1 00:00:06,280 --> 00:00:12,600 Speaker 1: Wokeno trillions. I'm Joel Webber and I'm Eric bell Tunas Eric, 2 00:00:13,240 --> 00:00:17,360 Speaker 1: we often try and make things accessible for people. I'm 3 00:00:17,400 --> 00:00:19,720 Speaker 1: gonna go out and say that this episode is going 4 00:00:19,760 --> 00:00:24,840 Speaker 1: to be more technical than most, but it serves a purpose. 5 00:00:24,880 --> 00:00:27,640 Speaker 1: What is that purpose? Yeah? No, here, here's the purpose 6 00:00:28,160 --> 00:00:31,280 Speaker 1: on the show today is Paul by Aki of Alps 7 00:00:31,960 --> 00:00:34,320 Speaker 1: and Paul by Achi. Let me just take you to 8 00:00:34,400 --> 00:00:36,839 Speaker 1: my personal career in I'm going to take you back, 9 00:00:36,920 --> 00:00:41,639 Speaker 1: Joel to the year two thousand six two right around there. 10 00:00:41,920 --> 00:00:45,080 Speaker 1: This is years ago. I get assigned E t F 11 00:00:45,120 --> 00:00:48,800 Speaker 1: s in data. I'm in data and I don't know 12 00:00:48,880 --> 00:00:50,640 Speaker 1: much about them. So where do I learn about them? 13 00:00:50,680 --> 00:00:53,400 Speaker 1: I go to this place, Index Universe, as well as 14 00:00:53,400 --> 00:00:57,400 Speaker 1: reading books and whatnot. An Index Universe was a hotbed 15 00:00:57,440 --> 00:01:00,760 Speaker 1: of et F analysis way before it was cool, and 16 00:01:00,840 --> 00:01:03,240 Speaker 1: Paul Baiacky was one of these original analysts. They had 17 00:01:03,240 --> 00:01:07,080 Speaker 1: about ten people there who were really good. I mean 18 00:01:07,080 --> 00:01:09,360 Speaker 1: they'd be good today, but they were. They were ten 19 00:01:09,440 --> 00:01:11,839 Speaker 1: years ahead of their time. This was led by Dave Natick, 20 00:01:11,880 --> 00:01:14,680 Speaker 1: who we found the show, and Matt Hogan. Dave now 21 00:01:14,680 --> 00:01:16,319 Speaker 1: at E t F Trends. Matt is now a bit 22 00:01:16,360 --> 00:01:19,480 Speaker 1: wise and but they had a whole crew and I 23 00:01:19,520 --> 00:01:22,240 Speaker 1: would listen to their podcasts, and Paul had a podcast, 24 00:01:22,319 --> 00:01:25,679 Speaker 1: he wrote articles, and since then he went to Fidelity, 25 00:01:25,760 --> 00:01:27,840 Speaker 1: a lot of them went other places, and so he 26 00:01:27,880 --> 00:01:31,160 Speaker 1: was at Fidelity. Now he's at ALPS. So today we'd 27 00:01:31,160 --> 00:01:34,679 Speaker 1: be talking to an analyst who is smart as an 28 00:01:34,680 --> 00:01:38,720 Speaker 1: analyst and used to have to judge ETFs critically, who 29 00:01:38,800 --> 00:01:40,560 Speaker 1: now went to an issuer and now he's got to 30 00:01:40,600 --> 00:01:43,440 Speaker 1: talk to advisors about the e t s that this 31 00:01:43,520 --> 00:01:47,000 Speaker 1: one firm sells and make the case. And so we 32 00:01:47,080 --> 00:01:49,880 Speaker 1: wanted to sort of take you into how an analyst, 33 00:01:49,880 --> 00:01:54,480 Speaker 1: a specialist talked to an advisor about why they should 34 00:01:54,560 --> 00:01:56,919 Speaker 1: use not only the e t F that the firm cells, 35 00:01:56,960 --> 00:02:00,080 Speaker 1: but that that category like why should I buy and 36 00:02:00,200 --> 00:02:02,440 Speaker 1: energy et F now? And then why should I buy yours? 37 00:02:03,280 --> 00:02:06,120 Speaker 1: In other words, this episode is you taking me to 38 00:02:06,320 --> 00:02:10,440 Speaker 1: your record shop. Yeah. This is definitely someone who I 39 00:02:10,440 --> 00:02:13,560 Speaker 1: would call it early influence on my career. So it's 40 00:02:13,560 --> 00:02:15,560 Speaker 1: it's it's it's fun to talk to him a and 41 00:02:15,639 --> 00:02:18,040 Speaker 1: be just um, you know, talk about some of those 42 00:02:18,040 --> 00:02:20,120 Speaker 1: early days, but also really talked about what he does 43 00:02:20,200 --> 00:02:24,000 Speaker 1: today and how he uses all that knowledge and you know, 44 00:02:24,080 --> 00:02:25,720 Speaker 1: it is interesting once you go to an issuer, you 45 00:02:25,800 --> 00:02:28,800 Speaker 1: kind of have to sell their products, and it isn't interesting, 46 00:02:28,880 --> 00:02:30,800 Speaker 1: you know how you have to wear. But I'm I 47 00:02:30,880 --> 00:02:34,080 Speaker 1: am certain that all of his analysis, on all the 48 00:02:34,240 --> 00:02:37,239 Speaker 1: articles he wrote have got to come in very handy. 49 00:02:37,639 --> 00:02:40,359 Speaker 1: Who's Alps and how big are they? They're a mid 50 00:02:40,400 --> 00:02:43,240 Speaker 1: size issuer. They've been around for a while, I don't know, 51 00:02:43,280 --> 00:02:46,840 Speaker 1: probably ten fifteen years. They've got six billion in assets, 52 00:02:47,320 --> 00:02:49,680 Speaker 1: so I guess that puts some rate around the top 53 00:02:49,720 --> 00:02:55,880 Speaker 1: twenty somewhere maybe biggest. Uh. They have sixteen products, um 54 00:02:56,000 --> 00:02:58,280 Speaker 1: and I know them for things like a m LP 55 00:02:58,520 --> 00:03:01,560 Speaker 1: which is the big MLP TF those are passed through 56 00:03:01,639 --> 00:03:05,680 Speaker 1: high yielding securities. And also the dogs they have like 57 00:03:05,880 --> 00:03:07,639 Speaker 1: S dog E dog. These are dogs of the dow 58 00:03:08,320 --> 00:03:11,639 Speaker 1: E t S. So it's a you know, honestly, this 59 00:03:11,720 --> 00:03:15,320 Speaker 1: is a classic like shop that had a couple of 60 00:03:15,360 --> 00:03:17,880 Speaker 1: hits enough to keep it going. I mean, you need 61 00:03:17,919 --> 00:03:21,400 Speaker 1: a couple none of these. The MLP was a blockbuster, 62 00:03:21,800 --> 00:03:24,400 Speaker 1: and then they had a few moderate hits and then 63 00:03:24,440 --> 00:03:27,240 Speaker 1: someone they struggle with. It's a it's really a metaphor 64 00:03:27,280 --> 00:03:29,400 Speaker 1: for the whole industry. But as long as you get 65 00:03:29,400 --> 00:03:31,560 Speaker 1: a couple of couple of hits, you know you're good. 66 00:03:31,560 --> 00:03:32,880 Speaker 1: And I think a lot of what they do now 67 00:03:32,960 --> 00:03:36,320 Speaker 1: is making sure they re um reintroduce those e t 68 00:03:36,520 --> 00:03:38,440 Speaker 1: F s that were hits, but also the new ones 69 00:03:38,480 --> 00:03:41,040 Speaker 1: they have that can compliment thus so which we will 70 00:03:41,080 --> 00:03:52,920 Speaker 1: discuss it this time on Trillions Climbing the Alps with Paula. Paul, 71 00:03:52,920 --> 00:03:57,080 Speaker 1: Welcome to Trillians. Thanks for having me. I'm excited, so 72 00:03:57,160 --> 00:04:02,200 Speaker 1: talk to me about what you do. So currently, I 73 00:04:02,280 --> 00:04:06,040 Speaker 1: am what in the E t F industry is typically 74 00:04:06,040 --> 00:04:11,000 Speaker 1: defined as a specialist, so I support a subset of ALPS, 75 00:04:11,040 --> 00:04:14,320 Speaker 1: s S S and c ALPS et F specifically in the 76 00:04:14,480 --> 00:04:18,840 Speaker 1: MLP energy infrastructure space. So basically I'm the subject matter 77 00:04:18,920 --> 00:04:22,560 Speaker 1: expert for our wholesaling team. I helped them when they're 78 00:04:22,560 --> 00:04:25,800 Speaker 1: meeting with advisors to talk at a high level about 79 00:04:25,839 --> 00:04:30,040 Speaker 1: the the industry, the product suite, portfolio solutions. And then 80 00:04:30,080 --> 00:04:34,280 Speaker 1: I also work with our portfolio management team, our capital 81 00:04:34,320 --> 00:04:38,360 Speaker 1: markets team, and then are management team to ensure that 82 00:04:38,720 --> 00:04:44,159 Speaker 1: distribution strategy on down to portfolio management is operating in 83 00:04:44,160 --> 00:04:47,680 Speaker 1: a way that's as efficient as possible. So talk to 84 00:04:47,680 --> 00:04:51,320 Speaker 1: me about your journey. How did how did you get there. Yeah. Sure. 85 00:04:51,440 --> 00:04:55,680 Speaker 1: So this podcast isn't anyways a decade in the making. 