1 00:00:05,559 --> 00:00:08,360 Speaker 1: Welcome to chilliance. I'm Joel Weber and I'm Erica'll shoot us. 2 00:00:12,920 --> 00:00:14,600 Speaker 1: Every once in a while we get to talk to 3 00:00:14,640 --> 00:00:18,439 Speaker 1: someone who's like basically an E t F V I P. 4 00:00:18,840 --> 00:00:22,640 Speaker 1: And I think we have another one of those people today. Absolutely, 5 00:00:22,680 --> 00:00:26,080 Speaker 1: you know, we we we tend to follow the shiny 6 00:00:26,120 --> 00:00:29,600 Speaker 1: objects a lot, and that's great, you know, but sometimes 7 00:00:29,600 --> 00:00:31,560 Speaker 1: you gotta go to where the assets are. And so 8 00:00:32,040 --> 00:00:34,280 Speaker 1: when you think about where the real money is because 9 00:00:34,320 --> 00:00:38,400 Speaker 1: sometimes I I challenged myself, I'm like recovering the meta 10 00:00:38,479 --> 00:00:41,600 Speaker 1: E t F like relentlessly, But when when you really 11 00:00:41,680 --> 00:00:45,600 Speaker 1: sort of think about where assets are, the big chunk 12 00:00:45,640 --> 00:00:48,720 Speaker 1: of money is with black Rock and Vanguard and State 13 00:00:48,760 --> 00:00:51,279 Speaker 1: Street and a lot of those funds that you know 14 00:00:51,560 --> 00:00:53,320 Speaker 1: might not get a lot of attention, but boy did 15 00:00:53,320 --> 00:00:55,800 Speaker 1: they get the assets. And so um, you know, you 16 00:00:55,880 --> 00:00:59,040 Speaker 1: gotta you have to talk to the industry leaders, um, 17 00:00:59,040 --> 00:01:01,400 Speaker 1: you know, regularly, and we have one today. In fact, 18 00:01:01,400 --> 00:01:04,679 Speaker 1: we have the biggest E t F company on planet Earth. 19 00:01:04,840 --> 00:01:07,800 Speaker 1: So we have number one today, black Rock In case 20 00:01:07,840 --> 00:01:10,960 Speaker 1: you haven't guessed it, I Shares has two point four 21 00:01:11,000 --> 00:01:15,600 Speaker 1: trillion dollars in US E t F assets. That is unbelievable. 22 00:01:15,640 --> 00:01:18,280 Speaker 1: I remember when you hit a trillion um. Now it's 23 00:01:18,319 --> 00:01:22,199 Speaker 1: two point four, and now you know it's not just flows. 24 00:01:22,200 --> 00:01:24,959 Speaker 1: The market appreciation is building the assets and so you 25 00:01:25,000 --> 00:01:27,039 Speaker 1: know at some point you know this is black Rock 26 00:01:27,080 --> 00:01:29,039 Speaker 1: and Vanguard particular are going to lead e t F 27 00:01:29,120 --> 00:01:32,520 Speaker 1: sets beyond mutual funds. And we've had several guests from 28 00:01:32,560 --> 00:01:35,840 Speaker 1: black Rock before, but they've all worked for this guy. 29 00:01:35,920 --> 00:01:39,200 Speaker 1: So Salim Romg the global head of I shares and 30 00:01:39,319 --> 00:01:42,319 Speaker 1: Index Investments for black Rock Or he's also a member 31 00:01:42,319 --> 00:01:47,600 Speaker 1: of the firm's Global Executive Committee, this time on trillions, 32 00:01:48,160 --> 00:01:52,000 Speaker 1: looking back and looking ahead with the global head of 33 00:01:52,120 --> 00:01:56,600 Speaker 1: EYE Shares, Salem, Welcome to Trillions. I'm excited to be here, 34 00:01:56,680 --> 00:01:59,000 Speaker 1: Joel and and and Eric and thank you guys for 35 00:01:59,040 --> 00:02:02,840 Speaker 1: having me. You and black Rock very close to having 36 00:02:02,960 --> 00:02:06,720 Speaker 1: ten trillion dollars assets under management. Do you guys have 37 00:02:06,800 --> 00:02:09,359 Speaker 1: like a big shot clock and and like how much 38 00:02:09,360 --> 00:02:13,720 Speaker 1: time until you hit ten trillion? Increasingly, the number I 39 00:02:13,840 --> 00:02:17,000 Speaker 1: focus on the most, I kind of from where I 40 00:02:17,040 --> 00:02:19,520 Speaker 1: sit is actually the number of clients that we serve. 