WEBVTT - ETF Rising Stars 0:00:05.920 --> 0:00:09.000 Welcome to Trillians. I'm Joel Webber and I'm Eric Baltierness. 0:00:10.960 --> 0:00:13.200 We talk a lot about how hyper competitive of a 0:00:13.320 --> 0:00:16.360 landscape et f s are. You know, it's dominated by 0:00:16.400 --> 0:00:19.680 behemoths and those are the issuers and some of the 0:00:19.840 --> 0:00:21.439 older E t f s who have been around a 0:00:21.440 --> 0:00:24.840 long time collected a lot of assets. This episode, we're 0:00:24.840 --> 0:00:28.560 gonna spend more time talking about maybe some indie rock, right, 0:00:29.080 --> 0:00:33.559 so let's talk about what you call rising stars. Right, 0:00:33.600 --> 0:00:35.519 So when you think about the E t F landscape, 0:00:35.560 --> 0:00:41.080 there's products of them have less than fifty million dollars, 0:00:41.400 --> 0:00:44.200 so I would consider that oblivion. So we're talking most 0:00:44.240 --> 0:00:47.559 ETFs live in oblivion literally, so it's tough to get 0:00:47.600 --> 0:00:49.560 out of there, including a lot of the fancy tickers 0:00:49.560 --> 0:00:52.680 that we talk about. Absolutely. Now there's a firm middle 0:00:52.760 --> 0:00:57.720 class which has about of the products. Although there's lower 0:00:57.720 --> 0:00:59.960 middle class and upper middle class. There's a different degree. 0:01:00.040 --> 0:01:03.920 So between one million and a billion, to me, is 0:01:03.920 --> 0:01:06.200 this sort of middle class, and then beyond a billion 0:01:06.400 --> 0:01:09.319 is sort of you're home free. You're now rich. Your 0:01:09.400 --> 0:01:13.320 upper upper class. That's seventeen percent of the product suburbs. 0:01:13.360 --> 0:01:18.800 That's right, So oblivion or middle class. Sevent are upper class. 0:01:19.240 --> 0:01:22.759 So to go from oblivion to middle class is hard enough, 0:01:22.800 --> 0:01:24.720 but then to like go all the way into the 0:01:24.800 --> 0:01:28.120 upper class, it's it's like a swimming up stream. Ye. 0:01:28.400 --> 0:01:30.080 You know, I think this is actually happens to be 0:01:30.120 --> 0:01:33.320 a pretty decent week to bring in a little music metaphor, 0:01:33.440 --> 0:01:36.200 because you know, Spotify is in the background, having just 0:01:36.240 --> 0:01:38.920 had its sort of a non I p O I 0:01:39.040 --> 0:01:42.000 p O, right, and you actually just watched the documentary 0:01:42.000 --> 0:01:43.640 that you think kind of helps frame all of this 0:01:43.720 --> 0:01:46.640 as well. Yeah, you know, I love my music metaphors, 0:01:46.680 --> 0:01:48.920 and this one's really good. This is about a radio station. 0:01:49.040 --> 0:01:51.520 It's on showtime. I think the name of the documentary 0:01:51.600 --> 0:01:53.960 is called Dare to Be Different New Wave, and it 0:01:54.040 --> 0:01:57.120 was basically w L I R in Long Island changed 0:01:57.160 --> 0:02:00.520 Format two from classic rock, which is all anybody was 0:02:00.560 --> 0:02:03.120 playing right stair Way to Heaven like all day every day, 0:02:03.160 --> 0:02:06.120 and in eight two they switched formats completely to new wave, 0:02:06.840 --> 0:02:09.480 so they're you know, they were playing stuff like YouTube, Duran, Duran, 0:02:09.600 --> 0:02:14.600 Depeche Mode, Beastie Boys. This was all became eighties, right, 0:02:14.840 --> 0:02:17.359 that was the main stream eventually, And to me, that 0:02:17.440 --> 0:02:21.000 format change is essentially consistent with what E. T F 0:02:21.120 --> 0:02:24.200 to me are a format change, right, they are completely 0:02:24.240 --> 0:02:27.160 new wave, and that this radio station had something interesting 0:02:27.200 --> 0:02:29.760 called the Screamer of the Week. And what that was 0:02:29.840 --> 0:02:32.359 They played like a few songs that they just got 0:02:32.360 --> 0:02:34.200 in that were new and the and the people would 0:02:34.240 --> 0:02:36.400 call in and vote for their favorite one, and whichever 0:02:36.480 --> 0:02:38.640 one one they played in heavy rotation the next week. 0:02:39.080 --> 0:02:40.880 So if you look at a list of their Screamers 0:02:40.880 --> 0:02:43.240 of the week, this is like early eighties. They've got 0:02:43.280 --> 0:02:46.120 stuff on here, People or People by Depeche Mode, Pretty 0:02:46.120 --> 0:02:49.000 Persuasion by R. E. M. New Year's Day by YouTube. 