WEBVTT - Luis Berruga on ETF Investments 0:00:02.000 --> 0:00:07.120 This is mesters in business with very results on Bloomberg Radio. 0:00:09.000 --> 0:00:12.280 This week. On the podcast, I have an extra special guest. 0:00:12.480 --> 0:00:16.639 Luis Paruga, has a fascinating career as both a tech 0:00:16.680 --> 0:00:23.640 wizard and investment banker before becoming CEO of global X 0:00:24.079 --> 0:00:27.200 e t f s. They are a forty billion dollar 0:00:27.680 --> 0:00:30.440 thematic E t F shop that have some of the 0:00:30.480 --> 0:00:35.000 most interesting E t F s UH that are out there. Sure, 0:00:35.120 --> 0:00:40.159 most of the industry are passive giant UH e t 0:00:40.400 --> 0:00:42.720 f s from the likes of Vanguard and Black Rock 0:00:42.800 --> 0:00:47.600 and State Street, but the space that those shops don't 0:00:47.640 --> 0:00:52.560 play in are coming up with ideas for themes that 0:00:52.680 --> 0:00:58.800 allow investors to focus on a very specific idea within 0:00:58.840 --> 0:01:02.960 the world of investor thing and we discuss everything from 0:01:03.040 --> 0:01:06.760 their founder run company E t F. I love the 0:01:06.800 --> 0:01:12.280 stock symbol BOSS to lithium two covered coal writing within 0:01:12.400 --> 0:01:16.399 NASDAK and SNP wind Power, just on and on. They 0:01:16.400 --> 0:01:22.840 have uranium, just really fascinating ideas that allow investors to 0:01:23.160 --> 0:01:30.040 express their investment themes in a very specific, fairly low cost, 0:01:30.520 --> 0:01:35.760 professionally managed e t F. I found the conversation fascinating 0:01:35.800 --> 0:01:38.240 and I think you will also if you're at all 0:01:38.319 --> 0:01:42.000 interested in E t F s and thematic investing in 0:01:42.360 --> 0:01:47.199 looking at the world through a somewhat different perspective than 0:01:47.840 --> 0:01:51.840 what we assume is standard from the giant E t 0:01:52.000 --> 0:01:55.520 F companies. I think you'll find this to be really 0:01:55.560 --> 0:02:00.240 an intriguing conversation. With no further ado. My interview of 0:02:00.280 --> 0:02:04.840 global X CEO Louise Baruga. Thank you for having me Berry. 0:02:05.120 --> 0:02:08.160 So let's talk a little bit about your background. Before 0:02:08.240 --> 0:02:11.440 you joined Global Acts, you were an investment banker at Jefferies. 0:02:11.520 --> 0:02:15.239 You advised on M and A and investures and capital raises, 0:02:15.320 --> 0:02:19.960 and before that, Morgan Stanley doing technology and operations planning 0:02:20.000 --> 0:02:23.239 for the Wealth and Asset Management Group discussed that background 0:02:23.240 --> 0:02:25.840 and how does that lead up to a career in 0:02:26.040 --> 0:02:28.560 E t S? You know, great questions. So, yeah, I 0:02:28.560 --> 0:02:31.280 had a career in investment banking with Jeffries and it 0:02:31.440 --> 0:02:35.960 was a really good professional experience because I did have 0:02:36.040 --> 0:02:39.000 the opportunity to work in M and A, equity and 0:02:39.080 --> 0:02:41.840 dead financing. I had a chance to be part of 0:02:41.880 --> 0:02:45.760 somebody interesting transactions in the banking space. I did in 0:02:45.960 --> 0:02:50.520 two thousand thirteen banking transaction that the market had seen 0:02:50.960 --> 0:02:53.399 since the Financial crisis. It was at two point four 0:02:53.520 --> 0:02:56.280 billion dollar deal, and that was a very interesting experience 0:02:56.280 --> 0:02:59.880 because it really allowed me Berry to understand this like 0:03:00.040 --> 0:03:04.160 cology behind MNE, which it came in very, very handy 0:03:04.360 --> 0:03:08.280 later on in the context of of Global lex Um. 0:03:08.320 --> 0:03:11.240 From the standpoint of Morgan Stanley was the earlier part 0:03:11.320 --> 0:03:13.160 of my career and it's a great company, a great 0:03:13.160 --> 0:03:17.679 group of people. I I would be forever thankful to 0:03:17.680 --> 0:03:19.520 to the guys that Morgan Stanley because they gave me 0:03:19.560 --> 0:03:22.480 the first opportunity to work to get a full time 0:03:22.560 --> 0:03:24.200 job