41 00:02:20,040 --> 00:02:22,480 Speaker 1: And I think the the amazing thing is and we 42 00:02:22,520 --> 00:02:28,040 Speaker 1: don't talk about it because assets are are clear and transparent. 43 00:02:28,919 --> 00:02:31,119 Speaker 1: But you know, in the fifty years since we got 44 00:02:31,120 --> 00:02:35,440 Speaker 1: our first client, and and you all interviewed Mac McCown, 45 00:02:35,560 --> 00:02:38,200 Speaker 1: who was our you know, the inventor of the whole category, 46 00:02:38,800 --> 00:02:41,320 Speaker 1: which I enjoyed, and he secured the first client for 47 00:02:41,560 --> 00:02:44,760 Speaker 1: Wells Fargo that became b g I, that became that 48 00:02:44,800 --> 00:02:49,440 Speaker 1: we acquired, UH through black Rock. You know, we now 49 00:02:49,440 --> 00:02:51,760 Speaker 1: have a hundred million people all around the world we 50 00:02:51,880 --> 00:02:55,440 Speaker 1: use our index capabilities and and and I think if 51 00:02:55,440 --> 00:03:00,000 Speaker 1: there's one number that's that's the most remarkable to me. Uh. 52 00:03:00,040 --> 00:03:02,280 Speaker 1: I know, you'd have to rename your show hundreds of millions, 53 00:03:02,280 --> 00:03:04,840 Speaker 1: and that's kind of less impressive than trillions. But but 54 00:03:04,919 --> 00:03:07,080 Speaker 1: if there's a number that's that's the most impressive to me, 55 00:03:07,120 --> 00:03:09,360 Speaker 1: it's that it's that there are a hundred million people 56 00:03:09,400 --> 00:03:11,079 Speaker 1: all around the world using our e t f s 57 00:03:11,080 --> 00:03:16,160 Speaker 1: and using our index capabilities for savings, for investing, for 58 00:03:17,240 --> 00:03:19,799 Speaker 1: a whole assortment of things from that very first client 59 00:03:19,919 --> 00:03:23,040 Speaker 1: that Mac had secured for us back in ninety one. 60 00:03:23,960 --> 00:03:26,400 Speaker 1: I mean, you know, that actually brings up an interesting question. 61 00:03:26,520 --> 00:03:30,799 Speaker 1: You forget how many people are investing an in particular 62 00:03:30,840 --> 00:03:34,120 Speaker 1: year shop like when you are in your regular life, 63 00:03:34,639 --> 00:03:37,440 Speaker 1: you know, throughout a year. Um, do people kind of 64 00:03:38,120 --> 00:03:40,240 Speaker 1: I don't know, bring up the I shares ets they own, 65 00:03:40,360 --> 00:03:42,160 Speaker 1: like a are you a little bit of a celebrity 66 00:03:42,200 --> 00:03:45,240 Speaker 1: given that I Shares is so prevalent in many people's 67 00:03:45,280 --> 00:03:48,760 Speaker 1: portfolios at this point. Uh, well, this is the first 68 00:03:48,840 --> 00:03:51,000 Speaker 1: job that I've had that I've been able to explain 69 00:03:51,040 --> 00:03:54,400 Speaker 1: to my kids. Uh, And so if that's one indicator, 70 00:03:54,480 --> 00:03:57,040 Speaker 1: I wouldn't call