0:02:49.520 --> 0:02:52.440 So they had a lot of songs that eventually became classics, 0:02:52.440 --> 0:02:54.600 but they also had some duds in their songs that 0:02:54.639 --> 0:02:57.080 you never heard of, like only You by the Flying Pickets, 0:02:57.080 --> 0:02:59.880 Connecticut by Hillary. So the Screamer of the Week was 0:03:00.240 --> 0:03:03.440 necessarily a definite classic, but it was them trying to 0:03:03.480 --> 0:03:07.160 sort of identify as early as possible a song that 0:03:07.800 --> 0:03:09.960 a breakthrough exactly. And that's what I try to do 0:03:10.000 --> 0:03:12.600 with my rising stars research when I do it on occasion. 0:03:12.680 --> 0:03:15.679 So back to the indie rock thing sort of things 0:03:14.880 --> 0:03:17.000 are the rocks maybe they make it maybe they don't. 0:03:18.200 --> 0:03:21.560 This week on Trillions the Rising Stars of the E 0:03:21.680 --> 0:03:25.880 t F World, we also have a guest Carolina Wilson, 0:03:26.040 --> 0:03:29.280 who's a reporter with Bloomberg News. She also has a 0:03:29.400 --> 0:03:33.120 daily column called E t F Watch, so she's almost 0:03:33.120 --> 0:03:35.800 the perfect person to join us and talk about some 0:03:35.840 --> 0:03:39.160 of the ones to watch right now. Carolina, Welcome to 0:03:39.200 --> 0:03:42.520 the show. You weren't born in the eighties. It's not 0:03:43.160 --> 0:03:46.640 when were you born in the year that fascinates me. 0:03:46.800 --> 0:03:49.680 First of all, she doesn't know anything about this radio 0:03:49.720 --> 0:03:52.280 station that you just talked about. Yeah, and like, to you, 0:03:52.280 --> 0:03:54.440 you two is probably this sort of like old man 0:03:54.720 --> 0:03:58.840 classic rock band, right right, like my dad's rock. But 0:03:58.960 --> 0:04:01.640 in two, I'm telling you they were new wave, and 0:04:02.000 --> 0:04:03.560 there is an equivalent to E t F. A lot 0:04:03.600 --> 0:04:05.640 of millennials that's all they know is E t F. 0:04:05.680 --> 0:04:08.080 They don't even know mutual funds anymore, and so there's 0:04:08.080 --> 0:04:11.040 definitely a consistency there. But yeah, what is new wave 0:04:11.080 --> 0:04:13.480 in current today is is going to seem like old 0:04:13.480 --> 0:04:16.880 Fogy tomorrow? Do you remember the cassette? Oh the the act. 0:04:17.080 --> 0:04:18.640 I was like, oh my god, they're gonna start asking 0:04:18.640 --> 0:04:20.800 me about bands now that I don't know. Yes, I 0:04:20.800 --> 0:04:24.760 know what a cassette is. I did, I did? Do you? 0:04:24.760 --> 0:04:28.000 How do you listen to music now Spotify? Yeah? Me too? 0:04:28.040 --> 0:04:30.640 You How about you? Are? I listened to through on 0:04:30.720 --> 0:04:33.120 Sirius in my car and then I still use iTunes 0:04:33.760 --> 0:04:36.440 old school. Yeah, I like to own it. My dad 0:04:36.600 --> 0:04:39.320 is too year old. I am. I'm okay with the 0:04:39.320 --> 0:04:43.520 world's changing. Eric, uh so, so Carolina, Um, we're gonna 0:04:43.520 --> 0:04:48.920 have Eric present his rising Star system and then we're 0:04:48.920 --> 0:04:52.480 going to critique a little bit. But let's look backwards, right, Eric, 0:04:52.720 --> 0:04:56.159 So you use this and you you look backwards at 0:04:56.440 --> 0:04:58.680 you know, ten years ago to see if you could 0:04:58.680 --> 0:05:02.799 have identified ones from history that did break through. What 0:05:02.800 --> 0:05:06.400 what tickers and e t f s popped? So in 0:05:06.560 --> 0:05:10.440 June that's about what eighteen months ago, I looked at 0:05:10.440 --> 0:05:12.480 the fastest growing e t F Here's how we do it. 0:05:12.760 --> 0:05:15.080 We basically look for a minimum masset level. In the 0:05:15.120 --> 0:05:18.040 