86 00:04:55,720 --> 00:04:58,440 Speaker 1: I mean, Eric and I have known each other for 87 00:04:58,440 --> 00:05:01,640 Speaker 1: for quite a while, and it's it's money because ten 88 00:05:01,720 --> 00:05:04,680 Speaker 1: years ago I was at index Universe, which became e 89 00:05:04,760 --> 00:05:08,200 Speaker 1: t F dot Com, and it was at the time 90 00:05:08,279 --> 00:05:12,920 Speaker 1: this team of analysts that they built too really disrupt 91 00:05:13,080 --> 00:05:18,039 Speaker 1: the way that advisors and investors thought about and analyzed ETFs. 92 00:05:18,120 --> 00:05:20,840 Speaker 1: We were sort of going after morning Star in terms 93 00:05:20,920 --> 00:05:24,400 Speaker 1: of an et F classification system and and E t 94 00:05:24,560 --> 00:05:27,880 Speaker 1: F analytics, and that's really how I cut my teeth 95 00:05:28,120 --> 00:05:31,400 Speaker 1: in the E t F world. Before that, I was 96 00:05:32,000 --> 00:05:35,039 Speaker 1: working at a small r A that was building indexes 97 00:05:35,040 --> 00:05:37,039 Speaker 1: for U I T S and we built an index 98 00:05:37,080 --> 00:05:39,839 Speaker 1: four And this is going way back now, the first 99 00:05:39,880 --> 00:05:43,960 Speaker 1: global shipping a t F s c A, which you 100 00:05:44,000 --> 00:05:46,440 Speaker 1: think about launching an e t F in two thousand 101 00:05:46,400 --> 00:05:49,440 Speaker 1: and eight, two thousand nine on global shipping not exactly 102 00:05:49,480 --> 00:05:52,320 Speaker 1: the best timing, and so I would say that my 103 00:05:52,400 --> 00:05:55,120 Speaker 1: timing in in many ways in life isn't always perfect, 104 00:05:55,160 --> 00:05:58,240 Speaker 1: as as I'm sure is the case with everybody. But 105 00:05:58,600 --> 00:06:02,600 Speaker 1: now ten years on I've gone to Fidelity to help 106 00:06:02,760 --> 00:06:05,240 Speaker 1: them build out their et F capability and grow their 107 00:06:05,279 --> 00:06:07,520 Speaker 1: asset base. And now I'm at SS and c ALPS. 108 00:06:08,240 --> 00:06:11,200 Speaker 1: I want to go back to the index Universe world 109 00:06:11,200 --> 00:06:12,720 Speaker 1: that was before et F dot com. They used to 110 00:06:12,760 --> 00:06:15,599 Speaker 1: have these conferences. I remember Paul the first time I 111 00:06:15,640 --> 00:06:18,279 Speaker 1: went there. I mean, I was probably the only person 112 00:06:18,320 --> 00:06:21,800 Speaker 1: from Bloomberg besides Chris Condon who covered UH funds. At 113 00:06:21,800 --> 00:06:24,040 Speaker 1: the time, it was two of us there. The last conference, 114 00:06:24,080 --> 00:06:25,839 Speaker 1: I think there was like twenty people from Bloomberg, but 115 00:06:26,080 --> 00:06:29,720 Speaker 1: this is probably back in maybe And I remember Jim 116 00:06:29,720 --> 00:06:32,360 Speaker 1: Wyant opened the conference with welcome to the right side 117 00:06:32,360 --> 00:06:34,520 Speaker 1: of history, and there was a buzz about it, and 118 00:06:34,520 --> 00:06:37,320 Speaker 1: that just before a trillion. Now they've got five trillion, basically, 119 00:06:37,720 --> 00:06:39,560 Speaker 1: but for a long time, et s for the underdog. 120 00:06:39,920 --> 00:06:41,760 Speaker 1: And do you as you go out on the road 121 00:06:41,800 --> 00:06:45,400 Speaker 1: and you talk to clients knowing all that, and now 122 00:06:45,440 --> 00:06:47,400 Speaker 1: you're talking to them about, like say a m LP 123 00:06:47,600 --> 00:06:51,479 Speaker 1: or specific e t F, how far have advisors come 124 00:06:51,560 --> 00:06:56,680 Speaker 1: or the users in using them, and also how much 125 00:06:56,800 --> 00:07:01,200 Speaker 1: further could this industry grow. So I think you hit 126 00:07:01,200 --> 00:07:02,919 Speaker 1: the nail on the head in terms of sort of 127 00:07:02,960 --> 00:07:06,160 Speaker 1: the counterculture of the early days in the E t 128 00:07:06,320 --> 00:07:10,240 Speaker 1: F market, And I think advisors. Back then, we're being 129 00:07:10,280 --> 00:07:12,520 Speaker 1: introduced to the e t F rapper, and in many 130 00:07:12,520 --> 00:07:16,800 Speaker 1: ways you just had this opposition, this this structural opposition 131 00:07:16,840 --> 00:07:20,040 Speaker 1: to the e t F rapper because of either misinformation 132 00:07:20,160 --> 00:07:22,520 Speaker 1: or just misconceptions about what e t f s were 133 00:07:22,560 --> 00:07:24,720 Speaker 1: designed to do and what they were actually doing. And 134 00:07:24,760 --> 00:07:29,920 Speaker 1: I think ten years on, advisors are are less opposed 135 00:07:29,960 --> 00:07:32,080 Speaker 1: to the sort of ideal of the e t F 136 00:07:32,280 --> 00:07:34,520 Speaker 1: and they're more accepting of the fact that e t 137 00:07:34,760 --> 00:07:39,720 Speaker 1: F s can fit within a broader advisory strategy. And 138 00:07:40,600 --> 00:07:44,280 Speaker 1: that's important because it gets to the heart of what 139 00:07:44,320 --> 00:07:46,960 Speaker 1: these advisors are trying to do, which is just investment 140 00:07:47,040 --> 00:07:51,360 Speaker 1: solutions that take into account things like asset location and 141 00:07:51,440 --> 00:07:56,000 Speaker 1: taxes and financial planning. And so now when I talked 142 00:07:56,040 --> 00:07:59,000 Speaker 1: to an advisor, that that conversation about what an e 143 00:07:59,080 --> 00:08:01,400 Speaker 1: t F does, or how an e t F operates, 144 00:08:01,480 --> 00:08:05,160 Speaker 1: or what the creation redemption processes, that those conversations don't 145 00:08:05,160 --> 00:08:09,560 Speaker 1: need to be had because there's there's now this varied 146 00:08:10,080 --> 00:08:12,200 Speaker 1: user base of e t f s that maybe didn't 147 00:08:12,200 --> 00:08:17,120 Speaker 1: exist ten years ago, and the intelligence around e t 148 00:08:17,280 --> 00:08:20,920 Speaker 1: F application has evolved and accelerated in many ways, and 149 00:08:20,960 --> 00:08:24,720 Speaker 1: so it makes it easier to have the conversation about 150 00:08:24,880 --> 00:08:28,640 Speaker 1: the exposure and the product as opposed to having to 151 00:08:28,680 --> 00:08:31,040 Speaker 1: take three steps back and start from scratch, if that 152 00:08:31,080 --> 00:08:35,000 Speaker 1: makes sense. How often do you meet with someone who's like, 153 00:08:35,760 --> 00:08:41,600 Speaker 1: w t F is an e T F well, or 154 00:08:41,640 --> 00:08:43,840 Speaker 1: somebody who's just read the latest article in the FT 155 00:08:44,080 --> 00:08:46,959 Speaker 1: or something that's just says they've never been tested or 156 00:08:47,000 --> 00:08:49,880 Speaker 1: they're gonna blow up. Is that still a thing because 157 00:08:49,920 --> 00:08:52,120 Speaker 1: those articles do come out, I don't know. Quarterly, there's 158 00:08:52,160 --> 00:08:55,000 Speaker 1: usually one that just like has everyone buzzing, but then 159 00:08:55,000 --> 00:08:58,400 Speaker 1: the flows just come in despite it. It feels like 160 00:08:58,559 --> 00:09:01,199 Speaker 1: they almost are meaningless of this point, But do advisors 161 00:09:01,240 --> 00:09:06,440 Speaker 1: still have worries? You do, and and you never want 162 00:09:06,440 --> 00:09:09,760 Speaker 1: to paint with two broad a brush in terms of 163 00:09:10,280 --> 00:09:15,040 Speaker 1: stereotyping certain demographics or certain cohorts of the advisory community. 