Speaker 1: Bloomberg Audio Studios, podcasts, radio News. You know, Molly, one
Speaker 1: of the most amazing stories to me in financial services
Speaker 1: over the last decade or so has been the growth
Speaker 1: of ETFs. Huge Just how amazed at the fun flows
Speaker 1: to ETFs and it makes a lot of sense. Unfortunately,
Speaker 1: we have people like Eric Paul Junis at Bloomberg Intelligence
Speaker 1: who keeps us update on what's going on there. But
Speaker 1: we wanted to talk to one of the practitioners in
Speaker 1: the business. Jennifer Grancio joins us. She's global head of
Speaker 1: distribution at TCW. Little firm on the West Coast, huge
Speaker 1: firm on the West Country, and they're into the ETF business. Jennifer,
Speaker 1: thanks for joining us here in our studio. What is
Speaker 1: the TCW ETF business? Tell us kind of how you
Speaker 1: guys are in that business.
Speaker 2: Happy to you, great to be here. So from a
Speaker 2: TCW perspective, a lot of people think of us as
Speaker 2: you know, the core of the fixed income portfolio, which
Speaker 2: we are for many investors with the TCW or met
Speaker 2: West funds, and now we're growing the equity business as well,
Speaker 2: so a lot of that will be ETFs and we
Speaker 2: also were going to do ETFs in the fixed income space.
Speaker 3: When you say you do ETFs, are you the one
Speaker 3: so that you're like deciding what goes into each one
Speaker 3: or like tell us what your role is in this marketplace?
Speaker 2: Yeah, for sure. So from an equity perspective at TCW,
Speaker 2: we have some great core strategies we run in mutual
Speaker 2: funds and SMAs through the end to number one acquisition,
Speaker 2: and then also we're converting a couple of legacy TCW
Speaker 2: active mutual funds. We're going to have a very impressive
Speaker 2: range of megatrend thematic products for clients. And if you
Speaker 2: think about why and what's the role and why does
Speaker 2: the world need that. There's a lot of index ETF
Speaker 2: option out there. A lot of people are very indexed
Speaker 2: in their portfolios, which has this real concentration bias now
Speaker 2: in large tech, and so we're offering the market a
Speaker 2: range of ETFs on energy and power transformation, reshoring of
Speaker 2: supply chains, artificial intelligence that let you take some money
Speaker 2: out of the core and really go after outperformance in
Speaker 2: alpha in portfolio.
Speaker 1: So by definition are those active ETFs.
Speaker 2: They are very concentrated portfolios and active and if you
Speaker 2: think about the markets, money's not free anymore rates are
Speaker 2: much higher. So we think the next ten to twenty
Speaker 2: years are our great market for active managers that can outperform.
Speaker 2: So all of these ETFs on the thematic side will
Speaker 2: be active. Yeah, So let's talk about some of those themes.
Speaker 2: I mean you had mentioned, you know, related to energy
Speaker 2: transition supply chains. What are some of the ones that
Speaker 2: you guys are really paying a lot of attention to
Speaker 2: right now. Yeah, I mean, those are two big ones,
Speaker 2: and they're not small, tactical, narrow trends. They're huge. They're
Speaker 2: going to be here for many decades. And so one
Speaker 2: of the ETFs is net Z and ETZ and that's
Speaker 2: about energy and power transformation. And so if you think
Speaker 2: about that, we are going to need to more than
Speaker 2: double our power and energy in the next twenty years.
Speaker 2: So think about that, more than double. And so companies
Speaker 2: that are at the forefront of how we service the
Speaker 2: need and demand and kind of months or demand we
Speaker 2: have for power, as well as companies that are more
Speaker 2: efficient have a huge opportunity to outperform. And so that's
Speaker 2: a big theme. And now in that theme, we own
Speaker 2: companies that are energy better energy producers. We own Vertive,
Speaker 2: which cools, data centers. We own waste and garbage companies
Speaker 2: that are finding ways to create natural gas and energy
Speaker 2: out of landfill. So it's a very diverse portfolio and
Speaker 2: very complementary and different than what you might hold in
Speaker 2: an index fund.
Speaker 1: When I started my equity research business way way back
Speaker 1: in a day, it starts within eight back in the eighties,
Speaker 1: it covered railroads.
Speaker 3: Really.
Speaker 1: We wrote the first research report on Consolidata Railroad, which
Speaker 1: the company which the government US government was privatizing via
Speaker 1: an IPO. We wrote about a two hundre page report
Speaker 1: on that owned that stock.
Speaker 3: For you, you want to give us a nice summary of
Speaker 3: that right now?
Speaker 1: Yeah, it was a great cost cutting thing. Taking railroad
Speaker 1: crews from five to two, tripled your margins.
Speaker 2: And that's and the other big trend is supply supply chain.