myself a celebrity. With my fifteen year 71 00:03:57,040 --> 00:03:59,800 Speaker 1: old and eleven year old, I'm happy to report that 72 00:04:00,120 --> 00:04:03,120 Speaker 1: to them put their birthday money into I Shares. That's 73 00:04:03,120 --> 00:04:07,200 Speaker 1: sort of a household requirement. But um, are you are you? 74 00:04:07,280 --> 00:04:09,400 Speaker 1: Are you willing to disclose the tickers I have? And 75 00:04:09,560 --> 00:04:13,600 Speaker 1: it's actually it's it's fascinating. So, uh, they had saved 76 00:04:13,680 --> 00:04:17,120 Speaker 1: up about about a thousand dollars a piece that I'd 77 00:04:17,120 --> 00:04:20,440 Speaker 1: open up, opened them up in account, commission free account, 78 00:04:21,080 --> 00:04:23,560 Speaker 1: and I told them that they could invest in whatever 79 00:04:23,600 --> 00:04:25,720 Speaker 1: they wanted as long as it was I Shares. It 80 00:04:25,800 --> 00:04:28,839 Speaker 1: was about a year or two ago, and my eleven 81 00:04:28,880 --> 00:04:34,520 Speaker 1: year old is uh, pretty frugal, and he had invested 82 00:04:34,520 --> 00:04:37,400 Speaker 1: in two I Shares tickers he'd invested in I VV, 83 00:04:37,600 --> 00:04:40,400 Speaker 1: which is three basis points, and he'd invested in I 84 00:04:40,480 --> 00:04:42,960 Speaker 1: T O T, which is three basis points. And he 85 00:04:43,040 --> 00:04:45,640 Speaker 1: really wanted to invest in the lowest cost ones that 86 00:04:45,680 --> 00:04:47,920 Speaker 1: were out there, and so that that's what he has 87 00:04:47,960 --> 00:04:52,440 Speaker 1: in his portfolio. My fifteen year old is into technology, 88 00:04:52,560 --> 00:04:54,760 Speaker 1: uh and in what I think was a very well 89 00:04:54,839 --> 00:04:59,240 Speaker 1: market time investment, he invested in the I robo and 90 00:04:59,279 --> 00:05:03,240 Speaker 1: he also tested in our software dedicated et F which 91 00:05:03,240 --> 00:05:05,800 Speaker 1: are a little bit more expensive in the thirties or 92 00:05:05,800 --> 00:05:09,839 Speaker 1: forty kind of basis points, depending on the exact investment. 93 00:05:10,320 --> 00:05:13,919 Speaker 1: But they've done really well. And and and you can't 94 00:05:13,960 --> 00:05:16,880 Speaker 1: over extrapolgalate over kind of two people who happened to 95 00:05:17,480 --> 00:05:20,000 Speaker 1: live with you, But I do think it brings out 96 00:05:20,839 --> 00:05:24,039 Speaker 1: kind of just the diversity of many different types of 97 00:05:24,080 --> 00:05:27,400 Speaker 1: investors out there. And and some are really looking for 98 00:05:27,440 --> 00:05:29,440 Speaker 1: the theme and some are looking for the low costs, 99 00:05:29,440 --> 00:05:31,800 Speaker 1: some are looking for both. And and it's just you know, 100 00:05:31,880 --> 00:05:34,839 Speaker 1: you extrappol like that across tens of millions of people, 101 00:05:34,880 --> 00:05:38,599 Speaker 1: and you get kind of the business that we've got. 102 00:05:39,800 --> 00:05:41,479 Speaker 1: So cele one of the things we want to do 103 00:05:41,560 --> 00:05:43,400 Speaker 1: is look back on this year, and then we're also 104 00:05:43,440 --> 00:05:45,400 Speaker 1: going to look ahead. But as long as we're talking 105 00:05:45,440 --> 00:05:47,560 Speaker 1: about your your kids and looking