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Speaker 1: This is Masters in Business with Barry Ridholts on Bloomberg Radio.

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Speaker 1: This week on the podcast, I have an extra special guest,

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Speaker 1: and I know I say that all the time, but

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Speaker 1: Salim Ramg, global head of I Shares and Index Investments

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Speaker 1: for black Rock. I share runs about four point six trillion.

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Speaker 1: Of the seven trillion in all of black Rock. Index

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Speaker 1: investments is about two point three trillion. E t s

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Speaker 1: are another two point three trillion, And really, who is

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Speaker 1: there better in the world to discuss E t f

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Speaker 1: s and indexing than Selim Ramg. We pretty much cover

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Speaker 1: everything from passive to active. We talk about E s

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Speaker 1: G as a rising investment class and why black Rock

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Speaker 1: thinks that's gonna exceed a trillion dollars over the next decade.

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Speaker 1: We discuss how the entire fixed income in bond market

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Speaker 1: has moved so aggressively to e t f s from

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Speaker 1: what used to be a bespoke, over the counter, sort

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Speaker 1: of old school type of Wall Street trade. We also

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Speaker 1: talk about the business of e t f s, how

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Speaker 1: they've grown, how they've traded, and and then most importantly,

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Speaker 1: we went over a variety of things involving governance and

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Speaker 1: what Larry Fink is doing to drive better behavior amongst

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Speaker 1: the C suite. In reality, black Rock looks at E

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Speaker 1: s G as a fundamental risk factor and it's a

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Speaker 1: way to help identify what companies are going to perform better.

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Speaker 1: It's not politics, but it's risk management. The whole conversation

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Speaker 1: was absolutely a tourtive force about indexing and E t

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Speaker 1: f s. If you were at all interested in wealth management,

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Speaker 1: or passive investing or active investing for that matter, you're

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Speaker 1: gonna find this to be absolutely fascinating. With no further ado,

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Speaker 1: my conversation with black Rocks Slim romj VISs Masters in

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Speaker 1: Business with Barry Ridholts on Bloomberg Radio. My extra special

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Speaker 1: guest this week is Salim Romjy. He is the global

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Speaker 1: head of I Shares and Index Investments for black Rock.

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Speaker 1: That group runs about four point six trillion dollars in

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Speaker 1: client assets. Salim comes to us with an economics and

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Speaker 1: politics degree from the University of Toronto and a law

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Speaker 1: degree from Cambridge University. Salim rom Jim, Welcome to Bloomberg.

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Speaker 1: Thanks a lot, Berry, It's great to be here. So

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Speaker 1: that's an interesting background. Toronto to Cambridge University, doing law

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Speaker 1: prior to joining black Rock, you were a partner at McKenzie.

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Speaker 1: How did that transition from consulting to asset management come about?

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Speaker 1: You know, I haven't thought about it in a while.

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Speaker 1: I had worked with black Rock and worked with I

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Speaker 1: Shares for a number of years as an advisor before

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Speaker 1: I joined back with I Shares in two thousand and five.

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Speaker 1: H and with black Rock had gotten to know UM

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Speaker 1: the senior team around the time of the merger with

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Speaker 1: b G I, and it was back in two thousand

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Speaker 1: and thirteen UM, after I'd gotten to know a bunch

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Speaker 1: of the senior leaders and a bunch of the members

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Speaker 1: of the firm and really liked the culture that Larry

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Speaker 1: had approached me and asked me whether I wanted to

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Speaker 1: join the firm, and after a couple of discussions, I

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Speaker 1: actually turned him down. He handled it pretty well, and

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Speaker 1: a week or two later area I was speaking at

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Speaker 1: a conference and our late partner, a guy named Charlie Halleck,

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Speaker 1: who had really built the Aladdin business and was the

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Speaker 1: co president of the firm before he died. He came

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Speaker 1: up to me and he said, he said, I heard

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Speaker 1: you turned us down. I said yes, and then he

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Speaker 1: asked me why I was such an idiot. He put

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Speaker 1: it in slightly more colorful terms than than that. But

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Speaker 1: then he sat me down and explained to me. He

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Speaker 1: answered his own question for about an hour and explained

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Speaker 1: to me why I was such an idiot. And the

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Speaker 1: very next day Larry called back concluded the two of

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Speaker 1: them were in the hoots and I've accepted the offer.

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Speaker 1: So I'd say it was a bumpy kind of pre start,

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Speaker 1: but after a couple of wrong turns that came to

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Speaker 1: the right decision and a blood ever since, ever since

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Speaker 1: that day. That's pretty funny. I suspect you left out

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Speaker 1: an important adverb. Absolutely absolutely so. So you go from

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Speaker 1: global head of corporate strategy, how do you migrate to

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Speaker 1: E T F and indexing from that? It doesn't seem

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Speaker 1: to be a natural path, or am I you know,

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Speaker 1: misunderstanding that looking in from the outside. Yeah, there was

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Speaker 1: one important beat in between. And you know, I can't

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Speaker 1: say I was. I was the head of strategy for

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Speaker 1: for just over a year, and truthfully, I'm not sure

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Speaker 1: that I had a major impact in that one year

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Speaker 1: on the firm. But what it was really useful for

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Speaker 1: me was I learned the culture from the inside. I

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Speaker 1: built relationships. I've really learned how the place worked. And

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Speaker 1: you know, black Rock's a unique place, and we're a

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Speaker 1: large public company, but their aspects which feel like a

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Speaker 1: small family run business because we still are run buyer founders.

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Speaker 1: And I think for me in that first year, getting

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Speaker 1: an appreciation of how the firm works and operates and

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Speaker 1: what some of the magic is inside, I think was

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Speaker 1: really important. The first place that Larry and Rob Pepito

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Speaker 1: had asked me to go after that year was our

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Speaker 1: US Wealth business. In our US Wealth business at the time,

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Speaker 1: this is back in two thousand and fifteen, was really

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Speaker 1: in the early days of bringing together their active investment

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Speaker 1: teams and their index investment teams. You know, these two

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Speaker 1: groups had kind of grown up as almost warring tribes,

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Speaker 1: and the goal was, how do you bring them together,

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Speaker 1: and how do you re orient the whole business around

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Speaker 1: financial advisors wealth managers principally big fee based wealth managers,

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Speaker 1: which you are well familiar with, and and how do

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Speaker 1: you really re orient the business around helping those clients

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Speaker 1: build a better portfolio. And so by the time I

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Speaker 1: left a few years later, the US Wealth business became

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Speaker 1: the source of more than half of I shares flows globally,

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Speaker 1: and so I think it was a very natural than

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Speaker 1: extension that when Larry called me up just around two

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Speaker 1: years ago and said it was time for the next

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Speaker 1: move that I went into this role around I shares

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Speaker 1: and our index investing business quite fascinating. So let's talk

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Speaker 1: a little bit about that index investing business. The index

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Speaker 1: funds more or less have the assets run themselves, but

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Speaker 1: the business of e t f s is anything but passive.

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Speaker 1: How do you describe what your primary responsibilities are overseeing

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Speaker 1: indexing and e t f s at black Rock. You know,

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Speaker 1: one of the luxuries I had when I was running

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Speaker 1: our client areas in US wealth was you always got

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Speaker 1: to assume that everything worked. And in my current role,

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Speaker 1: there's a lot of underlying engineering and precision and making

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Speaker 1: sure that the whole ecosystem works. So one big part

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Speaker 1: of what our teams do is really making sure that

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Speaker 1: our index exposures whether they're in indexing, in ETFs, in

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Speaker 1: index separate accounts, that they track precisely, that they have

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Speaker 1: great liquidity, that they have great tax efficiency, that we're

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Speaker 1: working with all of our partners across the ecosystem to

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Speaker 1: make sure that they work all the time, and I

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Speaker 1: think that's one huge undertaking in terms of people and

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Speaker 1: technology and partnership across a broad range of providers. That's

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Speaker 1: one essential part of the role, because you know, we're

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Speaker 1: we're fond of talking about e t s as a technology,

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Speaker 1: and they are. But the thing about a technology is

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Speaker 1: that it's got to work not some of the time,

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Speaker 1: but all of the time. And there's a big first

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Speaker 1: order undertaking to make sure that that happens, both in

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Speaker 1: the t S and in in our separate account. I'd

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Speaker 1: say the second thing there is really about the nature

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Speaker 1: of e t s themselves, and increasingly they're doing much

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Speaker 1: more than they did, you know, twenty years ago when

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Speaker 1: I sure has first got off the ground that what

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Speaker 1: we're starting to do more and more is not just

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Speaker 1: increase the access of the t f s and and

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Speaker 1: some of the moves that a number of the platforms

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Speaker 1: that announced last year towards commission free trading kind of

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Speaker 1: certainly helped that, but they're starting to really be much

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Speaker 1: more essential parts of whole portfolios, even beyond market cap

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Speaker 1: weighted indices. So things like factors and things like e

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Speaker 1: s G are increasingly things that take active risk are

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Speaker 1: increasingly becoming part of what e t s do uh

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Speaker 1: and I would say even deeper than that, and we

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Speaker 1: can get into this in a little bit more detail

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Speaker 1: whenever you want. They're also becoming essential parts of the

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Speaker 1: capital market, and so a real force in terms of

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Speaker 1: modernizing aspects of the bond market, for example, are what

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Speaker 1: ETFs are doing. And so a second really important part

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Speaker 1: is working with our clients and working with our teams

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Speaker 1: all around the world to start to imagine and start

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Speaker 1: to think through all the different ways in which e

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Speaker 1: t s can do more, even well beyond what we

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Speaker 1: already do with great precision across our traditional market gap

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Speaker 1: wait in indicries. The final part of the job is

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Speaker 1: really just connecting the dot. There's a lot of work

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Speaker 1: that we need to do with our partners in a

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Speaker 1: Latin about making it easier to access et s in

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Speaker 1: the workflow with partners outside of black Rock to really

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Speaker 1: make it easier to access and so it's really just

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Speaker 1: staying alert and staying focused on other uses and other

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Speaker 1: ways in which people are accessing these instruments all over

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Speaker 1: the world. So we're definitely going to get to E

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Speaker 1: s G and factor investing and FIXT income. But I

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Speaker 1: have to ask one question in about the index providers

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Speaker 1: like SMP and s c I and anybody else who's

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Speaker 1: creating a popular index. How does that relationship work? How

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Speaker 1: does black Rock either say I want that index in

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Speaker 1: an E T F or go to an index creator

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Speaker 1: and say we would like to see something like this.

