Speaker 1: Welcome to Trillions. I'm Joel Weeber and I'm Eric bel Tunis.
Speaker 1: Eric is just back from inside E t F S
Speaker 1: and Florida. What what is that again? Uh? You know,
Speaker 1: it's the biggest et F conference I think around. People
Speaker 1: go from the industry. It's in Hollywood, Florida, so it's
Speaker 1: always like nice weather in February. Uh. And you've got
Speaker 1: all kinds of people, you know, everybody from like Vanguard
Speaker 1: and black Rock, right, two small issuers, to index makers,
Speaker 1: to the back office to advisors. Uh. And they all
Speaker 1: just big trade show, big trade show. It's you know
Speaker 1: again like last year, I called the Comic Con of ETFs.
Speaker 1: So last year you took your microphone and we did
Speaker 1: a little episode and this year it was a really
Speaker 1: Last year it was fun. I like that one, so
Speaker 1: we wanted to do it again. Yeah. No, I think
Speaker 1: it's good. It's just a little little sound bites. And
Speaker 1: when I'm walking around, I'm busy, but I can get
Speaker 1: somebody for five minutes or less, and it's just a
Speaker 1: convenient way for me to get take a swab and
Speaker 1: try to uh, you know, give you a little taste
Speaker 1: of what what you missed. That's nice. I like that.
Speaker 1: What what was the theme of the Petrie dish this year? Um?
Speaker 1: You know, again E s G is relentless. The issuers
Speaker 1: are very excited about it. We'll go over that in
Speaker 1: a minute. UM. I don't know how much the actual
Speaker 1: investors like it, but um issuers are into E s G.
Speaker 1: There was some still, like I guess a little hangover
Speaker 1: from x I V implosion and whether these exotic products
Speaker 1: are suitable. UM was like a year ago, right, that
Speaker 1: was a year ago, but there's still now there's downloads,
Speaker 1: defined outcome ets. There's still a lot of I don't know,
Speaker 1: like power tool type products coming out UM. And then
Speaker 1: there was I think a lot of Thematic was a
Speaker 1: big one because again there's been some good money into
Speaker 1: them ETF. So that's where a lot of the smaller
Speaker 1: time people are excited, you know. And we have a
Speaker 1: couple of clips, clips of people with you know, basically
Speaker 1: an index, idea and a dream and they go to
Speaker 1: this event to try to hook up with an issuer. Oh,
Speaker 1: by the way, since last year trillions was brand new
Speaker 1: while you were at inside e TF, what do people
Speaker 1: have to say this time? UM, so last year not
Speaker 1: so much. Maybe one or two people this year a
Speaker 1: lot more I think. You know, obviously issuers will take
Speaker 1: notice because they want to come on and promote stuff.
Speaker 1: So I'm not taking all of it. It's not all
Speaker 1: going to my head. But there was some one guy
Speaker 1: in particular stop me and said, listen, I just was
Speaker 1: moved over to the E t F team at this
Speaker 1: big company, and um, I didn't know a lot and
Speaker 1: I sort of listened to your podcast, and I gotta
Speaker 1: tell you, like, I was not happy about being moved,
Speaker 1: but like your podcast really made it accessible fun, I
Speaker 1: understand it better. And now I even got my wife
Speaker 1: into it, and you know, she we both really love
Speaker 1: the R two Dad's episode, which continues to resonate. Um,
Speaker 1: and that was really great. That was the one that
Speaker 1: stuck out, and I was just like to get like
Speaker 1: that kind of heartfelt compliment about it. Was nice. I
Speaker 1: gotta tell you so, because we worked hard on this.
Speaker 1: So this time I'm trillions Comic Con of E t
Speaker 1: F S Round two. All right, So you went around
Speaker 1: inside et F with the microphone sticking in people's faces.
Speaker 1: Who were getting here from first? First is Ben Johnson
Speaker 1: from Morning Starting. Now we heard from him last year.
Speaker 1: He is my peer, kind of my competitor, but he's
Speaker 1: very articulate and um I just asked about a couple
Speaker 1: of the bigger sort of themes that were being buzzed
Speaker 1: out at the conference. The first one is on what
Speaker 1: one of the main presentations was on was what comes
Speaker 1: after the e t F? The e t F disrupted
Speaker 1: the mutual fund? What's going to disrupt the e t F?
Speaker 1: And Dave naten Egg and Matt Hogan speculated that the
Speaker 1: disruptor would be something called direct indexing, where you just
Speaker 1: basically fill out some form and you get a basket
Speaker 1: of stocks that's right tier liking because the E t
Speaker 1: F is sort of like you have to take what's there.