in the U S when I first moved from 0:03:24.240 --> 0:03:26.680 from Spain, and I learned alot because I spent a 0:03:26.720 --> 0:03:29.400 lot of time with financial advisors, which as you know, 0:03:29.639 --> 0:03:32.880 is a key segment of our client base today. So 0:03:33.040 --> 0:03:36.800 phenomenal learning experience with both Jefferis and Morgan Stanley. So 0:03:36.880 --> 0:03:40.880 you move here from Spain. What is the financial advice 0:03:40.960 --> 0:03:43.160 world like in Europe? What's it like in Spain? It 0:03:43.280 --> 0:03:47.920 has to be such a different set of the retirement 0:03:48.400 --> 0:03:52.200 planning is different, the safety and that that it's different. What's 0:03:52.240 --> 0:03:56.160 the finance industry like in Spain? It's fundamentally different. First 0:03:56.160 --> 0:03:59.200 of all, I think the amount of investors and participate 0:03:59.320 --> 0:04:03.280 in the financial markets is much smaller than it is 0:04:03.680 --> 0:04:08.000 in the US, and I think that the financial advisors 0:04:08.040 --> 0:04:10.600 are used, but not as widely used as they are 0:04:10.920 --> 0:04:14.920 in the US. And definitely the retail market participation is 0:04:14.920 --> 0:04:18.560 significantly lower than you can see in the in the 0:04:19.080 --> 0:04:22.280 U S. But I think it's definitely changing very because 0:04:22.520 --> 0:04:25.400 you know, you say, more and more fintech platforms and 0:04:25.520 --> 0:04:29.479 robo advisors that in a way are making access in 0:04:29.520 --> 0:04:33.680 financial markets easier for more and more investors in Spain. 0:04:33.720 --> 0:04:36.479 And also I think there are a few dynamics specifically 0:04:36.520 --> 0:04:41.000 in Spain where people are really concerned about the sustainability 0:04:41.040 --> 0:04:45.040 of the traditional pension plans. People in Spain when I 0:04:45.080 --> 0:04:47.800 was growing up in the eighties and nineties, they expect 0:04:47.839 --> 0:04:51.040 to just retire and and have the government give them 0:04:51.120 --> 0:04:53.880 like a pay check every month. And I think people 0:04:54.000 --> 0:04:58.039 are realizing that it's becoming more and more challenging over time. 0:04:58.120 --> 0:05:01.760 So that's incentivizing more and more investors in Spain to 0:05:01.880 --> 0:05:04.520 participate in the financial markets, which I think is really positive. 0:05:04.920 --> 0:05:09.080 So you joined Global Accent What led you to them? 0:05:09.200 --> 0:05:12.240 From Jefferies great questions? So I guess a couple of 0:05:12.279 --> 0:05:16.080 things up until that point, Berry, I was I had 0:05:16.200 --> 0:05:19.240 worked only for really big companies Morgan Instantly and Jeffrey, 0:05:19.279 --> 0:05:23.200 so I was definitely looking for something more entrepreneurial. One 0:05:23.200 --> 0:05:26.640 of my biggest frustrations with working at a big company 0:05:26.720 --> 0:05:29.320 is that they tend to be very bureaucratic. It takes 0:05:29.400 --> 0:05:32.000 a lot to get things done. So I was definitely 0:05:32.000 --> 0:05:34.680 looking for something more entrepreneurial where I could see more 0:05:34.720 --> 0:05:37.960 of an impact of my contributions in the actual output 0:05:38.320 --> 0:05:40.160 of of the business. So I was definitely one of 0:05:40.200 --> 0:05:43.320 the key drivers. And then the other driver Berry was 0:05:43.400 --> 0:05:47.160 that I I saw the potential of the ETF industry. 0:05:47.240 --> 0:05:50.040 Quite frankly, I was already an investor in e t 0:05:50.240 --> 0:05:52.719 f s at that point in time. I remember telling myself, 0:05:53.200 --> 0:05:56.200 why would anyone invest in mutual funds when you can 0:05:56.480 --> 0:06:00.200 buy an e t F instead. You have deliquently did 0:06:00.200 --> 0:06:03.720 the tax efficiency, the transparency, and I did the math, 0:06:03.839 --> 0:06:06.200 and I think at that point in time, roughly speaking, 0:06:07.200 --> 0:06:09.520 assets in it t s were roughly just ten T 0:06:10.480 --> 0:06:14.719 of assets in mutual funds, and I was pretty convinced 0:06:14.800 --> 0:06:18.240 