164 00:09:15,080 --> 00:09:18,040 Speaker 1: But I do think that some of the the older 165 00:09:18,200 --> 00:09:22,520 Speaker 1: advisors who are used to doing things a certain way, 166 00:09:22,520 --> 00:09:24,960 Speaker 1: are very comfortable with a certain product type or a 167 00:09:24,960 --> 00:09:29,640 Speaker 1: certain strategy, are more likely to to sort of take 168 00:09:29,640 --> 00:09:32,319 Speaker 1: de bait as it were, around some of the sensationalist 169 00:09:32,880 --> 00:09:36,120 Speaker 1: research or or articles on e T S. So you 170 00:09:36,160 --> 00:09:39,240 Speaker 1: do still have a conversation where a guy in the 171 00:09:39,280 --> 00:09:42,600 Speaker 1: fixed income space will will say, hey, we we saw 172 00:09:42,640 --> 00:09:46,400 Speaker 1: these products traded deep discounts, and and I told you so. 173 00:09:46,760 --> 00:09:49,520 Speaker 1: And in some ways, that's just the confirmation bias that 174 00:09:49,559 --> 00:09:53,439 Speaker 1: exists in people generally these days, whether it be financial 175 00:09:53,480 --> 00:09:57,559 Speaker 1: advisors or otherwise. And so I think when you when 176 00:09:57,600 --> 00:10:00,600 Speaker 1: you get down to it, the reality is is that 177 00:10:01,440 --> 00:10:03,200 Speaker 1: a lot of the e t F flows now are 178 00:10:03,240 --> 00:10:06,440 Speaker 1: just structural in nature. I mean, there's automatic buying that 179 00:10:06,520 --> 00:10:09,880 Speaker 1: takes place as a result of home office model subscriptions 180 00:10:09,880 --> 00:10:13,040 Speaker 1: at the big wire houses or otherwise, and so some 181 00:10:13,120 --> 00:10:16,440 Speaker 1: of the flows just happened regardless of what's happening on 182 00:10:16,480 --> 00:10:26,120 Speaker 1: the ground level. In some ways, in other words, the 183 00:10:26,120 --> 00:10:29,120 Speaker 1: e t s are more in models, target date funds, 184 00:10:29,240 --> 00:10:32,400 Speaker 1: and just where the money's coming in rain or shine, right, 185 00:10:32,480 --> 00:10:36,280 Speaker 1: and then there's tactical money. Speaking of tactical let's let's 186 00:10:36,320 --> 00:10:37,920 Speaker 1: dive into some of the e t F here, because 187 00:10:37,960 --> 00:10:41,319 Speaker 1: I think the ones that you're an expert or the 188 00:10:41,360 --> 00:10:43,199 Speaker 1: specialist in now it alps. I think we'll get a 189 00:10:43,280 --> 00:10:46,640 Speaker 1: system interesting conversations. Now, let's talk about m l P. 190 00:10:47,120 --> 00:10:49,319 Speaker 1: This is the MLP e t F. I believe it's 191 00:10:49,360 --> 00:10:51,280 Speaker 1: the largest m l m l P E t F 192 00:10:51,320 --> 00:10:53,240 Speaker 1: on the market right, And this was one of the 193 00:10:53,240 --> 00:10:57,000 Speaker 1: oldest and this is a classic case of what you 194 00:10:57,040 --> 00:10:59,920 Speaker 1: guys would have done an index universe and what we stilled, 195 00:11:00,160 --> 00:11:03,120 Speaker 1: which is a MLP versus a a m J which 196 00:11:03,160 --> 00:11:06,000 Speaker 1: is the E t N or uh the one that 197 00:11:06,080 --> 00:11:09,760 Speaker 1: I think MLP X which only owns m LPs. There's 198 00:11:09,760 --> 00:11:13,040 Speaker 1: a tax issue with mlp s and the way that 199 00:11:13,080 --> 00:11:16,320 Speaker 1: they get taxed, which makes it all kind of picking 200 00:11:16,320 --> 00:11:21,920 Speaker 1: your poison kind of situation. Now you're on team a MLP. Now, 201 00:11:22,040 --> 00:11:24,240 Speaker 1: so sell me on a m l P if I'm 202 00:11:24,240 --> 00:11:26,720 Speaker 1: an advisor, And I said, well, the there's such a 203 00:11:26,720 --> 00:11:28,800 Speaker 1: big tax drag inside that thing, why don't I just 204 00:11:28,880 --> 00:11:30,840 Speaker 1: use the E t N instead, which doesn't have that. 205 00:11:32,320 --> 00:11:36,359 Speaker 1: So it's it's one of these trade offs and investors 206 00:11:36,520 --> 00:11:40,440 Speaker 1: make in the markets in that if you want to own, 207 00:11:40,679 --> 00:11:42,840 Speaker 1: if you want to own an individual MLP, you're gonna 208 00:11:42,840 --> 00:11:46,200 Speaker 1: get issue to K one and in some for some 209 00:11:46,280 --> 00:11:48,959 Speaker 1: advisors that's just not palatable or for some investors that's 210 00:11:49,000 --> 00:11:51,400 Speaker 1: just not palatable. And so if you want to be 211 00:11:51,480 --> 00:11:54,040 Speaker 1: in the MLP space, which is a pass through vehicle 212 00:11:54,160 --> 00:11:58,760 Speaker 1: and has some interesting income characteristics, some tax deferral associated 213 00:11:58,800 --> 00:12:02,199 Speaker 1: with them at means they in order to get a 214 00:12:02,240 --> 00:12:06,000 Speaker 1: diversified pool of MLPs, you have to make some trade 215 00:12:06,000 --> 00:12:09,200 Speaker 1: offs because the RICK structure and i r S guidelines 216 00:12:09,800 --> 00:12:15,520 Speaker 1: cap MLPs of a RICK compliant mutual fund or et F, 217 00:12:15,679 --> 00:12:17,920 Speaker 1: and so the workaround is to create a C corps 218 00:12:18,440 --> 00:12:20,559 Speaker 1: around the e t F and so, without getting too 219 00:12:20,559 --> 00:12:23,120 Speaker 1: far in the weeds, but to answer your question, that 220 00:12:23,200 --> 00:12:28,280 Speaker 1: can create some tax drag in periods of positive performance. Now, 221 00:12:28,520 --> 00:12:31,440 Speaker 1: currently a m l P has what's called a deferred 222 00:12:31,480 --> 00:12:35,040 Speaker 1: tax asset, which means there is no tax drag for 223 00:12:35,040 --> 00:12:40,040 Speaker 1: for the foreseeable future given the near term performance of MLPs, 224 00:12:40,080 --> 00:12:45,120 Speaker 1: and so removing the tax consequences or some of the 225 00:12:45,160 --> 00:12:48,160 Speaker 1: tax complications of of running a C CORPSTF. What I'll 226 00:12:48,200 --> 00:12:53,720 Speaker 1: say is of MLPs distributions historically have been considered tax 227 00:12:53,760 --> 00:12:58,320 Speaker 1: deferred return of capital, which means those that portion of 228 00:12:58,360 --> 00:13:02,040 Speaker 1: your income that's coming into the into the funds just 229 00:13:02,160 --> 00:13:06,280 Speaker 1: lowers your cost basis and isn't taxed in that tax 230 00:13:06,360 --> 00:13:09,360 Speaker 1: here when it's kicked out. And so in that way 231 00:13:09,720 --> 00:13:13,000 Speaker 1: you do have some tax benefits for a taxable investor 232 00:13:13,080 --> 00:13:14,800 Speaker 1: that you don't get it in e t N, which 233 00:13:14,840 --> 00:13:19,000 Speaker 1: is just paying out a stream of income replicating the 234 00:13:19,120 --> 00:13:22,760 Speaker 1: income that's thrown off by the underlying securities in the index. 235 00:13:22,800 --> 00:13:25,960 Speaker 1: And it's taxes as ordinary income, as as any coupon 236 00:13:26,000 --> 00:13:28,559 Speaker 1: payment on a fixed income instrument would be. And so 237 00:13:29,280 --> 00:13:32,079 Speaker 1: so this gets down to sort of asset location and 238 00:13:32,400 --> 00:13:35,240 Speaker 1: tax consideration. So if you're in a I R A 239 00:13:35,559 --> 00:13:38,240 Speaker 1: or a tax defered account, something like an e t 240 00:13:38,360 --> 00:13:40,880 Speaker 1: N might be more appropriate because you're not really concerned 241 00:13:40,920 --> 00:13:45,520 Speaker 1: about tax deferral. And in a taxable account, that tax 242 00:13:45,559 --> 00:13:49,360 Speaker 1: deferral can be significant because let's say that you're an 243 00:13:49,360 --> 00:13:53,239 Speaker 1: older investor who's panning, planning on passing on your investments 244 00:13:53,280 --> 00:13:56,160 Speaker 1: to your children or your grandchildren. You get a step 245 00:13:56,240 --> 00:13:59,400 Speaker 1: up in basis at that point, and that can be 246 00:13:59,679 --> 00:14:03,360 Speaker 1: signal eificant in terms of the state planning and and 247 00:14:03,400 --> 00:14:06,400 Speaker 1: other tools that advisors are now being asked to deliver 248 00:14:06,480 --> 00:14:09,600 Speaker 1: to their clients. And so MLP is the largest, most 249 00:14:09,640 --> 00:14:13,240 Speaker 1: liquid ETF. To your point, it was the first MLP 250 00:14:13,440 --> 00:14:16,360 Speaker 1: only t F launch. We just had our tenure anniversary 251 00:14:16,360 --> 00:14:17,720 Speaker 1: and did a little bit of a bell ring at 252 00:14:17,720 --> 00:14:21,080 Speaker 1: the NYC and some some press around that, and so 253 00:14:22,240 --> 00:14:25,360 Speaker 1: in many ways, as you know better than anybody Eric 254 00:14:25,440 --> 00:14:28,680 Speaker 1: the first mover advantage in ETFs can be significant in 255 00:14:28,720 --> 00:14:32,200 Speaker 1: the right categories, and MLPs have proven to be that 256 00:14:32,320 --> 00:14:37,920 Speaker 1: over time. Now MLP X and the RICK compliant Energy 257 00:14:37,920 --> 00:14:41,400 Speaker 1: Infrastructure Products are sort of apples to oranges in some 258 00:14:41,440 --> 00:14:44,720 Speaker 1: ways to MLP because they capped their MLP exposure at 259 00:14:45,680 --> 00:14:48,840 Speaker 1: which means you mute some of the tax deferral and 260 00:14:49,120 --> 00:14:51,760 Speaker 1: you include some c corps that don't have the same 261 00:14:51,800 --> 00:14:54,360 Speaker 1: structure as an m LP from a tax perspective or 262 00:14:54,360 --> 00:14:57,200 Speaker 1: from a pass through perspective. You still play on the 263 00:14:57,240 --> 00:14:59,960 Speaker 1: same theme. And in recent years, Kinder Morgan in one 264 00:15:00,000 --> 00:15:02,920 Speaker 1: know can some of these large MLPs have converted to 265 00:15:02,960 --> 00:15:07,960 Speaker 1: sea corps. So in many ways, they're all different ways 266 00:15:08,040 --> 00:15:11,680 Speaker 1: to play this theme, which is companies that move that 267 00:15:12,720 --> 00:15:17,000 Speaker 1: process and store crude oil and natural gas, and and 268 00:15:17,440 --> 00:15:19,880 Speaker 1: that's a pretty simple business model. You collect a fee 269 00:15:19,880 --> 00:15:24,160 Speaker 1: for doing that, and that leads to pretty steady cash 270 00:15:24,160 --> 00:15:27,680 Speaker 1: flows relative to other pockets of of the energy complex. 