Speaker 1: But Ben is skeptical. Here's what he has to say. So,
Speaker 1: direct indexing is approach to creating portfolios that treats everyone
Speaker 1: is the unique snowflake that they are, that creates a
Speaker 1: very specific portfolio to meet their very specific leaves, which
Speaker 1: in theories a great concept. It's an interesting concept, but
Speaker 1: I think in reality it has the potential to walk
Speaker 1: back a lot of the progress that investors have made
Speaker 1: over the course of the past four plus decades, driving
Speaker 1: towards ever lower fees, ever, greater transparency, less complexity across
Speaker 1: the board, and fundamentally lower costs. So to the extent
Speaker 1: that you take this wonderful rapper, the e t F
Speaker 1: that we've all come down here to Florida to worship
Speaker 1: too for every year for ten plus years now, I
Speaker 1: think it could actually be detrimental to investors. That was
Speaker 1: a rain cloud. Well on their presentation. He was sort
Speaker 1: of saying, don't you know the e t F is
Speaker 1: going nowhere? I know what he's saying. Look, you can
Speaker 1: get an e t F now for four or five
Speaker 1: whole You get a whole portfolio. The world's cheapest TTF
Speaker 1: portfolio is now five basis points. That was another presentation.
Speaker 1: That's an amazing thing. Direct indexing would cost more. The
Speaker 1: selling and buying of the stocks would create potentially capital
Speaker 1: gains which get are eliminated because the creation redemption mechanism
Speaker 1: and the E t F. I agree with them. You
Speaker 1: know what Ben was saying, and I agree is the
Speaker 1: mass customization is your portfolio using E t S The
Speaker 1: fact that you can get anything in the world now.
Speaker 1: He equated it to going to Chipotle and like picking
Speaker 1: out all your ingredients, the ingredients or the E T
Speaker 1: F s. What Dave and Matt were kind of saying
Speaker 1: was like, maybe you want to like really get specific
Speaker 1: about the pork, and maybe you wanted from a certain
Speaker 1: you know, distributor with a certain uh, every ingredient of
Speaker 1: that particular ingredient would be your customized to you. I
Speaker 1: don't even think people care that much about that level
Speaker 1: of detail. I think an E s G that is
Speaker 1: maybe where they want that kind of customization because it
Speaker 1: is so personal. But I think if your portfolio, i mean,
Speaker 1: look a total market, a total bond, I think most
Speaker 1: people were just fine with that. Isn't it interesting though,
Speaker 1: how the word direct has a little bit of buzz
Speaker 1: to it because you know, in in I p O Land,
Speaker 1: which is what you have historically done to go public,
Speaker 1: Spotify last year did this direct listing thing and basically
Speaker 1: said we don't need this I p O and cuts
Speaker 1: out a bunch of fees and everything else, and and
Speaker 1: it's a little similar and that it harnesses the fact
Speaker 1: that at this day and age, people can just take
Speaker 1: things to market places with a different vibe than they've
Speaker 1: previously been able to. Yeah, there's just you know, the
Speaker 1: fact that these e t f s are on in exchange.
Speaker 1: You can trade them there regulated by the SEC. They're
Speaker 1: in a pretty prospectus rapping a lot of that official
Speaker 1: nous and liquidity is don't It's gonna take a long
Speaker 1: time for that to go away. But Matt and Dave
Speaker 1: are as sharp as they get, and you know, you gotta.
Speaker 1: Their presentation is always provocative, and it was again this year.
Speaker 1: So it's food for thought. Okay, now we're gonna hear
Speaker 1: from the legendary Paul Tutor Jones, who I um he
Speaker 1: spoke and then Paul Tutor Jones, the hedge fund manager.
Speaker 1: Jones got Jones, Yeah, he was up there presenting on
Speaker 1: e s G. He is all in on this. His
Speaker 1: company has built an index that a Goldman Sachs et
Speaker 1: F trap tracks with the ticker just and what I
Speaker 1: found interesting about his presentation was he doesn't do e
Speaker 1: s G like a lot of the funds, and a
Speaker 1: lot of the funds have their own special way of
Speaker 1: e s G. So I asked him about how he
Speaker 1: kind of puts worker compensation above climate issues, which most
Speaker 1: e s G might not do that, and that's why
Speaker 1: Exxon lands in his e t F just which a
Speaker 1: lot of people would be shocked at exons in your
Speaker 1: E t F. He justifies why. Oh and by the way,
Speaker 1: if you hear some dishes in the background. I after
Speaker 1: his presentation, I went backstage and uh, we had to
Speaker 1: go into the kitchen area, so it could be a
Speaker 1: little clangy back there. So just f why, Hey man,
Speaker 1: I'm working hard for the team here. The biggest difference
Speaker 1: between us and other e s g s we had
Speaker 1: no negative screening. So we listen to American public. The
Speaker 1: American public says climate changers are really important. But you
Speaker 1: know what, someone making a living wage, having being treated well,
Speaker 1: having a decent income is two and a half times
Speaker 1: support his climate change. And so again what we do
Speaker 1: is we listen to American public, and just because someone
Speaker 1: doesn't score great on climate change isn't a reason to
Speaker 1: exclude them from other things they may be doing great.
