1 00:00:02,440 --> 00:00:07,760 Speaker 1: Bloomberg Audio Studios, podcasts, radio News. You know, Molly, one 2 00:00:07,760 --> 00:00:10,200 Speaker 1: of the most amazing stories to me in financial services 3 00:00:10,200 --> 00:00:12,120 Speaker 1: over the last decade or so has been the growth 4 00:00:12,160 --> 00:00:16,520 Speaker 1: of ETFs. Huge Just how amazed at the fun flows 5 00:00:16,560 --> 00:00:19,320 Speaker 1: to ETFs and it makes a lot of sense. Unfortunately, 6 00:00:19,320 --> 00:00:21,800 Speaker 1: we have people like Eric Paul Junis at Bloomberg Intelligence 7 00:00:21,840 --> 00:00:23,759 Speaker 1: who keeps us update on what's going on there. But 8 00:00:24,239 --> 00:00:26,279 Speaker 1: we wanted to talk to one of the practitioners in 9 00:00:26,320 --> 00:00:28,960 Speaker 1: the business. Jennifer Grancio joins us. She's global head of 10 00:00:29,000 --> 00:00:33,720 Speaker 1: distribution at TCW. Little firm on the West Coast, huge 11 00:00:33,760 --> 00:00:37,920 Speaker 1: firm on the West Country, and they're into the ETF business. Jennifer, 12 00:00:37,920 --> 00:00:41,040 Speaker 1: thanks for joining us here in our studio. What is 13 00:00:41,080 --> 00:00:44,839 Speaker 1: the TCW ETF business? Tell us kind of how you 14 00:00:44,920 --> 00:00:45,879 Speaker 1: guys are in that business. 15 00:00:46,720 --> 00:00:48,720 Speaker 2: Happy to you, great to be here. So from a 16 00:00:48,720 --> 00:00:51,400 Speaker 2: TCW perspective, a lot of people think of us as 17 00:00:51,479 --> 00:00:54,360 Speaker 2: you know, the core of the fixed income portfolio, which 18 00:00:54,400 --> 00:00:57,080 Speaker 2: we are for many investors with the TCW or met 19 00:00:57,080 --> 00:01:01,040 Speaker 2: West funds, and now we're growing the equity business as well, 20 00:01:01,160 --> 00:01:03,720 Speaker 2: so a lot of that will be ETFs and we 21 00:01:03,760 --> 00:01:06,039 Speaker 2: also were going to do ETFs in the fixed income space. 22 00:01:06,480 --> 00:01:08,920 Speaker 3: When you say you do ETFs, are you the one 23 00:01:09,160 --> 00:01:11,680 Speaker 3: so that you're like deciding what goes into each one 24 00:01:11,760 --> 00:01:14,080 Speaker 3: or like tell us what your role is in this marketplace? 25 00:01:14,200 --> 00:01:17,640 Speaker 2: Yeah, for sure. So from an equity perspective at TCW, 26 00:01:18,160 --> 00:01:20,959 Speaker 2: we have some great core strategies we run in mutual 27 00:01:20,959 --> 00:01:24,000 Speaker 2: funds and SMAs through the end to number one acquisition, 28 00:01:24,240 --> 00:01:27,920 Speaker 2: and then also we're converting a couple of legacy TCW 29 00:01:28,080 --> 00:01:30,840 Speaker 2: active mutual funds. We're going to have a very impressive 30 00:01:30,959 --> 00:01:34,280 Speaker 2: range of megatrend thematic products for clients. And if you 31 00:01:34,280 --> 00:01:36,960 Speaker 2: think about why and what's the role and why does 32 00:01:37,000 --> 00:01:39,959 Speaker 2: the world need that. There's a lot of index ETF 33 00:01:40,120 --> 00:01:42,840 Speaker 2: option out there. A lot of people are very indexed 34 00:01:42,840 --> 00:01:45,759 Speaker 2: in their portfolios, which has this real concentration bias now 35 00:01:45,800 --> 00:01:48,400 Speaker 2: in large tech, and so we're offering the market a 36 00:01:48,480 --> 00:01:52,920 Speaker 2: range of ETFs on energy and power transformation, reshoring of 37 00:01:52,960 --> 00:01:56,720 Speaker 2: supply chains, artificial intelligence that let you take some money 38 00:01:56,720 --> 00:02:00,240 Speaker 2: out of the core and really go after outperformance in 39 00:02:00,280 --> 00:02:02,080 Speaker 2: alpha in portfolio. 