that number was increased significantly. So I saw the opportunity 0:06:18.240 --> 0:06:20.279 and that when global X came along and where are 0:06:20.360 --> 0:06:22.880 we know what percentage of the assets are in e 0:06:23.000 --> 0:06:25.440 t F relative to mutual funds right now? I think 0:06:25.560 --> 0:06:29.119 around thirty three or thirty four percent, so tripled since 0:06:29.120 --> 0:06:32.599 you joined global and I think that trend, quite frankly 0:06:32.680 --> 0:06:36.760 berry is accelerating, and my view is that it's going 0:06:36.839 --> 0:06:40.320 to continue to to increase even faster. I think there 0:06:40.320 --> 0:06:43.600 are many catalysts, lots of mutual funds to e t 0:06:43.839 --> 0:06:46.400 s that we're seeing in the market. I think for 0:06:46.480 --> 0:06:48.920 the one K plans are starting to use it t 0:06:49.120 --> 0:06:52.120 F more more broadly, and then some of the new 0:06:52.200 --> 0:06:55.599 changes around you know how you can do actively manage 0:06:55.600 --> 0:06:57.600 the strategies in the context of an ETF. I think 0:06:57.600 --> 0:07:01.240 that's going to accelerate the adoption of a d F significantly. 0:07:01.480 --> 0:07:05.279 Our mutual friend Dave Nodded has joked that if mutual 0:07:05.279 --> 0:07:08.080 funds came out today, they would never be approved by 0:07:08.080 --> 0:07:11.560 the SEC. What do you mean you share capital gains 0:07:11.600 --> 0:07:13.920 with people who haven't sold. That's a terrible idea, and 0:07:14.280 --> 0:07:18.440 clearly E t F s UH cleaned that up. Um. So, 0:07:18.560 --> 0:07:22.120 not only has the E t F industry been gaining momentum, 0:07:22.240 --> 0:07:26.160 but global X has really grown. You're now just about 0:07:26.160 --> 0:07:30.320 forty billion dollars in a very challenging year. Tell us 0:07:30.360 --> 0:07:33.040 what led to this growth? What what's made you guys 0:07:33.160 --> 0:07:36.880 as successful as you've become from a much smaller base 0:07:37.320 --> 0:07:40.280 a decade ago. Yeah, I mean, it's been a beautiful ride, 0:07:40.320 --> 0:07:43.000 to be honest. I joined Global Eggs in two thousand 0:07:43.000 --> 0:07:46.920 and fourteen and we have, if I remember correctly, approximately 0:07:47.120 --> 0:07:50.120 one and a half billion dollars in au M. I 0:07:50.160 --> 0:07:53.600 was employee number ten and for all intents and purposes, 0:07:53.600 --> 0:07:56.040 Bury we were to startup. I mean when I joined, 0:07:56.040 --> 0:07:59.040 I didn't have a computer for ten days, so you 0:07:59.080 --> 0:08:01.560 had a limit of that link. So fast forward to 0:08:01.600 --> 0:08:04.640 where we are today. We have over forty billion dollars 0:08:04.640 --> 0:08:08.760 in assets under management, we have two hundred employees, and 0:08:08.840 --> 0:08:11.600 we have a local presence in all of the major 0:08:11.680 --> 0:08:14.600 markets around the world. And and to your point, I 0:08:14.640 --> 0:08:17.400 think there are two main drivers of that growth. One 0:08:17.680 --> 0:08:21.320 is our leadership in thematic investing is an area that 0:08:21.360 --> 0:08:24.960 we've been very focused on. And the second aspect of 0:08:24.960 --> 0:08:28.320 our strategy that has been very very helpful is our 0:08:28.480 --> 0:08:31.560 global expression. We do believe the growth of the ATF 0:08:31.600 --> 0:08:34.160 industry is not just an U s phenomenon is a 0:08:34.200 --> 0:08:36.840 global phenomenon, and we want to be able to service 0:08:36.880 --> 0:08:40.120 our kinds in all regions of the world. So let's 0:08:40.120 --> 0:08:43.079 talk about the thematic side of it. When it comes 0:08:43.120 --> 0:08:47.680 to passive, there are obviously three giants. It's Vanguard, Black 0:08:47.800 --> 0:08:51.440 Rock and State Street, and then there's everybody else. But 0:08:51.640 --> 0:08:54.480 the thematic side seems to be wide open. Is that 0:08:54.559 --> 0:08:58.680 the thinking, Hey, here's here's some open fields. Let's let's 0:08:58.679 --> 0:09:01.040 see what we can do here and leave the behemoth 0:09:01.200 --> 0:09:05.200 to charge four bibs on a SMP five or a 0:09:05.200 --> 0:09:08.480 total market funds. Yeah. I mean that's a great point. 