Speaker 1: Exion is a great example. Exxon has the third highest
Speaker 1: pay UH in the oil and gas industry and the
Speaker 1: energy sector has the third and they have tenuere track
Speaker 1: record of the greatest gender equity screening, so that they're
Speaker 1: making sure they have a diverse, diverse workforce both on
Speaker 1: race and gender, virtually anyone in that whole sector. So
Speaker 1: it's not just about one event, it's about our one factor.
Speaker 1: It's about multiple factors. And that's why this is such
Speaker 1: a great et F So I hadn't heard about just
Speaker 1: what's your take on it when you look at what
Speaker 1: it's holding are I? Well, look, I agree with him.
Speaker 1: I do think workers compensation, quality of life. He basically
Speaker 1: showed a chart of what people think is most important
Speaker 1: from companies, and that's how he designed it. And the
Speaker 1: public is more concerned about workers compensation and treating people
Speaker 1: nicely than they are about the climate right now. So
Speaker 1: he's basically doing it structuring it that way. And I
Speaker 1: gotta tell you, this guy was very convincing. Um that's
Speaker 1: why he's probably such a success. The guy next to me,
Speaker 1: he sat down, Um, he goes. I gotta be honest,
Speaker 1: I was. I was pretty skeptical, but he kind of
Speaker 1: sold me on this and I told him that afterwards.
Speaker 1: He was pretty pleased by that. But just as off
Speaker 1: to a good start. I think it's about two million.
Speaker 1: That probably ranks it in top seven biggest d S
Speaker 1: g A t F S already. But he's ambitious. He
Speaker 1: wants this to be you know, a huge e t
Speaker 1: F billions of dollars. Uh. He's pretty aggressive, grassroots sounding
Speaker 1: for you know, try. He wants to take the fight
Speaker 1: to the c suite, make them hear people, and he
Speaker 1: thinks that you know you're by investing in that way,
Speaker 1: that's the best way to send them a message. And
Speaker 1: Excellent is not one that you would maybe expect to haven.
Speaker 1: And he has lens right, yes, And that is why
Speaker 1: I find it so interesting. What else is in there?
Speaker 1: You know, it's a lot of the tex stalks. Like
Speaker 1: I looked at it recently, I think it's like Google's
Speaker 1: in there. Um, you've got um apple. Most of them
Speaker 1: are ones you tend to see. But again, Excellent sort
Speaker 1: of you know, sticks out like a sore thumb. But
Speaker 1: he just you know that he's in there for a reason,
Speaker 1: according to him, who're gonna hear from? Next? Okay? Next
Speaker 1: is Perth Toll. She is one of these people who
Speaker 1: has an index in a dream. So she was there,
Speaker 1: you know, to do a lot of networking and she
Speaker 1: just landed a deal to get her index with an
Speaker 1: actual e t F and she found her first like
Speaker 1: anchor tenant or client like seed capital. And so she
Speaker 1: talked a little bit about what what this new ETF
Speaker 1: will do. So she had the idea for an index,
Speaker 1: and now she has to go around finding how do
Speaker 1: I get a wrapper for this? Yeah? Her index is
Speaker 1: freedom weighted Emerging Markets. Yeah, so we are instead of
Speaker 1: market cap waiting the emerging markets, we freedom weight the
Speaker 1: emerging markets, which means we're looking at seventy nine different
Speaker 1: freedom variables and getting a UM composite country score and
Speaker 1: using that country score UM that freedom level to wait
Speaker 1: and select countries. So our country weights and country selection
Speaker 1: comes from freedom waves in those countries. And that freedom
Speaker 1: weight comes from UM three different categories of freedoms, the
Speaker 1: rights of life, the rights of liberty, and the rights
Speaker 1: of property. And what made you think of this? So
Speaker 1: I grew up in China, and uh, I grew up,
Speaker 1: you know, half in China, half in the US, and
Speaker 1: I saw some things. UM when I went back to
Speaker 1: you know, live in Hong Kong and traveled a lot
Speaker 1: to mainland China over that time. UM, that made me
Speaker 1: realize that freedom was important for a market. And UM,