271 00:15:27,840 --> 00:15:29,840 Speaker 1: And so if I'm going to make the case for 272 00:15:29,920 --> 00:15:34,600 Speaker 1: being in the energy infrastructure space, that's it. They historically 273 00:15:34,640 --> 00:15:38,960 Speaker 1: have pretty compelling distributions and and dividends. The yields right 274 00:15:39,000 --> 00:15:42,680 Speaker 1: now in the market in fixed income or in utilities 275 00:15:42,680 --> 00:15:45,560 Speaker 1: of reats or other sort of bond procty sectors is 276 00:15:45,600 --> 00:15:50,040 Speaker 1: somewhat low, and advisors who are trying to generate income 277 00:15:50,120 --> 00:15:53,920 Speaker 1: off the equity allocation in their asset allocation might be 278 00:15:54,000 --> 00:15:57,280 Speaker 1: looking for something like a MLP or the energy infrastructure 279 00:15:57,320 --> 00:16:00,640 Speaker 1: as an alternative, which historically has had pretty low correlations 280 00:16:00,720 --> 00:16:04,520 Speaker 1: to reach in utilities and other income producing asset classes. Sure, 281 00:16:04,520 --> 00:16:05,960 Speaker 1: and I think most people out there who have heard 282 00:16:06,000 --> 00:16:08,400 Speaker 1: of MLPs think of it as yield and just so 283 00:16:08,600 --> 00:16:11,240 Speaker 1: for people who it's master limited partnership, they you know, 284 00:16:11,360 --> 00:16:14,560 Speaker 1: it's these companies that have the pipes that that which 285 00:16:14,600 --> 00:16:17,000 Speaker 1: brings me to another question, which ye say, m LP 286 00:16:17,160 --> 00:16:21,120 Speaker 1: yields four currently, so that's a juicy yield. Mlp X, 287 00:16:21,160 --> 00:16:22,720 Speaker 1: by the way, is half that. So to your point, 288 00:16:22,840 --> 00:16:25,160 Speaker 1: that has more of the MLPs and the higher yield. 289 00:16:25,760 --> 00:16:28,040 Speaker 1: Although now we're in energy, and I know energy has 290 00:16:28,040 --> 00:16:30,440 Speaker 1: had a tough go of it, like have you found 291 00:16:30,440 --> 00:16:34,360 Speaker 1: it difficult that you're in that sector? Yes, you have 292 00:16:34,440 --> 00:16:37,520 Speaker 1: the yield, but your energy energy has really taken it 293 00:16:37,560 --> 00:16:39,600 Speaker 1: on the chin lately. And could we see an energy 294 00:16:39,680 --> 00:16:43,800 Speaker 1: rebound um That's something that I think many people, just 295 00:16:44,120 --> 00:16:46,960 Speaker 1: some people say will never happen. Um, I'm not in 296 00:16:46,960 --> 00:16:48,920 Speaker 1: that camp. I think there will be an energy rebound. 297 00:16:48,920 --> 00:16:51,760 Speaker 1: I don't see energy consumption going down that all that much. 298 00:16:52,120 --> 00:16:54,840 Speaker 1: But what do you say about that? So I think 299 00:16:55,560 --> 00:16:58,400 Speaker 1: you're being a little bit diplomatic and saying that energy 300 00:16:58,440 --> 00:17:01,160 Speaker 1: has been a difficult place to be. It's been an 301 00:17:01,320 --> 00:17:04,560 Speaker 1: awful place to be for certain periods of time recently, 302 00:17:04,720 --> 00:17:07,399 Speaker 1: and so you look at the energies waiting in the 303 00:17:07,480 --> 00:17:10,400 Speaker 1: SMP just as a way to reflect that, and it's 304 00:17:10,800 --> 00:17:13,480 Speaker 1: at its lowest levels in thirty plus years, and that's 305 00:17:13,880 --> 00:17:18,399 Speaker 1: I think aligned really well with this growth value disparity 306 00:17:18,480 --> 00:17:20,160 Speaker 1: that we've seen in the market. And so you can 307 00:17:20,160 --> 00:17:22,280 Speaker 1: sort of relate the too, in the sense that there 308 00:17:22,320 --> 00:17:24,720 Speaker 1: are value managers out there who are pounding the table 309 00:17:24,760 --> 00:17:26,720 Speaker 1: saying value is going to come back, and we get 310 00:17:26,760 --> 00:17:29,960 Speaker 1: these short pops and and value relative to growth, and 311 00:17:29,960 --> 00:17:32,880 Speaker 1: and people say, is this the start of that mean 312 00:17:32,960 --> 00:17:35,520 Speaker 1: reversion as it relates to the value versus growth, and 313 00:17:36,480 --> 00:17:38,199 Speaker 1: those tend to be short lived, or at least they 314 00:17:38,240 --> 00:17:40,639 Speaker 1: have recently. I think energy is very similar to that 315 00:17:40,720 --> 00:17:43,960 Speaker 1: in the sense that we've had these short periods of outperformance. 316 00:17:44,200 --> 00:17:46,760 Speaker 1: People are sort of saying, well, is this the energy renaissance? 317 00:17:46,840 --> 00:17:49,480 Speaker 1: Is this when energy starts to outperform the market and 318 00:17:49,520 --> 00:17:52,440 Speaker 1: retake its leadership in the market, and then you get 319 00:17:52,600 --> 00:17:54,960 Speaker 1: negative headlines, or you get a pause, or you get 320 00:17:55,280 --> 00:17:59,520 Speaker 1: a significant period of extended negative performance. And so I 321 00:17:59,760 --> 00:18:02,720 Speaker 1: don't think that energy is as we currently see it 322 00:18:02,760 --> 00:18:05,080 Speaker 1: goes away anytime soon. I mean, the reality is is 323 00:18:05,119 --> 00:18:10,080 Speaker 1: that natural gas, in any version of the Green New 324 00:18:10,119 --> 00:18:12,840 Speaker 1: Deal or otherwise, is going to be an important bridge 325 00:18:12,960 --> 00:18:16,280 Speaker 1: to a renewable energy future. We we rely on it 326 00:18:16,359 --> 00:18:19,400 Speaker 1: to generate electricity if you're gonna be plugging your car 327 00:18:19,480 --> 00:18:22,720 Speaker 1: into the wall of your garage. That electricity currently isn't 328 00:18:22,760 --> 00:18:25,000 Speaker 1: coming from wind or solar, and it's unlikely to come 329 00:18:25,040 --> 00:18:29,240 Speaker 1: extensively from wind, solar or hydrogen in the future. And 330 00:18:29,280 --> 00:18:32,560 Speaker 1: so natural gas does provide us with the bridge. Crude oil, 331 00:18:32,600 --> 00:18:35,880 Speaker 1: on the other hand, is the one that's perhaps most 332 00:18:35,960 --> 00:18:39,040 Speaker 1: at risk, at least from an existential perspective right now, 333 00:18:39,119 --> 00:18:43,200 Speaker 1: and as we think about more progressive or or overhaul 334 00:18:43,240 --> 00:18:45,800 Speaker 1: of our energy policy. But even then, if you look 335 00:18:45,800 --> 00:18:49,440 Speaker 1: at some of the projections for energy demand going forward, 336 00:18:49,560 --> 00:18:51,880 Speaker 1: a lot of the incremental demand for crude oil isn't 337 00:18:51,880 --> 00:18:55,320 Speaker 1: coming from highway mileage or jet fuel. It's coming from 338 00:18:55,359 --> 00:19:00,359 Speaker 1: petrochemical demand, an emerging market specifically, and that's not likely 339 00:19:00,400 --> 00:19:04,720 Speaker 1: to subside anytime soon. And so there are these structural 340 00:19:04,800 --> 00:19:08,199 Speaker 1: challenges facing the legacy fossil fuel industry that I think 341 00:19:08,240 --> 00:19:11,399 Speaker 1: are real and and investors have to be wary of. 342 00:19:11,560 --> 00:19:14,800 Speaker 1: But as it relates to midstream energy infrastructure, I mean, 343 00:19:14,800 --> 00:19:19,120 Speaker 1: the reality is is that pipelines are valuable assets. And 344 00:19:19,359 --> 00:19:21,399 