0:09:08.679 --> 0:09:10.760 And I give you a little bit of the history 0:09:10.760 --> 0:09:13.240 of global legs because I think it's very relevant. Think 0:09:13.320 --> 0:09:16.720 about the two founders of global Lex, Bruno and Jose 0:09:17.240 --> 0:09:20.840 They set up global Lex in two thousand eight, and 0:09:20.880 --> 0:09:22.840 from my tandpoint, you have to be a little bit 0:09:22.880 --> 0:09:30.559 crazy to start in the sure business, and they didn't 0:09:30.559 --> 0:09:34.200 have much capital and enter the e F industry to 0:09:34.240 --> 0:09:37.760 compete with the large, the largest ASSEM managers in the world. 0:09:37.960 --> 0:09:39.920 But I think they did something very well. From the 0:09:40.000 --> 0:09:42.840 very beginning, they realized that the most effective way to 0:09:42.880 --> 0:09:46.960 compete was through innovation and That's why very early on 0:09:47.000 --> 0:09:50.600 they focused on on thematic investing and they launched which 0:09:50.720 --> 0:09:53.720 I believe is the first thematic e t F in 0:09:53.760 --> 0:09:57.280 the U S which was our Global Lex Lithium and 0:09:57.400 --> 0:10:02.000 battery technology exactly exactly, And and that's a big fun 0:10:02.120 --> 0:10:04.520 that's a three or four billion dollars something like that. Yeah, 0:10:04.520 --> 0:10:06.440 I mean twelve years later. It wasn't like that at 0:10:06.480 --> 0:10:08.880 the beginning, but twelve years later it's now going to 0:10:08.960 --> 0:10:12.920 be yet roughly speaking, around four billion dollars in assets 0:10:12.960 --> 0:10:15.920 and a very successful strategy. So what I told the 0:10:16.040 --> 0:10:19.360 friend I was interviewing you, He says, why does the 0:10:19.400 --> 0:10:22.360 world really need another e t F provider? And my 0:10:22.400 --> 0:10:26.800 answer was, Hey, not everybody wants to buy a passive 0:10:26.840 --> 0:10:31.560 index around the satellite of a core portfolio, or even 0:10:31.600 --> 0:10:34.120 just hey I have an idea. I think this is 0:10:34.120 --> 0:10:37.520 going to change the world. Is that the clients you're 0:10:37.520 --> 0:10:41.280 aiming for? Is that who the global X investor is? Yeah, 0:10:41.320 --> 0:10:43.600 I mean gad Franco. We have institutional investor, we have 0:10:43.640 --> 0:10:46.599 financial advancetors, we have retail clients. But I think the 0:10:47.040 --> 0:10:50.640 main reason behind the success and the growth of amatic 0:10:50.640 --> 0:10:55.199 investing is I think it's pretty straightforward, and the world 0:10:55.600 --> 0:10:59.240 very is changing at the fastest space that we have 0:10:59.360 --> 0:11:02.920 seen at any point in history. And what I see 0:11:03.440 --> 0:11:07.599 from more investors is that they don't think the traditional 0:11:07.920 --> 0:11:12.160 and traditional investment approach of looking at historical data to 0:11:12.280 --> 0:11:17.080 predict future returns is no longer enough. Many financial advisors 0:11:17.120 --> 0:11:20.400 and clients are telling us that an investment approach that 0:11:20.440 --> 0:11:24.080 looks into the future is needed, and that's where thematic 0:11:24.120 --> 0:11:26.800 investing comes into play. And I always use the exact 0:11:26.800 --> 0:11:31.800 same example. How you invest in in Google or in 0:11:31.920 --> 0:11:35.280 Facebook in two thousand three. You only invest in those 0:11:35.320 --> 0:11:38.480 companies if you are taking an investment approach that is 0:11:38.520 --> 0:11:42.480 looking into the future, because those business models, those products, 0:11:42.480 --> 0:11:47.040 those services simply didn't exist. And I think for our standpoint, 0:11:47.360 --> 0:11:50.800 thematic investing is the approach that allows investors to do 0:11:51.040 --> 0:11:56.000 just that makes sense to me. Let's talk about some 0:11:56.120 --> 0:11:59.000 of your more popular e t f s. But before 0:11:59.040 --> 0:12:01.560 we drill down on to some of my favorites, I 0:12:01.600 --> 0:12:05.360 have to ask where these ideas