back at the year, 106 00:05:48,200 --> 00:05:50,080 Speaker 1: what did you What did you tell them when they 107 00:05:50,080 --> 00:05:52,159 Speaker 1: came to you and said, Dad, what's up with these 108 00:05:52,160 --> 00:05:57,480 Speaker 1: mean stocks? They aren't that into investing that. They were 109 00:05:57,480 --> 00:05:59,760 Speaker 1: into the memestocks and the like. You know, we obviously 110 00:06:00,160 --> 00:06:02,920 Speaker 1: saw that, We looked at it, we researched at you know, 111 00:06:03,000 --> 00:06:07,320 Speaker 1: for a brief period of time, there was some run 112 00:06:07,400 --> 00:06:10,240 Speaker 1: up in in silver and including in our in our 113 00:06:11,040 --> 00:06:14,640 Speaker 1: some focus on our silvery t f Oh yeah, that's right. 114 00:06:14,680 --> 00:06:16,960 Speaker 1: But hold on, can I just give the audience a 115 00:06:17,000 --> 00:06:20,159 Speaker 1: little background here? So the meme Reddit crowd went to 116 00:06:20,320 --> 00:06:23,600 Speaker 1: game Stop, then a m C. But then they all 117 00:06:23,640 --> 00:06:26,040 Speaker 1: had this idea that if you, if you somehow corner 118 00:06:26,120 --> 00:06:29,680 Speaker 1: the silver market, the whole financial system would collapse. Like 119 00:06:29,720 --> 00:06:31,880 Speaker 1: they it was almost like that little thing in the 120 00:06:31,920 --> 00:06:33,680 Speaker 1: Death Star that if you can get the laser beam 121 00:06:33,760 --> 00:06:36,520 Speaker 1: right in there, the whole thing will explode. And but 122 00:06:37,120 --> 00:06:40,080 Speaker 1: they just didn't have enough. I'm not even close. But 123 00:06:40,080 --> 00:06:44,840 Speaker 1: they used SLV to attempt this destruction of the financial system. 124 00:06:44,880 --> 00:06:47,640 Speaker 1: It was all kind of like Keystone compish in my opinion. 125 00:06:47,680 --> 00:06:50,960 Speaker 1: But they did buy SLV one day and create volume 126 00:06:50,960 --> 00:06:53,400 Speaker 1: that I believe was record volume for the ticker, and 127 00:06:53,440 --> 00:06:55,640 Speaker 1: then it it immediately sort of like faded away. But 128 00:06:55,680 --> 00:06:57,359 Speaker 1: it was a story for a week. I think it 129 00:06:57,400 --> 00:06:59,040 Speaker 1: was a story for like a couple of days in 130 00:06:59,120 --> 00:07:02,119 Speaker 1: a week, and and and I think part of it, yeah, 131 00:07:02,600 --> 00:07:05,039 Speaker 1: it was that. And so it was I do think 132 00:07:05,040 --> 00:07:07,279 Speaker 1: the Meme stock piece while it was, while it was 133 00:07:07,440 --> 00:07:10,680 Speaker 1: very noteworthy, and Eric, I'm not sure if it was 134 00:07:10,720 --> 00:07:13,800 Speaker 1: you who has written about this that, like the media 135 00:07:13,880 --> 00:07:17,360 Speaker 1: sometimes about five percent of the activity and it's and 136 00:07:17,400 --> 00:07:20,760 Speaker 1: the more straightforward stuff doesn't get written about. But you know, 137 00:07:20,840 --> 00:07:24,560 Speaker 1: as we looked at this phenomenon and we really started 138 00:07:24,600 --> 00:07:29,400 Speaker 1: to see where was the movement around self directed commission 139 00:07:29,480 --> 00:07:32,320 Speaker 1: free investing going, because a lot of this coincided with 140 00:07:32,760 --> 00:07:36,920 Speaker 1: commission free