Speaker 1: if you look at the d A p L news 345 00:19:21,440 --> 00:19:24,720 Speaker 1: where there was an attempt to shut down this pipeline 346 00:19:24,760 --> 00:19:27,520 Speaker 1: that was already operating for an environmental review and then 347 00:19:27,520 --> 00:19:31,000 Speaker 1: a court stay and then an abandonment of a pipeline 348 00:19:31,000 --> 00:19:33,960 Speaker 1: on the East Coast, I mean, if anything, that means 349 00:19:34,000 --> 00:19:36,800 Speaker 1: that existing pipelines are more valuable than they were because 350 00:19:36,800 --> 00:19:38,600 Speaker 1: they're gonna be harder to build and harder to get 351 00:19:38,600 --> 00:19:44,280 Speaker 1: approval for. And the production in the United States, whether 352 00:19:44,320 --> 00:19:47,240 Speaker 1: it's in any of these various basins where fracking is 353 00:19:47,280 --> 00:19:50,160 Speaker 1: going on in natural gas and crude oil is being produced, 354 00:19:50,880 --> 00:19:55,680 Speaker 1: those pipes connect that to the various demand sights, whether 355 00:19:55,720 --> 00:19:58,040 Speaker 1: it be a refining facility for crude oil or whether 356 00:19:58,080 --> 00:20:00,159 Speaker 1: it be utility site and that's going to contin need 357 00:20:00,200 --> 00:20:03,119 Speaker 1: to be the case. Now, if you're an investor and 358 00:20:03,240 --> 00:20:05,840 Speaker 1: you have some energy exposure, whether it's a m LP 359 00:20:06,119 --> 00:20:08,840 Speaker 1: or something like let's say x l E Abroad Energy 360 00:20:08,920 --> 00:20:11,600 Speaker 1: TF that includes the integrated companies and some of those 361 00:20:11,680 --> 00:20:15,479 Speaker 1: large oil oil service companies, well, I do think that 362 00:20:15,520 --> 00:20:19,000 Speaker 1: it's prudent to think about how you can pair that 363 00:20:19,320 --> 00:20:22,959 Speaker 1: legacy fossil fuel or legacy energy position with something a 364 00:20:23,000 --> 00:20:26,960 Speaker 1: little bit more growth oriented or maybe even an option 365 00:20:27,040 --> 00:20:30,840 Speaker 1: on some of these emerging technologies in the energy space. 366 00:20:30,880 --> 00:20:34,159 Speaker 1: And so you talk about the thel C t F 367 00:20:34,240 --> 00:20:38,119 Speaker 1: lineup and ACES, which is our renewable energy TF is 368 00:20:38,160 --> 00:20:40,920 Speaker 1: something that we talk to advisors a lot about combining 369 00:20:40,920 --> 00:20:44,560 Speaker 1: with say MLP or a legacy energy position as a 370 00:20:44,600 --> 00:20:47,480 Speaker 1: way to to sort of pair the current with the future. 371 00:20:48,160 --> 00:20:51,080 Speaker 1: I want to talk about ACES more, uh, Paul, because 372 00:20:51,119 --> 00:20:56,040 Speaker 1: that's had a great year, like sixty year to date 373 00:20:56,040 --> 00:20:59,320 Speaker 1: that it's up right, what what exactly are you guys 374 00:20:59,320 --> 00:21:04,120 Speaker 1: are accomplishing in that fund? So it fits within this 375 00:21:04,200 --> 00:21:08,080 Speaker 1: thematic lineup of ETFs that that s sn C ALPS 376 00:21:08,080 --> 00:21:11,000 Speaker 1: has launched in the past couple of years, and it 377 00:21:11,080 --> 00:21:15,200 Speaker 1: tries to give you a blended exposure to a range 378 00:21:15,240 --> 00:21:18,400 Speaker 1: of different themes within a theme. And what I mean 379 00:21:18,400 --> 00:21:20,639 Speaker 1: by that is you think about renewable energy, and people 380 00:21:20,720 --> 00:21:23,520 Speaker 1: might think of wind or solar, but there's also fuel 381 00:21:23,560 --> 00:21:28,160 Speaker 1: cell technology and battery technology, hydrogen for example, that are 382 00:21:28,200 --> 00:21:31,400 Speaker 1: all part of this broader renewable energy push and are 383 00:21:31,400 --> 00:21:33,080 Speaker 1: all going to have a role to play in the 384 00:21:33,119 --> 00:21:36,439 Speaker 1: future energy mix within the country. And so what ACES 385 00:21:36,520 --> 00:21:39,639 Speaker 1: tries to do is give you exposure to all of 386 00:21:39,680 --> 00:21:43,200 Speaker 1: those themes in a way that maybe a pure play 387 00:21:43,240 --> 00:21:45,720 Speaker 1: solar fund when in or maybe a pure play wind 388 00:21:45,800 --> 00:21:48,200 Speaker 1: fund would not. And and I think that's why it's 389 00:21:48,200 --> 00:21:50,760 Speaker 1: been popular. I mean, it's over three million in assets 390 00:21:50,760 --> 00:21:53,320 Speaker 1: now to your point, you're a day performance has been 391 00:21:53,359 --> 00:21:57,120 Speaker 1: really compelling, and I think advisors are starting to use 392 00:21:57,200 --> 00:22:00,480 Speaker 1: it in the way that I described as a complement 393 00:22:00,720 --> 00:22:05,800 Speaker 1: to their legacy energy position, because the reality is you 394 00:22:05,800 --> 00:22:09,800 Speaker 1: can get a diversified energy sectory t F for example, 395 00:22:10,280 --> 00:22:13,919 Speaker 1: for less than ten basis ones, but you might be 396 00:22:13,960 --> 00:22:15,920 Speaker 1: willing to pay up a little bit from an expense 397 00:22:16,000 --> 00:22:19,960 Speaker 1: ratio perspective to get the growth oriented nature of renewable 398 00:22:20,080 --> 00:22:23,040 Speaker 1: energy exposure as a complement to that, and it's not 399 00:22:23,400 --> 00:22:26,760 Speaker 1: that you don't necessarily have exposure to some of those 400 00:22:26,800 --> 00:22:30,040 Speaker 1: themes in your portfolio through the SMP five hundred or 401 00:22:30,320 --> 00:22:32,840 Speaker 1: or you're diversified equity e t F because a lot 402 00:22:32,880 --> 00:22:36,320 Speaker 1: of these things sort of blur the line between technology 403 00:22:36,359 --> 00:22:39,840 Speaker 1: and energy because that's just the nature of renewable energy 404 00:22:39,880 --> 00:22:43,879 Speaker 1: development and production. But when you get it targeted in 405 00:22:43,920 --> 00:22:48,320 Speaker 1: this way, you do in many ways provide yourself with 406 00:22:48,359 --> 00:22:52,679 Speaker 1: some optionality on these these legacy fossil fuel companies, the 407 00:22:52,680 --> 00:22:55,600 Speaker 1: exons of chevrons of the world. And this is, uh, 408 00:22:55,720 --> 00:22:58,320 Speaker 1: this one's getting a huge kick from Tesla, So Tesla 409 00:22:58,400 --> 00:23:02,680 Speaker 1: is the top holding that that that helps UM. But yeah, 410 00:23:02,720 --> 00:23:04,960 Speaker 1: this is It's interesting when you think about E s G, 411 00:23:06,440 --> 00:23:08,880 Speaker 1: A lot of people think about like taking companies out 412 00:23:08,920 --> 00:23:12,359 Speaker 1: that are bad, right, this is not really that. This 413 00:23:12,440 --> 00:23:14,960 Speaker 1: is more of a theme fund going for a small 414 00:23:14,960 --> 00:23:17,560 Speaker 1: group of companies that are trying to make money in 415 00:23:17,600 --> 00:23:21,520 Speaker 1: the clean energy sector. Totally different. So it's probably this 416 00:23:21,560 --> 00:23:25,240 Speaker 1: would probably get classified under E s G. It's a 417 00:23:25,600 --> 00:23:28,199 Speaker 1: in a big tent kind of way, but it is 418 00:23:28,240 --> 00:23:30,520 Speaker 1: not E s G per se. It's more of a 419 00:23:30,680 --> 00:23:34,560 Speaker 1: play on a growth area. Yeah, I think you hit 420 00:23:34,560 --> 00:23:36,320 Speaker 1: the nail on the head. In fact, it did get 421 00:23:36,359 --> 00:23:42,160 Speaker 1: the blessing of the E s G reviewers, if you will. 422 00:23:42,240 --> 00:23:45,320 Speaker 1: But to your point, it's not a fund that's taking 423 00:23:45,320 --> 00:23:49,240 Speaker 1: the whole market and screening companies based on an E 424 00:23:49,440 --> 00:23:52,640 Speaker 1: s G methodology by Bloomberger M s c I. It's 425 00:23:52,680 --> 00:23:56,240 Speaker 1: simply a strategy that happens to fit within the construct 426 00:23:56,280 --> 00:23:58,640 Speaker 1: of how people think about E s G. At one 427 00:23:58,640 --> 00:24:00,520 Speaker 1: point about E s G that I think is worth 428 00:24:00,560 --> 00:24:03,320 Speaker 1: mentioning is people focus on the E, and they focus 429 00:24:03,359 --> 00:24:05,920 Speaker 1: on the S. And certainly aces would