case in June, I looked at one million minimum. Right, 0:05:18.360 --> 0:05:20.480 you have to have something going on to start, if 0:05:20.480 --> 0:05:23.240 you Yeah, if you look at an ETF that goes 0:05:23.279 --> 0:05:26.040 from one million to ten, that's a thousand percent growth rate. 0:05:26.040 --> 0:05:28.680 But that doesn't really You're right, so we look at 0:05:28.839 --> 0:05:31.280 a decent base of a hundred million back then and 0:05:31.320 --> 0:05:34.160 we saw which one's doubled assets A. So they grew 0:05:34.200 --> 0:05:38.560 by a hundred percent and broke through the billion dollar mark. Um. 0:05:38.800 --> 0:05:42.080 So there were five eighteen months ago that that fit 0:05:42.160 --> 0:05:45.320 that threshold. Um, they were a mixed bag. If you 0:05:45.320 --> 0:05:47.640 want to where are they now? And we'll look to today, 0:05:47.680 --> 0:05:52.560 there was so that's a whole another thing. Yeah. So 0:05:52.640 --> 0:05:54.680 one of them was the I Shares Edge ms C 0:05:54.760 --> 0:05:57.760 I us a momentum ETF ticker m t u M. 0:05:57.800 --> 0:05:59.680 At the time it had broken through to one point 0:05:59.760 --> 0:06:02.840 three billions, so it made my list. Today it has 0:06:02.880 --> 0:06:07.039 seven point four billion dollars. It returned in the eighteen 0:06:07.040 --> 0:06:11.040 months since identified it smash hit. This was like my 0:06:11.279 --> 0:06:14.000 you know, identifying that band before they break and all 0:06:14.000 --> 0:06:16.360 the all the radio does now is play it. That's right. 0:06:16.480 --> 0:06:20.920 So it's on every Spotify list. And Carolina she's probably 0:06:20.920 --> 0:06:23.440 written about mt u M because the flows are always 0:06:23.520 --> 0:06:26.360 making her radar. Yeah. Absolutely, But I feel like with 0:06:26.440 --> 0:06:28.960 these we have, don't we have the same issue we 0:06:29.000 --> 0:06:31.560 have with other single factor funds where they're cyclical, right, 0:06:31.560 --> 0:06:33.800 so we see money pouring into them, but I think 0:06:33.839 --> 0:06:37.240 on On Monday, m t U M fell three the 0:06:37.279 --> 0:06:40.760 SMP filed two. We have analysts saying that the momentum 0:06:40.800 --> 0:06:43.200 trade is over. Yes, this has grown a lot, but 0:06:43.760 --> 0:06:46.840 because it's such a huge tech trade count, won't we 0:06:46.880 --> 0:06:49.880 see investors yank money from this? Right? So the momentum etia, 0:06:50.000 --> 0:06:52.920 for those who don't know, is basically it's following the heat. 0:06:52.960 --> 0:06:54.960 It's looking for stocks that are doing well, and it 0:06:55.040 --> 0:06:58.400 just sort of tries to copy what's done well. And 0:06:58.440 --> 0:07:00.280 then it also has a screen for volatility, so it's 0:07:00.320 --> 0:07:02.920 not too volatile. But long story short, it's performance chasing. 0:07:03.400 --> 0:07:06.080 Right now, it's heavy tech, and it's it's gonna get hurt. 0:07:06.200 --> 0:07:08.360 But if tech starts to go down, it's gonna try 0:07:08.400 --> 0:07:11.000 to like sell the tech and latch onto what's doing well. 0:07:11.000 --> 0:07:14.119 Maybe it's utilities, who knows, Yeah, that's all it does. 0:07:14.640 --> 0:07:16.840 So it could have a rebound. But even if it 0:07:16.880 --> 0:07:19.720 does struggle a lot of times, when assets enter an 0:07:19.720 --> 0:07:21.320 e t F and it gets the seven eight billion, 0:07:21.640 --> 0:07:23.160 even if it has a rough year, it's not gonna 0:07:23.160 --> 0:07:25.600 lose all the assets. It might lose two three billion, 0:07:25.680 --> 0:07:28.160 but it's it's it is now a legit and it's 0:07:28.200 --> 0:07:30.480 the biggest momentum ETF, so it is the go to 0:07:30.640 --> 0:07:34.400 for the momentum trade. So this one popped. One that 0:07:34.560 --> 0:07:36.640 was a dud basically was f x U, which is 0:07:36.680 --> 0:07:40.680 the first trust Utilities alphabex Um. This is utility stocks, 0:07:40.680 --> 0:07:43.760 but it has an overlay of growth value screens. The 0:07:43.840 --> 0:07:45.720 