WEBVTT - The $30 Trillion ETF Market Is Coming 0:00:05.800 --> 0:00:06.480 Welcome to Trillions. 0:00:06.519 --> 0:00:08.240 I'm Joel Webber and I'm Eric Belchernas. 0:00:11.360 --> 0:00:13.680 Eric, there's a new survey that you were really excited 0:00:13.720 --> 0:00:16.240 to bring into this week's episode. What's it about. 0:00:16.760 --> 0:00:20.240 Yeah, it's a BBH survey of a variety of investors. 0:00:20.280 --> 0:00:24.320 I love ETF surveys, Joel, I really do, because I 0:00:24.400 --> 0:00:27.920 get all the flow data and volume data and priced 0:00:28.000 --> 0:00:30.120 data and holdings dad. You know, the terminal is full 0:00:30.200 --> 0:00:32.960 of all kinds of data. It's like a giant candy store. 0:00:33.479 --> 0:00:36.639 But we don't have survey data, not like this, and 0:00:36.840 --> 0:00:39.720 I love looking through it because it helps you sort 0:00:39.720 --> 0:00:42.879 of align the hard data with the anecdotal data. This 0:00:42.920 --> 0:00:45.040 is why I go to conferences and hang in the hallways. 0:00:45.479 --> 0:00:47.000 I want to hear from people. What are you thinking 0:00:47.040 --> 0:00:49.040 and doing to me? That's half of our job. So 0:00:49.440 --> 0:00:51.960 this survey, especially this one, I look through it and 0:00:52.000 --> 0:00:54.760 I got two notes out of it and some interesting 0:00:54.840 --> 0:00:58.200 data points here, some stuff I expect, some stuff I didn't, 0:00:58.680 --> 0:01:01.560 but I thought be cool to ask about some of 0:01:01.600 --> 0:01:06.560 the particulars in this really really thorough survey about how 0:01:06.600 --> 0:01:11.080 people feel about ETFs, what they're planning, different categories. There's 0:01:11.120 --> 0:01:12.280 a lot to chew on here. 0:01:12.760 --> 0:01:16.760 So to help us chew on that and these responses, 0:01:17.040 --> 0:01:19.680 we're going to be joined by Sean McNinch. He's the 0:01:19.680 --> 0:01:23.759 global head of ETFs at Brown Brothers Harriman. This survey 0:01:23.800 --> 0:01:28.920 is called Exchange Thoughts. It's the tenth annual global ETF 0:01:29.120 --> 0:01:37.680 Investor survey, this time on trillions. Survey says Sean, Welcome 0:01:37.680 --> 0:01:42.959 to jrillians, thanks for having me. Okay, so ten annual surveys, 0:01:43.319 --> 0:01:47.000 A little bit's changed in that time. What's the big 0:01:47.080 --> 0:01:51.520 high level takeaway from what's changed over that decade of 0:01:51.840 --> 0:01:52.320 the survey. 0:01:53.320 --> 0:01:55.960 I think it's just the evolution of the ETF market overall. 0:01:56.200 --> 0:01:58.880 You know, if you think about ETFs, you know they 0:01:58.880 --> 0:02:01.680 are really now or at the center of a lot 0:02:01.720 --> 0:02:05.760 of the investors allocation strategy. You know, more and more 0:02:05.880 --> 0:02:10.239 usage of ETFs, more asset classes, more structures. You know, 0:02:10.280 --> 0:02:11.799 if you look at some of the results of survey, 0:02:11.880 --> 0:02:14.799 you know, sixty percent of the investors we pulled are 0:02:14.840 --> 0:02:18.200 planning to increase their usage of ETFs. And it's no 0:02:18.280 --> 0:02:21.120 longer just a passive product, right, It's it's really moving 0:02:21.160 --> 0:02:25.040 into active, moving into new asset classes such as fixed income, 0:02:25.600 --> 0:02:28.120 and so there's there's just more and more usage of 0:02:28.240 --> 0:02:31.120 ETFs in the marketplace than, you know, than than there 0:02:31.200 --> 0:02:33.840 was ever before. You know, since we started this survey 0:02:33.880 --> 0:02:34.480 ten years. 0:02:34.320 --> 0:02:38.679 Ago and there's three hundred and twenty five global respondents 0:02:38.720 --> 0:02:42.000 to this. They're managing more than forty percent or managing 0:02:42.000 --> 0:02:45.160 more than a billion in assets. So this is also 0:02:45.280 --> 0:02:47.440 kind of an institutional crowd, right, and you've broken them 0:02:47.480 --> 0:02:51.920 down by the US, Europe, and then Greater China. When 0:02:51.960 --> 0:02:55.799 you when you kind of think about that that global distribution, 0:02:56.680 --> 0:02:59.480 what were the takeaways for the US audience that that 0:02:59.600 --> 0:03:02.120 you thought we're particularly interesting? 