come from. Some of 0:12:05.400 --> 0:12:11.440 these are really unusual, different, innovative. How do you guys 0:12:11.480 --> 0:12:15.319 come up with the theme for a new ETF? Great question, 0:12:15.559 --> 0:12:18.080 and I mean I guess it comes down to our 0:12:18.240 --> 0:12:21.800 proud development and our research team. Right now, we have 0:12:21.920 --> 0:12:27.160 a team very of over thirty research analysts located all 0:12:27.200 --> 0:12:30.120 over the world, and basically all they do is looking 0:12:30.120 --> 0:12:35.240 at these trends, talking to industry consultants, industry participants, and 0:12:35.400 --> 0:12:38.439 CEOs to really try to get a sense of where 0:12:38.559 --> 0:12:44.200 like the most relevant emerging trends are. And once we 0:12:44.280 --> 0:12:46.720 have at any point in time, we can have anywhere 0:12:46.760 --> 0:12:49.880 between twenty two thirty things that we're looking at. And 0:12:49.920 --> 0:12:52.800 then in terms of how we decide what things we 0:12:52.840 --> 0:12:56.680 eventually bring to market, we apply like a very simple 0:12:56.760 --> 0:13:00.280 but it's still robust framework that we have developed over 0:13:00.320 --> 0:13:03.160 the last fourteen years. We look at three things. We 0:13:03.200 --> 0:13:07.839 look at conviction, we look at investability, and we look 0:13:07.880 --> 0:13:10.840 at a time horizon. And let me explain that a 0:13:10.840 --> 0:13:13.679 little bit. Conviction, so we look at, you know, whether 0:13:13.760 --> 0:13:17.600 or not a specific theme is something that we have 0:13:17.679 --> 0:13:20.760 a high degree of conviction that will be a trend 0:13:20.880 --> 0:13:23.840 that will definitely have an impact in the economy over 0:13:23.880 --> 0:13:26.680 the next two or three decades. We look at decades, 0:13:26.720 --> 0:13:29.520 two or three decades, so we're not interesting interested in 0:13:29.600 --> 0:13:32.280 any that is kind of like popular for a couple 0:13:32.320 --> 0:13:34.160 of years, and I'll get to that in just one second. 0:13:34.160 --> 0:13:37.880 We're literally looking for the structural shifts in the economy. 0:13:38.160 --> 0:13:42.199 Think of robotics and artificial intelligence, cyber security, cloud competing. 0:13:42.240 --> 0:13:44.839 So that's the first step that we as a group 0:13:45.040 --> 0:13:49.640 try to assess our level of conviction about a given theme. 0:13:49.920 --> 0:13:53.559 Then the second step, which is very important, is investability. 0:13:54.000 --> 0:13:57.400 We need at least twenty five to thirty companies to 0:13:57.480 --> 0:13:59.840 be able to launch an e t F, so that's 0:13:59.880 --> 0:14:02.719 a minimum thirty count from a diversification standpoint, I think 0:14:02.720 --> 0:14:06.040 that's that's the recommended ex sense minimum amount of companies. 0:14:06.280 --> 0:14:08.400 And then finally we look at time horizon to your 0:14:08.440 --> 0:14:11.920 earlier point. Very we are not interested in trends that 0:14:11.960 --> 0:14:14.880 will be popular for a couple of of years. We 0:14:14.960 --> 0:14:19.680 are literally looking at disruptive and structural shifts in the 0:14:19.720 --> 0:14:23.520 economy that in some cases can take decades to play out. 0:14:23.560 --> 0:14:26.920 That's how we think about thematic investing. So one of 0:14:26.960 --> 0:14:30.720 my pet theories is that half the battle for e 0:14:30.840 --> 0:14:35.400 t S attracting assets is the ticker. If you have 0:14:35.440 --> 0:14:39.520 a catchy ticker, you halfway there. Am I out in 0:14:39.640 --> 0:14:42.080 a by myself with that, or do you think there's 0:14:42.120 --> 0:14:44.600 any truth to that, I mean, I would say I 0:14:44.640 --> 0:14:47.440 think that's I partially agree with that. I think obviously 0:14:47.480 --> 0:14:50.000 the ticket is very is very important particlely for the 0:14:50.080 --> 0:14:55.400 self detected retail client base. Catchy ticker can definitely increase 0:14:55.440 --> 0:14:58.360 the chances of a product to be successful. But I 0:14:58.360 --> 0:15:02.120 couldn't discount how much work goes into the proud development 0:15:02.200 --> 0:15:04.520 part of it has to be a good product. It 0:15:04.520 --> 0:15:07.840 has to be properly designed, and there are lots of 0:15:08.440 --> 0:15:11.880 decisions that go into creating an e t F berry. 