Speaker 1: Welcome to Trilliance. I'm Joel Webber and I'm Eric bel
Speaker 1: Tunis Eric. Sometimes it feels like the E t F
Speaker 1: space doesn't have a whole lot of white space for
Speaker 1: new products. Basically everything's taken up. I mean, we're living
Speaker 1: in a world where there's a pet carry TF, video game,
Speaker 1: et F, you name it, quantum computing. There's now ets
Speaker 1: for things that don't even know what those things are.
Speaker 1: I gotta go research them. So yeah, there's really hardly
Speaker 1: any more ideas here on planet Earth. So maybe instead
Speaker 1: of looking for white space, people need to look for
Speaker 1: real space, black space and leave Earth. That's what we're
Speaker 1: gonna spend. What are we hinting at here? A space
Speaker 1: the Final Frontier, literally the Final Frontier. There's a race
Speaker 1: going on with companies. You've got the Space Force, you know,
Speaker 1: coming into play, and now there's ETFs that are sort
Speaker 1: of trying to get ahead of that, and you know,
Speaker 1: see if they can appeal to investor's imagination and hopefully
Speaker 1: get some performance while they're at it. And this was
Speaker 1: another episode where we decided to outsource it to the
Speaker 1: ever intrepid Rachel Evans at Bloomberg News, who actually wouldn't
Speaker 1: talk to people who are involved directly in this space. Yeah,
Speaker 1: this from lent itself to field work because there's it's
Speaker 1: a whole industry and a lot of people don't know
Speaker 1: a lot about it and how legitimative is it. And
Speaker 1: she found some characters, some really good characters. Yeah, this
Speaker 1: week gund trillions the E t F space race and
Speaker 1: that's when it happened. That's when we first heard that
Speaker 1: they had come by. That's when we should have prepared
Speaker 1: ourselves for any eventuality, But we didn't imagine yourself as
Speaker 1: one of the crew of this faster than light spaceship
Speaker 1: of the future. You'll boldly go where no man has
Speaker 1: gone before, space, the Final Frontier. Just the mention of it,
Speaker 1: conscious images of Ewoks, zig Stardust, every sci fi book
Speaker 1: you ever read as a kid. It what if you're
Speaker 1: grown up self could invest in the cosmos just as
Speaker 1: easily as the US stock market. That's the mission for
Speaker 1: a clutch of new and planned E t F s.
Speaker 1: They want to take investing out of this world. To
Speaker 1: find out more about this new opportunity, I headed to
Speaker 1: the Hayden Planetarium in New York's Natural History Museum to
Speaker 1: meet Christopher Kramer, a PhD student at Brown University and
Speaker 1: an expert in Martian rocks. The lady on the desk said,
Speaker 1: I could go straight in with a thank you very much,
Speaker 1: thank Hello are your Christopher? Rachel everts between backing news,
Speaker 1: how how are you doing at this is cool? Christopher
Speaker 1: was in town to host a three D tour of
Speaker 1: the Red Planet, but first we sat down deep in
Speaker 1: the bowels of the museum to chat about the types
Speaker 1: of companies doing business in space. There's been pretty sense
Speaker 1: of commercialization in the realm of lower orbiting satellites are
Speaker 1: just they're various commercial satellites, artificial satellites that over the
Speaker 1: Earth that are the foundation of various communications technologies that
Speaker 1: we use today. And there is a big push through
Speaker 1: the miniaturization of satellites to make it even easier for
Speaker 1: various public and private interests to deploy their instrumentation of choice,
Speaker 1: their hardware of choice into Earth orbit. And so they're
Speaker 1: huge profits to be made. And I think that they're
Speaker 1: huge profits being made in that in that realm right now.