0:03:02.880 --> 0:03:05.760 Yeah, No, I think it's you know, the asset classes 0:03:05.760 --> 0:03:08.080 that they're using and the more and more demand. You know, 0:03:08.120 --> 0:03:10.760 if you look at some of those surveys results for 0:03:10.800 --> 0:03:14.520 the US investors in about forty six percent of those 0:03:14.560 --> 0:03:18.720 investors are planning to increase their usage of fixed income ets, right, 0:03:18.760 --> 0:03:22.440 And that's relatively a newer asset class than the ETF wrapper. 0:03:23.040 --> 0:03:24.600 There's there's less products out there. 0:03:24.720 --> 0:03:27.280 More and more of the new products that are coming 0:03:27.320 --> 0:03:30.440 out have a fixed income bent to them, and that's 0:03:30.480 --> 0:03:33.519 obviously of interest to investors as they are looking at 0:03:33.840 --> 0:03:37.040 rising interest rates and how do we kind of diversify 0:03:37.280 --> 0:03:41.240 the risk from equity to fixed income and other asset classes. 0:03:41.800 --> 0:03:44.720 Yeah, that fixed income bit came out in the surveys. 0:03:44.840 --> 0:03:49.080 The ESG responses pop to me, which I know Eric's 0:03:49.080 --> 0:03:51.000 gonna want to say something about what. What did you 0:03:51.000 --> 0:03:53.560 write your Bloomberg Intelligence notes about Eric? 0:03:53.760 --> 0:03:57.080 Yeah, the first note I wrote was the early in 0:03:57.120 --> 0:04:01.280 this survey guide. I guess you call it twenty five pages. 0:04:02.200 --> 0:04:04.640 Here's the question, what is the most important factor when 0:04:04.640 --> 0:04:07.920 selecting an ETF? This all the surveys have this. I 0:04:07.920 --> 0:04:10.840 love seeing where this ends. Number one expense ratio, number 0:04:10.840 --> 0:04:14.360 two etf issuer. Now last year issue was one expense 0:04:14.440 --> 0:04:16.960 ratio two. What does that tell you? Those two things 0:04:17.000 --> 0:04:19.880 are joined at the hip, and when we think about 0:04:19.920 --> 0:04:22.080 flows every year, you know it's now become the big 0:04:22.080 --> 0:04:26.920 two Vanguard Blackrock, Yet there's definitely a plenty of money 0:04:26.960 --> 0:04:28.960 for everybody else. It's a big tent that said, you 0:04:29.040 --> 0:04:32.000 have to just acknowledge how big they're. So my note 0:04:32.040 --> 0:04:36.640 was sort of equating Blackrock and Vanguard ETFs to ibm'stock 0:04:36.680 --> 0:04:39.240 in the eighties where an advisor would be like, you 0:04:39.279 --> 0:04:42.760 can't get fired for buying IBM, Like, who could really, 0:04:43.080 --> 0:04:44.800 you know, diss you for that or get upset if 0:04:44.800 --> 0:04:47.720 you're a client. It'd be hard to really get mad 0:04:47.760 --> 0:04:50.120 at an advisor or fire them if they put you 0:04:50.120 --> 0:04:53.000 in black Rock or Vanguard ETFs. It's a career risk 0:04:53.520 --> 0:04:56.560 motivated move as long as a low cost move. And 0:04:56.640 --> 0:04:58.760 so because some people say, well why do they they 0:04:58.760 --> 0:05:01.720 get all the assets and the flows when everybody has 0:05:01.760 --> 0:05:05.200 cheap ETFs, I'm like, well, the brand matters too, and 0:05:05.279 --> 0:05:10.479 so I guess Sean, you know that those response responses 0:05:10.600 --> 0:05:13.240 kind of I think tune in or connect with the 0:05:13.279 --> 0:05:15.600 flows or did you see something different there? 0:05:16.279 --> 0:05:17.960 No, I think that that's obviously right. 0:05:18.000 --> 0:05:21.000 And obviously the big three with with Vanguard, black Rock 0:05:21.440 --> 0:05:25.360 and SSGA, you know, having the line share the market share. 