Speaker 2: That's it.
Speaker 1: So I know you've got an ETF on railroads. That's
Speaker 1: why I bring it up. Is that again, I think
Speaker 1: about the roads and supply chain. I guess we all
Speaker 1: got really smart about supply change and the delicate nature
Speaker 1: of supply change during the pandemic. How do you guys
Speaker 1: think about that?
Speaker 2: Yeah, so the sort of restoring of supply chains and
Speaker 2: manufacturing to America and North America is again it's a
Speaker 2: monster trend. It started during COVID. So if I'm deer
Speaker 2: and I'm trying to make it tractor and my bolt
Speaker 2: is made in Asia, I couldn't get my bolt. It
Speaker 2: was really bad for business. So we're seeing that trend
Speaker 2: already having started. And then on top of that, we've
Speaker 2: now got geopolitical issues that make us more nervous about
Speaker 2: doing things like semiconductors outside of the US. So again huge,
Speaker 2: very broad, multi sector trend. And what we own in
Speaker 2: sup or the reshoring of supply chain ETF is all
Speaker 2: the way from railroads, So how are we going to
Speaker 2: transport things if we're manufacturing all over North America. It's
Speaker 2: fantastic for railroads and they've been undervalued. So that's a
Speaker 2: big performance opportunity. And early in the cycle where I
Speaker 2: think we have three trillion of committed projects of new manufacturing,
Speaker 2: more than we've ever had in the US. Early in
Speaker 2: the cycle, we invest a lot in what we call
Speaker 2: picks and shovels, so Martin Marrietta Vulcan companies that make materials.
Speaker 2: So as we build all of these factors, factories, pardon me.
Speaker 2: And then we own a lot of semiconductor names as well,
Speaker 2: because all of these factors are going to have AI
Speaker 2: and robots and they have much higher demand for content
Speaker 2: from a semiconductor perspective.
Speaker 3: I wanted to ask you about the AI theme next.
Speaker 3: That's certainly got to be a big one of these
Speaker 3: thematic trends that you're focusing on. So how are you
Speaker 3: positioning around AI right now?
Speaker 2: Yeah, So in the case of AI, it's in those
Speaker 2: two portfolios to some extent. And then we have a
Speaker 2: mutual fund at TCW which we're converting to an ETF,
Speaker 2: so watch the space for that.
Speaker 3: And the advantage of that is it just like you know,
Speaker 3: I guess, because ETFs tend to be a bit cheaper
Speaker 3: for like a more consumer friendly product. Is that the idea?
Speaker 2: Yeah, in this case, it's an active fund, so it's
Speaker 2: not a sort of a cheap index fund. But the argument,
Speaker 2: and what I think you see a lot of active
Speaker 2: manager converting where it makes sense, is that the market
Speaker 2: likes ETFs. It likes the ability to click through and
Speaker 2: see the underlying holdings on the website, it likes the
Speaker 2: tax advantages of an ETF, and so in the case
Speaker 2: of these mega trends, we see the market in general
Speaker 2: buying ETFs, not funds. So we have a very long
Speaker 2: track record on the TCW Artificial Intelligence Fund, and we're
Speaker 2: converting it to an ETF and a little bit like
Speaker 2: what we talked about in the case of net Z
Speaker 2: and sub, the AI fund has an ability to invest
Speaker 2: in different things as we move through time. So it's
Speaker 2: not all big tech. It's also systems and enablers and
Speaker 2: hardware that is going to grow aggressively as all these
Speaker 2: companies are doing more in AI.
Speaker 1: So it's safe to say, you, guys at tc there'll
Speaker 1: be a big believers in AI. We are okay, because
Speaker 1: I guess my skeptical self sient analysts nature is like,
Speaker 1: where did this come from? Is this just big data
Speaker 1: from three or four years ago? Is this just big
Speaker 1: tech growing as a percentage a GDP of twenty years ago?
Speaker 1: What's new about AI?
Speaker 2: We're in the We're in the next evolution of training
Speaker 2: systems asking systems questions with all these models and natural
Speaker 2: language models asking questions in a way that we just
Speaker 2: get faster and faster and better output. And so that's
Speaker 2: really that's good for everyone and so it'll start slowly,
Speaker 2: but as more people learn to get that leverage, I
Speaker 2: think we're going to see is you're going to see
Speaker 2: it boom.
Speaker 1: Yep, and it's you know. We hear every company in
Speaker 1: the S and pat on with it on their conference
Speaker 1: call talking about you know uh ai and how it's
Speaker 1: getting to be critical to their business. Jennifer Grantcio, thanks
Speaker 1: so much for joining us. Jennifer is a global head
Speaker 1: of Distribution for TCW. We appreciate our coming into our
Speaker 1: Bloomberg Interactor Broker studio in New York City.