0:15:12.000 --> 0:15:13.880 You have to define the theme that you have to 0:15:13.920 --> 0:15:18.200 define the different pockets within the theme. Look at liquidity 0:15:19.040 --> 0:15:23.920 market cup wedding virtues, equal weight rebalancing frequencies. So the 0:15:24.040 --> 0:15:27.040 product has to be very well designed to be successful. 0:15:27.080 --> 0:15:31.000 But yes, if you, on top of up have an 0:15:31.000 --> 0:15:34.640 attractive ticker, it can definitely increase the chances of being successful. 0:15:34.720 --> 0:15:37.920 So let me talk about some of my favorites of 0:15:37.960 --> 0:15:41.760 your e t F s we already mentioned the lithium 0:15:41.760 --> 0:15:43.480 will come back to that when we talk about some 0:15:43.520 --> 0:15:49.040 other related a t F. I love this founder run companies. 0:15:49.400 --> 0:15:52.440 What's the ticker for that bus? How great is that 0:15:52.560 --> 0:15:57.000 boss for an e t F of companies? That are 0:15:57.080 --> 0:16:00.160 still run by the founders. So the first question is 0:16:00.320 --> 0:16:04.120 why does that matter? Why does founder run companies make 0:16:04.160 --> 0:16:07.680 a difference. I mean, our analysis was that the companies 0:16:07.680 --> 0:16:11.440 that are run by their founders tend to make long 0:16:11.560 --> 0:16:15.200 term investment decisions in the business and versus having the 0:16:15.320 --> 0:16:18.680 pressure of having to report quarterly earnings and like the 0:16:18.800 --> 0:16:22.800 earnings targets that research analysts and you know tend to 0:16:22.800 --> 0:16:25.080 assign to every single company. So we do think these 0:16:25.120 --> 0:16:29.400 companies over the long run could perform better than the 0:16:29.680 --> 0:16:32.440 broader market. And also it's an interesting play in the 0:16:32.520 --> 0:16:36.560 sense that founder rank companies tend to take a more 0:16:37.080 --> 0:16:41.400 cautious approach to business than maybe other type of of companies. 0:16:41.480 --> 0:16:45.320 That was the main value proposition behind the founder run companies. 0:16:45.360 --> 0:16:48.160 And to your point that it was a very interesting tacker. 0:16:48.240 --> 0:16:51.360 We spend our problem and teams spent literally weeks to 0:16:51.400 --> 0:16:53.760 come up with with that one. Well, it's brilliant. Let's 0:16:53.760 --> 0:16:58.280 do another one. The interest rate hedge at F stock 0:16:58.320 --> 0:17:01.680 symbol rate. That's another a great ticker. How do you 0:17:01.800 --> 0:17:05.360 hedge interest rate risk in an e t F. Well, 0:17:05.400 --> 0:17:07.160 in this part of our case, we're doing that through 0:17:07.200 --> 0:17:10.720 like TSE the Revatives is a fairly complex product. We 0:17:10.800 --> 0:17:13.000 tried for the most part, we tried to follow like 0:17:13.040 --> 0:17:16.119 a passively managed approach to all of ours. In this 0:17:16.200 --> 0:17:19.719 part of our case, it was very difficult to provide 0:17:19.720 --> 0:17:22.879 that structure through like a passively managed strategy. So we 0:17:23.000 --> 0:17:26.280 take a more tactical and active managed approach to that 0:17:26.600 --> 0:17:29.359 particular product, and we were very lucky because we were 0:17:29.359 --> 0:17:32.400 able to secure this ticker red, which is definitely it's 0:17:32.400 --> 0:17:34.280 a very it's a very young product. We just launched 0:17:34.280 --> 0:17:37.240 a few months ago, but we have a high degree 0:17:37.280 --> 0:17:39.119 of confidence that it will be very successful over the 0:17:39.119 --> 0:17:41.399 aron run. The timing is pretty good. You you have 0:17:41.440 --> 0:17:44.320 an interest rate hedge as rates start to spike up. 0:17:44.440 --> 0:17:48.600 You literally launched within a month of the first FED increase, 0:17:48.720 --> 0:17:54.199 so that's pretty timely. Let's talk about cybersecurity. Ticker