Speaker 1: Even as many of us in the US now stream
Speaker 1: a favorite shows, these satellites beam TV into millions of
Speaker 1: homes around the world. They're also responsible for positioning technology
Speaker 1: like the GPS in your car and ensuring that everyone
Speaker 1: agrees what time it is at any given moment. Space,
Speaker 1: Christopher tells me, could also fuel new industries from tourism
Speaker 1: to mining asteroids for precious metals. It all sounds pretty
Speaker 1: far out. So I went to meet Andrew Channon, whose
Speaker 1: firm Procure a M is one of those planning to
Speaker 1: start a space ETF. I asked him to tell me
Speaker 1: how he got interested in space. So, starting off in
Speaker 1: the et F industry in two thousand seven working for
Speaker 1: an et F specials firm, we're seeing a lot of
Speaker 1: innovation in the ets space. We were kind of past
Speaker 1: that first phase where the low hanging fruit products were
Speaker 1: already taken. So space was always one of those things
Speaker 1: where looking back, yes there are satellite companies and aerospace
Speaker 1: companies and defence companies that were kind of tied into
Speaker 1: this broader theme. Really, we started seeing so much more
Speaker 1: public interest in space over the last several years. Originally,
Speaker 1: in our early days, it was really a government effort,
Speaker 1: and governments wanted to plant their flag figuratively and literally
Speaker 1: on showing how they were the best and that they
Speaker 1: can say we're gonna put a man on the moon
Speaker 1: and they can do it. And I think that was
Speaker 1: one way to to bring the country together but also
Speaker 1: just show what we're capable of. At a certain point,
Speaker 1: governments realized that it's good for us to do this,
Speaker 1: that we can you know, rally our our our citizens
Speaker 1: around it. But does the government really need to be
Speaker 1: the one coming up with all the solutions? And through
Speaker 1: that realization and paving the way forward with regulations, it's
Speaker 1: made companies more comfortable in trying to expand their business
Speaker 1: futures into space as well. So really and very strongly
Speaker 1: in the last decade, you're seeing a huge ship where
Speaker 1: there's a significant amount of investment capital going into the
Speaker 1: private side, not the government side, where wealthy individuals the Basos,
Speaker 1: Branson's and Mosques of the world putting their own money
Speaker 1: where their mouth is and trying to create their own solutions.
Speaker 1: But some of the things that they're trying to do
Speaker 1: actually help out the governments. Jeff Bezos, Richard Branson, and
Speaker 1: Elon Musk have all very publicly pursued their own space programs,
Speaker 1: but the broader space industry also has bags of potential.
Speaker 1: Morgan Stanley estimates that space could generate one point one
Speaker 1: trillion of revenue by up from about billion today. Recently,
Speaker 1: NASA invited nine companies to bid for contracts to land
Speaker 1: on the Moon, just after successfully landing a probe on Mars.
Speaker 1: But the space industry could also get a boost from
Speaker 1: another dimension. You look at the universe and how how
Speaker 1: abundant it is, and it makes people think that, you know,
Speaker 1: there's a high probability that we aren't alone. And if
Speaker 1: we aren't alone, all of those could spring some very
Speaker 1: new growth potential in the space industry itself. So, you know,
Speaker 1: are a little green mental mals waking out there or
Speaker 1: some other type of intelligent life. I don't know where
Speaker 1: intelligent life is or what they may look like, but
Speaker 1: I certainly would not be surprised at at some point,
Speaker 1: whether we're we're told or we actually experienced it for ourselves,
Speaker 1: that there that we're not alone. And yeah, I think
Speaker 1: all that makes makes everything, you know, that much more
Speaker 1: exciting when looking at space as as an actual industry.
Speaker 1: What happens when we do meet extraterrestrial life, Well, we
Speaker 1: could become great friends and buddies with them. And we
Speaker 1: could work together and we can learn their technologies and
Speaker 1: make our systems even better and completely transform our of life,
Speaker 1: whether it's on Earth or via using space systems and networks.
Speaker 1: Or what happens when extraterrestrial life absolutely hates us and
Speaker 1: doesn't want to get along with us and they want
Speaker 1: our planet or they want to erase us. Well, in
Speaker 1: that case, we're gonna need a lot of defense spending.
Speaker 1: Those are two completely different paths, but ones that would
Speaker 1: show very different futures for how investments this might might proceed.