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Speaker 1: What is that relationship like? You know, it's a relationship

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Speaker 1: not I guess when I talk about the the ecosystem

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Speaker 1: in vague terms, index providers are one really important part

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Speaker 1: of it, and sometimes it's really accessing intellectual property that

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Speaker 1: they developed. You know, take your well known broad indices,

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Speaker 1: whether it's uh MSTI and emerging markets or the SMP

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Speaker 1: five or something like that, and being able to use

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Speaker 1: that to be able to make sure that as we're

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Speaker 1: being precise about what we're tracking to, we're tracking to

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Speaker 1: something clients know and respect. And you know, there are

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Speaker 1: other ways in which will work with them around new

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Speaker 1: innovations in e s G, in factors in other areas

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Speaker 1: as we keep expanding out the ecosystem. But I look

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Speaker 1: at them as important partners, just as I look at

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Speaker 1: exchanges as important partners, just as I look at authorized

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Speaker 1: participants and market makers as important partners, which is that. However,

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Speaker 1: you know, in our process to make high quality ETFs,

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Speaker 1: there are a lot of relationships and partnerships that we

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Speaker 1: need to forge outside of black Rock index Providers being

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Speaker 1: one of them, to really make sure it operates as

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Speaker 1: clients expect. Quite fascinating. Let's talk a little bit about

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Speaker 1: the fee war for e t f s and indexing.

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Speaker 1: I guess the few war is over. For investors who

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Speaker 1: were evaluating various products, what else should they be considering

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Speaker 1: besides the sticker price? The sticker price is important, and

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Speaker 1: you know, I like to think we've been a leader

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Speaker 1: in as we grow reinvesting a number of our gains

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Speaker 1: back with our clients. Just you know, as context, over

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Speaker 1: the past six years or so, we've reinvested six hundred

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Speaker 1: million dollars back into the reductions, somewhere around one and

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Speaker 1: a half to two and a half percent of our

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Speaker 1: revenues in any given year. Uh, and we expect to

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Speaker 1: continue to do that as we grow, particularly in our

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Speaker 1: core series. But beyond the sticker price, there are a

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Speaker 1: number of areas that are, if anything, more important, and

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Speaker 1: I wish more attention was paid to those aspects, even

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Speaker 1: as attention is paid to the expense ratios just I mean,

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Speaker 1: look at taxes. If you think about a taxable investor,

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Speaker 1: just in the United States, a typical active mutual fund

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Speaker 1: has around a hundred and fifty hundred and sixty basis

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Speaker 1: points annually of tax drag inequities and that's a huge

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Speaker 1: edwin for most taxable investors. And so the tax efficiency

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Speaker 1: of the rapper becomes a really important aspect to what

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Speaker 1: the investor takes home at the end of each year.

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Speaker 1: Liquidity and the ability to get in and out of

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Speaker 1: an exposure relatively easily. That can add anywhere between fifty

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Speaker 1: and a hundred basis points or more of cost at

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Speaker 1: the time of the trade, and I think that's under

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Speaker 1: appreciated as well. And the third piece, which is a cost,

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Speaker 1: is really the cost of not tracking precisely to the index.

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Speaker 1: We invest a lot in terms of people on technology

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Speaker 1: to make sure we track precisely, but if you veer

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Speaker 1: off by fifty basis points, that's ultimately a cost that's

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Speaker 1: going to the investors. So I think the expense ratio

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Speaker 1: has had a lot of attention, some of the attention

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Speaker 1: we've caused, but I think things like tax efficiency, things

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Speaker 1: like liquidity, things like tracking are even more important financially

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Speaker 1: to investors, and I wish they got the same kind

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Speaker 1: of focus. I hope they will get the same kind

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Speaker 1: of focus in the minds of investors and those who

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Speaker 1: advise them. Let's focus some attention on some of those issues.

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Speaker 1: I'm not really worried about the tax inefficiency because active

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Speaker 1: managers can make it up with their stock picking prowess,

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Speaker 1: So I don't know if we really have to worry

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Speaker 1: about that. But let's talk let's I'm I'm joking in

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Speaker 1: case people don't realize that, but but let's talk a

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Speaker 1: little bit about tracking error. How complex is it, especially

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Speaker 1: in some of these really substantially sized dtfs, to make

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Speaker 1: sure that they track precisely with the underlying index. I

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Speaker 1: have to think that's a lot more work than people realize.

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Speaker 1: One of the benefits I would say of having a

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Speaker 1: single technology platform, which we view through a LATIN is

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Speaker 1: the ability to really scale that across many trillions of assets,

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Speaker 1: and being able to bring a degree of precision and

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Speaker 1: a degree of expertise to it. But but if you

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Speaker 1: look at across our teams who manage our index investing.

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Speaker 1: It's a combination of great technology, it's a combination of

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Speaker 1: that plus incredibly discipline process and there are hundreds of

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Speaker 1: different elements in the process. And our teams, you know,

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Speaker 1: they're rightfully called portfolio engineers because what they're really doing

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Speaker 1: is a it's an engineering task to make sure that

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Speaker 1: everything works and operates as it should. And it's pretty

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Speaker 1: fundamental element of data science because we're always looking out

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Speaker 1: in the securities markets, looking at our indices, looking at

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Speaker 1: how our exposures track, and and particularly around the times

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Speaker 1: that you have major index rebalances, you know, every quarter

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Speaker 1: or twice a year all around the world. It's just

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Speaker 1: making sure that that happens precisely. Really defines I think

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Speaker 1: a good quality and a high quality index provider from

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Speaker 1: someone who is a lot less preciser or just you know,

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Speaker 1: not as well engineered. So there's been a lot of

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Speaker 1: criticism of indexing over the past I don't know, twenty

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Speaker 1: years really, since a great financial crisis, we've seen a

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Speaker 1: lot of inflows into indexing. What do you make of

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Speaker 1: some of the wacky your criticisms passive distorts, price discovery,

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Speaker 1: and that it has this inherent monopoly problem how do

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Speaker 1: you look at those sort of claims. Yeah, look, one

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Speaker 1: is with a bit of a grain of salt. And

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Speaker 1: these have been going on for you know, forty years.

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Speaker 1: There's an ad that I keep in my office when

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Speaker 1: when we get back to our office, which is from

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Speaker 1: the late seventies, which talks about indexation being an American

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Speaker 1: because you know, no American, but want just staverage returns.

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Speaker 1: And so this narrative around indexation has been around for

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Speaker 1: a while, and in any given period, even in the

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Speaker 1: past few years, I'll see indexation be accused of, you know,

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Speaker 1: being right at the center of concentrated capitalism. There was

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Speaker 1: a piece a few years ago which accused us of

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Speaker 1: being Marxists, and so, you know, I don't, to be honest,

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Speaker 1: I don't pay a huge amount of attention to some

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Speaker 1: of those kind of fringe theories. What I look at

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Speaker 1: is two things. Look at the facts, and then I

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Speaker 1: look at our clients. And what the facts say is

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Speaker 1: that in the hundred and eighty trillion dollar marketplace of

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Speaker 1: equity and fixed income securities, indexation in all forms ETFs

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Speaker 1: funds separate accounts were one tenth of that active is

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Speaker 1: about of that total marketplace, and if you look at

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Speaker 1: it from an E t F lens, e t F

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Speaker 1: s or five percent of the equity markets and one

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Speaker 1: per cent of the bond markets. And as we look

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Speaker 1: at things like price discovery, e t f s have

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Speaker 1: really been a vehicle that's aided price discovery. It's especially

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Speaker 1: true in the bond market. There are a number of

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Speaker 1: third parties. Bank of England published a report a few

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Speaker 1: months ago around this about how e t s aided

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Speaker 1: price discovery, and other third parties have also come to

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Speaker 1: similar conclusions on the facts. But the real thing I

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Speaker 1: look to is our clients. And you know, we now

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Speaker 1: have tens of millions of investors in r E t

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Speaker 1: s and ultimately, if we provide something that's trans parent,

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Speaker 1: we provide something that's good value. When we provide something

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Speaker 1: that has integrity both in terms of our own produciary

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Speaker 1: mindset and in terms of the engineering, more clients will

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Speaker 1: come to us. And I think that's what really matters,

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Speaker 1: and that's where we really keep the area of our focus.

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Speaker 1: We always look at the facts, but every time we

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Speaker 1: look at the facts on things like pricing and things

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Speaker 1: like concentration, it's kind of the opposite of what has

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Speaker 1: been speculated about is actually the truth. So it's those

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Speaker 1: two things that are really I try and stay focused

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Speaker 1: on and and some of the fringe theories get annoying

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Speaker 1: from time to time, and but I try and keep

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Speaker 1: a relatively level ahead and look, if the facts say

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Speaker 1: something different, we'll come to a different conclusion that I

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Speaker 1: think we're a long way away, you know, from us

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Speaker 1: reaching some Marxist singularity that some of speculated may happen.

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Speaker 1: Let's talk about an outlier products that's been out there

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Speaker 1: that's very different than your core products. When when we

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Speaker 1: look at the way some of the oil et F

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Speaker 1: like USO have traded, or some of the VIX products

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Speaker 1: that kind of went berserk a few years ago, how

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Speaker 1: do you educate the public about your core products and

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Speaker 1: why things like those two are really one officer in

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Speaker 1: this case too offs they're not the normal E t

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Speaker 1: F product. Yeah, I think like the the E t

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Speaker 1: F has now been around for just over thirty years,

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Speaker 1: and I should have been around for just over twenty years,

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Speaker 1: and there now are several thousand E t F and

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Speaker 1: and I think that there is you know, it's time

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Speaker 1: that there was a more consistent way of naming and

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Speaker 1: naming conventions around what appropriately should and shouldn't be called

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Speaker 1: an e t F. For US, we think e t

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Speaker 1: f s are really transparent, rules based diversified investments in

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Speaker 1: a Body Act fund structure. And you know, we had

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Speaker 1: joined with a coalition about a fid as than other

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Speaker 1: et F providers that accounted for well over the assets

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Speaker 1: of the industry, who felt pretty much the same way

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Speaker 1: that a number of things that fit that description are

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Speaker 1: appropriately ts. But you know, if you've got a commodity fund,

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Speaker 1: including we've got some commodity funds and things like gold

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Speaker 1: and silver that should appropriately be called a exchange traded

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Speaker 1: commodity because it's different than some of the funds and

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Speaker 1: the fund structures and some of the products out there

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Speaker 1: that call themselves ets, you know, they're really just structured products.

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Speaker 1: And I think that some of the providers that do

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Speaker 1: that should really own that, and if clients or investors

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Speaker 1: want to buy those, power to them. But I think

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Speaker 1: that having clarity around you know, what is a transparent,

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Speaker 1: rules based diversified investment fund versus what something else, be

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Speaker 1: a commodity or be it like a structured product or

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Speaker 1: a note, I think really helps investors and helps the industry,

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Speaker 1: and so that's I We've been a really vocal part

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Speaker 1: of this coalition, and I think that the time has

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Speaker 1: come and the industry has come of age, that it's

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Speaker 1: worth being able to provide that degree of clarity for

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Speaker 1: investors to know exactly the type of structure that they're

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Speaker 1: getting into. Quite fascinating. Let's talk a little bit about

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Speaker 1: what's going on these days in fixed income. If you

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Speaker 1: would have told me a decade ago that the Fed

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Speaker 1: would be out buying fixed income ETFs, I would have

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Speaker 1: looked at you like you had two heads. But here

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Speaker 1: we are. The Federal Reserve is buying fixed income products

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Speaker 1: in et F forms. What does that say about the

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Speaker 1: viability of e t f s and their ability to manage? Yeah?