0:05:25.839 --> 0:05:28.679 You know, that's definitely the case. As people are looking 0:05:28.720 --> 0:05:32.520 to buy passive products and as you're looking at you know, 0:05:32.680 --> 0:05:36.040 where flows are going and more and more entrance coming 0:05:36.040 --> 0:05:38.520 in here. That may change as we look to the 0:05:38.560 --> 0:05:43.080 active ETF space, right and it's still relatively small fertile ground, 0:05:44.000 --> 0:05:45.839 and you know it's only about five percent of the 0:05:45.880 --> 0:05:48.920 total assets are made up of active ETFs. But I 0:05:49.600 --> 0:05:52.480 completely agree with you on the pass side. More and 0:05:52.520 --> 0:05:55.880 more investors are really looking at expense ratio in the 0:05:55.960 --> 0:05:59.160 brand when selecting passive vehicles. But that could change as 0:05:59.160 --> 0:06:03.239 we get into different types of you know, ETFs. 0:06:02.880 --> 0:06:07.479 And the Blackrock and Vanguard ETFs are also becoming some 0:06:07.560 --> 0:06:11.920 of the most liquid once these puppies are cheap broad 0:06:12.560 --> 0:06:14.920 liquid like is liquid is like a trading over a 0:06:14.960 --> 0:06:17.480 billion a day look out. I mean, these things are 0:06:17.480 --> 0:06:20.800 going to rule the land for twenty thirty years. One 0:06:20.800 --> 0:06:24.359 other interesting part to this is trading spreads and volume 0:06:24.880 --> 0:06:29.400 were low. Volume in particular was the third most important reason, 0:06:29.440 --> 0:06:32.000 and it dropped to like eight or nine. And is 0:06:32.000 --> 0:06:34.400 that a sign that investors are getting a little better 0:06:34.440 --> 0:06:39.000 about looking at the holdings and ETF implied liquidity or 0:06:39.279 --> 0:06:41.599 is there some other explanation for that? Now? 0:06:41.680 --> 0:06:43.600 I think that's that's kind of the evolution of the 0:06:43.600 --> 0:06:46.560 ETFs and the maturation of the ETF product, right. I 0:06:46.640 --> 0:06:50.000 think early on, you know, people were really concerned about volume, 0:06:50.080 --> 0:06:52.880 you know, making sure these products traded well, making sure 0:06:52.920 --> 0:06:55.920 there were tight spreads. I almost think especially with the 0:06:56.320 --> 0:06:59.920 most liquid ets in looking at different ETFs that trade, 0:07:00.240 --> 0:07:02.960 it's almost a given that there is tight spreads and 0:07:03.000 --> 0:07:06.240 there's you know, investors can come in and now of 0:07:06.240 --> 0:07:10.520 these products and you know, in a cost effective way. 0:07:11.080 --> 0:07:13.080 So I think that's that's the kind of the evolution 0:07:13.200 --> 0:07:15.800 of the e TF market, as how investors are looking 0:07:15.840 --> 0:07:20.560 at different selection criteria that it's almost a given that 0:07:20.560 --> 0:07:23.880 that there's liquidity in the market, there's volume to support that. 0:07:25.000 --> 0:07:27.200 So what do you make of the fact that what 0:07:27.440 --> 0:07:30.640 Eric is referring to as an answer to this question, 0:07:31.240 --> 0:07:33.240 the question was what is the most important factor when 0:07:33.280 --> 0:07:36.960 selecting an ETF? Expense ratio rinks number one in the US, 0:07:37.240 --> 0:07:42.080 but that is like a distant fifth in Europe, and 0:07:42.160 --> 0:07:45.640 it's a it's in sixth place in Greater China. Europe 0:07:45.680 --> 0:07:49.880 puts tax efficiency first, trading spread second. Greater China has 0:07:49.960 --> 0:07:53.840 index methodology first, trading volume second. I'm sort of surprised 0:07:53.920 --> 0:07:56.840 that regionally there seems to be a difference in what 0:07:56.880 --> 0:07:59.720 you're looking for in ETFs. But what about what about 0:07:59.720 --> 0:08:00.800 Europe for instance? 