bug Bug, 0:17:54.960 --> 0:17:57.840 tell us what's in the cybersecurity? I mean, cyber security 0:17:57.880 --> 0:18:00.320 is one of our highest conviction things right now for 0:18:00.359 --> 0:18:03.119 a number of of reasons. Very First of all, there 0:18:03.160 --> 0:18:07.640 are fourteen point four billion devices connected to the Internet 0:18:08.200 --> 0:18:11.360 right now, which is great, but you know the day 0:18:11.480 --> 0:18:13.600 you know, the more devices that you have connected to 0:18:13.640 --> 0:18:17.800 the Internet, the more points of vulnerability there are, so 0:18:17.840 --> 0:18:20.760 the need for cybersecurity is very obviously we have seen 0:18:20.800 --> 0:18:24.040 that also in the context of the conflict between Russia 0:18:24.119 --> 0:18:27.720 and Ukraine, were like the narrative over the first few 0:18:27.720 --> 0:18:32.359 weeks was all around cybersecurity and and those types of things, 0:18:32.760 --> 0:18:36.399 And the analysis that we've been doing in our research team, 0:18:36.560 --> 0:18:40.240 we expect global cybersecurity is spending over the next five 0:18:40.320 --> 0:18:43.639 years to be around one point five trillion dollars. So 0:18:44.000 --> 0:18:46.760 we have a high degree of conviction in that theme. 0:18:47.080 --> 0:18:51.120 And even in the context of a very volatal environment 0:18:51.119 --> 0:18:53.240 that we have seen over the last four quarters, we 0:18:53.320 --> 0:18:57.119 continue to see consistent influence coming into that DF. And 0:18:57.200 --> 0:18:59.760 let's talk about what I think is your biggest fund 0:18:59.800 --> 0:19:03.800 with about six billion dollars is the NASTAC one hundred 0:19:03.960 --> 0:19:07.520 covered Quality t F. You also have an SMP fire 0:19:08.280 --> 0:19:12.000 covered call. Why covered calls? What what does that create 0:19:12.440 --> 0:19:16.360 within the t F. We think it's a great solution 0:19:16.520 --> 0:19:20.440 for for clients that are looking for two things, either 0:19:20.760 --> 0:19:25.600 income or a risk management tool to play the volatile 0:19:25.680 --> 0:19:29.000 environment that we have seen in the markets. Our flagship 0:19:29.040 --> 0:19:31.720 product q I l leviaches and as that one one 0:19:32.119 --> 0:19:35.359 covered called ETF with six point six billion dollars in 0:19:35.400 --> 0:19:39.200 a u M it's right now roughly offering a dividend 0:19:39.280 --> 0:19:42.480 yield of around twelve percent, So you are an income 0:19:42.520 --> 0:19:46.480 oriented investor. Particularly vary in the context of right now. 0:19:46.520 --> 0:19:48.760 Things have changed recently, but we have been for an 0:19:48.800 --> 0:19:52.440 extended period of time going through like a historically low 0:19:52.600 --> 0:19:56.160 interest rate environment. So many of our clients were struggling 0:19:56.160 --> 0:20:00.360 to find alternative sources income for their p all us, 0:20:00.480 --> 0:20:05.520 and this product paying over the twelve dividen dive then 0:20:05.640 --> 0:20:08.760 yield and monthly distributions was very, very attractive for many 0:20:08.760 --> 0:20:11.520 of our our clients. So so how do you manage 0:20:11.560 --> 0:20:15.040 the risk that, hey, if the nastack starts going higher 0:20:15.560 --> 0:20:17.760 and from the lows in October Town, now we're up 0:20:17.880 --> 0:20:20.200 i don't know, ten percent almost in the in the nastac. 0:20:20.720 --> 0:20:24.359 How do you manage having the stock called away from you? 0:20:24.400 --> 0:20:27.320 When you're writing dividends, you're giving someone the right to 0:20:27.440 --> 0:20:30.920 purchase that stock at a higher price if you run 0:20:31.000 --> 0:20:33.200 up to that price. How do you hedge that exposure 0:20:33.240 --> 0:20:36.680 to make sure the underlying doesn't get called away? There's 0:20:36.680 --> 0:20:39.439 a good question what happens there is the volatility that 0:20:39.440 --> 0:20:41.880 you see in the market That's why. That's another way 0:20:41.920 --> 0:20:44.760 in which we are seeing clients using this covered college 0:20:44.760 --> 0:20:47.919 