Speaker 1: I saw the difference between the mainland Chinese market and
Speaker 1: the Hong Kong market and you know, frankly the US
Speaker 1: market and just noticed that freedom has a huge impact
Speaker 1: on market. So that's a fascinating idea that that markets
Speaker 1: are better off when they're free, right, and that there's
Speaker 1: different types of freedom that she's come up with. How
Speaker 1: do you think that's gonna work in an e t
Speaker 1: f Uh, We're gonna have to see she you know,
Speaker 1: she's basing it on the more freedom, the more democracy,
Speaker 1: the better capital markets do. So look, the performance will
Speaker 1: probably drive most of the flows here, but I just
Speaker 1: love that this is I love this part of the
Speaker 1: ETF industry where somebody who has a real life experience
Speaker 1: that's you know, across borders comes here and turns it
Speaker 1: into an actionable idea. It's very Silicon Valley esque. And
Speaker 1: you know, you don't get these kind of stories at
Speaker 1: the big issuers very much. So there's a lot of
Speaker 1: these small indies I call them who are just on
Speaker 1: the grassroots with a you know, an idea, looking to
Speaker 1: get it going. And you know a couple of them
Speaker 1: will will become hits. So so you got like China, Mexico, Nigeria,
Speaker 1: and how do you put all those together? Well, clearly, look,
Speaker 1: most emerging markets ttfs are like twenty China. This will
Speaker 1: be something else. There are some fundamentally weighted emerging market
Speaker 1: tts or that do it different ways, where China is
Speaker 1: a lower weight. UM, so I would imagine it would
Speaker 1: look something more like that, and so you'd probably be
Speaker 1: looking at if one of the countries that wasn't China
Speaker 1: did really well, you would do better. My guess is
Speaker 1: this thing kind of fluctuates and performance and it probably
Speaker 1: will catch some people if it has a good run.
Speaker 1: But I do think that it's an E s G
Speaker 1: play like it can appeal to the E s G
Speaker 1: investor in the into the in terms of the emerging markets. Okay,
Speaker 1: so we've talked to Ben and bottle Lightning with a
Speaker 1: big idea. Who's next. Next up we have is Michael
Speaker 1: Steele Um if you much MSNBCU, he's on a lot um.
Speaker 1: He's the he used to be the chairman of the GOP.
Speaker 1: I believe he was there with Donna Brazil doing this
Speaker 1: just sort of like political roundtable. Not for nothing. You've
Speaker 1: got some names I did. He was pretty easy. He
Speaker 1: came out after into the public sphere and a lot
Speaker 1: of people were talking to him, and I just walked
Speaker 1: up real quick and asked him. I had to ask
Speaker 1: him about MAGA And you know, there's a MAGA et
Speaker 1: F that invests in stocks that have heavy GOP donors.
Speaker 1: What do you think of that? I did not have
Speaker 1: to check that out. Really really, that's a real thing.
Speaker 1: That's a real thing. Yeah, God bless him. Is it?
Speaker 1: Is it a good return? No? It has no Tech's
Speaker 1: only industrials and energy, So yeah, without tech because they
Speaker 1: don't they don't donate top so that you know tech. Yeah, yeah,
Speaker 1: where we got Look, we can have a better relationship
Speaker 1: with the tech community, for sure, because I think a
Speaker 1: lot of the things is that the tech community is
Speaker 1: concerned about. At least old school conservatives like myself would
Speaker 1: be there advocating to support them, but it's kind of
Speaker 1: hard these days. So dude didn't even know about MAGA. Yeah,
Speaker 1: he didn't know about it. I mean it's pretty small
Speaker 1: e t F. But um, you know his reaction was
Speaker 1: I think interesting. You know somebody who used to be uh,
Speaker 1: the GOP chairman, That is an interesting idea that that
Speaker 1: would be the target market, right there is somebody like that.
Speaker 1: It is also interesting that he understands why it wouldn't
Speaker 1: have tech right, and it's so and it's a problem,
Speaker 1: and and and then it's a problem. I think it
Speaker 1: was just really interesting. And maybe someday, someday MAGA will
Speaker 1: have overweight tech. Who knows that'll be the day. Uh.