reason it made my list and I learned from this 0:07:45.840 --> 0:07:47.760 is that it was used in a fund of funds 0:07:48.080 --> 0:07:50.120 and once that fund of funds kicked it out, it 0:07:50.240 --> 0:07:53.600 lost it. It's almost like it had like one gigantic investor, 0:07:54.320 --> 0:07:57.280 and so it's shrunk to two hundred million from having 0:07:57.280 --> 0:07:59.960 one point seven billion. So it's and it's only up 0:08:01.560 --> 0:08:04.920 absolutely and there's a couple in the middle, like Jeffrey Gunlock, 0:08:05.000 --> 0:08:06.640 the famous bond manager, has an e t F t 0:08:06.760 --> 0:08:09.160 O t L the double line total return. That one 0:08:09.200 --> 0:08:11.080 is up to three point four billion. That's a billion 0:08:11.080 --> 0:08:12.880 more than when we identified it. It had a three 0:08:12.920 --> 0:08:15.240 percent return. Pretty good. And then another one that I 0:08:15.320 --> 0:08:17.160 was a pretty big hit was Noble. This is the 0:08:17.240 --> 0:08:21.320 pro Shares SMP dividant aristocrats. It looks for companies that 0:08:21.320 --> 0:08:25.120 have increased their dividends for twenty five straight years. It 0:08:25.240 --> 0:08:28.800 is a rigid screen. How's Noble done in oh, b L, 0:08:29.000 --> 0:08:31.640 how's that done? Pretty well? It was up eighteen months 0:08:31.640 --> 0:08:33.680 since we looked at it. It's not three point four billion, 0:08:33.720 --> 0:08:36.600 that's about double from when we identified it. So to me, 0:08:36.720 --> 0:08:40.840 Noble was a legit hit from this list, even with 0:08:40.880 --> 0:08:44.840 its really strict requirements. Yeah, and Noble is like, look, 0:08:44.920 --> 0:08:47.880 everyone loves dividend paying stocks, even if you're not going 0:08:47.880 --> 0:08:49.600 there for yield, because this thing doesn't yield a lot 0:08:49.640 --> 0:08:52.480 because when you're that rigid, the stocks are going to 0:08:52.679 --> 0:08:56.120 be low yielding. But people just love dividend paying stocks. 0:08:56.800 --> 0:08:59.720 Envelope of cash from your grandmother. And it's also sturdy, 0:08:59.800 --> 0:09:02.800 st already company. So Noble was probably very much in 0:09:02.800 --> 0:09:07.600 a lot of like retirement accounts people who are conservative. Um, 0:09:07.679 --> 0:09:10.840 and it it spawned a few copycats. So you know 0:09:10.920 --> 0:09:15.959 you mentioned your class system earlier, Eric, because there's different 0:09:16.200 --> 0:09:19.800 kind of thresholds that ets can kind of climb through. Right, 0:09:20.520 --> 0:09:22.680 So when you think about what these ones that you 0:09:22.720 --> 0:09:26.520 identified eighteen months ago, I've done where where? How far 0:09:26.559 --> 0:09:28.320 did they get and how far could they go? Still? 0:09:28.800 --> 0:09:31.280 So all of them over a billion? So I identified 0:09:31.360 --> 0:09:34.160 them when they were sort of middle class into the 0:09:34.200 --> 0:09:37.400 elite one billion. They cracked the top. Yeah, they're they're like, 0:09:37.440 --> 0:09:41.360 they're rich. Basically they they except for f XU, which 0:09:41.400 --> 0:09:44.640 actually backslid, but the other ones are now firmly in 0:09:44.679 --> 0:09:48.760 this sort of elite category. All right, So we looked backward, Eric, 0:09:48.800 --> 0:09:52.640 you've also refined the system because of that. So let's 0:09:52.679 --> 0:09:57.079 talk about right now some current screamers that you've identified. Yeah, 0:09:57.120 --> 0:09:58.640 I feel like the when I did in the past, 0:09:58.679 --> 0:10:00.680 I got some more brand name is, like, you know, 0:10:00.760 --> 0:10:03.680 Jeffrey Gunlock and Spider and I Shares. So I tweaked 0:10:03.679 --> 0:10:05.840 it a little bit to try to get more indie 0:10:06.440 --> 0:10:08.480 e t s in there, a little more theme ets, 0:10:08.559 --> 0:10:11.640 because when you use a hundred million base, you tend 0:10:11.679 --> 0:10:13.040 to screen out some of those. So I went to 0:10:13.040 --> 0:10:16.000 a thirty million dollar base, and