Speaker 1: So how does that translate into a fund, Well, it
Speaker 1: depends who's designing it. State Street is the only money
Speaker 1: manager currently out with the spacecf it's Final Frontiers Fund,
Speaker 1: which also buys companies involved in deep sea exploration, allocates
Speaker 1: about fifty of its assets to aerospace and defense companies
Speaker 1: already found in an existing fund. Andrew Channon can't discuss
Speaker 1: the inner workings of his fund, as it is still
Speaker 1: seeking approval from the u S regulator, but to look
Speaker 1: at the index his fund plans to track suggests it
Speaker 1: will likely allocate almost two thirds of its assets to
Speaker 1: communications and consumer focused firms like Garmen. A third space
Speaker 1: ETF with its own methodology, is also in the works
Speaker 1: from DWS Group. I wanted to learn more about these
Speaker 1: differing approaches and whether investors could feel misled if they
Speaker 1: discovered their Space fund was full of everyday names, so
Speaker 1: I spoke to the man behind the index that Andrew's
Speaker 1: fund intends to use, Mica Walter Range. Mica previously worked
Speaker 1: for the Space Foundation, a nonprofit that supports space activities,
Speaker 1: and partnering with s Network Global Indexes to create the benchmark.
Speaker 1: I think it's largely a matter of the story of
Speaker 1: explaining the people. Many people don't even understand that GPS
Speaker 1: is an important component of their cell phones and the
Speaker 1: other systems that they use on a daily basis. Even
Speaker 1: in the financial industry, probably most people don't understand that
Speaker 1: the timing of the global financial network is governed from space.
Speaker 1: So understanding just how intimately involved space is in our
Speaker 1: daily lives is something that I think actually does get
Speaker 1: people excited when they realize that we have all of
Speaker 1: these wonderful things because of space. A number of the
Speaker 1: companies in the index are actively engaged in exploration. They're
Speaker 1: building the technology, they're putting together the systems that will
Speaker 1: be used to send robots to other planets, to send
Speaker 1: people deep into space. If you're investing now, that's what
Speaker 1: you can look forward to seeing in the future. The
Speaker 1: other part is a lot of people are excited about
Speaker 1: some of these new space startups. But UM these companies
Speaker 1: that are trying to do different things from UM what
Speaker 1: has been done in the past, or doing them in
Speaker 1: different ways. How many of these, of course are not
Speaker 1: publicly traded, not yet. However, they off them to have
Speaker 1: partnerships with the current companies that are publicly traded, and
Speaker 1: so when you invest in those companies, you're also in
Speaker 1: a sense investing in those partnerships. And for those of
Speaker 1: us who are not Silicon Valley venture capital firms, it
Speaker 1: may be the only way. That's all sounds compelling, But
Speaker 1: I'm no expert. Do these funds pass the test? Are
Speaker 1: they spacey enough? I asked Christopher Kramer, the Mars academic,
Speaker 1: to take a look at the companies that Andrew's fund
Speaker 1: will likely buy. A right, so, I have a couple
Speaker 1: of UM lists of companies that are proposed to be
Speaker 1: in UM, A couple of ets that are going to
Speaker 1: be sharing launched. Yeah, these are all These are very familiar.
Speaker 1: Um and a lot of these, I mean, just looking
Speaker 1: at these, a lot of these are earth opening satellite companies.
Speaker 1: Do they seem like space companies? Do you? I mean,
Speaker 1: obviously A T and T is kind of a telecommunications
Speaker 1: company really, but I mean, if you're if you're criterion
Speaker 1: it's just that that they have deployed some of their
Speaker 1: corporate hardware assets beyond the edge of Earth's atmosphere, then
Speaker 1: I would say, yeah, that's that's a pretty low bar
Speaker 1: for entry. But I think it's the only really realistic
Speaker 1: criteria that you can use in the year. So I
Speaker 1: would say, um, yeah, absolutely, if you did decide to
Speaker 1: kind of add to a portfolio, um and by you know,
Speaker 1: an ATF, would you consider buying a space ETF. Would
Speaker 1: that be something that would appeal Yeah? Probably, I mean
Speaker 1: I I wouldn't. I would be cautious only if only
Speaker 1: because I mean I feel like I'd be like putting
Speaker 1: my all my eggs in one basket sort of thing, like,
Speaker 1: I mean, I mean, I'm more invested in space in
Speaker 1: one way, and I don't necessarily want to Maybe I
Speaker 1: want to have like a backup plan in case, in case,
Speaker 1: like the bottom falls out of space exploration. But that's
Speaker 1: not to express any sort of doubt in the in
Speaker 1: the value of these sorts of investments. So if I
Speaker 1: were doing something different in my goal were to make money,
Speaker 1: then I see no reason why not. You just don't
Speaker 1: want to lose your jo of and lose your money
Speaker 1: at the same time. Yeah, I think that's okay. So
Speaker 1: that was amazing. First of all, Little Green Men. Yes, Look,
Speaker 1: this is what stuck out to me is Andrew chaining
Speaker 1: sort of and I just watched this whole thing on
Speaker 1: Netflix about like the edge of the universe and whether
Speaker 1: there's other life, And I love that he sort of said, yeah,
Speaker 1: you think aliens are nice, this will make money. You
Speaker 1: think aliens are like fear Phone will take over Earth?