Speaker 1: And if you want to learn more about MAGA, Rachel
Speaker 1: Evans did a great episode with us where she went
Speaker 1: and talked to the founder down in Texas, what what
Speaker 1: instigated the idea and how it's constructed. Okay, so the
Speaker 1: first guy that we talked to was Ben Johnson. You
Speaker 1: talked to him more than once. What was what was
Speaker 1: the next question that you asked him? I asked him
Speaker 1: about the There was two big bombshell news that was
Speaker 1: there's always somebody putting out news around the conference. Fidelity
Speaker 1: and Schwab literally within an hour of each other, put
Speaker 1: out news that they were increasing the amount of e
Speaker 1: t s you could trade for free, because last year
Speaker 1: Vanguard said you can basically trade all of them eighteen
Speaker 1: hundred and everybody was like, oh my god. It was
Speaker 1: like a bombshell. And so now Fidelity and Schwab said, okay,
Speaker 1: we're gonna up ours now you can trade five hundred
Speaker 1: for free. I asked Ben about that and what he thought.
Speaker 1: I think the important point for investors is to understand
Speaker 1: that free is not free. That although it's a fantastic
Speaker 1: thing that fees had been compressed to near zero levels,
Speaker 1: there's a handful of funds that charge nothing, that commissions
Speaker 1: have gone away. In the case of an ever larger
Speaker 1: list of e t s that the real risk here
Speaker 1: is that they're an implicit costs that are hidden elsewhere.
Speaker 1: So I think the first place you should look is
Speaker 1: what are you learning on your cash account, what are
Speaker 1: you earning on your money market account, and how does
Speaker 1: that stack up relative to say an online savings account. Okay,
Speaker 1: so that's interesting. Yeah, again, you know low cost e
Speaker 1: t f s low cost you're free trading. There's a
Speaker 1: bit of a loss leader angle to this. They're trying
Speaker 1: to get you into do other things. He made a
Speaker 1: good point that if you're doing free trading and using
Speaker 1: their platform, and like you have a cash account there,
Speaker 1: look at how much you're getting on that cash account
Speaker 1: and compare it elsewhere. That's one thing. The other thing
Speaker 1: is did e t F that trade for free on
Speaker 1: schwab and fidelity other places they are paid a play.
Speaker 1: So a lot of those issuers are giving them money
Speaker 1: to make them free trading their subsidizing that, and they
Speaker 1: picked the e t f s to push that. They
Speaker 1: don't have as much assets, so a lot of times
Speaker 1: the ones that are free aren't the ones you that
Speaker 1: might be most popular, that you might want. So it's
Speaker 1: another thing to look out for. You know. Another thing
Speaker 1: that I was wondering about Eric last year, Uh, you
Speaker 1: had to go up on stage and make a pitch
Speaker 1: about something. Oh God, you didn't do well? What how
Speaker 1: did you do this year? Not good? What happened? I
Speaker 1: don't know what it is? And what's the format? What
Speaker 1: are you guys? What are you doing? It's Uh, it's
Speaker 1: basically called Battle of the Pundance and we all make
Speaker 1: a case for the best new e TF launch. We
Speaker 1: have two minutes. Somebody's assigned to rebut you for one minute,
Speaker 1: and then you have thirty second response and then the
Speaker 1: audience cheers. The cheering of the audiences decides the winner.
Speaker 1: And I don't know, it's probably middle of the I'm
Speaker 1: always middle of the pack. Um, what was your pick?
Speaker 1: What was your opony? This year? I picked a A
Speaker 1: A U a new gold ETF from Perth, and I
Speaker 1: picked it because it it's a cheap, it's physically it's
Speaker 1: physically backed, it's backed by the Australian Government. It's it's
Speaker 1: just it's got a lot of features, it's low cost,
Speaker 1: and I really wanted to talk about how I think
Speaker 1: gold is misunderstood. So I made the case for gold
Speaker 1: and the e t F. But who took you down? Uh?
Speaker 1: The person Dave not A had me and he his his.
Speaker 1: The two things he said weren't that hard to overcome.
Speaker 1: But I just got a little flustered. Again. I was
Speaker 1: running on empty at that point because it was later
Speaker 1: in the conference, and uh, right afterwards, I was like,
Speaker 1: I had the two responses have been perfect, but I
Speaker 1: just didn't work out. And I think that's where I
Speaker 1: lost some points. Is responding to his rebut all I
Speaker 1: was just a little Yeah, I was on my I
Speaker 1: was on my back heels a little. Yeah. So you
Speaker 1: were focused on getting interviews. But the highlight obviously was
Speaker 1: clearly Todd Rosenbluth did a actual rap. Yeah, he did
Speaker 1: quality et F and he and he did a rap
Speaker 1: about it is hilarious. There is if you go to
Speaker 1: his h If you go to his Twitter account, he
Speaker 1: posted some video of it and it's pretty much musty TV. Yeah,
Speaker 1: graded one of them and Walhart I still loving pretty good.