I just looked at 0:10:16.160 --> 0:10:19.880 which one's had the biggest percentage jump in assets, but 0:10:20.160 --> 0:10:22.600 I looked at flows. So in other words, who had 0:10:22.600 --> 0:10:26.200 the biggest organic growth of the thirty million dollar base, 0:10:26.480 --> 0:10:29.400 sorted by the percentage growth over the top five over 0:10:29.440 --> 0:10:34.400 a year, so the past twelve months. And so we'll 0:10:34.440 --> 0:10:36.440 start with the top. The one that just to me 0:10:36.720 --> 0:10:40.280 was on top by a mile was Bots the Global 0:10:40.440 --> 0:10:43.880 x Robotics and Artificial Intelligence ETF. It had thirty million 0:10:43.920 --> 0:10:46.800 dollars a year ago. It's taken in two point three 0:10:46.880 --> 0:10:51.120 billion dollars since then. That's a seven thousand eight increase 0:10:51.160 --> 0:10:53.360 of organic growth in one e t F. I don't 0:10:53.600 --> 0:10:56.960 that's literally going from oblivion to like firmly in the 0:10:57.000 --> 0:10:59.720 elites in one year. It's that you'd never see that. 0:10:59.760 --> 0:11:03.560 What is it do? So? Bots basically tracks companies that 0:11:03.600 --> 0:11:07.800 are designing UH machines and robotics things for the military, 0:11:07.880 --> 0:11:12.000 the household. It's basically tech and industrials, and it's companies 0:11:12.040 --> 0:11:15.920 really focused on robotics and artificial intelligence. Carolina, had you 0:11:15.960 --> 0:11:18.760 known about this one? Had this been on your list? Yeah? Absolutely? 0:11:18.800 --> 0:11:20.920 And I think that it's it's hard to talk about 0:11:20.960 --> 0:11:26.520 bots without mentioning it's like arch enemy Robo. Yeah, I 0:11:26.559 --> 0:11:33.040 like that. Okay, Bots launched in September. Robo also following 0:11:33.120 --> 0:11:37.560 this robotics and automation theme, launched in October. But since 0:11:37.640 --> 0:11:41.920 Bots launched, it's basically outperformed Robo. You know, we're talking 0:11:41.920 --> 0:11:44.560 about Bots being up about sixty one per cent since 0:11:44.559 --> 0:11:49.280 it launched in September versus robos fifty three percent gain 0:11:49.440 --> 0:11:52.880 in that same time frame. Um, it's funny because I 0:11:52.880 --> 0:11:58.119 think less diversification has paid off. Here Bots holds thirty companies. 0:11:58.280 --> 0:12:02.080 Robo I think is closer to what was it, ninety holdings. 0:12:02.480 --> 0:12:05.040 But then you have a significant concentration risk, right, and 0:12:05.080 --> 0:12:07.640 maybe this is where one of the cons one of 0:12:07.640 --> 0:12:11.600 those conpoints come in for Bots. Yeah. Bots his market 0:12:11.600 --> 0:12:13.920 cap weighted, as you know that that makes you have 0:12:14.040 --> 0:12:17.720 more large cap exposure. Typically Robo is equal weighted in 0:12:17.800 --> 0:12:21.640 two tiers, and uh, as Carolina said, it's a lot 0:12:21.679 --> 0:12:25.760 more diversified. Bots had a few large caps that took off, 0:12:25.800 --> 0:12:28.840 so it outperformed Robot. And you keep to go from 0:12:28.840 --> 0:12:32.280 oblivion to the elite, It's usually always going to be 0:12:32.360 --> 0:12:34.560 some kind of what I call a shiny object moment 0:12:34.559 --> 0:12:37.920 where the performance is so outrageous people cannot ignore it. 0:12:38.240 --> 0:12:40.040 They go after it like a shiny object and a 0:12:40.040 --> 0:12:44.920 little child. Right. And so this thing was up at 0:12:44.920 --> 0:12:46.400 one point over the past year. It's come down a 0:12:46.400 --> 0:12:49.480 bit in the recent sell off, but it crushed Robo. 0:12:49.800 --> 0:12:53.160 It's like Terminator too. This was like Robert Patrick, you know, 0:12:53.559 --> 0:12:55.880 in the middle of the movie, just like a object 0:12:55.880 --> 0:13:00.360 for you. Yeah, exactly well done, man, I like that, say, welcome, 0:13:00.400 --> 0:13:04.199 there we go, we're cooking with and the fee right, 0:13:04.280 --> 0:13:10.000 so robot charges basis points. Bots is at st so 0:13:10.120 --> 0:13:12.760 