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Speaker 1: I think at first, just as a disclosure, Barry, the

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Speaker 1: mandate that black Rock has with the Federal Reserve is

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Speaker 1: behind a wall with our financial markets advisory work. So

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Speaker 1: I'm not involved in any way in terms of the

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Speaker 1: FED and black Rocks work there. But if I could

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Speaker 1: just paint a broader context and then answer your quest,

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Speaker 1: and the broader context is this, which is that that

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Speaker 1: fixed income ETFs are now a couple of thousand products

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Speaker 1: and over one point three trillion dollars of assets, and

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Speaker 1: they've been around for nearly twenty years. And when we

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Speaker 1: look at uses by central banks around the world, they're

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Speaker 1: well over thirty official institutions. About half of them would

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Speaker 1: be central banks that already use fixed income ets in

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Speaker 1: one form of the other. The Federal Reserve is kind

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Speaker 1: of the next and obviously a very significant central bank,

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Speaker 1: but it's joining a group that's already pretty significant size

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Speaker 1: and in their use of fixed income ets. And when

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Speaker 1: I look at why official institutions, why other asset managers,

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Speaker 1: by pension funds, by insurance companies, so a whole range

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Speaker 1: of institutional investors are turning to fixed income ETFs. You know,

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Speaker 1: they're quite straightforward. They're much cheaper to trade than the

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Speaker 1: underlying bond market. I think the events of February and

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Speaker 1: March and April showed that they were much more liquid

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Speaker 1: than the underlying bond market itself. I think they also

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Speaker 1: showed that you could get better, more actionable prices in

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Speaker 1: the E t F And they really are an improvement

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Speaker 1: or a modernizing force relative to certain antiquated aspects of

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Speaker 1: the bond market itself. And so for many of these

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Speaker 1: institutional investors. Over the past few years, they've been turning

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Speaker 1: to fixed income ETFs to get cheaper trades, more liquidity,

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Speaker 1: better prices. I suspect that the reason why the Federal

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Speaker 1: Reserve look to them was actually pretty similar to the

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Speaker 1: reason why other central banks or other big institutional investors

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Speaker 1: look to them, which is that they were transparent, easier

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Speaker 1: way to access the bond market. Makes a lot of

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Speaker 1: sense to me. Let's talk a little bit about that liquidity.

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Speaker 1: In preparing for this conversation, I found a Baron's article

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Speaker 1: that reported h y G the high yield Bonnie TF.

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Speaker 1: The week of March three, it traded about sixty thousand

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Speaker 1: times a day. The top five holdings in the e

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Speaker 1: t F only traded about five times a day, which

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Speaker 1: raises a really interesting question. Has black Rock replaced the

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Speaker 1: bond trading desk of Old Wall Street. I wouldn't go

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Speaker 1: that far, but let me let me explain two interesting

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Speaker 1: things that have been going on. The second one answers

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Speaker 1: kind of your your question, which is that the first

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Speaker 1: one is really what's happened? And I think it's happened

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Speaker 1: across you know, a dozen different instances of stress, including

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Speaker 1: the financial crisis in the bond markets. Is that when

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Speaker 1: the bond markets turned volatile, more and more investors turned

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Speaker 1: to e t f s as a means by which

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Speaker 1: to get good price discovery and good liquidity. And I

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Speaker 1: think in that heightened period of volatility, probably the most

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Speaker 1: significant volatility we've seen since the financial crisis of February

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Speaker 1: and March and April, that the numbers you're citing showing

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Speaker 1: actually what was happening, which is that board investors were

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Speaker 1: turning to the bond ETF in this case h y G.

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Speaker 1: But I could paint you the same example with very

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Speaker 1: similar numbers a week before in LQV, in the treasury market,

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Speaker 1: in emerging markets, in a whole series of different categories

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Speaker 1: across the bond market of investors turning to e t

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Speaker 1: F in times of volatility. And I think the latest

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Speaker 1: period of volatility made that happen in a much more

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Speaker 1: significant way. And when you dig underneath it, what's what's

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Speaker 1: also happening underneath it is that e t f are

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Speaker 1: part of a modernizing force in the bond market itself,

435
00:25:41,560 --> 00:25:45,680
Speaker 1: and so whether it's dealers on Wall Street not having

436
00:25:45,760 --> 00:25:50,040
Speaker 1: to deal with individual bond trades because they can do

437
00:25:50,119 --> 00:25:55,360
Speaker 1: it in a basket. For certain low size, high efficiency,

438
00:25:55,560 --> 00:25:58,240
Speaker 1: high scale bond trades, it's easier to do it through

439
00:25:58,240 --> 00:26:01,200
Speaker 1: a portfolio trade or ruin with the e t F

440
00:26:02,119 --> 00:26:04,159
Speaker 1: that the e t F is becoming a way in

441
00:26:04,280 --> 00:26:06,879
Speaker 1: which certain segments of the market can move to a

442
00:26:07,000 --> 00:26:10,159
Speaker 1: more electronic means of bond trading, to move to a

443
00:26:10,200 --> 00:26:12,800
Speaker 1: more efficient way of bond trading, and to really start

444
00:26:12,840 --> 00:26:15,159
Speaker 1: to modernize aspects of the bond market, kind of like

445
00:26:15,280 --> 00:26:18,879
Speaker 1: the equity markets did fifteen or twenty years before. I

446
00:26:18,960 --> 00:26:21,200
Speaker 1: think the big thing that's changed is that the e

447
00:26:21,359 --> 00:26:24,800
Speaker 1: t F is bringing this degree of liquidity and bringing

448
00:26:24,840 --> 00:26:28,200
Speaker 1: this degree of technology that starts to work in unison

449
00:26:28,480 --> 00:26:31,399
Speaker 1: with how dealers operate, how some of these all to

450
00:26:31,520 --> 00:26:35,080
Speaker 1: all trading venues operate, as well as how issuers like

451
00:26:35,200 --> 00:26:38,720
Speaker 1: ourselves operate, to be able to remove some of the

452
00:26:38,800 --> 00:26:42,320
Speaker 1: more antiquated aspects of the bond market, which which aren't

453
00:26:42,320 --> 00:26:44,840
Speaker 1: really serving the needs of clients in the way that

454
00:26:45,000 --> 00:26:48,320
Speaker 1: they need to anymore. Let's dive a little deeper into

455
00:26:48,400 --> 00:26:52,960
Speaker 1: that because it's a fascinating subject. In the US equity markets,

456
00:26:53,040 --> 00:26:56,000
Speaker 1: there are what the joke is the Wilson five thousand

457
00:26:56,480 --> 00:27:01,000
Speaker 1: is about stocks in the In the bond market, if

458
00:27:01,040 --> 00:27:07,000
Speaker 1: we include municipal bonds, treasuries, corporates, there are literally countless

459
00:27:08,320 --> 00:27:13,720
Speaker 1: variations of duration and and it seems like there's millions

460
00:27:13,760 --> 00:27:16,920
Speaker 1: of bonds. So when we look at the idea of

461
00:27:17,720 --> 00:27:21,040
Speaker 1: net asset value versus trading price, whether it's for the

462
00:27:21,160 --> 00:27:24,520
Speaker 1: agg or or anything like that. You know, with any

463
00:27:24,680 --> 00:27:28,400
Speaker 1: equity index, everything in it is trading, if not all

464
00:27:28,480 --> 00:27:32,360
Speaker 1: the times, right. But but when we look at these bonds,

465
00:27:32,760 --> 00:27:36,200
Speaker 1: you know, so what what does that mean for actually

466
00:27:36,880 --> 00:27:40,600
Speaker 1: considering that gap between n A V and price? And

467
00:27:40,760 --> 00:27:44,040
Speaker 1: how do we figure out in A V when a

468
00:27:44,160 --> 00:27:48,240
Speaker 1: lot of these holdings trade so infrequently but by appointment

469
00:27:48,280 --> 00:27:52,440
Speaker 1: only look in normal markets, and we're tracking you know,

470
00:27:52,680 --> 00:27:56,119
Speaker 1: several dozen measures around the quality of r E t

471
00:27:56,320 --> 00:27:59,639
Speaker 1: f s, the quality of our competitor ETFs relative to

472
00:27:59,720 --> 00:28:02,200
Speaker 1: the mark it's in which they operate, and particularly in

473
00:28:02,280 --> 00:28:05,800
Speaker 1: times when markets are closed or you have certain dislocations

474
00:28:06,600 --> 00:28:10,159
Speaker 1: in certain markets due to natural disasters or other events.

475
00:28:10,760 --> 00:28:14,199
Speaker 1: The bond market those you said is really quite unique,

476
00:28:14,240 --> 00:28:16,680
Speaker 1: and I think the the important facet of it is

477
00:28:16,760 --> 00:28:19,680
Speaker 1: that it trades largely over the counter, and I think

478
00:28:19,760 --> 00:28:23,760
Speaker 1: that the important modernizing aspect of the E t F

479
00:28:24,080 --> 00:28:26,440
Speaker 1: is all about the E, which is that it trades,

480
00:28:26,480 --> 00:28:30,120
Speaker 1: not exchange. And once it trains not exchange, prices become

481
00:28:30,160 --> 00:28:37,000
Speaker 1: more transparent and access becomes much more widespread, because whether

482
00:28:37,080 --> 00:28:40,400
Speaker 1: you're an institutional investor that's looking to be able to

483
00:28:40,480 --> 00:28:43,520
Speaker 1: access the E t F or you're an individual that

484
00:28:43,600 --> 00:28:46,680
Speaker 1: may be going on to a self directed platform, you're

485
00:28:46,720 --> 00:28:50,000
Speaker 1: getting access to on exchange prices that in a very

486
00:28:50,560 --> 00:28:53,880
Speaker 1: broadly accessible, almost democratized way. And I think with that

487
00:28:54,120 --> 00:28:58,600
Speaker 1: on exchange pricing, what's happening is that it's becoming more

488
00:28:58,720 --> 00:29:02,800
Speaker 1: transparent as to where actionable markets are. And if you

489
00:29:02,880 --> 00:29:04,719
Speaker 1: combine it with the point that you've made it earlier

490
00:29:04,800 --> 00:29:07,880
Speaker 1: about h y G trading a hundred and sixty eight

491
00:29:07,920 --> 00:29:11,720
Speaker 1: thousand times in a day, what's happening is that the

492
00:29:11,840 --> 00:29:16,560
Speaker 1: exchange for the exchange traded fund in moments of stress,

493
00:29:17,440 --> 00:29:20,120
Speaker 1: is becoming the place in which actionable markets are made.