0:08:01.000 --> 0:08:03.800 Yeah, I think because you know, the US market is 0:08:03.840 --> 0:08:06.240 the most liquid when you're comparing the different regions and 0:08:06.320 --> 0:08:09.280 the ETF market, that investors have gotten by that in 0:08:09.320 --> 0:08:12.120 the US market and that they see that there is 0:08:12.160 --> 0:08:14.720 liquidity in that market. I think as you move over 0:08:14.760 --> 0:08:18.160 to Europe and into Asia, there's still questions about liquidity 0:08:18.200 --> 0:08:21.320 and making sure that there is enough volume on the 0:08:21.360 --> 0:08:24.440 local exchanges to support those ETFs. 0:08:24.800 --> 0:08:27.600 You know, it's like almost like there's still a couple 0:08:27.640 --> 0:08:29.240 of years back from where completely. 0:08:29.400 --> 0:08:31.240 But you also have the fragmentation of the market over 0:08:31.280 --> 0:08:34.040 in Europe too, you know, so if you think about 0:08:34.160 --> 0:08:38.760 there's fragmentation of across the different exchanges across the you know, 0:08:38.880 --> 0:08:42.520 twenty eight different exchanges in the European marketplace, so you know, 0:08:42.640 --> 0:08:46.160 whereas in the US you have centralized liquidity on a 0:08:46.160 --> 0:08:49.920 few exchanges, so you're fracturing that as you're going into Europe. 0:08:49.960 --> 0:08:53.079 So investors are more keen on looking at trading volumes, 0:08:53.080 --> 0:08:56.000 looking at spreads as they're making making investment decisions. 0:08:56.600 --> 0:09:00.560 By the way, what is greater China in the survey's. 0:08:59.840 --> 0:09:04.280 Twan, Hong Kong and mainland China. 0:09:04.320 --> 0:09:06.400 That fragmentation is a huge issue. Every time I go 0:09:06.440 --> 0:09:09.120 to Europe, they always talk about the consolidated tape. They 0:09:09.120 --> 0:09:10.599 want to put it all on one so that the 0:09:10.679 --> 0:09:13.880 volume looks more realistic. But it's very difficult when you 0:09:13.920 --> 0:09:16.480 have all these different countries. It's harder as a data 0:09:16.520 --> 0:09:19.120 person as a research channalyst, I feel for Rebecca and 0:09:19.160 --> 0:09:21.640 Henry who cover those areas for US US is so 0:09:21.960 --> 0:09:25.760 we're spoiled. It's just one country, one currency, and is 0:09:25.760 --> 0:09:26.120 really good. 0:09:26.160 --> 0:09:27.920 And Eric, I would also add that over in Europe 0:09:28.120 --> 0:09:30.720 it's a huge OTC market too, right, So yeah, a 0:09:30.800 --> 0:09:34.000 lot of the trading volume is done off exchange, right, 0:09:34.080 --> 0:09:36.680 so you don't have that liquidity of those prints on 0:09:36.760 --> 0:09:38.640 exchange as you would do here in the US market 0:09:38.640 --> 0:09:38.959 as well. 0:09:40.400 --> 0:09:42.120 Uh, for sure, that's one of the headwinds over there. 0:09:42.120 --> 0:09:44.880 I also I want to actually add another thesis or 0:09:44.920 --> 0:09:48.440 theory to your questions role, which is that I feel 0:09:48.440 --> 0:09:52.720 like if you look at where fees and the flows 0:09:53.040 --> 0:09:56.120 travel south the quickest, it's in countries where the government 0:09:56.120 --> 0:09:58.559 has pushed the people to like plan their own retirement, 0:09:59.120 --> 0:10:00.439 so they got to be like a a little more 0:10:00.440 --> 0:10:03.440 like heads up, whereas in other in many other countries, 0:10:03.720 --> 0:10:06.000 a lot of people just like the government's got me. 0:10:06.559 --> 0:10:09.199 I don't really need to care that much, but once 0:10:09.360 --> 0:10:12.839 this is your money. I think, uh, defined contribution plans 0:10:12.840 --> 0:10:15.880 in particular pushed Americans to become a little more savvy, 0:10:16.280 --> 0:10:18.959 and also the move to the fiduciary advisor. Once the 0:10:19.000 --> 0:10:21.680 advisor gets a percent of the assets instead of paid 0:10:21.679 --> 0:10:24.120 off by the mutual fund company, they're going to put 0:10:24.920 --> 0:10:26.839 the expens ory issue much higher because now it's coming 0:10:26.880 --> 0:10:29.760 out of their pot too. Would you agree with that, 0:10:29.760 --> 0:10:31.200 Sean most definitely. 0:10:31.280 --> 0:10:33.600 You know, the financial advisory market here in the US 0:10:33.720 --> 0:10:36.800 is so much more evolved than in the versus in 0:10:36.840 --> 0:10:40.640 the European market and Asian market as well, So that's 0:10:40.679 --> 0:10:43.720 definitely an area of potential growth in those markets. 