bots are significantly cheaper the other thing bots has and 0:13:12.800 --> 0:13:15.920 this is rare for me too. Product right robo existed 0:13:16.000 --> 0:13:18.040 bots said, Hey, I like that. Let me come out 0:13:18.080 --> 0:13:20.920 with one. This is global X. It's more liquid now 0:13:20.960 --> 0:13:24.080 it's about double the trading volume. So I'm sure robot 0:13:24.160 --> 0:13:26.520 is not thrilled about bots coming into play. But this 0:13:26.559 --> 0:13:28.560 is how brutal the et F landscape is. You can 0:13:28.559 --> 0:13:31.760 come out of the product that's very similar and just um, 0:13:31.800 --> 0:13:34.400 you know, make you eat into that other person's market 0:13:34.640 --> 0:13:38.920 specific rit man, every robot gets to find another robot. Okay, 0:13:38.920 --> 0:13:41.840 so this is shiny object, but how are people going 0:13:41.880 --> 0:13:43.600 to use it in their portfolio? When it comes to 0:13:43.640 --> 0:13:46.120 theme ETFs, I highly recommend looking at two things. The 0:13:46.240 --> 0:13:49.920 overlap with big indexes, like how much original exposure you getting. 0:13:49.960 --> 0:13:52.800 So bots only has about one percent overlap with the 0:13:52.840 --> 0:13:55.600 SMP five hundred in the MSCI world, So it's definitely 0:13:55.679 --> 0:13:58.560 capturing a lot of unique companies. Now, granted it's got 0:13:58.920 --> 0:14:02.000 paying companies and small HAPs and whatnot. But it's pretty original. 0:14:02.800 --> 0:14:05.000 So I would say that given it that it does 0:14:05.040 --> 0:14:07.959 have little overlap, which we call high active share, it 0:14:07.960 --> 0:14:10.280 should be used like hot sauce. You know. It should 0:14:10.280 --> 0:14:12.640 be something on the edge of a portfolio that you 0:14:12.720 --> 0:14:15.360 just believe in, but you're gonna you know, it's got 0:14:15.400 --> 0:14:18.760 what's more volatile than those indexes, so it could underperform 0:14:18.800 --> 0:14:22.520 by more than the index. So essentially it's something to 0:14:22.520 --> 0:14:25.800 be used in small proportions, likely um and something that 0:14:25.840 --> 0:14:28.320 you have to maybe really believe in the story because 0:14:28.320 --> 0:14:31.200 you're probably gonna experience some pretty nasty sell offs here 0:14:31.200 --> 0:14:42.240 and there. Okay, next Rising Star. The next one is 0:14:42.240 --> 0:14:45.040 the Arc web X point oh e t F, another 0:14:45.080 --> 0:14:48.000 futuristic sounding et F with the ticker r k W. 0:14:48.680 --> 0:14:50.800 It had twenty one million dollars a year ago. It's 0:14:50.840 --> 0:14:54.800 taken in four hundred and three million since then. That's increase. 0:14:54.880 --> 0:14:57.640 And this one just went won an award, right, No, 0:14:58.040 --> 0:15:00.360 So the one that won an award was a r 0:15:00.440 --> 0:15:03.000 k K a sister e t F called Arc Innovation. 0:15:03.480 --> 0:15:06.200 So this is a fun family that is managed by 0:15:06.480 --> 0:15:10.480 a woman named Cathy Wood, and they are all active 0:15:10.840 --> 0:15:13.240 and all really a lot of the products are looking 0:15:13.280 --> 0:15:17.800 at like futuristic themes like innovation, the human genome, three 0:15:17.880 --> 0:15:22.520 D printing, industrial innovation. So they try to see themselves 0:15:22.600 --> 0:15:26.280 as a the closest thing to a venture capitalist, that 0:15:26.360 --> 0:15:28.640 is an active manager. That's interesting, right, and and that's 0:15:28.760 --> 0:15:32.320 a place that active can actually play, right. So arc 0:15:32.760 --> 0:15:34.760 A r k W this this e t F is 0:15:34.840 --> 0:15:39.040 up a hundred and fift since launching in the past year, 0:15:39.400 --> 0:15:41.440 and even six percent year to date. It's been a 0:15:41.520 --> 0:15:44.720 rough year for internet type stocks, but it's still outperforming 0:15:45.160 --> 0:15:49.080 and it's been rewarded. If you can not just beat 0:15:49.120 --> 0:15:52.000 the SMP by a couple percentage points, but if you 0:15:52.040 --> 0:15:55.080 can crush it into oblivion, stomp on it and do 0:15:55.120 --> 0:15:58.320 a touchdown dance on its head, you will get assets. 