494
00:29:20,360 --> 00:29:24,720
Speaker 1: In normal markets, they track pretty clearly, but in dislocated markets,

495
00:29:25,040 --> 00:29:29,040
Speaker 1: the thing that's trading many many thousand times in a

496
00:29:29,160 --> 00:29:32,960
Speaker 1: given day is really where actionable prices are relative to

497
00:29:33,160 --> 00:29:37,560
Speaker 1: where the best assessment of the pre previous days nav

498
00:29:37,720 --> 00:29:39,920
Speaker 1: might have been. I almost think about it by analogy

499
00:29:40,040 --> 00:29:42,720
Speaker 1: is that if you think about this isn't a perfect analogy,

500
00:29:42,800 --> 00:29:44,840
Speaker 1: but if you think about, you know, you might get

501
00:29:44,880 --> 00:29:47,880
Speaker 1: an appraisal on your house. An appraisal on your house

502
00:29:48,000 --> 00:29:50,960
Speaker 1: is based on the best comparables in your neighborhood and

503
00:29:51,080 --> 00:29:54,600
Speaker 1: for other houses like yours. But the market for your

504
00:29:54,640 --> 00:29:56,920
Speaker 1: house is the price at which you buy or sell.

505
00:29:57,880 --> 00:30:01,600
Speaker 1: And in the case of exchange is and exchange traded funds,

506
00:30:01,760 --> 00:30:04,720
Speaker 1: people are buying and selling in moments of stress, many

507
00:30:04,880 --> 00:30:07,920
Speaker 1: tens of thousands of times a day, and that's where

508
00:30:08,520 --> 00:30:13,120
Speaker 1: they're really becoming the point at which prices are discovered.

509
00:30:13,680 --> 00:30:15,840
Speaker 1: And the final point I'd say to this berry is

510
00:30:15,920 --> 00:30:19,360
Speaker 1: just that this isn't true for every fixed income ETF.

511
00:30:19,480 --> 00:30:22,360
Speaker 1: It's not even true for every I shares fixed income ETF.

512
00:30:22,800 --> 00:30:25,400
Speaker 1: But there are a number of you know, what we

513
00:30:25,520 --> 00:30:29,640
Speaker 1: looks as flagship or tier one I shares ETFs that

514
00:30:29,720 --> 00:30:33,280
Speaker 1: are trading on average more than a hundred million dollars

515
00:30:33,320 --> 00:30:36,320
Speaker 1: a day, and many of these are Most of these

516
00:30:36,400 --> 00:30:40,240
Speaker 1: exhibit these price discovery aspects UH and we think that

517
00:30:40,360 --> 00:30:43,320
Speaker 1: that price discovery coupled with the transparency of being on

518
00:30:43,440 --> 00:30:47,480
Speaker 1: an exchange is really the modernizing force that we're talking about.

519
00:30:48,120 --> 00:30:52,480
Speaker 1: And I think that, if anything, the stresses of February

520
00:30:52,760 --> 00:30:55,320
Speaker 1: and of March and of April in the bond market

521
00:30:55,520 --> 00:30:59,920
Speaker 1: is accelerating this force because people see how they per

522
00:31:00,040 --> 00:31:03,480
Speaker 1: formed under stress, and even the skeptics are now becoming

523
00:31:03,560 --> 00:31:06,120
Speaker 1: some of our becoming our clients in terms of in

524
00:31:06,280 --> 00:31:09,600
Speaker 1: terms of fixed income ets. Quite interesting. Let's talk a

525
00:31:09,680 --> 00:31:13,440
Speaker 1: little bit about your boss's letter. Larry Think writes these

526
00:31:13,520 --> 00:31:15,720
Speaker 1: letters to c e o s each year and it's

527
00:31:15,800 --> 00:31:19,080
Speaker 1: been one of the hallmarks of his leadership at Black Rock.

528
00:31:20,400 --> 00:31:22,720
Speaker 1: What is he looking for from the C suite? Does

529
00:31:22,920 --> 00:31:26,640
Speaker 1: Does he believe he can cajole c e o s

530
00:31:26,680 --> 00:31:30,200
Speaker 1: and CFOs into better ethical behavior? What are the purpose

531
00:31:30,680 --> 00:31:35,120
Speaker 1: of those letters? Yeah? I think now when I look

532
00:31:35,240 --> 00:31:39,240
Speaker 1: at particularly the letters around we'd issued in January, that

533
00:31:39,920 --> 00:31:43,000
Speaker 1: the most important thing for me coming out of this

534
00:31:43,200 --> 00:31:46,880
Speaker 1: year's letter was the notion that E. S. G risks

535
00:31:47,000 --> 00:31:50,080
Speaker 1: and and he particularly focused on climate risk is an

536
00:31:50,120 --> 00:31:53,320
Speaker 1: investment risk. And I think that's a really important and

537
00:31:53,440 --> 00:31:59,360
Speaker 1: fundamental concept because it's not about cajolling people into certain behaviors.

538
00:32:00,240 --> 00:32:04,959
Speaker 1: It's just recognizing that for long term investors and index

539
00:32:05,040 --> 00:32:08,080
Speaker 1: investors are the ultimate long term investors because I can't

540
00:32:08,160 --> 00:32:10,000
Speaker 1: I'm not permitted to sell the stock if it's in

541
00:32:10,040 --> 00:32:12,320
Speaker 1: the index. I've got to hold it for as long

542
00:32:12,400 --> 00:32:14,840
Speaker 1: as it's in the index. So we're the ultimate long

543
00:32:14,960 --> 00:32:19,600
Speaker 1: term investors. Uh that that we're thinking about risk reward

544
00:32:19,680 --> 00:32:24,800
Speaker 1: trade offs for companies and asset classes, and it's about

545
00:32:25,280 --> 00:32:27,680
Speaker 1: E s G risks in this case, climate risk being

546
00:32:27,720 --> 00:32:31,040
Speaker 1: an example as really being fundamental to the risk reward

547
00:32:31,160 --> 00:32:36,120
Speaker 1: tradeoff of investments, or said differently, through research we've done

548
00:32:36,160 --> 00:32:39,200
Speaker 1: within black Rock, research we've read and worked with with

549
00:32:39,440 --> 00:32:43,920
Speaker 1: other third parties, it becomes a better way to do

550
00:32:44,400 --> 00:32:48,920
Speaker 1: longer term investing is through an E S G lens.

551
00:32:49,240 --> 00:32:51,640
Speaker 1: And so we really saw it, and Larry really saw

552
00:32:51,720 --> 00:32:55,320
Speaker 1: it as fundamental to our fiduciary duty to help clients

553
00:32:55,400 --> 00:32:59,520
Speaker 1: invest and help clients invest mindful of the different risks.

554
00:33:00,240 --> 00:33:02,720
Speaker 1: You know, our firm was founded on a principle of

555
00:33:02,840 --> 00:33:06,080
Speaker 1: risk management, and so just as we look at liquidity risks,

556
00:33:06,160 --> 00:33:08,080
Speaker 1: just as we look at credit risks, just as we

557
00:33:08,160 --> 00:33:10,920
Speaker 1: look at geo political risks, we also have to look

558
00:33:10,960 --> 00:33:15,200
Speaker 1: at E S G engine risks and the practical application

559
00:33:15,320 --> 00:33:20,320
Speaker 1: of this meant that for our active investors, they integrated

560
00:33:20,600 --> 00:33:23,320
Speaker 1: E s G risks alongside all the other risks in

561
00:33:23,480 --> 00:33:26,000
Speaker 1: terms of the trade offs that they're making. And for

562
00:33:26,600 --> 00:33:30,120
Speaker 1: index investors or the area that I'm responsible for, what

563
00:33:30,280 --> 00:33:33,800
Speaker 1: we set out to do was to really increase access

564
00:33:34,320 --> 00:33:38,320
Speaker 1: through launching the breadth of product offerings in E s

565
00:33:38,400 --> 00:33:42,160
Speaker 1: G investing, so that investors who wanted to be able

566
00:33:42,200 --> 00:33:44,920
Speaker 1: to invest through an E s G lens could do

567
00:33:45,080 --> 00:33:48,440
Speaker 1: so with the t S or with index funds while

568
00:33:48,520 --> 00:33:51,880
Speaker 1: benefiting from all the efficiency and all the transparency and

569
00:33:51,960 --> 00:33:54,920
Speaker 1: all the choice that we're able to offer through being

570
00:33:54,960 --> 00:33:58,240
Speaker 1: a scale et F and index provider. And so it's

571
00:33:58,280 --> 00:34:01,680
Speaker 1: really that fundamental peace Perry, which is it's about investment

572
00:34:01,840 --> 00:34:06,320
Speaker 1: risk that influenced Larry's thinking and then influenced our thinking

573
00:34:06,360 --> 00:34:10,640
Speaker 1: as fiduciaries. So here's the pushback I hear all the time,

574
00:34:10,760 --> 00:34:15,160
Speaker 1: and full disclosure, I agree with you. I think that

575
00:34:15,520 --> 00:34:19,200
Speaker 1: it's a great risk screen. Uh, you'll you'll avoid all

576
00:34:19,239 --> 00:34:23,560
Speaker 1: sorts of headaches, especially on the governance side. It certainly

577
00:34:23,640 --> 00:34:27,160
Speaker 1: looks like a risk management tool. But some of the

578
00:34:27,239 --> 00:34:31,799
Speaker 1: pushback we've heard, including from the labor department has been

579
00:34:32,280 --> 00:34:36,759
Speaker 1: this is just social justice warriors and politics and it

580
00:34:36,840 --> 00:34:40,840
Speaker 1: has nothing whatsoever to do with assets or risk management.