Speaker 1: This etf will also make money. I thought that was awesome.
Speaker 1: And he's really upfront about the fact that, you know,
Speaker 1: he's been interested in space for a very long time. Yeah,
Speaker 1: he's seen the movies, he's read the books. You know,
Speaker 1: this is an area of interest. He actually has a
Speaker 1: bet going on with his in law was about where
Speaker 1: and when Little Green Men actually arrived. On this point,
Speaker 1: this is the thing he could actually tell me the
Speaker 1: details of the bet. I'll have to go back and
Speaker 1: look at the details, but there is a bat outstanding
Speaker 1: between him and his in law is about when we
Speaker 1: actually get aliens on Earth and region. What was your
Speaker 1: day go away from from really doing this a little
Speaker 1: bit of a deep dive into uh space ets. So
Speaker 1: the big takeaway from me was this kind of gap,
Speaker 1: both in terms of E t f s and in
Speaker 1: terms of space generally, between what's kind of possible now
Speaker 1: and the potential. So you have at the moment, satellites
Speaker 1: are kind of the the sort of the big space
Speaker 1: industry that's out there. Yet there's this potential for asteroid mining,
Speaker 1: getting it kind of precious metals in lumps of rock
Speaker 1: in space. You could be potentially seeking water from from
Speaker 1: asteroids or even from the moon. H there's the potential
Speaker 1: for space tourism. You know, all these incredible, almost crazy
Speaker 1: sounding ideas are potentially possible in the future, but actually
Speaker 1: accessing those ideas now is very difficult because so many
Speaker 1: of those companies aren't public. Also exactly to this private
Speaker 1: public thing, where's something like SpaceX, which is you know,
Speaker 1: I think the third biggest adventure capital backed company in
Speaker 1: the US right now, and and it is has been
Speaker 1: highly successful for Evenlan masking company, but it is not
Speaker 1: you know, a public company yet, so few people can
Speaker 1: actually see returns on that investment. Yeah, And I think
Speaker 1: that's really an issue with thematic funds generally, is that
Speaker 1: how early can you get into these kind of themes.
Speaker 1: Is space developed enough as a concept to be able
Speaker 1: to invest in it now? The funds that are out
Speaker 1: there now sort of suggest that yes you can, because
Speaker 1: you can buy satellite companies, you can buy some of
Speaker 1: the sort of early stage rocket development companies that are public.
Speaker 1: But it is quite a thin field. If you look
Speaker 1: at kind of the number of companies that are in
Speaker 1: these funds, you're looking at around thirty or so. Whereas
Speaker 1: when you compare that to you know, an SP five
Speaker 1: hundred fund for example, that clues in the name you
Speaker 1: have a significantly more diversified set of companies. How does
Speaker 1: that squere with you? Yes, So when I think of
Speaker 1: theme ETFs exactly that I look at how much are
Speaker 1: of these companies are just in run of the mill
Speaker 1: sector or SMP ETFs And here's um the spider space ETF.