40 00:02:02,120 --> 00:02:04,560 Speaker 1: So by definition are those active ETFs. 41 00:02:04,600 --> 00:02:08,560 Speaker 2: They are very concentrated portfolios and active and if you 42 00:02:08,600 --> 00:02:11,760 Speaker 2: think about the markets, money's not free anymore rates are 43 00:02:11,840 --> 00:02:14,040 Speaker 2: much higher. So we think the next ten to twenty 44 00:02:14,080 --> 00:02:17,880 Speaker 2: years are our great market for active managers that can outperform. 45 00:02:18,120 --> 00:02:20,880 Speaker 2: So all of these ETFs on the thematic side will 46 00:02:20,919 --> 00:02:23,400 Speaker 2: be active. Yeah, So let's talk about some of those themes. 47 00:02:23,400 --> 00:02:25,519 Speaker 2: I mean you had mentioned, you know, related to energy 48 00:02:25,560 --> 00:02:28,320 Speaker 2: transition supply chains. What are some of the ones that 49 00:02:28,360 --> 00:02:30,280 Speaker 2: you guys are really paying a lot of attention to 50 00:02:30,440 --> 00:02:33,320 Speaker 2: right now. Yeah, I mean, those are two big ones, 51 00:02:33,360 --> 00:02:36,839 Speaker 2: and they're not small, tactical, narrow trends. They're huge. They're 52 00:02:36,840 --> 00:02:39,399 Speaker 2: going to be here for many decades. And so one 53 00:02:39,440 --> 00:02:42,320 Speaker 2: of the ETFs is net Z and ETZ and that's 54 00:02:42,320 --> 00:02:45,519 Speaker 2: about energy and power transformation. And so if you think 55 00:02:45,560 --> 00:02:48,560 Speaker 2: about that, we are going to need to more than 56 00:02:48,680 --> 00:02:51,960 Speaker 2: double our power and energy in the next twenty years. 57 00:02:51,960 --> 00:02:55,600 Speaker 2: So think about that, more than double. And so companies 58 00:02:55,600 --> 00:02:58,160 Speaker 2: that are at the forefront of how we service the 59 00:02:58,240 --> 00:03:00,720 Speaker 2: need and demand and kind of months or demand we 60 00:03:00,800 --> 00:03:03,680 Speaker 2: have for power, as well as companies that are more 61 00:03:03,720 --> 00:03:07,480 Speaker 2: efficient have a huge opportunity to outperform. And so that's 62 00:03:07,480 --> 00:03:10,079 Speaker 2: a big theme. And now in that theme, we own 63 00:03:10,160 --> 00:03:14,200 Speaker 2: companies that are energy better energy producers. We own Vertive, 64 00:03:14,520 --> 00:03:18,639 Speaker 2: which cools, data centers. We own waste and garbage companies 65 00:03:18,680 --> 00:03:21,040 Speaker 2: that are finding ways to create natural gas and energy 66 00:03:21,040 --> 00:03:24,040 Speaker 2: out of landfill. So it's a very diverse portfolio and 67 00:03:24,200 --> 00:03:26,840 Speaker 2: very complementary and different than what you might hold in 68 00:03:26,840 --> 00:03:27,640 Speaker 2: an index fund. 69 00:03:28,080 --> 00:03:31,040 Speaker 1: When I started my equity research business way way back 70 00:03:31,080 --> 00:03:33,600 Speaker 1: in a day, it starts within eight back in the eighties, 71 00:03:33,680 --> 00:03:34,720 Speaker 1: it covered railroads. 72 00:03:36,040 --> 00:03:36,360 Speaker 3: Really. 73 00:03:36,680 --> 00:03:40,240 Speaker 1: We wrote the first research report on Consolidata Railroad, which 74 00:03:40,320 --> 00:03:43,360 Speaker 1: the company which the government US government was privatizing via 75 00:03:43,360 --> 00:03:45,600 Speaker 1: an IPO. We wrote about a two hundre page report 76 00:03:45,600 --> 00:03:46,560 Speaker 1: on that owned that stock. 77 00:03:46,600 --> 00:03:48,080 Speaker 3: For you, you want to give us a nice summary of 78 00:03:48,080 --> 00:03:48,640 Speaker 3: that right now? 79 00:03:48,960 --> 00:03:52,600 Speaker 1: Yeah, it was a great cost cutting thing. Taking railroad 80 00:03:52,640 --> 00:03:55,400 Speaker 1: crews from five to two, tripled your margins. 81 00:03:55,920 --> 00:03:59,160 Speaker 2: And that's and the other big trend is supply supply chain. 