platforms in the United States and massive growth 141 00:07:36,960 --> 00:07:41,560 Speaker 1: and self directed investors. Actually, the truth is, if you 142 00:07:41,600 --> 00:07:44,720 Speaker 1: will a little bit more mundane, about one percent or 143 00:07:44,760 --> 00:07:47,800 Speaker 1: a very small fraction of total retail trading in the 144 00:07:47,880 --> 00:07:50,680 Speaker 1: United States over the past kind of year two has 145 00:07:50,720 --> 00:07:53,760 Speaker 1: been in meme stocks. Two thirds of it has been 146 00:07:53,760 --> 00:07:56,320 Speaker 1: into e t F s UM and it's mostly just 147 00:07:56,440 --> 00:07:59,480 Speaker 1: purchases of ETFs. And so that was really the trend 148 00:07:59,520 --> 00:08:02,200 Speaker 1: that we took a lot of faith in, a lot 149 00:08:02,200 --> 00:08:05,320 Speaker 1: of focus in and and and that doesn't show any 150 00:08:05,360 --> 00:08:08,160 Speaker 1: real signs of abating, if you will, because I think 151 00:08:08,200 --> 00:08:12,400 Speaker 1: there's a fundamental shift that's underway, one of which is 152 00:08:12,680 --> 00:08:16,520 Speaker 1: a massive growth and self directed investors since the beginning 153 00:08:16,520 --> 00:08:21,240 Speaker 1: of the pandemic. And second is a complete reduction or 154 00:08:21,280 --> 00:08:25,840 Speaker 1: a very very significant reduction in commission barriers. How much 155 00:08:26,000 --> 00:08:29,560 Speaker 1: of a headwind is inflation going to be? You know, 156 00:08:29,720 --> 00:08:31,320 Speaker 1: it's a I don't think we're allowed to say the 157 00:08:31,320 --> 00:08:38,800 Speaker 1: word transitory anymore. I think that's that right. It's important 158 00:08:38,800 --> 00:08:43,000 Speaker 1: to keep perspective around these things that clearly inflation is elevated, 159 00:08:43,160 --> 00:08:51,480 Speaker 1: and for many people that's a really unusual thing. I'm 160 00:08:51,480 --> 00:08:53,480 Speaker 1: still old enough that I remember the early eighties and 161 00:08:53,559 --> 00:08:57,160 Speaker 1: inflation was a different kind of animal back then. But 162 00:08:57,240 --> 00:08:59,800 Speaker 1: I think as we look at it from black Rock's perspective, yeah, 163 00:08:59,800 --> 00:09:03,120 Speaker 1: and lation is elevated. But if you think about our 164 00:09:03,160 --> 00:09:06,880 Speaker 1: own views by the end of next year, by three 165 00:09:07,800 --> 00:09:10,160 Speaker 1: those levels will start to moderate out once you get 166 00:09:10,160 --> 00:09:12,440 Speaker 1: through some of the energy shocks and some of the 167 00:09:12,440 --> 00:09:14,680 Speaker 1: supply chain shocks that we've been dealing with. And even 168 00:09:14,679 --> 00:09:16,280 Speaker 1: if you look at the price of oil just in 169 00:09:16,320 --> 00:09:19,040 Speaker 1: the past month or so, um you can start to 170 00:09:19,040 --> 00:09:21,839 Speaker 1: see some reduction. So I think it's it's a it's 171 00:09:21,840 --> 00:09:24,880 Speaker 1: a new risk, it's a real risk in investors portfolios. 