0:15:58.680 --> 0:16:00.360 And that is the name of the game these days. 0:16:00.400 --> 0:16:02.280 I don't it's either all the money is going to 0:16:02.360 --> 0:16:05.520 cheap beta or these shiny objects that just basically run 0:16:05.600 --> 0:16:09.080 circles around the market. So currently, tell me about what 0:16:09.240 --> 0:16:13.480 this one does. Well, So Eric mentioned futuristic themes, it's 0:16:13.480 --> 0:16:16.480 definitely capitalizing on that. But I think another way to 0:16:16.520 --> 0:16:19.800 say that is that it's it's using these giant buzzwords 0:16:19.920 --> 0:16:23.960 right now. Right, So internet of things, cloud, computing, digital currencies. 0:16:24.000 --> 0:16:25.880 I think r W was one of the first U 0:16:25.960 --> 0:16:29.120 s ETFs to have indirect exposure to bitcoin because it 0:16:29.280 --> 0:16:31.160 held I think it's largest holding at one point was 0:16:31.240 --> 0:16:34.640 g BTC, which was this um private vehicle, but this 0:16:34.800 --> 0:16:39.040 Bitcoin trust and r K it's sister fund that you 0:16:39.120 --> 0:16:41.200 had mentioned earlier also held it. But I think that 0:16:41.480 --> 0:16:44.720 it's using some of those things to its advantage, right, Yeah, 0:16:44.720 --> 0:16:46.360 And I think if you look at the holdings, let's 0:16:46.360 --> 0:16:49.680 just look at some of the stocks and here Amazon, Tesla, Twitter, 0:16:50.200 --> 0:16:53.800 basically fang Fund. Yeah, it's it. There's but it's still 0:16:53.880 --> 0:16:57.280 not that much overlap with the SMP. It's got only 0:16:58.040 --> 0:17:00.800 overlap with that or the tech ETF. And it's interesting. 0:17:00.880 --> 0:17:02.920 We had Kathy Wood on this the E t F 0:17:02.960 --> 0:17:05.760 TV show I do, and we asked her about, hey, 0:17:05.800 --> 0:17:09.040 aren't these high octane stocks just gonna like just crash 0:17:09.080 --> 0:17:12.280 and the performance will suffer. She said something that you know, 0:17:12.440 --> 0:17:16.119 was very noteworthy, which is she considers this portfolio deep value. 0:17:16.280 --> 0:17:19.520 She considers Amazon deep value. She just says, you have 0:17:19.560 --> 0:17:21.480 to think about it ten twenty years down the road, 0:17:21.560 --> 0:17:25.360 and she just Amazon in particular. She's very bullish on 0:17:25.400 --> 0:17:28.600 that stock more than the other Fang stocks and thinks 0:17:28.640 --> 0:17:30.960 that that company is just um, you know, going to 0:17:31.080 --> 0:17:35.040 really change the game and multiple ways. So I think, 0:17:35.680 --> 0:17:37.679 you know, you make a strong sales case here, but 0:17:37.720 --> 0:17:39.680 you have to have the performance to back it up. 0:17:39.920 --> 0:17:43.760 And then for now she does, and then uh, it's look, 0:17:43.840 --> 0:17:48.479 the PE ratio is so high it's negative. It's like 0:17:48.920 --> 0:17:51.200 it's like gone to kill screen because it's got companies 0:17:51.200 --> 0:17:53.960 with negative earnings, and so it's it's just, look, this 0:17:54.000 --> 0:17:57.879 is very volatile, high high price to earnings ratio. You're 0:17:57.920 --> 0:18:01.240 paying a lot for the stocks basically, and it's costly 0:18:01.280 --> 0:18:04.679 at seventy five basis points. Okay, so the next rising 0:18:04.720 --> 0:18:08.480 star I like. I like this one because it's somewhat expected, right, 0:18:09.000 --> 0:18:13.560 and it looks outside the US because it's the emerging 0:18:13.640 --> 0:18:17.280 market Internet. Yes, e m q Q went from thirty 0:18:17.280 --> 0:18:20.119 four million dollars this time last year and it's taken 0:18:20.119 --> 0:18:22.640 in four hundred and four million, and that's a one 0:18:22.640 --> 0:18:26.720 tho increase in organic flows. I have a great story here. 0:18:27.200 --> 0:18:30.719 So I interviewed UM in May almost a year ago. 0:18:30.800 --> 0:18:33.280 Kevin Carter, he's the founder of the