Speaker 1: So breaking it down sent industrials, so it's heavy industrials
Speaker 1: that is aerospace and defense companies, So it looks a
Speaker 1: lot like X L I, but more like I T A,
Speaker 1: which is the I shares aerospace and defense. But it
Speaker 1: does have only three percent overlap with the SMP five hundreds,
Speaker 1: So if you do own just sort of like the SMP,
Speaker 1: you're probably not getting a lot of space or military
Speaker 1: spending for that matter. And it's got about a fift
Speaker 1: overlap with I T A, which I thought it would
Speaker 1: have more overlap, So I don't know. It's kind of
Speaker 1: past my overlap sniff test, I guess, And it's about
Speaker 1: the same volatility as a sector E T F. But
Speaker 1: if you're looking at correlations, it's going to correlated I
Speaker 1: T A, but only correlated to the SMP five hundred,
Speaker 1: So it adds a little diversification. So uh, it's better
Speaker 1: than some that I've seen, but there's others that I
Speaker 1: think are even more uh. In in this sort of
Speaker 1: smaller niche area of a fledging industry, this one does
Speaker 1: have some big socks like bowing and whatnot. The really
Speaker 1: interesting thing that from a differentiation perspectives, if you look
Speaker 1: at the cost, now that is something where you really
Speaker 1: do see a gap between something like the SMP five hundreds,
Speaker 1: which you can get for four basis points total stock
Speaker 1: market for three basis points. These funds, the cheapast of
Speaker 1: which is going to charge well, does charge forty five
Speaker 1: basis points. There's a fund in the works from Deutsche
Speaker 1: that would be coming out dw S as I think
Speaker 1: they're now rebranded, that will look to charge fifty basis points.
Speaker 1: And Andrew's fund will look at seventy five basis points.
Speaker 1: So when you think about that versus say three or
Speaker 1: four basis points for your broad SMP five funds, you
Speaker 1: can certainly see that there's an advantage to coming out
Speaker 1: with these thematic products from an issue at perspective for investors. Yeah,
Speaker 1: you gotta pay a bit more. Yeah, absolutely that This
Speaker 1: is sort of like the new active. These are ways
Speaker 1: to sort of roll the dice and try to do
Speaker 1: a little better. And also you can understand them, right,
Speaker 1: they capture imagination. Speaking of that, Andrew's is the most expensive,
Speaker 1: I guess on the list, but his ticker is so
Speaker 1: freaking killer UFO. I mean, he's the guy who came
Speaker 1: up with hack, which is you know, top two best
Speaker 1: tickers ever UFO to me, what's the spider one again?
Speaker 1: It's x k ff. Oh god, that is so bad UFO.
Speaker 1: To me, if if they all start out performing and
Speaker 1: have that sort of nice performance moment, I bet UFO
Speaker 1: does a little better simply because of that capturing of
Speaker 1: the imagination. Although the spider one is forty five, it'll
Speaker 1: be cheap versus sort of you know, flashing. And this
Speaker 1: is another example where you know, we have one product
Speaker 1: that's already out yet, Ufo not out yet, So what's
Speaker 1: that going to be like when it finally does maybe
Speaker 1: come to market, right, Yeah, And the same with the
Speaker 1: Deutsch product, which also has a pretty decent ticker. They're
Speaker 1: looking at Galaxy g l x Y, which you know,
Speaker 1: because it's not bad, it's kind of that's pretty good. Yeah.
Speaker 1: I think the static one is interesting because they're trying
Speaker 1: to draw that connection with their existing sector based products,
Speaker 1: and hence you've got the X at the beginning. They're
Speaker 1: trying to align it with those other kind of sector
Speaker 1: spider ets that are out there and suggesting that this
Speaker 1: is a new type of sector. How much were people
Speaker 1: are willing to talk about sort of just getting this
Speaker 1: real estate now so that if this economy, which is,
Speaker 1: you know, there's there's certain projections that put it up
Speaker 1: close to like a trillion dollar ors over the next
Speaker 1: couple of years that this will be a place that
Speaker 1: we see this extraordinary growth. So just by having that
Speaker 1: ticker and getting their first, you're basically building the house
Speaker 1: that you'll put furniture and once the company's come to
Speaker 1: bear later well a bit like the real space race.