Speaker 1: This is where you wanted can join in again. Matt
Speaker 1: Hogan one. He always wins. This guy could sell ice
Speaker 1: to Eskimos. I think he could win doing x I V.
Speaker 1: I think he'd go up there right now do x
Speaker 1: IV and beat all of us. I will say it
Speaker 1: is kind of like a home game for him. This
Speaker 1: is like playing Tom Brady at Gillette Stadium. Okay, but
Speaker 1: he's he's just the reigning champ. He's the Tom Brady
Speaker 1: of this format. And I'm I'm good at other things,
Speaker 1: but I just this this particular format. I just never
Speaker 1: feel comfortable. You're good at asking for questions? What other
Speaker 1: what other questions did you ask? Okay? So I didn't
Speaker 1: get to interview Michael lewis per se, but I did
Speaker 1: turn the mic on when he was speaking with Barry
Speaker 1: red Holts on stage, So this audio isn't quite as good.
Speaker 1: But there's two things I thought were interesting. The first
Speaker 1: was on um, you know how he said the markets
Speaker 1: were rigged? Yeah, Barry just said, are they still and
Speaker 1: he kind of doubled down a little bit and here's
Speaker 1: what he said, which I thought, this is kind of shocking.
Speaker 1: SEC commissioners. They all said markets rigged. They will say
Speaker 1: back then he said, no, no, it couldn't possibly be.
Speaker 1: Um So this this shift inside the SEC, the shift
Speaker 1: in signs design. But at the time, UM there was
Speaker 1: this is outrageous scandal. Scandals interesting because a the SEC
Speaker 1: admits it, and I mean, are they doing anything? Um
Speaker 1: be what he talked about in Flashboys. When he put
Speaker 1: the dollar amount, it resonated because he's like, look, this
Speaker 1: is tiny, little fractions of sense. But if you added
Speaker 1: up over the course of a year, he's between about
Speaker 1: twelve billion and ninety billion that go into these high
Speaker 1: frequency trading pockets. And that is a lot. I mean
Speaker 1: when when you talk about like there was a study
Speaker 1: last year that eleven billion was spent on underperforming active managers,
Speaker 1: and I thought that was a lot. So this is
Speaker 1: a much more than that, and so I do think
Speaker 1: it adds up. That said, I moderated a panel on
Speaker 1: trading and a lot of the people on there, I said,
Speaker 1: what do you think of high frequency trading? They said,
Speaker 1: it's it's actually more positive than than negative because it
Speaker 1: does provide liquidity. It fills a lot of liquidity gaps,
Speaker 1: and they just think that twelve to ninety billion is
Speaker 1: just worth worth the causing. Yeah. So anyway, interesting little
Speaker 1: side point. Now, he was also asked about what he
Speaker 1: invested in with his personal money, and uh, let's see
Speaker 1: what he says, very simply, uh sexy. So oh, I
Speaker 1: actually knew he was going to say that because he's
Speaker 1: been quoted a couple of times. So he's one of
Speaker 1: the people. Like all celebrity Indexer, they're people who are
Speaker 1: kind of famous, and he's probably one of the most
Speaker 1: compelling because here's a guy who has sniffed around all
Speaker 1: the sort of battels of Wall Street and the financial
Speaker 1: system and used to work on it. Yeah, and used
Speaker 1: to work on it, and that's where he puts his money.