fund. Here in 0:18:33.320 --> 0:18:36.320 the Bloomberg office, we sat on one of these red booths. Uh, 0:18:36.359 --> 0:18:39.520 mostly because his fund was up like a whopping. It 0:18:39.560 --> 0:18:41.720 was tiny. I had to like beg my editors to 0:18:41.800 --> 0:18:44.080 let me write about this tiny, tiny, forty eight million 0:18:44.160 --> 0:18:47.000 dollar fund. And the headline that came out of that 0:18:47.000 --> 0:18:51.560 story was Chinese tech investments spur huge returns for pint 0:18:51.680 --> 0:18:54.879 sized fund. And I spoke to him maybe five or 0:18:54.880 --> 0:18:56.920 six months later. I think he called me. He was like, 0:18:57.040 --> 0:19:00.080 they had over four hundred million in assets, and he 0:19:00.160 --> 0:19:01.919 was like, remember when you called my e t F 0:19:01.960 --> 0:19:05.760 a pine sized fund. Listen these issues given like, no, 0:19:05.840 --> 0:19:09.360 it's my editor. Yeah, you forget, like especially this one. 0:19:09.400 --> 0:19:11.640 This is just one guy and an idea. So he's 0:19:11.640 --> 0:19:14.600 out there and so he really gets takes the media 0:19:14.880 --> 0:19:17.840 coverage seriously and that that one idea that he had though, 0:19:17.960 --> 0:19:21.119 was he wanted more China exposure because he looked at 0:19:21.160 --> 0:19:24.080 emerging market e t f s and realized that he 0:19:24.119 --> 0:19:26.800 couldn't get as much China as you wanted, and so 0:19:26.960 --> 0:19:29.160 e m q Q became the vehicle to do that. Right. 0:19:29.200 --> 0:19:31.880 It's funny because Eric he coined this perfectly. He said 0:19:31.920 --> 0:19:34.959 that this fund had a triple dose of China. I 0:19:35.000 --> 0:19:38.840 think it holds over sixty of its geographic allocation to 0:19:39.080 --> 0:19:41.879 Chinese companies. You compare that to e M, the colossal 0:19:41.920 --> 0:19:45.200 I Shares Emerging Markets fund that has like so that's 0:19:45.200 --> 0:19:47.520 where that triple dose comes in. But yeah, it's a 0:19:47.560 --> 0:19:52.640 super targeted Chinese Internet uh play and hugely popular, and 0:19:52.760 --> 0:19:55.480 yes it's six China. But let's just take a bigger, 0:19:55.480 --> 0:19:57.800 broader step back. The emerging markets e t f s 0:19:57.840 --> 0:20:00.280 like e M and vw O that people use, they 0:20:00.320 --> 0:20:04.000 only have about seven, eight, maybe ten percent tech. The 0:20:04.119 --> 0:20:07.320 SMP is like what tech, So you could argue that 0:20:07.359 --> 0:20:10.959 the big emerging markets in indices are underweight tech. This 0:20:11.000 --> 0:20:12.840 is a case of an e t F that just saw, 0:20:13.000 --> 0:20:14.959 and this is how a lot of ETF innovation happens. 0:20:15.240 --> 0:20:17.639 It sees a flaw in one of the big guys, 0:20:18.119 --> 0:20:20.760 and it basically comes out and tries to fill that gap. 0:20:21.280 --> 0:20:23.199 And this I think was the complaint of hey, my 0:20:23.240 --> 0:20:26.399 emerging markets e t F isn't really capturing this like 0:20:27.000 --> 0:20:30.119 juggernaut tech movement in the emerging markets, and so this 0:20:30.160 --> 0:20:32.639 one comes out and fills a void. Going back to 0:20:32.680 --> 0:20:34.760 the music analogy, Eric, at one point you said, this 0:20:34.840 --> 0:20:38.399 is a mash up it's combining two hugely popular trends 0:20:38.480 --> 0:20:42.679 into one fund. Okay, so we got one more current 0:20:42.840 --> 0:20:45.240 rising star that you've identified. What is that? The Crane 0:20:45.240 --> 0:20:47.800 Shares Bill Serrah ms C I China A share e 0:20:47.880 --> 0:20:50.320 t F k B A went from thirty five million 0:20:50.440 --> 0:20:52.399 in this time last year and it's taken two hundred 0:20:52.480 --> 0:20:55.760 and eighty million since then. And that's a lot for 0:20:55.800 --> 0:20:58.320 a single country. And it's just part of a single country. 0:20:58.359 --> 0:21:00.600 It's just the A shares of China. But what this 0:21:00.640 --> 0:21:03.000 one does that a lot of people like it's It's 0:21:03.040 --> 0:21:05.000