0:10:43.920 --> 0:10:44.920 As the financial. 0:10:44.600 --> 0:10:49.160 Advisory committee or community starts to grow in those geographies, 0:10:49.200 --> 0:10:52.280 that that could be a good you know, Taal went 0:10:52.320 --> 0:10:53.240 for the ETF market. 0:10:53.960 --> 0:10:56.200 So the other note I wrote about this servidual was 0:10:56.240 --> 0:11:00.839 that BBH is predicting that global ETFs we'll hit thirty 0:11:00.880 --> 0:11:01.600 trillion dollars. 0:11:01.760 --> 0:11:02.800 I was gonna ask about this. 0:11:03.120 --> 0:11:05.559 Yeah, I mean right now they're at nine. Okay, that's 0:11:05.600 --> 0:11:08.400 a lot of trillions, and we should name the podcast 0:11:08.400 --> 0:11:09.400 after this says something like. 0:11:09.320 --> 0:11:11.520 That hindsight, the trillions thing looks really good. 0:11:11.600 --> 0:11:12.800 I know that was your idea. 0:11:13.360 --> 0:11:16.400 Okay, So thirty trillion is a lot of trillions. Is 0:11:16.600 --> 0:11:19.560 bluebrig intelligence north of that or south of that? 0:11:19.760 --> 0:11:22.920 So the note said that bbh's thirty trillion dollar call 0:11:23.000 --> 0:11:27.640 will in parentheses eventually come true. I just don't know 0:11:27.679 --> 0:11:31.600 if ten years might take longer. Here's why, Sean. The 0:11:31.640 --> 0:11:35.160 main reason is market appreciation. We just came from a 0:11:35.320 --> 0:11:37.920 decade where this stock market went up like twenty percent 0:11:37.960 --> 0:11:41.840 a year and it was just so so much above average. 0:11:41.600 --> 0:11:44.880 This reversion to the mean of historical returns could mean 0:11:45.200 --> 0:11:47.680 a lot of years where it's not up or down. 0:11:47.960 --> 0:11:50.240 And if you don't have that market appreciation, I don't 0:11:50.240 --> 0:11:52.960 think flows get you there. The other thing is what 0:11:53.000 --> 0:11:55.600 I said earlier, where I think some of these countries 0:11:55.640 --> 0:12:00.199 and their mindset and plumbing is so ingrained and it 0:12:00.280 --> 0:12:02.560 might even take twenty thirty years for some of that 0:12:02.600 --> 0:12:06.160 plumbing to loosen up so that the all the ETFs 0:12:06.200 --> 0:12:09.439 are on a level playing field with other types of structures. 0:12:10.200 --> 0:12:10.440 Yeah. 0:12:10.440 --> 0:12:12.600 So if you look at the thirty trillion number, they 0:12:12.600 --> 0:12:15.360 would have to grow at about a fourteen percent annual rate. 0:12:15.920 --> 0:12:17.720 And I think what we factored in in there is 0:12:17.720 --> 0:12:21.320 this conversion from mutual funds into ets and that could 0:12:21.320 --> 0:12:24.040 help springboard some of that growth rate. And if you 0:12:24.080 --> 0:12:26.719 just look at netflows, you know, like looking at last 0:12:26.760 --> 0:12:30.800 year's netflows ets were up about eight hundred and sixty billion. 0:12:31.160 --> 0:12:34.880 Mutua funds had net outflows about eight hundred and twenty 0:12:35.400 --> 0:12:39.280 billion of assets as well. So we're really looking at 0:12:39.320 --> 0:12:42.760 this more shift from mutual funds into ETFs, right, and 0:12:42.800 --> 0:12:46.120 whether that's through mutual fund to ETF conversions or more 0:12:46.160 --> 0:12:50.680 and more investors selling mutual funds to buy ets, which 0:12:50.679 --> 0:12:54.720 we've seen as a trend in our surveys results as well. 0:13:02.120 --> 0:13:04.440 So conversions have come up a couple times already. Let's 0:13:04.480 --> 0:13:07.600 just talk about what the survey indicated on that we've 0:13:07.600 --> 0:13:10.720 talked about conversions a lot. This is mutual fund conversions 0:13:10.760 --> 0:13:13.680 to ETFs. What did the survey reveal. 