Speaker 1: It's all about planting a flag, right, you want to
Speaker 1: claim something for that much more eloquently than I agree,
Speaker 1: But I think that's I think it's very true, and
Speaker 1: we've seen it time and again in the E t
Speaker 1: F market. If you are first out there, if you
Speaker 1: have a catchy ticker and can kind of get some
Speaker 1: real estate, then the assets do kind of flow in
Speaker 1: if you see some performance. I mean, that's going to
Speaker 1: be the big sort of test of these products as
Speaker 1: they kind of evolve. Are they able to adapt to
Speaker 1: the direction that the space industry goes? Are they able
Speaker 1: to in their indexes incorporate these new companies in an
Speaker 1: efficient manner and then actually capitalize on that to show performance.
Speaker 1: You can almost just see there's like one dynamite I
Speaker 1: p O that happens at some time in the future,
Speaker 1: whether it's Basin next or somebody else, and it just
Speaker 1: totally sweeps all these up with it. Again, when you
Speaker 1: post that there's a space etf filing, you tend to
Speaker 1: get some snickers on Twitter. There's definitely like it sounds gimmicky, like, oh,
Speaker 1: what are they thinking of next? But let's face it.
Speaker 1: M merri Lynch had a report which you mentioned. I
Speaker 1: believe that the industry Morgans only sorry that could hit
Speaker 1: UM three trillion. It's up from three fifty billions a day.
Speaker 1: I think Berlinch also had a report, And there's are
Speaker 1: Google that, there's articles on these and they're all written
Speaker 1: very legitimately. But for some reason, you take that idea
Speaker 1: put it in a TF and people sometimes think it's
Speaker 1: like a scam or a gimmick, But the people you
Speaker 1: talk to were dead serious because they work in that industry. Yeah.
Speaker 1: I was actually pleasantly surprised by that. I mean, as
Speaker 1: a journalist I come to all these things pretty skeptically
Speaker 1: and trying to pick holes in these things. I actually
Speaker 1: was quite impressed with, like how much potential there is
Speaker 1: for space because it does sound like this kind of
Speaker 1: whack a doodle idea when you kind of like mention
Speaker 1: it's people. I think the issue is still going to
Speaker 1: be can you put that into an e t F?
Speaker 1: And that I think is still kind of an open
Speaker 1: question as to whether these funds really do represent space.
Speaker 1: But they do seem to at least attempt to represent
Speaker 1: it as it currently is, and I think that's going
Speaker 1: to be the kind of question for these funds going
Speaker 1: forward if we're really at the beginning of a new
Speaker 1: space age where there's little micro rockets that can proventile
Speaker 1: stuff like who knows where this goes? So did people
Speaker 1: talked to kind of know what an e t F
Speaker 1: was when you said you're like E t F reporter,
Speaker 1: they had they know that? Or do you have to
Speaker 1: go to like it's like a mutual from the trades? Yeah? No,
Speaker 1: On the on the whole, people were fairly savvy about
Speaker 1: E t F. I thought it was quite interesting chatting
Speaker 1: with the guy Christopher Kramer who is at the Martian
Speaker 1: Rock Expert. I mean, he's, you know, a young guy.
Speaker 1: You know, he's in in his mid twenties studying you know,
Speaker 1: these kind of very spacey things, but you know he's
Speaker 1: still kind of has friends that are interested in e
Speaker 1: TF and and understands what they were. He didn't currently
Speaker 1: own any himself. He had a few mutual funds Index
Speaker 1: mutual funds UM, but he know got the idea of
Speaker 1: an e t F very quickly and was able to
Speaker 1: kind of think about how this might work in that
Speaker 1: sort of instrument. Rachel Evans, thanks for another field trip
Speaker 1: on Trillions. Thanks for having me, Thanks for listening to
Speaker 1: Trillions until next time. You can find us on the
Speaker 1: Bloomberg terminals, Bloomberg dot com, Apple Podcasts, Spotify, and wherever
Speaker 1: else you'd like to listen. We'd love to hear from you.
Speaker 1: We're on Twitter, I'm at Joel Webber Show, He's at
Speaker 1: Eric Caltunist, and Ray Chill is at Rachel Evans. Underscore
Speaker 1: and Why Trillions is produced by Magnus Henrickson. Francesca Levy
Speaker 1: is the head of Bloomberg podcast by