581
00:34:41,239 --> 00:34:45,600
Speaker 1: How do you respond to that sort of pushback, including

582
00:34:46,120 --> 00:34:47,640
Speaker 1: when you have the head of the d o L

583
00:34:47,760 --> 00:34:50,560
Speaker 1: saying I want to consider whether or not we should

584
00:34:50,560 --> 00:34:54,000
Speaker 1: allow E s G products in in four oh one case. Yeah,

585
00:34:54,080 --> 00:34:57,160
Speaker 1: I think the without getting into all the specifics of

586
00:34:57,320 --> 00:34:59,600
Speaker 1: the d o L proposal in the Big Black Rock,

587
00:34:59,640 --> 00:35:03,400
Speaker 1: has comm meanted on that separately. I think the fundamental

588
00:35:03,520 --> 00:35:08,720
Speaker 1: and positive aspect is the notion that for us as fiduciaries,

589
00:35:09,680 --> 00:35:13,440
Speaker 1: we have to be able to have conviction ourselves and

590
00:35:13,560 --> 00:35:16,800
Speaker 1: be able to ensure that our clients equally have conviction

591
00:35:17,680 --> 00:35:20,719
Speaker 1: that these are the right risk reward trade us and

592
00:35:20,840 --> 00:35:23,719
Speaker 1: we're doing it to be able to improve their long

593
00:35:23,840 --> 00:35:28,839
Speaker 1: term investment returns. And so the facts and the analytics

594
00:35:29,120 --> 00:35:32,600
Speaker 1: and the evidence behind that and our discussions with clients

595
00:35:32,880 --> 00:35:34,920
Speaker 1: are really going to be the determinants of that. So

596
00:35:35,160 --> 00:35:39,000
Speaker 1: we're actually totally fine. Was saying the bar should be

597
00:35:39,080 --> 00:35:43,440
Speaker 1: about value, not just about values, and it's really from

598
00:35:43,480 --> 00:35:46,640
Speaker 1: that value lens that our whole thesis and and the

599
00:35:46,760 --> 00:35:49,560
Speaker 1: letter that Larry authored back in January is rooted, So

600
00:35:49,800 --> 00:35:52,440
Speaker 1: so we have no problem with that is a as

601
00:35:52,480 --> 00:35:54,560
Speaker 1: a screen, if you will, because it's very fundamental to

602
00:35:54,640 --> 00:35:57,640
Speaker 1: how we think about kind of the issue. The second

603
00:35:57,680 --> 00:36:00,400
Speaker 1: thing that I'd say is that from an index lens,

604
00:36:00,840 --> 00:36:03,760
Speaker 1: and actually from across all the assets the Black Rock manages,

605
00:36:04,239 --> 00:36:07,560
Speaker 1: it's not our money, it's the client's money. And so

606
00:36:07,800 --> 00:36:10,040
Speaker 1: one of the things that from an index lens that

607
00:36:10,360 --> 00:36:13,000
Speaker 1: we can do within our I shares an index investing

608
00:36:13,200 --> 00:36:15,560
Speaker 1: is to be able to offer client's choice. And so

609
00:36:16,160 --> 00:36:19,279
Speaker 1: that's the reason why we've expanded our product lineup. Part

610
00:36:19,360 --> 00:36:22,279
Speaker 1: of it was based on the investment thesis, and part

611
00:36:22,320 --> 00:36:24,879
Speaker 1: of it was based off of the client demand that said,

612
00:36:24,960 --> 00:36:27,800
Speaker 1: I just want this choice and I want the ability

613
00:36:27,840 --> 00:36:31,440
Speaker 1: to choose which types of exposures I put my money in.

614
00:36:32,120 --> 00:36:34,600
Speaker 1: And one of the great things about indexation is that

615
00:36:34,719 --> 00:36:38,160
Speaker 1: you can offer that at scale. And so just as context,

616
00:36:38,280 --> 00:36:41,160
Speaker 1: like a couple of years ago, we had about twenty

617
00:36:41,719 --> 00:36:44,760
Speaker 1: e t F and index fund offerings and they mostly

618
00:36:44,840 --> 00:36:48,880
Speaker 1: catered to socially responsible investing, kind of a niche category

619
00:36:49,080 --> 00:36:52,040
Speaker 1: largely in Europe. Today we have over a hundred and

620
00:36:52,080 --> 00:36:55,080
Speaker 1: twenty just a couple of years later, and it's really

621
00:36:55,160 --> 00:36:58,680
Speaker 1: catering to a much more broad and mainstream audience all

622
00:36:58,760 --> 00:37:01,840
Speaker 1: across the world, in the United States, in Europe, in Asia.

623
00:37:02,560 --> 00:37:05,560
Speaker 1: And the thing that surprised me about that has been

624
00:37:05,800 --> 00:37:08,400
Speaker 1: I always thought demand existed in Europe, but if you

625
00:37:08,520 --> 00:37:11,800
Speaker 1: look at the you know, just over twenty billion dollars

626
00:37:11,880 --> 00:37:13,920
Speaker 1: that we've raised in e t F E s G

627
00:37:14,160 --> 00:37:17,440
Speaker 1: S sets to date, most of that has come from

628
00:37:17,600 --> 00:37:21,239
Speaker 1: US investors who really just wanted the ability to for

629
00:37:21,320 --> 00:37:24,239
Speaker 1: a provider to offer choice but still provide it with

630
00:37:24,320 --> 00:37:27,040
Speaker 1: the same transparency and efficiency and and all the other

631
00:37:27,120 --> 00:37:30,000
Speaker 1: aspects that they've come to enjoy around E t S.

632
00:37:30,520 --> 00:37:34,080
Speaker 1: Let's talk a little bit about those fun flows. For

633
00:37:34,200 --> 00:37:38,520
Speaker 1: the past i'll call it twenty years, it's been relatively modest.

634
00:37:39,160 --> 00:37:42,160
Speaker 1: E s G has been historically, it's been a niche product.

635
00:37:42,640 --> 00:37:46,560
Speaker 1: But black Rock is talking about one point two trillion

636
00:37:47,280 --> 00:37:51,919
Speaker 1: in global sustainable et F assets within a decade. That's

637
00:37:51,960 --> 00:37:56,360
Speaker 1: a giant number. We've seen some flows into sustainability and

638
00:37:56,480 --> 00:37:59,680
Speaker 1: into e s G, but nothing that extrapolates out to

639
00:37:59,800 --> 00:38:01,880
Speaker 1: one point to trillion. How do you guys come up

640
00:38:02,200 --> 00:38:06,200
Speaker 1: with a number that emense? Yeah, I think it's two things.

641
00:38:06,320 --> 00:38:08,919
Speaker 1: I'll look forward to returning to your show in ten years.

642
00:38:09,000 --> 00:38:10,920
Speaker 1: If this is if we're still doing podcasts, it's ten

643
00:38:11,040 --> 00:38:14,759
Speaker 1: years to see how accurate our projections are. But it's

644
00:38:14,800 --> 00:38:18,360
Speaker 1: really two things. The first thing is just the nature

645
00:38:18,400 --> 00:38:21,840
Speaker 1: of this client demand. And I've been surprised to the upside.

646
00:38:22,480 --> 00:38:25,800
Speaker 1: You know, the twenty plus billion dollar number I sided

647
00:38:25,840 --> 00:38:28,759
Speaker 1: and flows this year. I thought it would be three

648
00:38:28,840 --> 00:38:31,239
Speaker 1: or four years before we could start to cite those

649
00:38:31,320 --> 00:38:34,640
Speaker 1: kind of numbers. But I've been surprised to the upside

650
00:38:34,840 --> 00:38:39,760
Speaker 1: at the client demand that exists for this particular type

651
00:38:39,840 --> 00:38:42,919
Speaker 1: of investing capability. So I think that we're tapping into

652
00:38:43,040 --> 00:38:46,839
Speaker 1: something which is deeper than just a niche, and it's

653
00:38:46,840 --> 00:38:50,359
Speaker 1: pretty widespread amongst the demand or the latent demand. It's

654
00:38:50,360 --> 00:38:53,719
Speaker 1: amongst institutions, amongst wealth managers in the United States and

655
00:38:54,440 --> 00:38:58,439
Speaker 1: in Europe, in in all different kinds of investors looking

656
00:38:58,560 --> 00:39:01,879
Speaker 1: to access this. But the second thing I think has

657
00:39:01,920 --> 00:39:06,839
Speaker 1: been also overlooked, which is that in vexation hasn't been

658
00:39:06,920 --> 00:39:11,520
Speaker 1: brought to bear in sustainability much at all over the

659
00:39:11,600 --> 00:39:14,239
Speaker 1: past several years. And maybe that's because it was such

660
00:39:14,280 --> 00:39:16,800
Speaker 1: a niche area of investment, and I think part of

661
00:39:16,840 --> 00:39:19,719
Speaker 1: the demand that we're seeing an ep F form is

662
00:39:19,800 --> 00:39:22,400
Speaker 1: also coming from the fact that we can offer this

663
00:39:22,560 --> 00:39:27,279
Speaker 1: type of choice hundred twenty different offerings, that we can

664
00:39:27,400 --> 00:39:31,000
Speaker 1: offer things that are at a fraction, you know, typically

665
00:39:31,120 --> 00:39:35,239
Speaker 1: one fifth of the fee of a traditional E s

666
00:39:35,320 --> 00:39:38,680
Speaker 1: G active fund. And I think those pieces which have

667
00:39:38,800 --> 00:39:41,360
Speaker 1: really been driving the E t F business to go

668
00:39:41,680 --> 00:39:45,759
Speaker 1: from you know, nothing to nearly seven trillion dollars over

669
00:39:45,840 --> 00:39:48,760
Speaker 1: the past two or three decades, are now being brought

670
00:39:49,040 --> 00:39:51,120
Speaker 1: to E s G itself, and I think this is

671
00:39:51,760 --> 00:39:54,160
Speaker 1: fundamental to what I think that the e t F

672
00:39:54,600 --> 00:39:57,839
Speaker 1: is now doing, which is that it's become a way

673
00:39:58,000 --> 00:40:01,800
Speaker 1: in which to wrap different investor disciplines. You know, we

674
00:40:02,080 --> 00:40:05,759
Speaker 1: we obviously started in market cap weighted indices and that

675
00:40:05,960 --> 00:40:09,480
Speaker 1: was really the basis of I shares particularly, and developed

676
00:40:09,520 --> 00:40:13,399
Speaker 1: in emerging market equities. We've expanded into fixed income, which,

677
00:40:13,400 --> 00:40:15,400
Speaker 1: as we talked about, is a little bit more opaque,

678
00:40:15,440 --> 00:40:19,400
Speaker 1: and we're bringing transparency and some modernizing forces. But some

679
00:40:19,520 --> 00:40:22,800
Speaker 1: of the really exciting things are that we're developing in

680
00:40:22,960 --> 00:40:25,759
Speaker 1: things like e s G, or in things like factors,

681
00:40:25,960 --> 00:40:28,920
Speaker 1: or in things like some of our thematic EPFs E

682
00:40:29,040 --> 00:40:32,080
Speaker 1: t F that essentially take active risk and they deviate

683
00:40:32,160 --> 00:40:35,600
Speaker 1: from market cap weighted index. But what we're doing is

684
00:40:35,680 --> 00:40:39,080
Speaker 1: that we're doing it in a way which is efficient,

685
00:40:39,440 --> 00:40:43,719
Speaker 1: which is rules based, which is transparent, and ultimately we

686
00:40:43,840 --> 00:40:46,920
Speaker 1: think that can offer a better deal for investors. And

687
00:40:47,000 --> 00:40:50,680
Speaker 1: this is just the next evolution that we're not just

688
00:40:50,840 --> 00:40:54,400
Speaker 1: seeing any t s, but we're trying to lead the charge.

