockdown in Brooklyn? What
Speaker 1: were you watching or listening to? I mean, honly I
Speaker 1: don't watch a ton of TV. I think I mentioned earlier.
Speaker 1: I have like a four and a half a year
Speaker 1: all that gives me really entertained, and between that and
Speaker 1: global legs, I don't have a ton of time. So
Speaker 1: I al really tried to watch documentaries because they are
Speaker 1: definitely shorter in nature, so I don't have to watch
Speaker 1: three seasons to you know, finish the story. So I
Speaker 1: really I've been really into business documentaries. Literally, I watched
Speaker 1: HBO documentary on Warren Buffett, which is the one that
Speaker 1: I deeply admired. I was also watching recently a documentary
Speaker 1: on en Roun, which I didn't know the story to
Speaker 1: hell of a story. It's a health of story. I mean,
Speaker 1: you know a little bit. But I now we're living
Speaker 1: through it all over again. I know it's actually very
Speaker 1: very relevant. And I guess the last couple of days,
Speaker 1: I've been watching a documentary about FIFA on the World Cup.
Speaker 1: You know, it's funny because I was a World Cup
Speaker 1: fan like twenty years ago and I just fell in
Speaker 1: love with the pace of the game. And this year
Speaker 1: it just seems like it's become so politicized and quatar
Speaker 1: and the no beer and it's just it's just kind
Speaker 1: of crazy. Um. But I watched the U s Welles match.
Speaker 1: I've never seen a draw that felt like a loss.
Speaker 1: You know, it was like, wait, what spoiler alert? I hope,
Speaker 1: I hope everybody's already already watched that. Um. But it's
Speaker 1: a lot of fun to watch, isn't it. I love
Speaker 1: it and I quite frank I mean it's um. When
Speaker 1: I grew up, playing sports is a big part of
Speaker 1: who I am, and I just love watching the World Cup.
Speaker 1: It is true that this year's World Cup feels, for
Speaker 1: whatever reason, a little bit different. But I will tell you.
Speaker 1: I mean, when I first moved to Chicago from Spain,
Speaker 1: it was two thus on three just crazy. Has been
Speaker 1: like already twenty years ago. If I wanted to go
Speaker 1: to a restaurant or a bar to watch the game,
Speaker 1: it was really difficult to find a restaurant or a bar.
Speaker 1: The two thousand and three, like really four years later, definitely,
Speaker 1: I think because of the women's soccer team and how
Speaker 1: did so well, there was definitely a lot more attention
Speaker 1: towards towards the sport because in really four years you
Speaker 1: were able to watch games everywhere. But there was definitely
Speaker 1: like a big transition there. I found World Cup because
Speaker 1: around the same time, oh two oh three, my wife
Speaker 1: and I run a cruise and you run around all
Speaker 1: day and then you come back to the room about
Speaker 1: three in the afternoon and it's taken nap before dinner,
Speaker 1: and I would flip it on the TV and there
Speaker 1: was World Cup, or I would go to the one
Speaker 1: of the bar and the whole staff is watching World
Speaker 1: Cup and it was really fascinating. You have to give
Speaker 1: it a little time to get into the ebb and
Speaker 1: flow of the game and suddenly you find it's so
Speaker 1: different than football or baseball. It just has these natural waves.
Speaker 1: It was a lot of fun and I look forward
Speaker 1: to it every couple of years. It's really a blast.
Speaker 1: When I was in Chicago, mean, why are they? Probably
Speaker 1: my best experiences in Chicago was going to Spain won
Speaker 1: the World Cup in two thousand and all of my friends.
Speaker 1: I was working with Morgan at that time, all of
Speaker 1: my friends and I went to like a bar by
Speaker 1: the Chicago River and you know, we want. Of course,
Speaker 1: I would very happy for me, and then because it
Speaker 1: was a long, long day for all of us, I'm sure,
Speaker 1: let's talk about some of your mentors who helped shape
Speaker 1: your career. I mean this may sound I mean, of course,
Speaker 1: there are lots of people have helped my career over
Speaker 1: the years, and people have been very helpful. So this
Speaker 1: may come across as maybe maybe a little bit to
Speaker 1: touch you, Philly, but I will actually say my mom
Speaker 1: and my dad very because at the end of the day,
Speaker 1: they've worked very hard. They work very hard when I
Speaker 1: was growing up to give me like a really good education,
Speaker 1: and that's something that I'm very very thankful for because
Speaker 1: they were teachers, so they don't have many resources, and
Speaker 1: they worked very very hard Unque frankly because of the
Speaker 1: values that you know, over the years they kind of
Speaker 1: made me. And we're out because I know the day
Speaker 1: things like you know, being thoughtful, being kind, work, ethic, positivity.