Speaker 1: I can't think of a more ringing endorsement for Index
Speaker 1: funds than him buying him and Berkshire Hathaway. Again, that's
Speaker 1: also on the flip side a little. I mean, Warren
Speaker 1: Buffett's argubably the most famous active managers, so it's not
Speaker 1: like he's all into Index. But I thought his answer
Speaker 1: was pretty good. Okay. Next up Hector McNeil, who runs
Speaker 1: an ETF issuer in in Europe. He's actually start up
Speaker 1: a few companies. He's a veteran the industry. He was
Speaker 1: over from Europe and there's a lot of build up
Speaker 1: in Europe. People are like claiming their it's like a
Speaker 1: land grab. He talked about the European et F market
Speaker 1: A little thought was interesting. We're based in London as usual,
Speaker 1: pretty much no further two into meets from every other
Speaker 1: business that we've set up self are. But we believe that,
Speaker 1: uh personally, we believe Europe's where the growth is because
Speaker 1: I mean, you look at the US's four trillion dollars
Speaker 1: of assets. Europe's under a billion, one half times population
Speaker 1: than the US. Similar wealth demographic were probably five or
Speaker 1: seven years behind Europe still less than ten percent and
Speaker 1: passives as well, you know, you here so you can
Speaker 1: see how the the US will probably go to six
Speaker 1: seven trillion and easy fs you know where Europe, you know,
Speaker 1: we'll probably get to two three trillion. So the growth
Speaker 1: is there for me. So here's a guy who is
Speaker 1: talking about the European market, very optimistic over there again
Speaker 1: it's way lower than the US. There's some I don't know,
Speaker 1: artificial barriers with brokers and you know, not switching to
Speaker 1: the fee base. But I'm going to need details. But
Speaker 1: I think look, Europe reminds me of the ETFs. Are technology,
Speaker 1: and a good technology usually just breaks down the walls eventually,
Speaker 1: and I think that's what everyone's thinking. So there is
Speaker 1: a European inside et f s. But it was interesting
Speaker 1: to see somebody from Europe here sort of you know,
Speaker 1: making connect. We got we gotta work on our ground
Speaker 1: and we got to do a Europe episode and by
Speaker 1: the trip, well you know, Tom Sara Fagus, this is public.
Speaker 1: Now he's moving to Yeah, he will be heading up
Speaker 1: the ets European I know will know he's officially entrenched
Speaker 1: when he says smart Beta. Do you think people over
Speaker 1: there will understand how to pronounce his name better than
Speaker 1: they do here? I still can't say his first name.
Speaker 1: I got his last name down. Yeah. My goal for
Speaker 1: his first name is by end of this year. So
Speaker 1: we have two more. Yeah, two more. So let's go
Speaker 1: to um Alex Moazid. Hopefully I didn't butcher his name,
Speaker 1: but I think he did. I never met him before
Speaker 1: here's a guy who wrote a book and he is
Speaker 1: basically taking his book, made an index out of the
Speaker 1: concept in the book, and now he's running around looking.
Speaker 1: He'll tell us about it. I'm going to launch a
Speaker 1: e t F based on platform and marketplace business models
Speaker 1: and the next few months and I'm here to learn
Speaker 1: about the e t F landscape and who the different
Speaker 1: players are and how this whole industry works, and what's
Speaker 1: the premise of the e t F, Like how did
Speaker 1: it come about? The e t F is based on
Speaker 1: a book I published in twenty sixteen called Modern Monopolies,
Speaker 1: and it's all about how these platform business models really
Speaker 1: control every major vertical in the economy. There has been
Speaker 1: a couple of e t F s born from books, um,
Speaker 1: but this one's uh, you know interesting And again I
Speaker 1: think this is the kind of thing if you're look,
Speaker 1: if you're picking stocks and you have a new way
Speaker 1: to do it, it's a little bit of a uphill battle.
Speaker 1: The large cap stock picking smart baid areas pretty crowded.
Speaker 1: That said, if you can capture the imagination, like if
Speaker 1: that phrase what was a market monopolies? You know, if
Speaker 1: if that's the right phrase, that just sears through the noise. Um,
Speaker 1: he could have a hit on his hands. But you know, again,
Speaker 1: here's somebody out there think about platforms, right, you think
Speaker 1: like Spotify or an Apple or a Netflix, and you
Speaker 1: put all those together and overweight those things like whoa,
Speaker 1: that could be really interesting. Yeah. Look the robotics CTF
Speaker 1: when it came out. Yeah, I mean, robotics wasn't that
Speaker 1: big of a word when it came out. So if platforms,
Speaker 1: you know, you never know what's just gonna like rise
Speaker 1: up above the noise and capture imagination or just like
Speaker 1: hidden in plain sight. Yeah, having that little lens right there. Unfortunately,
Speaker 1: the odds are for these small issuers that the product
Speaker 1: will kind of FAILU rude awakening. Yeah. Well again I've
Speaker 1: read as that that apps, you know, never make it.