689
00:40:54,480 --> 00:40:57,760
Speaker 1: Within eye Shares is the ability to do more things,

690
00:40:57,840 --> 00:40:59,920
Speaker 1: whether it's E S G or factors or fixed in

691
00:41:00,040 --> 00:41:03,160
Speaker 1: come or thematics. Even as we continue to build out

692
00:41:03,440 --> 00:41:07,360
Speaker 1: and expand in the traditional market cap way that arenas so.

693
00:41:07,680 --> 00:41:11,440
Speaker 1: So let's talk about a market risk type et F.

694
00:41:12,200 --> 00:41:15,160
Speaker 1: Why haven't we seen a bitcoin ETF approved yet? And

695
00:41:15,360 --> 00:41:17,680
Speaker 1: is black Rock going to be the first firm? It's

696
00:41:17,680 --> 00:41:20,800
Speaker 1: a launch one who knows and no. The answer to

697
00:41:20,920 --> 00:41:25,879
Speaker 1: your question, our general philosophy is we want to get

698
00:41:25,960 --> 00:41:29,920
Speaker 1: behind things that are long term, that are good for

699
00:41:30,040 --> 00:41:33,960
Speaker 1: our investors and aren't just the one hit wonders. And

700
00:41:34,560 --> 00:41:37,000
Speaker 1: there are many things that we have declined to do

701
00:41:37,200 --> 00:41:40,120
Speaker 1: over the years which could have been commercially successful for

702
00:41:40,480 --> 00:41:44,120
Speaker 1: you know, a year or several months or so, but

703
00:41:44,320 --> 00:41:48,239
Speaker 1: really just aren't what we want to be into. But

704
00:41:48,400 --> 00:41:52,719
Speaker 1: we are big believers in things like thematic ETFs, and

705
00:41:53,080 --> 00:41:55,040
Speaker 1: and we did a lot of research in concert with

706
00:41:55,200 --> 00:41:59,040
Speaker 1: our active investing teams around what do we think are

707
00:41:59,120 --> 00:42:01,200
Speaker 1: the four or five biggest trends that are going to

708
00:42:01,400 --> 00:42:05,880
Speaker 1: impact investing for the next decade or two. Things like

709
00:42:06,080 --> 00:42:10,520
Speaker 1: generational wealth change, things like urbanization, things like the advent

710
00:42:10,640 --> 00:42:14,200
Speaker 1: of new and disruptive technologies are examples of that. And

711
00:42:14,320 --> 00:42:18,880
Speaker 1: we've then developed ETFs that cater to those particular trends.

712
00:42:19,400 --> 00:42:21,680
Speaker 1: And we've done that first and foremost because we think

713
00:42:21,760 --> 00:42:25,239
Speaker 1: those are good long term investments for clients that can

714
00:42:25,320 --> 00:42:29,239
Speaker 1: deliver superior returns over time. And secondly, those are the

715
00:42:29,360 --> 00:42:32,560
Speaker 1: types of trends that we want to get behind and

716
00:42:32,640 --> 00:42:34,600
Speaker 1: what we want to be what we want to be

717
00:42:35,040 --> 00:42:38,320
Speaker 1: known for. So uh, we we study what other firms do,

718
00:42:38,560 --> 00:42:41,960
Speaker 1: but you know, there's a lot that others can launch,

719
00:42:42,280 --> 00:42:45,440
Speaker 1: and and we're happy not to launch because of of

720
00:42:46,280 --> 00:42:49,040
Speaker 1: our own stance in terms of we want to innovate,

721
00:42:49,640 --> 00:42:51,319
Speaker 1: but we also want to be able to look our

722
00:42:51,360 --> 00:42:54,239
Speaker 1: clients in the eyes a year from now, two years

723
00:42:54,320 --> 00:42:56,400
Speaker 1: from now, three years from now, ten years from now,

724
00:42:56,680 --> 00:42:58,800
Speaker 1: and be able to say that we put them in

725
00:42:58,920 --> 00:43:01,440
Speaker 1: a good investment vehicle and not be able to let

726
00:43:01,520 --> 00:43:04,680
Speaker 1: them down. So let's combine three things. Let's combine long

727
00:43:04,880 --> 00:43:09,440
Speaker 1: term with our discussion of fixed income and our discussion

728
00:43:09,480 --> 00:43:12,840
Speaker 1: of E s G and talk about muni bonds and

729
00:43:13,040 --> 00:43:17,080
Speaker 1: green bonds. How do you navigate E s G in

730
00:43:17,160 --> 00:43:21,440
Speaker 1: the fixed income space very carefully? It's a we have launched.

731
00:43:21,640 --> 00:43:24,759
Speaker 1: We have launched E s G in fixed income, and

732
00:43:25,440 --> 00:43:29,080
Speaker 1: but it's a much more complicated set of circumstances, in

733
00:43:29,239 --> 00:43:32,360
Speaker 1: part because of data and being able to really understand

734
00:43:32,440 --> 00:43:35,359
Speaker 1: the data well to be able to craft the right

735
00:43:35,440 --> 00:43:38,160
Speaker 1: set of scores and scores that we believe in, and

736
00:43:38,520 --> 00:43:41,759
Speaker 1: we're selective as to where we are expanding. And I

737
00:43:41,840 --> 00:43:44,799
Speaker 1: think that's one of the benefits of having Black Rock

738
00:43:45,480 --> 00:43:49,120
Speaker 1: and our whole history and legacy around fixed income is

739
00:43:49,200 --> 00:43:52,359
Speaker 1: that we've got great active muni investors, and we've got

740
00:43:52,440 --> 00:43:56,839
Speaker 1: great active fundamental investors, and we've got great teams who

741
00:43:56,920 --> 00:43:59,200
Speaker 1: were able to really work with and think through some

742
00:43:59,320 --> 00:44:02,480
Speaker 1: of these problems with to understand what's the right circumstances

743
00:44:02,560 --> 00:44:05,879
Speaker 1: which to launch um some of these products, versus what's

744
00:44:05,880 --> 00:44:08,840
Speaker 1: the right circumstance in which to hold back until the

745
00:44:08,920 --> 00:44:11,759
Speaker 1: data is better, until the offering is better. So that

746
00:44:11,880 --> 00:44:13,960
Speaker 1: when we launch, we can launch something that we can

747
00:44:14,000 --> 00:44:17,600
Speaker 1: stand behind. So, um we are doing more a portion

748
00:44:17,680 --> 00:44:20,399
Speaker 1: of the D and twenty products that I mentioned. While

749
00:44:20,480 --> 00:44:23,200
Speaker 1: most of them are inequities, many of them are also

750
00:44:23,280 --> 00:44:26,719
Speaker 1: in fixed income and we want to maintain our kind

751
00:44:26,760 --> 00:44:28,800
Speaker 1: of innovation, but we also we also want to do

752
00:44:28,920 --> 00:44:31,840
Speaker 1: it only when we feel we can really underwrite the

753
00:44:31,920 --> 00:44:34,839
Speaker 1: true integrity and quality of the products that we offer.

754
00:44:35,320 --> 00:44:38,759
Speaker 1: So so you mentioned active, what sort of demands is

755
00:44:38,840 --> 00:44:44,680
Speaker 1: black Rock seeing from investors for actively managed e t s?

756
00:44:45,160 --> 00:44:47,400
Speaker 1: And I know to some listeners that might sound like

757
00:44:47,520 --> 00:44:52,439
Speaker 1: a contradiction in terms, but it isn't necessarily. So yeah,

758
00:44:52,520 --> 00:44:55,680
Speaker 1: we're certainly seeing a lot of supply starting to starting

759
00:44:55,719 --> 00:44:58,160
Speaker 1: to brew. I don't think you know we goes by,

760
00:44:58,239 --> 00:45:00,520
Speaker 1: but you know, see a new filing from UM UM

761
00:45:00,640 --> 00:45:04,560
Speaker 1: some manager look, I I'd sort of say, including us.

762
00:45:04,680 --> 00:45:08,800
Speaker 1: And we've launched one or two truly active e t

763
00:45:09,040 --> 00:45:11,239
Speaker 1: f s already. We've done it under the black Rock

764
00:45:11,400 --> 00:45:14,719
Speaker 1: brand to make the distinction clear, and we obviously have

765
00:45:14,880 --> 00:45:17,880
Speaker 1: plans to to expand. But what I'd say is that

766
00:45:18,200 --> 00:45:21,400
Speaker 1: is two things. First, when you look at e t

767
00:45:21,640 --> 00:45:23,920
Speaker 1: s through the lens that not actively managed but what

768
00:45:24,080 --> 00:45:27,600
Speaker 1: takes active risk, so things that deviate from a market

769
00:45:27,640 --> 00:45:31,160
Speaker 1: capuated index like factors or e s G or thematics.

770
00:45:31,719 --> 00:45:35,440
Speaker 1: We already are the largest and the fastest growing active

771
00:45:35,520 --> 00:45:37,560
Speaker 1: risk taking e t F firm. We've got over two

772
00:45:37,680 --> 00:45:40,200
Speaker 1: hundred billion dollars in those categories. Those are growing at

773
00:45:40,200 --> 00:45:43,200
Speaker 1: a very nice pace, and we're very optimistic that that

774
00:45:43,320 --> 00:45:47,160
Speaker 1: will grow significantly into the future. When you look at

775
00:45:47,280 --> 00:45:51,400
Speaker 1: actively managed e t F s, I think the perspective

776
00:45:51,480 --> 00:45:53,840
Speaker 1: to keep in mind that the e t F itself

777
00:45:54,000 --> 00:45:57,600
Speaker 1: isn't some magic pill that solves problems. That if you

778
00:45:57,719 --> 00:46:02,920
Speaker 1: solve all problems. If you've got a underperforming expensive active

779
00:46:03,000 --> 00:46:05,719
Speaker 1: manager in a mutual fund and then you put them

780
00:46:05,719 --> 00:46:08,840
Speaker 1: in an e t F, you then have a underperforming,

781
00:46:09,040 --> 00:46:13,840
Speaker 1: expensive actively managed ETF. And so it's not some magic

782
00:46:13,920 --> 00:46:17,840
Speaker 1: that's going to recreate things. Certainly our efficiencies to the rapper,

783
00:46:18,360 --> 00:46:21,719
Speaker 1: there certainly are areas about it that are compelling, But

784
00:46:21,880 --> 00:46:24,520
Speaker 1: I think that the real test is going to be

785
00:46:24,640 --> 00:46:29,600
Speaker 1: twofold one, do the active managers deliver in this rapper

786
00:46:29,840 --> 00:46:32,719
Speaker 1: or not? The evidence from the mutual fund part of

787
00:46:32,760 --> 00:46:35,440
Speaker 1: the industry has been I think you could say mixed.