82 00:03:59,200 --> 00:03:59,480 Speaker 2: That's it. 83 00:03:59,560 --> 00:04:01,480 Speaker 1: So I know you've got an ETF on railroads. That's 84 00:04:01,520 --> 00:04:04,240 Speaker 1: why I bring it up. Is that again, I think 85 00:04:04,240 --> 00:04:06,200 Speaker 1: about the roads and supply chain. I guess we all 86 00:04:06,200 --> 00:04:09,360 Speaker 1: got really smart about supply change and the delicate nature 87 00:04:09,360 --> 00:04:11,680 Speaker 1: of supply change during the pandemic. How do you guys 88 00:04:11,720 --> 00:04:12,200 Speaker 1: think about that? 89 00:04:12,560 --> 00:04:15,520 Speaker 2: Yeah, so the sort of restoring of supply chains and 90 00:04:15,560 --> 00:04:18,720 Speaker 2: manufacturing to America and North America is again it's a 91 00:04:18,800 --> 00:04:22,160 Speaker 2: monster trend. It started during COVID. So if I'm deer 92 00:04:22,200 --> 00:04:24,159 Speaker 2: and I'm trying to make it tractor and my bolt 93 00:04:24,240 --> 00:04:26,120 Speaker 2: is made in Asia, I couldn't get my bolt. It 94 00:04:26,200 --> 00:04:29,200 Speaker 2: was really bad for business. So we're seeing that trend 95 00:04:29,279 --> 00:04:31,839 Speaker 2: already having started. And then on top of that, we've 96 00:04:31,839 --> 00:04:35,159 Speaker 2: now got geopolitical issues that make us more nervous about 97 00:04:35,200 --> 00:04:39,120 Speaker 2: doing things like semiconductors outside of the US. So again huge, 98 00:04:39,320 --> 00:04:42,520 Speaker 2: very broad, multi sector trend. And what we own in 99 00:04:42,760 --> 00:04:46,280 Speaker 2: sup or the reshoring of supply chain ETF is all 100 00:04:46,320 --> 00:04:49,120 Speaker 2: the way from railroads, So how are we going to 101 00:04:49,200 --> 00:04:52,440 Speaker 2: transport things if we're manufacturing all over North America. It's 102 00:04:52,720 --> 00:04:56,120 Speaker 2: fantastic for railroads and they've been undervalued. So that's a 103 00:04:56,120 --> 00:04:59,720 Speaker 2: big performance opportunity. And early in the cycle where I 104 00:04:59,720 --> 00:05:03,000 Speaker 2: think we have three trillion of committed projects of new manufacturing, 105 00:05:03,040 --> 00:05:05,719 Speaker 2: more than we've ever had in the US. Early in 106 00:05:05,720 --> 00:05:07,680 Speaker 2: the cycle, we invest a lot in what we call 107 00:05:07,720 --> 00:05:12,360 Speaker 2: picks and shovels, so Martin Marrietta Vulcan companies that make materials. 108 00:05:12,360 --> 00:05:15,480 Speaker 2: So as we build all of these factors, factories, pardon me. 109 00:05:15,839 --> 00:05:18,719 Speaker 2: And then we own a lot of semiconductor names as well, 110 00:05:18,800 --> 00:05:20,919 Speaker 2: because all of these factors are going to have AI 111 00:05:21,279 --> 00:05:24,360 Speaker 2: and robots and they have much higher demand for content 112 00:05:24,680 --> 00:05:26,240 Speaker 2: from a semiconductor perspective. 113 00:05:26,400 --> 00:05:28,440 Speaker 3: I wanted to ask you about the AI theme next. 114 00:05:28,480 --> 00:05:30,120 Speaker 3: That's certainly got to be a big one of these 115 00:05:30,160 --> 00:05:32,919 Speaker 3: thematic trends that you're focusing on. So how are you 116 00:05:32,960 --> 00:05:34,960 Speaker 3: positioning around AI right now? 117 00:05:35,080 --> 00:05:37,000 Speaker 2: Yeah, So in the case of AI, it's in those 118 00:05:37,040 --> 00:05:39,760 Speaker 2: two portfolios to some extent. And then we have a 119 00:05:39,839 --> 00:05:42,760 Speaker 2: mutual fund at TCW which we're converting to an ETF, 120 00:05:42,839 --> 00:05:44,120 Speaker 2: so watch the space for that. 121 00:05:44,920 --> 00:05:46,960 Speaker 3: And the advantage of that is it just like you know, 122 00:05:47,880 --> 00:05:49,920 Speaker 