in theory fit 430 00:24:05,960 --> 00:24:09,960 Speaker 1: the E to uh perhaps a capital E. But the 431 00:24:10,040 --> 00:24:12,919 Speaker 1: G and that is is really important and and it 432 00:24:13,000 --> 00:24:15,320 Speaker 1: gets sort of lost in the shuffle of of a 433 00:24:15,359 --> 00:24:18,400 Speaker 1: lot of E s G conversations. And so there are 434 00:24:18,480 --> 00:24:22,160 Speaker 1: pockets in the market that are making strong governance improvements 435 00:24:22,240 --> 00:24:25,600 Speaker 1: that don't necessarily fit that E or that S in 436 00:24:25,720 --> 00:24:27,800 Speaker 1: most investor minds, and a m l P is one 437 00:24:27,840 --> 00:24:29,600 Speaker 1: of those. And I just mentioned it not to sort 438 00:24:29,600 --> 00:24:32,639 Speaker 1: of force it in here, but just to remind investors 439 00:24:32,640 --> 00:24:35,440 Speaker 1: and advisors that that G part is really important, because 440 00:24:35,440 --> 00:24:38,840 Speaker 1: you can have a technology company that the knocks it 441 00:24:38,840 --> 00:24:40,639 Speaker 1: out of the park on the E and the S, 442 00:24:40,840 --> 00:24:44,399 Speaker 1: but their governance might not be as strong as you 443 00:24:44,520 --> 00:24:47,359 Speaker 1: might need it to be given the goal of a 444 00:24:47,400 --> 00:24:50,359 Speaker 1: broader E s G initiative. This is a huge problem 445 00:24:50,359 --> 00:24:53,920 Speaker 1: for E s G what you're tapping into, because they 446 00:24:54,000 --> 00:24:57,320 Speaker 1: there's just images people have of energy or oil, but 447 00:24:57,359 --> 00:24:59,040 Speaker 1: they forget the S and the G. I think in 448 00:24:59,160 --> 00:25:03,040 Speaker 1: just capitals, E T F XN is in there um 449 00:25:03,200 --> 00:25:05,639 Speaker 1: been if if energy has a rally, I think E 450 00:25:05,800 --> 00:25:08,439 Speaker 1: s G people that have completely excluded energy are going 451 00:25:08,480 --> 00:25:12,160 Speaker 1: to be unhappy for however long that rally lasts. But 452 00:25:12,320 --> 00:25:13,680 Speaker 1: on the other on the other flip side, I will 453 00:25:13,680 --> 00:25:15,600 Speaker 1: push back on the G a little. There's an interesting 454 00:25:15,600 --> 00:25:18,119 Speaker 1: came with Berkshire. Berkshire is not in like any E 455 00:25:18,280 --> 00:25:20,920 Speaker 1: S G T S because the governance I think it's 456 00:25:20,960 --> 00:25:24,240 Speaker 1: fift independent board and the average is like eighty six 457 00:25:24,320 --> 00:25:28,560 Speaker 1: or something, and Buffets like, yeah, I've been on independent boards. 458 00:25:28,560 --> 00:25:32,119 Speaker 1: They're not independent. And it's an interesting issue because it's 459 00:25:32,119 --> 00:25:36,520 Speaker 1: Buffett talking. And that's why E s G is like, um, 460 00:25:36,560 --> 00:25:39,920 Speaker 1: how did Churchill describe Russia a labyrinth wrapped in a 461 00:25:40,000 --> 00:25:43,359 Speaker 1: mystery inside a riddle? I feel like that's E s 462 00:25:43,400 --> 00:25:47,119 Speaker 1: G for me. I constantly find contradictions and things that 463 00:25:47,240 --> 00:25:50,639 Speaker 1: over overrule the other thing. But your point is a 464 00:25:50,640 --> 00:25:54,360 Speaker 1: good one, Paul. The G can actually you know, there's 465 00:25:54,359 --> 00:25:56,440 Speaker 1: a waiting to it that and a lot of people 466 00:25:56,440 --> 00:25:58,560 Speaker 1: have said this that the G is actually more important 467 00:25:58,560 --> 00:26:00,600 Speaker 1: than the E and the S. Want to talk about 468 00:26:00,600 --> 00:26:05,760 Speaker 1: the dogs though, Right, this is another uh success for 469 00:26:05,800 --> 00:26:08,720 Speaker 1: you guys. And it's based on the dogs of the 470 00:26:08,760 --> 00:26:12,639 Speaker 1: Dow theory, right, can you explain that? Yeah? So, in 471 00:26:12,680 --> 00:26:14,960 Speaker 1: the most simple terms, the dogs of the Dow theory 472 00:26:15,080 --> 00:26:17,840 Speaker 1: just said, of those dirty companies in the Dow Jones 473 00:26:17,880 --> 00:26:22,160 Speaker 1: Industrial Average, the ones with the highest yields are effectively 474 00:26:22,560 --> 00:26:24,920 Speaker 1: the companies that you want to own the next year, 475 00:26:24,960 --> 00:26:29,239 Speaker 1: because based on mean reversion or historical performance, those are 476 00:26:29,240 --> 00:26:31,439 Speaker 1: the ones that are most likely to outperform the market 477 00:26:31,640 --> 00:26:34,520 Speaker 1: on a go forward basis. And so what the dogs do? 478 00:26:34,640 --> 00:26:37,240 Speaker 1: And it started with s dog, which is really sort 479 00:26:37,280 --> 00:26:39,680 Speaker 1: of an old DTF that's been around quite a while 480 00:26:39,800 --> 00:26:43,359 Speaker 1: and has been used by a wide range of advisors 481 00:26:43,359 --> 00:26:46,159 Speaker 1: and investors over a long period of time. It was 482 00:26:46,200 --> 00:26:48,560 Speaker 1: one I remember back at my et F dot com 483 00:26:48,640 --> 00:26:52,359 Speaker 1: day's interacting with Jeremy Held, a former ALPS guy, about 484 00:26:52,440 --> 00:26:54,359 Speaker 1: and trying to understand what they were trying to achieve 485 00:26:54,400 --> 00:26:56,000 Speaker 1: with it, and it's pretty simple. You just sort of 486 00:26:56,359 --> 00:26:59,800 Speaker 1: take the highest yielding stocks from the ten at the 487 00:26:59,800 --> 00:27:02,119 Speaker 1: time time and now eleven different sectors of the market, 488 00:27:02,440 --> 00:27:06,679 Speaker 1: and you don't have market weights on the sectors. You 489 00:27:06,680 --> 00:27:08,679 Speaker 1: have equal weights to all of the sectors, and so 490 00:27:08,720 --> 00:27:12,080 Speaker 1: the idea is you're just sort of maximizing your exposure 491 00:27:12,240 --> 00:27:14,760 Speaker 1: to the to the companies with the highest yield which 492 00:27:15,040 --> 00:27:17,879 Speaker 1: within each sector of the market. And it's a different 493 00:27:17,920 --> 00:27:20,119 Speaker 1: way to look at value. It's a different way to 494 00:27:20,160 --> 00:27:24,200 Speaker 1: look at yields. And you think about most dividend strategies, 495 00:27:24,200 --> 00:27:28,760 Speaker 1: they take the whole market, they do some simple in 496 00:27:28,800 --> 00:27:32,159 Speaker 1: the case of some of the first generation dividend ETFs 497 00:27:32,960 --> 00:27:35,639 Speaker 1: screens for the highest yielding stocks, maybe they try and 498 00:27:35,680 --> 00:27:37,879 Speaker 1: protect that yield a little bit by payout ratio or 499 00:27:37,920 --> 00:27:40,240 Speaker 1: something to that effect, and then you just wait them 500 00:27:40,240 --> 00:27:42,159 Speaker 1: based on that score, and you end up having a 501 00:27:42,160 --> 00:27:45,119 Speaker 1: lot of exposure to utilities, into staples and some of 502 00:27:45,119 --> 00:27:47,440 Speaker 1: the sort of higher yielding sectors of the market sort 503 00:27:47,440 --> 00:27:50,320 Speaker 1: of by definition. And then you have some of the 504 00:27:50,440 --> 00:27:54,240 Speaker 1: other strategies, which are aristocratic strategies, which look at companies 505 00:27:54,240 --> 00:27:56,640 Speaker 1: that have paid dividends for twenty years, or grown dividends 506 00:27:56,640 --> 00:27:59,240 Speaker 1: for twenty years, or perhaps you do something that's a 507 00:27:59,280 --> 00:28:01,679 Speaker 1: little bit more of the thodical or quantitative in nature, 508 00:28:02,080 --> 00:28:05,359 Speaker 1: trying to screen out for the quality of that income stream. 