Speaker 1: I think you learned that at home and you know,
Speaker 1: whether you realize it or not, I think every single
Speaker 1: decision that you're make in life is made through the
Speaker 1: lens of your values. And that's why I think it's
Speaker 1: it's so important. I'm very thankful to my parents for
Speaker 1: that good answer. You're you're not the only person who
Speaker 1: have brought up their parents or their or their father
Speaker 1: as as a as a key mentor, and I hear
Speaker 1: it pretty regularly. Let's talk about books. What are some
Speaker 1: of your favorites and what are you reading right now.
Speaker 1: One of my favorite books is A Month's Search for
Speaker 1: Meaning by Victor Franco. It's about the experiences of a
Speaker 1: prisoner in a Nazi concentration camp and it goes through that,
Speaker 1: you know, some of the challenges, is about inner strength, positivity, resilience,
Speaker 1: and it's a book that I always find extremely useful,
Speaker 1: particularly when you are going through a rough time in life,
Speaker 1: which are is it can happen to all of us.
Speaker 1: I always find myself going back to that book because
Speaker 1: it really helps me put things in in perspective. Right,
Speaker 1: everything is relative, and no matter how bad your day is,
Speaker 1: it ain't that bad relatively speaking. So I've always find
Speaker 1: myself going back to that book. And then now more recently,
Speaker 1: there like a different more more of an easy read.
Speaker 1: I'm reading a book called Atomic Habits by James Clear
Speaker 1: That is, I mean, the value proposition is very simple,
Speaker 1: is about how little adjustments in love in your life
Speaker 1: can lead to really remarkable outcomes. And I'm finding it's
Speaker 1: very It's a very easy read, but very interesting takeaways.
Speaker 1: I'm trying to remember who who said the quote you
Speaker 1: build your habits and then your habits build you. Um.
Speaker 1: And I have that book at home in my queue.
Speaker 1: I haven't gotten to it, but I've heard really good
Speaker 1: things about it. I just want to recommend it because
Speaker 1: it gives you, First of all, it highlights the importance
Speaker 1: of having good habits, but it goes beyond that. It's
Speaker 1: actually giving you some practical examples of how you can
Speaker 1: create habits in a much easier way. So very very powerful.
Speaker 1: What sort of advice would you give to a recent
Speaker 1: college graduate who was interested in a career in either
Speaker 1: investing or E t F s or working thematically. I
Speaker 1: think it would be to just try to talk to
Speaker 1: as many people in the industry as as you can.
Speaker 1: I think you know part in our case of of
Speaker 1: the A t F industry and asset management. Talk to
Speaker 1: portfolio management managers, pro development teams, research allies to try
Speaker 1: really get a good sense of what our industry is about.
Speaker 1: If you do that consistently, I think a few things
Speaker 1: will happen. One is that you will learn a lot
Speaker 1: about the industry too. Whenever you make the final decision
Speaker 1: of entering the industry, that decision will be a much
Speaker 1: more informed decision that if you had not gone through
Speaker 1: this this process. And finally, quite frankly, I would not
Speaker 1: be surprised if you end up working for one of
Speaker 1: the people that you actually interviewed over that kind of
Speaker 1: networking process really interesting. And our final question, what do
Speaker 1: you know about the world of thematic e t fs, investing,
Speaker 1: UM and just exchange traded funds today? You wish you
Speaker 1: knew twenty five years or so ago when you first
Speaker 1: began your career. Probably the biggest lesson is that the
Speaker 1: investment management industry is it's a marathon, it's not a sprint. UM.
Speaker 1: I think patience is probably one of the most underestimated
Speaker 1: skills in our industry, and I think it's incredibly important.
Speaker 1: And I was definitely very impatient in my early twenties,
Speaker 1: but I think I want to think at least that
Speaker 1: over the years, I've become much more patient, and I
Speaker 1: take my time to make some of the more more
Speaker 1: important decisions, and I definitely think more with a long
Speaker 1: term horizon in mind. Get rich slowly is always good advice. Louise,
Speaker 1: this has been absolutely fascinating. Thank you for being so
Speaker 1: generous with your time. We have been speaking with Louis Bruga.
Speaker 1: He is CEO of Global x E t f S.
Speaker 1: If you enjoy this converse station, well, be sure and
Speaker 1: check out any of our previous four hundred and fifty
Speaker 1: discussions we've had over the previous eight or nine years.
Speaker 1: You can find those at iTunes, Spotify, YouTube, or wherever
Speaker 1: you get your podcasts. We love your comments, feedback and
Speaker 1: suggestions right to us at m IB podcast at Bloomberg
Speaker 1: dot net. I would be remiss if I did not
Speaker 1: thank the crack team that helps us put these conversations
Speaker 1: together each week. Bob Bragg is my audio engineer. Attika
Speaker 1: val Bron is my project manager. Paris Wold is our producer.
Speaker 1: Sean Russo is my head of research. I'm Barry Retults.
Speaker 1: You've been listening to Masters in Business on Bloomberg radioa