0:13:14.960 --> 0:13:17.800 We didn't have any particular questions on the mutual funded 0:13:17.880 --> 0:13:21.079 ETF conversions, but what we did see, you know, looking 0:13:21.120 --> 0:13:23.480 at just the number of conversions that have happened and 0:13:23.520 --> 0:13:25.600 just the number that are in the pipeline, they're going 0:13:25.679 --> 0:13:30.280 to be major mutu fund managers doing conversions into muture 0:13:30.280 --> 0:13:33.120 funds into ETFs. And if you also just look at 0:13:33.160 --> 0:13:36.800 the number of active ETFs come in to market last year, 0:13:36.960 --> 0:13:39.640 that represented you know, about a thirty percent increase in 0:13:39.679 --> 0:13:42.400 a number of active ETFs. So these traditional muta fund 0:13:42.440 --> 0:13:44.280 managers that said, hey, we're never going to launch an 0:13:44.280 --> 0:13:47.440 ETF are now launching ets because they know they need 0:13:47.720 --> 0:13:50.160 to have that product in their in their product lineup. 0:13:50.640 --> 0:13:53.560 So I think that's where we're seeing potential opportunities, not 0:13:53.600 --> 0:13:57.240 only obviously market appreciation, but also that just that pure 0:13:57.360 --> 0:14:01.520 number of new entrants coming in this space and basically 0:14:01.559 --> 0:14:03.439 taking away from the mutual land market. 0:14:04.160 --> 0:14:04.319 Yeah. 0:14:04.320 --> 0:14:07.160 And I will say I actually used that in my 0:14:07.720 --> 0:14:10.120 I was just on a Canada tour and one of 0:14:10.160 --> 0:14:12.400 the points I made was that BBH has thirty trillion. 0:14:12.480 --> 0:14:15.000 JP Morgan preicted the US market to hit fifteen trillion 0:14:15.440 --> 0:14:18.120 in the next five years, and Bank of America two 0:14:18.160 --> 0:14:21.240 years ago predicted fifty trillion global by twenty twenty nine. 0:14:22.360 --> 0:14:24.560 My point wasn't are they going to all come true? 0:14:25.000 --> 0:14:27.600 My point was a they're directionally correct. I think we 0:14:27.600 --> 0:14:32.640 can agree. But here's some real inside Wall Street firms 0:14:33.280 --> 0:14:36.480 now making these predictions and putting out product. Morgan Stanley 0:14:36.560 --> 0:14:39.920 jumped in, this is big boy money, right. So to 0:14:39.960 --> 0:14:43.320 Sean's point, if you get a lot of those clientele, 0:14:43.600 --> 0:14:46.640 a lot of those fas, plus the blob of money 0:14:46.640 --> 0:14:48.920 that's in mutual funds. Let's say half of it comes over, 0:14:49.520 --> 0:14:52.040 you could get close even without a lot of market appreciation. 0:14:52.560 --> 0:14:55.080 But again, last year was in twenty twenty one, the 0:14:55.160 --> 0:14:58.120 flows were nine hundred billion and that was a record. Well, 0:14:58.160 --> 0:15:01.240 in order to get to thirty trillion from you know, 0:15:01.600 --> 0:15:03.640 you would need more than that every year. So that's 0:15:03.640 --> 0:15:07.120 the only reason I'm most slightly cautious. But I'm certainly 0:15:07.160 --> 0:15:09.560 with you in spirit, and I think you'll eventually see 0:15:09.600 --> 0:15:10.640 thirty trillion, no doubt. 0:15:11.920 --> 0:15:15.320 So what about commodity ETFs. Because we've talked about fixed 0:15:15.360 --> 0:15:18.800 income ETFs a con on the program, like and they've 0:15:18.800 --> 0:15:21.880 become more and more prevalent, but we haven't spent as much, 0:15:22.080 --> 0:15:24.920 quite as much time talking about commodity ETFs. And I 0:15:24.960 --> 0:15:27.760 think just with the overall economic environment that we're in 0:15:27.840 --> 0:15:30.840 right now, there's increasing interest. So what do this survey 0:15:30.920 --> 0:15:32.640 reveal about commodity ETFs. 0:15:32.680 --> 0:15:34.800 Well, if you look at the commodity ETFs last year, 0:15:34.800 --> 0:15:38.120 I think seven on the top ten perform and ETFs 0:15:38.160 --> 0:15:40.960 were commodity based, right, And I think that's that's kind 0:15:40.960 --> 0:15:43.880 of a typical move to when there's volatility in the market, 0:15:43.960 --> 0:15:48.320 you know, uh, investors moving to different asset classes like commodities. 