509 00:28:05,400 --> 00:28:07,680 Speaker 1: And so you have all of these different approaches to 510 00:28:07,760 --> 00:28:12,040 Speaker 1: dividends which are really aligned closely with the value strategy, 511 00:28:12,119 --> 00:28:15,160 Speaker 1: because the dividend factor tends to to look a lot 512 00:28:15,200 --> 00:28:18,359 Speaker 1: like the value factor over time. But the Dogs is 513 00:28:18,400 --> 00:28:23,080 Speaker 1: just different because it takes this really old world Wall 514 00:28:23,160 --> 00:28:26,680 Speaker 1: Street strategy, the dogs of the doubt theory, and applies 515 00:28:26,720 --> 00:28:28,520 Speaker 1: it in in the E T F Rapper, and it 516 00:28:28,600 --> 00:28:30,320 Speaker 1: was one of the first to do it, which I 517 00:28:30,359 --> 00:28:34,440 Speaker 1: think makes it really relatable to advisors. And then we've 518 00:28:34,760 --> 00:28:36,840 Speaker 1: we've applied it to other markets. So we've got an 519 00:28:36,840 --> 00:28:40,320 Speaker 1: emerging markets and an international and then more recently a 520 00:28:40,400 --> 00:28:43,280 Speaker 1: real estate dog. And it's it's worth mentioning that that 521 00:28:43,640 --> 00:28:46,880 Speaker 1: S Networks, the creator of those indexes, is now part 522 00:28:46,880 --> 00:28:49,719 Speaker 1: of the Allarian family of indexes, and Hillaryan is our 523 00:28:49,800 --> 00:28:52,600 Speaker 1: partner on on MLP and e n F are the 524 00:28:52,600 --> 00:28:55,960 Speaker 1: the index provider for those strategies. And so in some ways, 525 00:28:56,920 --> 00:29:03,760 Speaker 1: this relationship between issuer and inde provider is being reflected 526 00:29:04,360 --> 00:29:06,960 Speaker 1: in in at S sinc Alps in a way that 527 00:29:07,520 --> 00:29:10,280 Speaker 1: is perhaps unique to the industry, given the changes that 528 00:29:10,320 --> 00:29:13,160 Speaker 1: have been made between self indexing or otherwise. And you 529 00:29:13,200 --> 00:29:16,440 Speaker 1: broke up something interesting, S Dog spawn E Dog and 530 00:29:16,560 --> 00:29:20,080 Speaker 1: there's a there's a three or four dogs now, um, 531 00:29:20,120 --> 00:29:22,680 Speaker 1: And when you have a hit E t F do 532 00:29:22,720 --> 00:29:24,880 Speaker 1: you meet in a room and say, okay, we should 533 00:29:24,880 --> 00:29:26,800 Speaker 1: just run with this a little bit. And and like 534 00:29:26,840 --> 00:29:28,520 Speaker 1: a movie, if you have a hit movie, you come 535 00:29:28,520 --> 00:29:31,280 Speaker 1: out with a sequel. Yeah, it's it's a good question. 536 00:29:31,360 --> 00:29:33,960 Speaker 1: I mean, I've only been at S sinc Alps since 537 00:29:34,000 --> 00:29:36,720 Speaker 1: the beginning of the year, and so I haven't been 538 00:29:37,120 --> 00:29:40,120 Speaker 1: in a lot of those product development sessions. Now, I 539 00:29:40,200 --> 00:29:43,080 Speaker 1: have been in product development sessions at other firms, and 540 00:29:43,120 --> 00:29:46,040 Speaker 1: so I do think that if you have a strategy 541 00:29:46,080 --> 00:29:49,120 Speaker 1: that's successful and it makes sense to port it to 542 00:29:49,200 --> 00:29:54,560 Speaker 1: a different market, whether it be region specific, development specific, 543 00:29:54,800 --> 00:29:58,200 Speaker 1: or even cap specific, certainly firms are going to do 544 00:29:58,240 --> 00:30:00,920 Speaker 1: the research and determine if it makes sense to launch 545 00:30:00,920 --> 00:30:03,760 Speaker 1: those products. And I think S Dog was certainly a 546 00:30:03,800 --> 00:30:07,160 Speaker 1: template for the dog and Eyed Dog and our dog. Um, 547 00:30:07,160 --> 00:30:09,320 Speaker 1: there's another name in the lineup of your E t F. 548 00:30:09,440 --> 00:30:11,160 Speaker 1: I want to talk about river Front. You've got a 549 00:30:11,160 --> 00:30:13,000 Speaker 1: couple of e t s with river Front in the name. 550 00:30:14,400 --> 00:30:16,000 Speaker 1: I want you to go into them. But I recall 551 00:30:16,080 --> 00:30:17,880 Speaker 1: when I wrote my E t F book river Front, 552 00:30:18,040 --> 00:30:19,760 Speaker 1: I refer to them as the e t F whisper 553 00:30:20,600 --> 00:30:23,000 Speaker 1: because a lot of firms were going to them because 554 00:30:23,000 --> 00:30:25,360 Speaker 1: they are master They use E t s and their models, 555 00:30:25,800 --> 00:30:28,000 Speaker 1: and they were telling the e t F firm, hey, 556 00:30:28,040 --> 00:30:30,240 Speaker 1: you should come out with this. One of those products 557 00:30:30,320 --> 00:30:32,880 Speaker 1: is b KLN to invest Go. I think another one 558 00:30:32,960 --> 00:30:34,680 Speaker 1: was s p l V M lp X I think 559 00:30:34,720 --> 00:30:36,960 Speaker 1: was one. I think they told Jeremy Schwartz at Wisdom 560 00:30:36,960 --> 00:30:40,160 Speaker 1: Tree they should make d x J lean towards exporters 561 00:30:40,200 --> 00:30:43,560 Speaker 1: before d x J blew up. And then I get 562 00:30:43,600 --> 00:30:45,480 Speaker 1: the feeling they were like, hey, we're tired of giving 563 00:30:45,480 --> 00:30:49,160 Speaker 1: away all our our ideas, but now there's three of 564 00:30:49,200 --> 00:30:53,600 Speaker 1: them branded under your product lineup. How did that happen 565 00:30:53,680 --> 00:30:57,840 Speaker 1: and what do they do? So I think river Front 566 00:30:57,920 --> 00:31:01,080 Speaker 1: is a great example of these early E t F 567 00:31:01,520 --> 00:31:06,040 Speaker 1: strategists that have in many ways help shape the E 568 00:31:06,160 --> 00:31:08,280 Speaker 1: t F industry as as you described. I mean you 569 00:31:08,280 --> 00:31:11,160 Speaker 1: think about med Faber and Cambria. There's there's a number 570 00:31:11,200 --> 00:31:14,320 Speaker 1: of these firms. Even Adelman worked with black Robe, I 571 00:31:14,360 --> 00:31:16,720 Speaker 1: believe to to launch some ETFs or at least to 572 00:31:16,720 --> 00:31:19,400 Speaker 1: help conceive some et F strategies, and so I think 573 00:31:19,400 --> 00:31:22,920 Speaker 1: that feedback loop has been very positive in terms of 574 00:31:23,280 --> 00:31:26,720 Speaker 1: innovation and et F strategy development. And and river Front 575 00:31:26,720 --> 00:31:29,800 Speaker 1: I've known forever, I mean Rob Glaunia and I sort 576 00:31:29,800 --> 00:31:32,160 Speaker 1: of go way back, and I've moderated some panels with 577 00:31:32,240 --> 00:31:33,880 Speaker 1: him and inside e t F s, and so I've 578 00:31:33,920 --> 00:31:36,360 Speaker 1: always been really familiar with the firm. But I mean 579 00:31:36,800 --> 00:31:41,400 Speaker 1: as RIGGS, for example, the Riverfront Strategic Income Fund relates 580 00:31:41,440 --> 00:31:44,080 Speaker 1: to the broader SS and C ALPS business I think 581 00:31:44,680 --> 00:31:50,120 Speaker 1: is probably more revealing than sort of digging into the 582 00:31:50,160 --> 00:31:53,520 Speaker 1: individual strategies themselves, in the sense that ALPS has this 583 00:31:53,640 --> 00:31:57,480 Speaker 1: really unique business where we we have a ton of 584 00:31:57,600 --> 00:32:02,520 Speaker 1: different partners, whether it be in ex providers or advisors 585 00:32:02,600 --> 00:32:07,480 Speaker 1: who we partner with either from a distribution perspective, remember 586 00:32:07,520 --> 00:32:12,000 Speaker 1: ALPS is the distribution partner for the select sector spiders. 587 00:32:12,080 --> 00:32:14,880 Speaker 1: And then you have a strategy like RIGS, which is 588 00:32:14,920 --> 00:32:18,520 Speaker 1: sort of a multi asset income strategy designed and built 589 00:32:18,680 --> 00:32:24,960 Speaker 1: by Riverfront that needed the infrastructure to manage and to 590 00:32:25,440 --> 00:32:28,680 Speaker 1: actually execute on that e t F and the and 591 00:32:28,800 --> 00:32:31,560 Speaker 1: the piping the infrastructure and then e t F, whether 592 00:32:31,640 --> 00:32:35,240 Speaker 1: it be the day to day operations or otherwise, is 593 00:32:35,320 --> 00:32:38,000 Speaker 1: critically important to the success of an ETF, and that's 594 00:32:38,080 --> 00:32:41,160 Speaker 1: one of the sort of mini services that ALPS as 595 00:32:41,160 --> 00:32:44,120 Speaker 1: a broader brand offers to firms like Riverfront, and so 596 00:32:45,120 --> 00:32:48,640 Speaker 1: I think the the idea is is that historically, some 597 00:32:48,720 --> 00:32:52,240 Speaker 1: of these advisors have gone out in monstero mutual fund, 598 00:32:52,280 --> 00:32:54,160 Speaker 1: which is just an easier way to to sort of 599 00:32:54,160 --> 00:32:58,560 Speaker 1: wrap up their strategies for their clients. Instead of cobbling 600 00:32:58,600 --> 00:33:01,360 Speaker 1: together a mix of different mutual funds, you sort of 601 00:33:01,360 --> 00:33:04,280 Speaker 1: have your one stop shop mutual fund that provides you 602 00:33:04,320 --> 00:33:07,080 Speaker 1: the exposure that you need for those smaller clients. And 603 00:33:07,400 --> 00:33:11,080 Speaker 1: the ETF rapper just happens to be the latest evolution 604 00:33:11,120 --> 00:33:14,240 Speaker 1: in that product delivery mechanism that allows a firm like 605 00:33:14,360 --> 00:33:18,080 Speaker 1: Riverfront to deliver on some of these And the added 606 00:33:18,120 --> 00:33:21,560 Speaker 1: benefit is that, unlike a mutual fund, anybody can buy 607 00:33:21,800 --> 00:33:24,440 Speaker 1: the t F and so in theory, you know only 608 00:33:24,720 --> 00:33:28,280 Speaker 1: have this mechanism to deliver your strategies to your existing clients. 