3: I guess, because ETFs tend to be a bit cheaper 123 00:05:49,960 --> 00:05:52,240 Speaker 3: for like a more consumer friendly product. Is that the idea? 124 00:05:52,320 --> 00:05:54,640 Speaker 2: Yeah, in this case, it's an active fund, so it's 125 00:05:55,200 --> 00:05:58,120 Speaker 2: not a sort of a cheap index fund. But the argument, 126 00:05:58,120 --> 00:05:59,560 Speaker 2: and what I think you see a lot of active 127 00:05:59,560 --> 00:06:02,839 Speaker 2: manager converting where it makes sense, is that the market 128 00:06:02,920 --> 00:06:06,479 Speaker 2: likes ETFs. It likes the ability to click through and 129 00:06:06,480 --> 00:06:09,680 Speaker 2: see the underlying holdings on the website, it likes the 130 00:06:09,720 --> 00:06:12,280 Speaker 2: tax advantages of an ETF, and so in the case 131 00:06:12,279 --> 00:06:14,919 Speaker 2: of these mega trends, we see the market in general 132 00:06:15,080 --> 00:06:18,000 Speaker 2: buying ETFs, not funds. So we have a very long 133 00:06:18,120 --> 00:06:22,159 Speaker 2: track record on the TCW Artificial Intelligence Fund, and we're 134 00:06:22,160 --> 00:06:24,440 Speaker 2: converting it to an ETF and a little bit like 135 00:06:24,480 --> 00:06:26,480 Speaker 2: what we talked about in the case of net Z 136 00:06:26,760 --> 00:06:29,760 Speaker 2: and sub, the AI fund has an ability to invest 137 00:06:29,839 --> 00:06:31,720 Speaker 2: in different things as we move through time. So it's 138 00:06:31,760 --> 00:06:34,640 Speaker 2: not all big tech. It's also systems and enablers and 139 00:06:34,720 --> 00:06:38,360 Speaker 2: hardware that is going to grow aggressively as all these 140 00:06:38,360 --> 00:06:39,640 Speaker 2: companies are doing more in AI. 141 00:06:39,760 --> 00:06:41,280 Speaker 1: So it's safe to say, you, guys at tc there'll 142 00:06:41,279 --> 00:06:44,320 Speaker 1: be a big believers in AI. We are okay, because 143 00:06:44,320 --> 00:06:48,480 Speaker 1: I guess my skeptical self sient analysts nature is like, 144 00:06:49,320 --> 00:06:51,640 Speaker 1: where did this come from? Is this just big data 145 00:06:51,720 --> 00:06:54,039 Speaker 1: from three or four years ago? Is this just big 146 00:06:54,120 --> 00:06:57,760 Speaker 1: tech growing as a percentage a GDP of twenty years ago? 147 00:06:58,080 --> 00:06:59,200 Speaker 1: What's new about AI? 148 00:07:00,040 --> 00:07:03,240 Speaker 2: We're in the We're in the next evolution of training 149 00:07:03,320 --> 00:07:06,880 Speaker 2: systems asking systems questions with all these models and natural 150 00:07:06,920 --> 00:07:09,840 Speaker 2: language models asking questions in a way that we just 151 00:07:09,880 --> 00:07:12,400 Speaker 2: get faster and faster and better output. And so that's 152 00:07:12,560 --> 00:07:15,120 Speaker 2: really that's good for everyone and so it'll start slowly, 153 00:07:15,400 --> 00:07:18,080 Speaker 2: but as more people learn to get that leverage, I 154 00:07:18,080 --> 00:07:20,280 Speaker 2: think we're going to see is you're going to see 155 00:07:20,280 --> 00:07:21,000 Speaker 2: it boom. 156 00:07:20,760 --> 00:07:23,840 Speaker 1: Yep, and it's you know. We hear every company in 157 00:07:23,880 --> 00:07:26,800 Speaker 1: the S and pat on with it on their conference 158 00:07:26,840 --> 00:07:29,240 Speaker 1: call talking about you know uh ai and how it's 159 00:07:29,240 --> 00:07:31,480 Speaker 1: getting to be critical to their business. Jennifer Grantcio, thanks 160 00:07:31,480 --> 00:07:33,520 Speaker 1: so much for joining us. Jennifer is a global head 161 00:07:33,560 --> 00:07:36,520 Speaker 1: of Distribution for TCW. We appreciate our coming into our 162 00:07:36,520 --> 00:07:38,880 Speaker 1: Bloomberg Interactor Broker studio in New York City.