Speaker 1: Only one percent survives. So in the ETF industry, in
Speaker 1: the small space, the thematic ETFs, the percentage a little higher,
Speaker 1: but it's similar to that drum roll last one. So
Speaker 1: I also spoke to Shelley and Tonio Wicks from the
Speaker 1: Investment Company Institute Institute. She's an economist there. She does
Speaker 1: a lot of great research, and I just asked about
Speaker 1: mutual funds because a lot of people focus obviously on
Speaker 1: e t f s here, mutual funds tend to be
Speaker 1: sort of, um, I don't know, cousin, that's forgotten about. Yeah,
Speaker 1: and some charts show how they've lost money, and it's
Speaker 1: a little bit of a you know, um tribal situation
Speaker 1: for e t f s and against mutual funds. But
Speaker 1: I just I thought it'd be cool to end on
Speaker 1: the fact that even though all this stuff is going
Speaker 1: on at the e t F industry, um, you know,
Speaker 1: mutual funds are alive and while they're far going anywhere,
Speaker 1: and uh so I decided to ask about that. I
Speaker 1: think that everybody looks at the J curve growth of
Speaker 1: e t s and just extrapolates that, and that's not
Speaker 1: going to be the case. There is always going to
Speaker 1: be a role for mutual funds and e t s.
Speaker 1: There are investors who are mutual fund investors that will
Speaker 1: never move over to the E t F space, and
Speaker 1: maybe they shouldn't. You need to take on the responsibility
Speaker 1: of trading that et F and if you're not comfortable
Speaker 1: with that secondary market trading and how the equity markets work,
Speaker 1: the mutual fund might be where you want to be.
Speaker 1: It's where your comfort zone is. And also, um, E
Speaker 1: t s. You know, in the four oh one case space,
Speaker 1: tax efficiency doesn't matter. It's broke, you need brokerage windows.
Speaker 1: It's not necessarily a fit for you know, mutual funds.
Speaker 1: They're a great fit for the four oh one case space.
Speaker 1: So they're not going away. I mean these two things
Speaker 1: are going to co exist for years, years, years, years, decades. Also,
Speaker 1: mutual funds. Mutual funds incorporate index funds, and they taken
Speaker 1: a lot of money. They took in I don't know,
Speaker 1: maybe a two billion last year. UM, so they're passive.
Speaker 1: So inside mutual funds is passive in a way. UM.
Speaker 1: And the four one K argument was very strong E
Speaker 1: t F s. You ever see Superman two, of course,
Speaker 1: when he goes into that box and he loses his powers.
Speaker 1: That box is the four one K market to the
Speaker 1: E t F just does not have all its superpowers.
Speaker 1: Go away because you don't need to interday trade. The
Speaker 1: tax efficiency goes away. You can get cheap institutional classes
Speaker 1: because the four one K market can pull the money together,
Speaker 1: so the cost issue goes away, and actually you can
Speaker 1: actually rack up more costs because of buying. Um, you
Speaker 1: have to pay the spread every time you buy the
Speaker 1: e t F. So the four one k market just
Speaker 1: doesn't really make any sense for e t f s.
Speaker 1: So the mutual funds definitely have that. But again their
Speaker 1: asset growth has come from market returns and that's been great.
Speaker 1: So they've taken in on average six billion a year
Speaker 1: just on the stock market going up, even though they
Speaker 1: lost on average a hundred billion a year. So again
Speaker 1: they're not going anywhere. But the organic growth is definitely
Speaker 1: a problem for especially active mutual funds. And just to
Speaker 1: come full circle, active was a big conversation here, Um,
Speaker 1: there's a lot more optimism about active ETFs non transparent
Speaker 1: active ETFs, which is we should do an episode on
Speaker 1: at some point down the road. And a lot of
Speaker 1: the traditional active funds that you love and know are
Speaker 1: all there now right. You know, You've got Fidelity was there.
Speaker 1: They have a booth, you know, so you know, it's
Speaker 1: very much all together at this point. I think a
Speaker 1: lot of these funds, and Shelly reiterated this, they look
Speaker 1: at the e t F as just another distribution vehicle.
Speaker 1: I'm sure they wouldn't like this to happen because the
Speaker 1: e t F makes them less money. But at the
Speaker 1: end of the day, it's another distribution vehicle. Look, you know,
Speaker 1: if you're a musician, you want my music in the
Speaker 1: c D, you want it in vinyl, where you want
Speaker 1: it through iTunes. Um, you know, I don't care as
Speaker 1: long as you're listening to it. Thanks for listening to
Speaker 1: Trilliance until next time. We can find us on the
Speaker 1: Bloomberg terminal, Bloomberg dot com, Apple Podcast, Spotify, where else
Speaker 1: can back to listen. We'd love to hear from you.
Speaker 1: We're on I'm at Joel Webber Show, He's at Eric Balcunas.
Speaker 1: Trillions is produced by Magnus Hendrickson. Francessica Levie is the
Speaker 1: head of Bloomberg Podcast by