788
00:46:36,480 --> 00:46:41,040
Speaker 1: And second is active management willing to tackle the fundamental thing,

789
00:46:41,239 --> 00:46:43,640
Speaker 1: which I think is fees. And when you look at it,

790
00:46:43,719 --> 00:46:46,520
Speaker 1: at least in our own analysis, active management on a

791
00:46:46,560 --> 00:46:49,839
Speaker 1: growth basis, you know, many firms do quite well. It's

792
00:46:49,920 --> 00:46:53,680
Speaker 1: just that after fees is when you get the real underperformance.

793
00:46:53,880 --> 00:46:56,960
Speaker 1: And so our own conclusion from that is that too

794
00:46:57,000 --> 00:46:59,360
Speaker 1: many active managers are charging too much money for what

795
00:46:59,520 --> 00:47:02,239
Speaker 1: it is that day deliver. So it'll be interesting to

796
00:47:02,320 --> 00:47:05,680
Speaker 1: see if they really tackle that from a fee perspective

797
00:47:05,920 --> 00:47:08,160
Speaker 1: in the context of the e t F wrapper or not.

798
00:47:08,480 --> 00:47:09,960
Speaker 1: I think could of course do that in the mutual

799
00:47:10,000 --> 00:47:12,759
Speaker 1: fund wrapper at any given time. They've chosen not to.

800
00:47:13,480 --> 00:47:16,440
Speaker 1: But I think those are those are really the fundamental issues.

801
00:47:16,520 --> 00:47:18,640
Speaker 1: The et F is just a rapper. We think it

802
00:47:18,680 --> 00:47:21,960
Speaker 1: happens to be better than the rapper that was invented,

803
00:47:23,680 --> 00:47:26,799
Speaker 1: but it doesn't solve all problems. It just helps bring

804
00:47:26,960 --> 00:47:31,160
Speaker 1: greater efficiency and greater transparency, which benefits certain aspects but

805
00:47:31,239 --> 00:47:34,600
Speaker 1: not every so. So, since you brought up fees, let's

806
00:47:34,719 --> 00:47:37,320
Speaker 1: let's talk a little bit about that. We've been seeing

807
00:47:37,920 --> 00:47:42,359
Speaker 1: an ongoing price war for for a long time. Where

808
00:47:42,360 --> 00:47:46,000
Speaker 1: do you see I shares pricing heading towards let's say

809
00:47:46,160 --> 00:47:50,200
Speaker 1: five years from now, slightly lower, meaningfully lower. At what

810
00:47:50,400 --> 00:47:54,680
Speaker 1: point does pricing stabilize? And let me just add, I

811
00:47:54,719 --> 00:47:58,040
Speaker 1: don't think anyone is really looking for free as we've

812
00:47:58,120 --> 00:48:00,799
Speaker 1: seen with free trading turns out to be a little

813
00:48:00,840 --> 00:48:04,960
Speaker 1: more expensive than than people expect. So in terms of

814
00:48:05,440 --> 00:48:09,799
Speaker 1: greater efficiencies and greater scale, where do prices end up

815
00:48:09,880 --> 00:48:13,279
Speaker 1: going to over the next five years. Yeah, Look, i'd

816
00:48:13,320 --> 00:48:16,319
Speaker 1: say one thing, actually two things about that. Well, one

817
00:48:16,360 --> 00:48:19,000
Speaker 1: thing we've been pretty public and vocal about. I think

818
00:48:19,040 --> 00:48:22,360
Speaker 1: the other piece we've tried but will try and be

819
00:48:22,640 --> 00:48:25,040
Speaker 1: more public and more vocal. The first thing is just

820
00:48:25,360 --> 00:48:29,040
Speaker 1: from our own perspective. You know what what we see

821
00:48:29,680 --> 00:48:31,480
Speaker 1: in terms of pricing, and I think in this case

822
00:48:31,560 --> 00:48:33,960
Speaker 1: you're talking about the expense ratio of the funds itself,

823
00:48:34,840 --> 00:48:37,799
Speaker 1: is that there there are a segment of clients who

824
00:48:37,880 --> 00:48:42,040
Speaker 1: are very sensitive to the tr and many of those clients,

825
00:48:42,320 --> 00:48:45,600
Speaker 1: if you change it, they will invest more money with you.

826
00:48:45,960 --> 00:48:48,319
Speaker 1: And that's what we found over the past five years,

827
00:48:48,360 --> 00:48:51,239
Speaker 1: over the past three years, over the past year, and

828
00:48:51,360 --> 00:48:53,879
Speaker 1: that's why we've made the investments that we have over

829
00:48:53,920 --> 00:48:56,040
Speaker 1: the past number of years that I mentioned, the six

830
00:48:56,400 --> 00:48:59,200
Speaker 1: d billion dollars, and that's why we've been pretty public

831
00:48:59,320 --> 00:49:02,440
Speaker 1: that you know, every year we intend to reinvest another

832
00:49:02,520 --> 00:49:05,239
Speaker 1: one point five two point five of our revenues, so

833
00:49:05,520 --> 00:49:09,120
Speaker 1: call it another hundred million dollars within pricing, so that

834
00:49:09,440 --> 00:49:13,439
Speaker 1: the benefits as we grow also accrue to our fund

835
00:49:13,520 --> 00:49:16,800
Speaker 1: holders as being a real benefit of our scale. So

836
00:49:17,400 --> 00:49:19,239
Speaker 1: that's kind of one lens to look at it through.

837
00:49:20,040 --> 00:49:23,360
Speaker 1: I think the other lens, which sometimes is less appreciated,

838
00:49:23,560 --> 00:49:26,440
Speaker 1: is just all the different segments in which we operate

839
00:49:26,600 --> 00:49:29,759
Speaker 1: within I shirts, there's one segment which is defined by

840
00:49:29,800 --> 00:49:33,560
Speaker 1: our core, which is really that price sensitive segment, and

841
00:49:33,640 --> 00:49:35,759
Speaker 1: that's important to us. That's where a lot of our

842
00:49:35,920 --> 00:49:40,400
Speaker 1: pricing action has been concentrated. But in areas like fixed income,

843
00:49:40,560 --> 00:49:43,319
Speaker 1: particularly those fixed income instruments that are outside the core,

844
00:49:44,120 --> 00:49:46,680
Speaker 1: what clients really care about is they care about the liquidity,

845
00:49:47,080 --> 00:49:49,680
Speaker 1: where they care about the bid offer spreads, or they

846
00:49:49,719 --> 00:49:52,520
Speaker 1: care about other aspects of cost, which, as we talked

847
00:49:52,560 --> 00:49:55,799
Speaker 1: about earlier, are often ten times is important to their

848
00:49:55,840 --> 00:49:58,839
Speaker 1: total cost of what they own. And if you think

849
00:49:58,880 --> 00:50:02,799
Speaker 1: about things like fact ers or e s G. Or thematics,

850
00:50:03,640 --> 00:50:05,960
Speaker 1: what clients are really coming to us and those exposures

851
00:50:06,080 --> 00:50:10,080
Speaker 1: for is a means to outperform, but for a very

852
00:50:10,160 --> 00:50:13,000
Speaker 1: low thing. And so when they look at us in

853
00:50:13,120 --> 00:50:15,400
Speaker 1: factors and when they look at us in E s G,

854
00:50:16,200 --> 00:50:18,520
Speaker 1: they're often looking at us because we're a bargain, because

855
00:50:18,560 --> 00:50:22,719
Speaker 1: we're off what they were paying a active manager in

856
00:50:22,880 --> 00:50:26,600
Speaker 1: terms of fees to deliver that out performance. And so

857
00:50:26,960 --> 00:50:30,279
Speaker 1: I think it's important to understand that full set. I

858
00:50:30,320 --> 00:50:32,719
Speaker 1: won't bore you with their two other segments, and um

859
00:50:33,000 --> 00:50:36,000
Speaker 1: that I didn't talk about precision instruments being among them,

860
00:50:36,520 --> 00:50:39,640
Speaker 1: but I think we operate in all those different segments

861
00:50:40,200 --> 00:50:43,680
Speaker 1: with very different segments of clients, from d I Y

862
00:50:44,080 --> 00:50:48,800
Speaker 1: self directed investors all the way through to other active

863
00:50:48,840 --> 00:50:52,759
Speaker 1: managers as well as the biggest segment being firms that

864
00:50:52,880 --> 00:50:57,120
Speaker 1: you well know, which is large discretionary wealth managers. And

865
00:50:57,239 --> 00:50:59,600
Speaker 1: so each of them have different factors that they look

866
00:50:59,640 --> 00:51:05,160
Speaker 1: at in terms of price, tax, efficiency, tracking error, liquidity,

867
00:51:05,760 --> 00:51:08,560
Speaker 1: and just the underlying quality and the ability to deliver

868
00:51:08,680 --> 00:51:10,759
Speaker 1: that quality at scale, and that all goes into the

869
00:51:10,840 --> 00:51:14,000
Speaker 1: formula round. So I know I only have you for

870
00:51:14,080 --> 00:51:17,480
Speaker 1: a few more minutes, so let's jump to our speed.

871
00:51:17,640 --> 00:51:21,040
Speaker 1: Rounds are are questions that we ask all our guests

872
00:51:21,160 --> 00:51:23,319
Speaker 1: to get a little more insight into who they are.

873
00:51:24,120 --> 00:51:27,320
Speaker 1: Let's let's start with under lockdown. What are you streaming

874
00:51:27,360 --> 00:51:30,640
Speaker 1: these days? Give us your favorite either Netflix or Amazon

875
00:51:30,760 --> 00:51:34,439
Speaker 1: Prime or podcast you're listening to. Tell us what's keeping

876
00:51:34,480 --> 00:51:38,160
Speaker 1: you entertained while you're sheltering at home. You know, I've

877
00:51:38,200 --> 00:51:41,480
Speaker 1: been watching a it's kind of an obscure TV show.

878
00:51:41,520 --> 00:51:44,720
Speaker 1: It's called Kim's Convenience. It's about this family up in Canada,

879
00:51:44,800 --> 00:51:47,319
Speaker 1: which is where I grew up, that runs a small

880
00:51:47,360 --> 00:51:49,960
Speaker 1: convenience store. And my dad used to run a small

881
00:51:50,000 --> 00:51:51,680
Speaker 1: convenience store and I used to work at it when

882
00:51:51,719 --> 00:51:53,960
Speaker 1: I was a kid. And so that's my kind of

883
00:51:54,440 --> 00:51:57,240
Speaker 1: if you will, comfort food TV that I've been watching.

884
00:51:57,280 --> 00:51:59,319
Speaker 1: It's a great show, but I think it's more any

885
00:51:59,360 --> 00:52:01,000
Speaker 1: other people who up in Canada and worked in the

886
00:52:01,040 --> 00:52:02,719
Speaker 1: convenience store would love it. So I may not have

887
00:52:02,800 --> 00:52:04,880
Speaker 1: broad appeal, but for me it has a lot of

888
00:52:05,000 --> 00:52:12,480
Speaker 1: comfort appeal for sure Canadian convenience store workers. So so

889
00:52:12,600 --> 00:52:15,640
Speaker 1: tell us about your mentors who helped shape your career.