0:15:48.880 --> 0:15:52.160 You know, I think if you look at the investor results, 0:15:52.160 --> 0:15:55.640 you know, sixty nine percent plan to maintain or increase 0:15:55.680 --> 0:15:59.320 their allocations to commodity to atfs the next twelve months, 0:15:59.440 --> 0:16:01.920 with about you know, about half of those, so thirty 0:16:01.960 --> 0:16:04.840 three percent saying they're going to increase their allocation to 0:16:04.880 --> 0:16:07.720 commodity ETFs. So I think that, you know, that kind 0:16:07.720 --> 0:16:10.880 of bodes well for continuing uh, you know, assets coming 0:16:10.920 --> 0:16:14.480 into commodity space, and especially with you know, volatility in 0:16:14.520 --> 0:16:18.520 the marketplace, I think those those commodity ets, we'll gather 0:16:18.640 --> 0:16:19.200 some assets. 0:16:21.440 --> 0:16:25.120 Okay, let's turn to thematic ETFs. Themes were really big 0:16:25.480 --> 0:16:28.960 back in the low rate era, you know, like themes 0:16:29.000 --> 0:16:33.360 like ARC and innovation, clean tech and all that. Now 0:16:33.640 --> 0:16:36.400 everything's flipped. So you do have natural resources doing well 0:16:36.400 --> 0:16:38.840 because they are full of values thoughts, but it does 0:16:38.840 --> 0:16:41.280 seem like the thematic play tends to be more with growth. 0:16:41.360 --> 0:16:43.400 So I was surprised to this result, which is that 0:16:43.880 --> 0:16:47.160 you have respondents saying that in three years, what percentage 0:16:47.160 --> 0:16:49.600 of your portfolio will be in thematic ETFs in the 0:16:49.720 --> 0:16:53.080 US about forty three percent, say over eleven percent. That 0:16:53.160 --> 0:16:56.160 seems a little high for me. And then the other 0:16:56.200 --> 0:16:59.440 one is in China it's over eighty percent. Like they 0:16:59.480 --> 0:17:02.440 must they love their themes over there, I guess. But 0:17:02.480 --> 0:17:04.800 those both those numbers seem a little high relative to 0:17:04.840 --> 0:17:08.200 flows and anecdotal not saying that's crazy high, But what 0:17:08.200 --> 0:17:09.080 what's your thought there? 0:17:10.640 --> 0:17:13.320 We Well, first of all, all the investors that participate 0:17:13.400 --> 0:17:16.000 in survey are users of ETFs, right, so if they 0:17:16.000 --> 0:17:18.520 are not users of ets, we've we're not including them. 0:17:18.560 --> 0:17:21.679 So right out of the gates, there's there's that population 0:17:21.880 --> 0:17:25.320 that aren't investing in ets today, you know. So this increase, 0:17:25.600 --> 0:17:27.760 you know, typically inflates the numbers here a little bit. 0:17:28.200 --> 0:17:30.919 But I do think thematic ets, especially last year, had 0:17:31.080 --> 0:17:34.320 a little bit of a dip in market appreciation. But 0:17:34.359 --> 0:17:38.280 I think as more and more UH investors are coming into, 0:17:38.640 --> 0:17:40.720 you know, to this year, they'll be looking for different 0:17:40.720 --> 0:17:44.119 ways to invest their their assets into into new different 0:17:44.160 --> 0:17:46.400 asset classes, and I think thematic. 0:17:46.119 --> 0:17:49.120 Et s is one area where you. 0:17:49.080 --> 0:17:52.960 Know, investors looking to diversify away from market capital type 0:17:53.000 --> 0:17:56.240 of products they'll be moving into into more thematic ETFs. 0:17:58.520 --> 0:18:01.760 Also thought it was interesting what some of the strategies 0:18:01.920 --> 0:18:05.200 in the thematic ETFs that resonate. Obviously, Internet and technology 0:18:05.680 --> 0:18:10.040 are a big one, but artificial intelligence came up as 0:18:10.200 --> 0:18:14.199 one that would be particularly interesting in the US and 0:18:14.359 --> 0:18:17.120 in Greater China. What did you make of that? 0:18:18.240 --> 0:18:20.679 Well, I think that's that's obviously a huge growth area 0:18:21.240 --> 0:18:24.360 across you know, just not even financial services, but across 0:18:24.359 --> 0:18:28.760 how different firms are using AI to improve their you know, 0:18:28.880 --> 0:18:32.040 back office operations. So I think, you know, investors are 0:18:32.040 --> 0:18:35.160 trying to figure out ways to capitalize on that growth 0:18:35.600 --> 0:18:40.120 into the AI community and that that that obviously will 0:18:40.320 --> 0:18:42.240 kind of bode well for those types of products in 0:18:42.240 --> 0:18:42.719 the future. 