strategies is almost as a risk management tool because in 0:20:47.960 --> 0:20:52.800 this environment of high levels of volatility, the option premium 0:20:52.880 --> 0:20:55.880 that you get on that when you write the option 0:20:56.119 --> 0:20:58.520 goes app so effectively when there is more volatility, you 0:20:58.560 --> 0:21:00.800 get like a higher dividen yield of them one. So 0:21:00.880 --> 0:21:03.080 that's why more and more clients in the contract the 0:21:03.160 --> 0:21:06.440 last for course, have been using this strategy as a 0:21:06.520 --> 0:21:11.480 way to monetize that volatility. So that one is your 0:21:11.480 --> 0:21:14.800 flagship at six billion dollars, you have some et fs 0:21:14.880 --> 0:21:18.240 with you know a handful of millions of dollars. At 0:21:18.320 --> 0:21:22.399 what point are these break even? What is the self 0:21:22.440 --> 0:21:25.160 funding level for any t F? I've heard some people 0:21:25.200 --> 0:21:30.720 say million, fifty million, a hundred million. How much assets 0:21:30.800 --> 0:21:34.760 doesn't e t F have to attract before your confident? Hey, 0:21:34.800 --> 0:21:38.040 this is at least a break even and it can 0:21:38.200 --> 0:21:41.560 change quite a bit based on the exposure of the 0:21:41.840 --> 0:21:45.959 of the a t F, particularly the geographic exposure in 0:21:46.000 --> 0:21:50.480 our case. Roughly speaking, they break even point is anywhere 0:21:50.520 --> 0:21:53.840 between five fifty to a hundred million dollars in a 0:21:53.920 --> 0:21:56.560 u M, which is really a pretty big number. It 0:21:57.040 --> 0:21:59.879 shows you how challenging it is for some of the 0:22:00.040 --> 0:22:03.119 smaller e t F companies that you know they have 0:22:03.160 --> 0:22:06.440 ten million dollars in in an e t F, you're 0:22:06.480 --> 0:22:09.720 suggesting that's the money loser for that company. I mean 0:22:09.760 --> 0:22:11.919 it always. It depends on the economies of the scale 0:22:11.920 --> 0:22:14.520 of the business that you are you are considering. But 0:22:14.600 --> 0:22:19.760 when you factor in you know, legal costs, compliance, portfolio management, trading, 0:22:20.119 --> 0:22:22.119 there is a lot that goes into launching and and 0:22:22.359 --> 0:22:24.680 e t F. So yeah, I mean, I do think 0:22:24.680 --> 0:22:27.200 of fifties around the sweet spot in terms of break even. 0:22:28.200 --> 0:22:31.560 So let's talk about some more of these e t fs. 0:22:31.600 --> 0:22:34.880 But I really want to start by asking how much 0:22:34.920 --> 0:22:38.320 horsepower goes into running these funds. You know you have 0:22:38.400 --> 0:22:43.680 a pre sizeable workforce. Is this mostly data and operations 0:22:43.760 --> 0:22:50.000 people or research or trading? What's the underlying human resources 0:22:50.040 --> 0:22:53.480 that you have to pour into launching a new ETF? 0:22:54.160 --> 0:22:56.600 Great question. It's a combination of both, and I'd like 0:22:56.680 --> 0:22:59.320 to think about it in two different ways. One is, 0:22:59.359 --> 0:23:01.800 when the the a t F is already in the 0:23:01.880 --> 0:23:05.400 market and it's already trading on exchange, then you need 0:23:05.440 --> 0:23:09.760 a fer amount of resources. You know portfolio management, trading resources, 0:23:09.840 --> 0:23:15.359 profile administration, compliance, risk management, and products management people just 0:23:15.480 --> 0:23:19.159 to make sure that the product is behaving exactly how 0:23:19.160 --> 0:23:22.520 it's supposed to behave and right now we have close 0:23:22.560 --> 0:23:24.359 to a hundred at F. Obviously, it takes a for 0:23:24.440 --> 0:23:28.840 amount of resources, and then before you actually launch the 0:23:28.920 --> 0:23:32.080 product to market, that's when the work is more heavy 0:23:32.080 --> 0:23:35.640 on the proud development and research part of the process, 0:23:35.640 --> 0:23:40.800 and particularly around thematic investing. Verry, I wouldn't underestimate the 0:23:40.800 --> 0:23:44.119 amount of resources that you need to bring a thematic 0:23:44.200 --> 0:23:46.399