890
00:52:16,040 --> 00:52:19,279
Speaker 1: You know, gosh, there's been so many people along the way.

891
00:52:19,520 --> 00:52:23,400
Speaker 1: Charlie Halleck, our late partner saved me from not just

892
00:52:23,520 --> 00:52:25,880
Speaker 1: saved me from making a real career mistake. But I

893
00:52:25,960 --> 00:52:29,920
Speaker 1: think was also in the couple of years that we

894
00:52:30,280 --> 00:52:34,600
Speaker 1: worked together at the firm before he had passed, was

895
00:52:34,760 --> 00:52:38,600
Speaker 1: both a really important mentor and at times a really

896
00:52:38,640 --> 00:52:41,120
Speaker 1: harsh critic. And I think some of the things that

897
00:52:41,520 --> 00:52:45,279
Speaker 1: people sometimes misunderstand about mentors that you know, they think

898
00:52:45,360 --> 00:52:48,240
Speaker 1: mentorship is just being a good cheerleader and a good supporter.

899
00:52:49,000 --> 00:52:52,920
Speaker 1: Sometimes mentorship is really about tough love. Charlie, for me,

900
00:52:53,160 --> 00:52:56,480
Speaker 1: was very much about tough love. But he really became

901
00:52:56,560 --> 00:52:59,840
Speaker 1: a really really important guide for me to really understand

902
00:53:00,000 --> 00:53:02,640
Speaker 1: Black Rock, to really understand how it worked, to really

903
00:53:02,719 --> 00:53:06,120
Speaker 1: understand some of the genius of the firm that a

904
00:53:06,600 --> 00:53:11,279
Speaker 1: relative newcomer might take years and years to appreciate. I

905
00:53:11,360 --> 00:53:13,759
Speaker 1: got a crash course in a couple of years through

906
00:53:14,120 --> 00:53:17,680
Speaker 1: Charlie that you know, I will certainly always be grateful for,

907
00:53:18,320 --> 00:53:21,440
Speaker 1: along with him, of course, correcting my career with his

908
00:53:21,520 --> 00:53:24,680
Speaker 1: own blunt style when I had mistakenly turned the firm down.

909
00:53:25,200 --> 00:53:28,080
Speaker 1: That's tell us about some of your favorite books. What

910
00:53:28,280 --> 00:53:30,720
Speaker 1: what are you reading now? What have you enjoyed reading?

911
00:53:31,040 --> 00:53:33,040
Speaker 1: You know, I was reading a little bit earlier on

912
00:53:33,840 --> 00:53:36,839
Speaker 1: what i'd call a bunch of disaster and despair books.

913
00:53:37,040 --> 00:53:39,799
Speaker 1: My wife thankfully taught me out of it, because there's

914
00:53:39,840 --> 00:53:43,239
Speaker 1: a whole genre about, like The Twilight of Democracy is one,

915
00:53:43,440 --> 00:53:45,800
Speaker 1: which is actually really good book. But I've now moved

916
00:53:45,880 --> 00:53:49,040
Speaker 1: to reading a biography of Wellington which looks to be

917
00:53:49,200 --> 00:53:52,920
Speaker 1: very good. And I'm also reading a book called wolf

918
00:53:53,040 --> 00:53:56,520
Speaker 1: Hall that I have owned but haven't read, And so

919
00:53:57,040 --> 00:53:59,359
Speaker 1: I'm using this to make a dent in both of those.

920
00:53:59,440 --> 00:54:00,840
Speaker 1: Of a big gang will file in case you have

921
00:54:00,920 --> 00:54:03,719
Speaker 1: a guest, but we'll fall at Wellington kind of a

922
00:54:03,760 --> 00:54:06,399
Speaker 1: bit better, and at times at least the Wellington piece

923
00:54:06,440 --> 00:54:10,239
Speaker 1: can be uplifting, quite interesting. What sort of advice would

924
00:54:10,280 --> 00:54:14,320
Speaker 1: you give to a recent college grad who was interested

925
00:54:14,480 --> 00:54:19,040
Speaker 1: in a career in either wealth management or indexing or

926
00:54:19,280 --> 00:54:25,319
Speaker 1: E T S. I think the important thing is each

927
00:54:25,400 --> 00:54:28,839
Speaker 1: of those industries, right, So just take wealth management, which

928
00:54:29,080 --> 00:54:31,560
Speaker 1: you are very familiar with having built a firm, or

929
00:54:31,800 --> 00:54:36,560
Speaker 1: asset management. They're going through vast changes, and I think

930
00:54:36,680 --> 00:54:39,120
Speaker 1: that you know, it's all great to talk about change

931
00:54:39,160 --> 00:54:42,160
Speaker 1: in the abstract real time, it could be painful and

932
00:54:42,719 --> 00:54:47,480
Speaker 1: it can be challenging, and so I think they're really

933
00:54:47,520 --> 00:54:49,960
Speaker 1: exciting industries. Their industries that I've been part of for

934
00:54:50,239 --> 00:54:53,800
Speaker 1: a few decades, two decades, but but I think for

935
00:54:53,880 --> 00:54:58,160
Speaker 1: a new graduate, it's really making sure that one they're

936
00:54:58,280 --> 00:55:02,680
Speaker 1: up for that and two that they really love client service,

937
00:55:03,080 --> 00:55:06,960
Speaker 1: because whether you're a fiduciary wealth manager or whether you're

938
00:55:06,960 --> 00:55:10,200
Speaker 1: a fiduciary assid manager, you've got to be comfortable with

939
00:55:10,280 --> 00:55:13,279
Speaker 1: the notion that you're here to serve the client. But

940
00:55:13,400 --> 00:55:15,800
Speaker 1: it isn't your money, it's theirs, and you've got to

941
00:55:15,840 --> 00:55:19,080
Speaker 1: get joy out of that aspect of it, which I

942
00:55:19,120 --> 00:55:22,080
Speaker 1: think is inherent to both of those businesses as much

943
00:55:22,160 --> 00:55:26,160
Speaker 1: as you know constant radical changes as well. And our

944
00:55:26,200 --> 00:55:29,200
Speaker 1: final question, what do you know about the world of

945
00:55:29,360 --> 00:55:33,600
Speaker 1: indexing and ets today that you wish you knew twenty

946
00:55:33,719 --> 00:55:37,160
Speaker 1: years ago when you were first getting started in this field.

947
00:55:37,680 --> 00:55:39,239
Speaker 1: So I'm going to give you a boring answer to

948
00:55:39,320 --> 00:55:41,560
Speaker 1: this one, very which is that in the late nineties

949
00:55:41,840 --> 00:55:46,080
Speaker 1: I was a very unsuccessful occasional day trader and I

950
00:55:46,160 --> 00:55:47,960
Speaker 1: had a good run up and then it all ended

951
00:55:47,960 --> 00:55:50,880
Speaker 1: in tears around the late two thousand and two thousand

952
00:55:50,960 --> 00:55:53,680
Speaker 1: and one. It took me away from the market, was

953
00:55:53,760 --> 00:55:56,360
Speaker 1: shy about the market for a few years after that,

954
00:55:57,080 --> 00:55:59,360
Speaker 1: and I think that the thing that I wish I knew,

955
00:56:00,000 --> 00:56:03,160
Speaker 1: it's just the importance of staying invested. Now, that's a

956
00:56:03,440 --> 00:56:06,040
Speaker 1: boring and reliable answer, but I am the beta guy,

957
00:56:06,239 --> 00:56:09,640
Speaker 1: so you believe in boring and reliable over the long term.

958
00:56:10,400 --> 00:56:13,640
Speaker 1: And but it really has paid off. And and just so,

959
00:56:13,800 --> 00:56:15,520
Speaker 1: the thing I wish I knew was that I'd stopped

960
00:56:15,520 --> 00:56:18,000
Speaker 1: worrying about kind of timing the market and I just

961
00:56:18,480 --> 00:56:22,600
Speaker 1: really focus on staying in the market. And for investors

962
00:56:22,760 --> 00:56:25,680
Speaker 1: like me, and I think for many investors, we were

963
00:56:25,680 --> 00:56:28,239
Speaker 1: able to take a long term view. That's probably the

964
00:56:28,320 --> 00:56:31,480
Speaker 1: soundest and best way to build wealth over the long term.

965
00:56:31,800 --> 00:56:34,880
Speaker 1: You know, I totally agree with that answer. Thank you,

966
00:56:35,160 --> 00:56:37,920
Speaker 1: Silim Ramje for being so generous with your time. We

967
00:56:38,080 --> 00:56:41,239
Speaker 1: have been speaking with Silim ramg the global head of

968
00:56:41,320 --> 00:56:44,880
Speaker 1: Eye Shares and Index Investments for black Rock, which his

969
00:56:45,000 --> 00:56:48,680
Speaker 1: division runs about four point six trillion in client assets.

970
00:56:49,680 --> 00:56:52,160
Speaker 1: If you enjoy this conversation, be sure and check out

971
00:56:52,440 --> 00:56:55,720
Speaker 1: well our previous podcasts. We're up to about three fifty.

972
00:56:56,200 --> 00:57:01,920
Speaker 1: You can find that at iTunes, Spotify, Google podcast Us, Stitcher, Overcast,

973
00:57:01,960 --> 00:57:06,560
Speaker 1: wherever your final podcasts are sold. We love your comments,

974
00:57:06,680 --> 00:57:11,320
Speaker 1: feedback and suggestions right to us at m IB podcast

975
00:57:11,400 --> 00:57:14,600
Speaker 1: at Bloomberg dot net. You can check out my weekly

976
00:57:14,719 --> 00:57:18,400
Speaker 1: column at Bloomberg dot com Slash Opinion. Sign up for

977
00:57:18,520 --> 00:57:21,160
Speaker 1: our daily reads at rid Halts dot com. Follow me

978
00:57:21,240 --> 00:57:23,720
Speaker 1: on Twitter at rid Halts. Be sure to give us

979
00:57:23,760 --> 00:57:27,320
Speaker 1: a review at Apple iTunes. I would be remiss if

980
00:57:27,400 --> 00:57:29,600
Speaker 1: I did not thank our crack staff that helps put

981
00:57:29,640 --> 00:57:33,800
Speaker 1: these conversations together each week. Tim Harrow is my audio engineer,

982
00:57:34,080 --> 00:57:38,840
Speaker 1: Michael Boyle is my booker. Slash producer. Ticob Valbrun is

983
00:57:38,920 --> 00:57:43,000
Speaker 1: our project manager. Michael bat Nick is our head of research.

984
00:57:43,720 --> 00:57:47,080
Speaker 1: I'm Barry Rid Hults. You've been listening to Master's Business

985
00:57:47,560 --> 00:57:48,680
Speaker 1: on Bloomberg Radio.