0:18:43.680 --> 0:18:46.760 And how why do you think the Americans are so 0:18:46.880 --> 0:18:50.159 much more bullish on cannabis than everybody else? That was 0:18:50.200 --> 0:18:51.439 another one that jumped out at me. 0:18:52.160 --> 0:18:54.320 I think it's just you know, the evolution of the 0:18:54.320 --> 0:18:57.159 ETF market, right, there's a lot more cannabis type of 0:18:57.240 --> 0:19:01.240 ETFs here in the US market. And once again, that's 0:19:01.280 --> 0:19:05.520 another you know, asset class that investors are looking you know, 0:19:05.640 --> 0:19:08.000 some some investors are looking to get some exposure to 0:19:08.640 --> 0:19:11.920 whereas over in in you know, Europe, you know, there's 0:19:12.119 --> 0:19:14.440 a few products there, but I don't believe there's any 0:19:14.840 --> 0:19:16.399 over in in Asia. 0:19:16.520 --> 0:19:20.760 Yet, all right, let's move to ESG, my favorite topic. 0:19:22.000 --> 0:19:23.840 What what surprised you here? 0:19:26.040 --> 0:19:27.160 It does? 0:19:27.280 --> 0:19:31.600 It doesn't surprise me when I see surveys way over 0:19:31.920 --> 0:19:34.479 optim being way over optimistic on ESG. And I'll tell 0:19:34.480 --> 0:19:37.520 you why, Sean. It's not your fault. Nobody filling out 0:19:37.520 --> 0:19:41.360 a survey wants to be judged. That's typically why political 0:19:41.400 --> 0:19:44.000 polls can be off. You don't really want to share 0:19:44.040 --> 0:19:46.720 that you're voting for this one person. So in this case, 0:19:46.960 --> 0:19:49.119 you have forty five percent of US investors say they 0:19:49.119 --> 0:19:53.639 want to increase their exposure to ESG. That's a lot 0:19:53.720 --> 0:19:57.240 of money. I know Europe is good, but Europe's almost fake. 0:19:57.680 --> 0:20:00.439 They're just relabeled at ESG and the government it pushes 0:20:00.440 --> 0:20:03.680 everybody there, and it's a it's not natural. US is 0:20:03.720 --> 0:20:07.960 a natural market, and last year US esgtfs accounted for 0:20:08.040 --> 0:20:12.840 one percent of flows. This year there's outflows. Why they're underperforming. 0:20:13.119 --> 0:20:15.760 I think the underperformance because they tend to be overweight 0:20:15.880 --> 0:20:19.280 tech and growth, which is not is you know now 0:20:19.400 --> 0:20:21.560 value and energy had such a good run. I think 0:20:21.640 --> 0:20:25.080 that underperformance, just like we saw of currency, HGTFS is 0:20:25.080 --> 0:20:26.880 going to have a lot of once bitten twice shy 0:20:26.960 --> 0:20:29.119 going on. In other words, even if ESG has another 0:20:29.240 --> 0:20:32.040 run where tech and growth outperform and they look good, 0:20:32.680 --> 0:20:34.720 I think the tourists are shaken out for good. I 0:20:34.720 --> 0:20:36.800 think you might have a small niche of two three 0:20:36.800 --> 0:20:40.840 percent market share of true believers. I've stood by this 0:20:40.880 --> 0:20:43.480 call for six seven years, even before it was cool. 0:20:43.840 --> 0:20:46.359 Now some more people have been somewhat critical of ESG, 0:20:46.920 --> 0:20:49.679 but that's my theory. So I'm not surprised these are 0:20:49.720 --> 0:20:52.280 the results. And I'm not saying this is wrong. I 0:20:52.440 --> 0:20:55.840 just think people are going to generally say yeah, because 0:20:55.840 --> 0:20:59.000 they don't want their name attached to somebody who doesn't 0:20:59.040 --> 0:21:00.920 like ESG, because it's to be like, what you don't 0:21:01.000 --> 0:21:03.280 like this stuff? Are you a bad person? 0:21:05.760 --> 0:21:05.960 Yeah? 0:21:06.119 --> 0:21:07.080