609 00:33:28,640 --> 00:33:31,880 Speaker 1: You open up the door to all of these other 610 00:33:31,920 --> 00:33:35,880 Speaker 1: potential clients and and in theory, leverage the ALPS distribution 611 00:33:36,800 --> 00:33:40,960 Speaker 1: team to help deliver that to a wider audience. You 612 00:33:41,000 --> 00:33:43,880 Speaker 1: go way back right. I remember listening to the podcast 613 00:33:43,960 --> 00:33:47,520 Speaker 1: with you and you go Eggboniki. I think, I know, 614 00:33:47,600 --> 00:33:49,080 Speaker 1: I see him once in a while. He's great. He's 615 00:33:49,080 --> 00:33:51,520 Speaker 1: one of my favorite people. I know. You guys had 616 00:33:51,560 --> 00:33:53,840 Speaker 1: a nice little spark. You followed David Matt, who was 617 00:33:53,920 --> 00:33:55,640 Speaker 1: tough act to follow, but you did a great job. 618 00:33:56,640 --> 00:34:00,800 Speaker 1: Those podcasts were like graduate school for me at the time. 619 00:34:01,600 --> 00:34:04,600 Speaker 1: And again we're talking about E T S had a 620 00:34:04,600 --> 00:34:07,480 Speaker 1: trillion back then. What inning are we in Now? You 621 00:34:07,560 --> 00:34:09,600 Speaker 1: have that base knowledge, Now you're on the road talking 622 00:34:09,600 --> 00:34:13,239 Speaker 1: to advisors. So where do you see this going? Both 623 00:34:13,280 --> 00:34:15,399 Speaker 1: E T F s and passive as a percentage of 624 00:34:15,480 --> 00:34:19,239 Speaker 1: the market. Well, I think the point about David Matt, 625 00:34:19,280 --> 00:34:21,600 Speaker 1: I think is an interesting one ten years ago because 626 00:34:21,640 --> 00:34:23,600 Speaker 1: what was it three or four years ago where their 627 00:34:23,640 --> 00:34:26,000 Speaker 1: own stage and E T F are gonna get disrupted 628 00:34:26,000 --> 00:34:30,480 Speaker 1: by direct indexing, which, by the way, we've pushed back 629 00:34:30,520 --> 00:34:31,880 Speaker 1: on that a little bit. I think they got a 630 00:34:31,880 --> 00:34:35,560 Speaker 1: little ahead of themselves. I think direct indexing make carve 631 00:34:35,640 --> 00:34:37,960 Speaker 1: out a five percent niche, but I just don't see 632 00:34:38,000 --> 00:34:39,719 Speaker 1: it disrupting. I don't know if you have a different take. 633 00:34:40,120 --> 00:34:43,040 Speaker 1: I was aligned with them, and I still think that 634 00:34:43,080 --> 00:34:45,480 Speaker 1: direct indexing will have a large role to play. But 635 00:34:45,560 --> 00:34:48,600 Speaker 1: I think it it's one of those sort of old 636 00:34:48,640 --> 00:34:51,520 Speaker 1: adages where people overestimate what can be done in a 637 00:34:51,600 --> 00:34:53,920 Speaker 1: year and underestimate what can be done in five and 638 00:34:53,960 --> 00:34:56,480 Speaker 1: so I think in some ways direct indexing is an 639 00:34:56,520 --> 00:34:59,200 Speaker 1: example of that. But I do think that the e 640 00:34:59,360 --> 00:35:01,600 Speaker 1: t F asset base is going to continue to grow, 641 00:35:01,640 --> 00:35:05,720 Speaker 1: both through the market move and through increased adoption. I mean, again, 642 00:35:05,800 --> 00:35:08,120 Speaker 1: we talked about the structural drivers of e t F 643 00:35:08,120 --> 00:35:09,920 Speaker 1: flows and I think that will continue. But I do 644 00:35:10,000 --> 00:35:14,320 Speaker 1: think that there are disruptive forces out there that will 645 00:35:14,400 --> 00:35:17,759 Speaker 1: challenge the the e t F orthodoxy, and whether that 646 00:35:17,840 --> 00:35:21,799 Speaker 1: be token ized versions of an smp F t F 647 00:35:22,120 --> 00:35:25,719 Speaker 1: that exists on a blockchain and perhaps even lowers the 648 00:35:25,800 --> 00:35:29,040 Speaker 1: cost of of getting exposure and lowering the friction of 649 00:35:29,040 --> 00:35:32,520 Speaker 1: getting exposure to the SMP five hundred in the version 650 00:35:32,600 --> 00:35:34,399 Speaker 1: that that exists now in an e t F. I mean, 651 00:35:34,400 --> 00:35:37,880 Speaker 1: there are threats and and that's one of the beauties 652 00:35:37,960 --> 00:35:40,240 Speaker 1: of this market and of this industry in some ways 653 00:35:40,280 --> 00:35:43,040 Speaker 1: is that there's always innovation taking place, and and the 654 00:35:43,040 --> 00:35:45,360 Speaker 1: minute you rest on your laurels, no matter how great 655 00:35:45,880 --> 00:35:48,640 Speaker 1: this e t F run has been, you have to 656 00:35:48,680 --> 00:35:51,640 Speaker 1: be aware of them and try to understand them so 657 00:35:51,680 --> 00:35:54,040 Speaker 1: that you can do your own job better and hopefully 658 00:35:54,520 --> 00:35:57,120 Speaker 1: provide the clients that you're working with, regardless of what 659 00:35:57,200 --> 00:36:00,319 Speaker 1: step you are in the value chain. Alright, Paul, I 660 00:36:00,360 --> 00:36:03,560 Speaker 1: gotta ask my closing question, what's your favorite et F ticker, 661 00:36:07,280 --> 00:36:09,600 Speaker 1: what's your favorite ALPS ticker? And what's your favorite non 662 00:36:09,600 --> 00:36:14,640 Speaker 1: ALPS ticker? So I love Aces just because it's a 663 00:36:15,160 --> 00:36:17,520 Speaker 1: it's a great product, but also I just think it's 664 00:36:17,520 --> 00:36:21,440 Speaker 1: a great ticker. I mean, MLP is one of those 665 00:36:21,680 --> 00:36:29,680 Speaker 1: really what's the word I'm looking specific and like straightforward, right, 666 00:36:29,719 --> 00:36:31,520 Speaker 1: I mean, there's not a lot of nuance to it. 667 00:36:31,320 --> 00:36:34,120 Speaker 1: It says exactly what it is right out of the gate. 668 00:36:34,400 --> 00:36:39,320 Speaker 1: And so I think robos a cool ticker. I've always 669 00:36:39,400 --> 00:36:46,080 Speaker 1: been sort of fascinated by the tickers that explain what 670 00:36:46,239 --> 00:36:50,080 Speaker 1: the fund does in four letters in a way that 671 00:36:50,719 --> 00:36:53,280 Speaker 1: you wouldn't have thought was possible. And and what's funny 672 00:36:53,400 --> 00:36:56,200 Speaker 1: is is you know, just to sort of go inside 673 00:36:56,200 --> 00:36:59,480 Speaker 1: Baseball a little bit. I think more et f issuers 674 00:36:59,600 --> 00:37:03,440 Speaker 1: than you think. Go to Urban Dictionary when trying to 675 00:37:03,520 --> 00:37:07,560 Speaker 1: determine what their tickers are. All right, Paul Backy, thank 676 00:37:07,560 --> 00:37:10,280 Speaker 1: you so much for joining us on Trillions. My pleasure. 677 00:37:10,280 --> 00:37:12,000 Speaker 1: This is great. Thank you guys. Have a great rest 678 00:37:12,040 --> 00:37:17,320 Speaker 1: of your week in Labor Day weekend. Thanks for listening 679 00:37:17,360 --> 00:37:19,680 Speaker 1: to Trillions. Until next time. You can find us on 680 00:37:19,680 --> 00:37:24,040 Speaker 1: the Boomberg terminal, Bloomberg dot com, Apple Podcast, Spotify, and 681 00:37:24,080 --> 00:37:26,279 Speaker 1: whatever else you like to listen. We'd love to hear 682 00:37:26,280 --> 00:37:28,719 Speaker 1: from you. We're on Twitter, I'm at Joel Webber Show, 683 00:37:29,200 --> 00:37:32,719 Speaker 1: He's at Eric Faltunus, and you find more about Alps 684 00:37:32,760 --> 00:37:36,719 Speaker 1: at Alps Funds dot com. This episode of Trillions was 685 00:37:36,760 --> 00:37:40,200 Speaker 1: produced by Magnus Hendrickson. Francesca Levy is the head of 686 00:37:40,239 --> 00:37:44,320 Speaker 1: Bloomberg Podcast. Bye.