172 00:09:25,360 --> 00:09:28,840 Speaker 1: We're certainly seeing it in things like our tips and 173 00:09:28,960 --> 00:09:33,120 Speaker 1: our inflation ETFs, so like our fixed income flows are 174 00:09:33,160 --> 00:09:37,200 Speaker 1: coming into inflation. But we're also seeing it in in 175 00:09:37,360 --> 00:09:41,000 Speaker 1: things that are great inflation hedges, whether that's value stocks 176 00:09:41,040 --> 00:09:44,600 Speaker 1: or kind of our own value ETFs, whether it's in 177 00:09:44,640 --> 00:09:47,520 Speaker 1: things like real estate, and so there are plenty of 178 00:09:47,559 --> 00:09:51,240 Speaker 1: ways for investors to protect and hedge against inflation, both 179 00:09:51,240 --> 00:09:55,080 Speaker 1: in fixed income, inequities and commodities. But it's just new 180 00:09:55,960 --> 00:09:59,360 Speaker 1: and it's a it's just making sure that as as 181 00:09:59,440 --> 00:10:02,120 Speaker 1: investors look at their overall portfolio that they've got the 182 00:10:02,200 --> 00:10:06,440 Speaker 1: right diversification and hedges built into place. Yeah, and that's 183 00:10:06,480 --> 00:10:09,199 Speaker 1: really what we saw this year. The flows are ridiculous 184 00:10:09,480 --> 00:10:13,000 Speaker 1: for all ETFs that they're taking in about four billion 185 00:10:13,040 --> 00:10:15,080 Speaker 1: a day. Normally they've taken in two billion a day 186 00:10:15,120 --> 00:10:18,120 Speaker 1: this year. They took this just double step up. And 187 00:10:18,200 --> 00:10:20,520 Speaker 1: people ask me what why the extra and it was 188 00:10:20,559 --> 00:10:24,000 Speaker 1: the breadth, you know, things like tips, commodities, um, you 189 00:10:24,040 --> 00:10:26,640 Speaker 1: see a lot of the non you know, uh, I 190 00:10:26,640 --> 00:10:29,200 Speaker 1: guess beta e t f s taking in money some 191 00:10:29,240 --> 00:10:32,160 Speaker 1: of the things that lagged small caps the value. I 192 00:10:32,160 --> 00:10:36,040 Speaker 1: guess my question for you is our big theme from 193 00:10:36,040 --> 00:10:38,920 Speaker 1: our outlook next year's ETFs have transcended the passive label. 194 00:10:39,000 --> 00:10:42,600 Speaker 1: I think it's officially not that that association is broken, 195 00:10:43,160 --> 00:10:46,200 Speaker 1: whether it's the tipsy dfs or the you know, smart 196 00:10:46,280 --> 00:10:49,840 Speaker 1: beta or ARC or themes. I don't I don't think 197 00:10:49,920 --> 00:10:51,760 Speaker 1: people I think they really that E t F is 198 00:10:51,880 --> 00:10:54,720 Speaker 1: is much more like a true wrapper. And I could 199 00:10:54,720 --> 00:10:57,599 Speaker 1: you talk a little bit about what you're seeing this 200 00:10:57,800 --> 00:11:01,640 Speaker 1: year in flows and where that extra money is coming from, 201 00:11:01,840 --> 00:11:05,679 Speaker 1: and how people are utilizing the rapper a little bit. Yeah, No, 202 00:11:05,800 --> 00:11:08,200 Speaker 1: it's a it's a great point, Eric, And I'll cite 203 00:11:08,200 --> 00:11:10,319 Speaker 1: a little bit of the global numbers, which will be 204 00:11:10,400 --> 00:11:14,000 Speaker 1: slightly different than the ones that you cited, which I 205 00:11:14,040 --> 00:11:16,160 Speaker 1: think are the US numbers. But if we look at 206 00:11:16,200 --> 00:11:19,800 Speaker 1: the global numbers, you know today there's over a trillion 207 00:11:19,880 --> 00:11:23,360 Speaker 1: dollars that's come into e t f s globally, both 208 00:11:23,400 --> 00:11:25,120 Speaker 1: here in the US as well as in Europe, as 209 00:11:25,160 --> 00:11:27,280 Speaker 1: well as in kind of a range of different locally 210 00:11:27,360 --> 00:11:30,120 Speaker 1: t F lines that we have and that others have 211 00:11:30,240 --> 00:11:33,240 Speaker 1: across the world. And just as context, you know, around 212 00:11:33,280 --> 00:11:36,280 Speaker 1: the time that black Rock bought b g I, so 213 00:11:36,440 --> 00:11:39,599 Speaker 1: back in two thousand and ten, the total et F 214 00:11:39,760 --> 00:11:43,599 Speaker 1: market was a trillion dollars and so and and you 215 00:11:43,640 --> 00:11:46,439 Speaker 1: know this year it's not even over yet. Um, we're 216 00:11:46,480 --> 00:11:49,719 Speaker 1: seeing that amount in the industry and flows. And I 217 00:11:49,840 --> 00:11:54,120 Speaker 1: think the the the amazing thing is when we look 218 00:11:54,200 --> 00:11:56,840 Speaker 1: at the total e t F s for the industry 219 00:11:56,920 --> 00:11:59,400 Speaker 1: relative to the addressable market we think of the addressible 220 00:11:59,400 --> 00:12:02,839 Speaker 1: market is also docks and bonds. That's three of the 221 00:12:02,880 --> 00:12:06,079 Speaker 1: global addressable market. Even if we take the number Eric 222 00:12:06,200 --> 00:12:09,360 Speaker 1: that I think that you've used in in other publications, 223 00:12:09,440 --> 00:12:14,920 Speaker 1: which is the addressable market as all registered UH investment products, 224 00:12:14,960 --> 00:12:17,760 Speaker 1: it's still fift. So whichever way you take it, it's 225 00:12:17,760 --> 00:12:21,679 Speaker 1: still a small number relative to a big system. And 226 00:12:22,160 --> 00:12:26,040 Speaker 1: we absolutely believe, as you said, that the e t 227 00:12:26,240 --> 00:12:28,480 Speaker 1: F is really just a wrapper. It's a more efficient 228 00:12:28,559 --> 00:12:31,599 Speaker 1: way in which to wrap public market securities. And so 229 00:12:32,080 --> 00:12:34,679 Speaker 1: we've kind of moved we we certainly have and are 230 00:12:34,800 --> 00:12:38,160 Speaker 1: very proud of holdings like my son has, which is 231 00:12:38,800 --> 00:12:41,440 Speaker 1: you know that good low cost exposures like i VV, 232 00:12:42,280 --> 00:12:47,040 Speaker 1: but we've also expanded into a whole arena of index 233 00:12:47,520 --> 00:12:51,680 Speaker 1: oriented ETFs, things like factors or E s G or thematics, 234 00:12:52,640 --> 00:12:56,079 Speaker 1: which are transparent, rules based indices, but their goal is 235 00:12:56,160 --> 00:12:59,280 Speaker 1: to outperform a traditional market gap way to index. And 236 00:12:59,360 --> 00:13:02,480 Speaker 1: if you think about that category, you know, for US 237 00:13:03,120 --> 00:13:05,920 Speaker 1: that's about just under four hundred billion dollars of our 238 00:13:05,960 --> 00:13:08,280 Speaker 1: et f s are in those types of things factors, 239 00:13:08,320 --> 00:13:11,360 Speaker 1: E s G and thematics, and that's double what it 240 00:13:11,559 --> 00:13:14,040 Speaker 1: was just a few years ago. And so that's really 241 00:13:14,080 --> 00:13:18,640 Speaker 1: a fast growing kind of area. And and and we've 242 00:13:18,760 --> 00:13:21,319 Speaker 1: also extended it into active management. I mean, it's a 243 00:13:21,480 --> 00:13:24,240 Speaker 1: it's amazing to be just in the past year. You know, 244 00:13:24,360 --> 00:13:27,640 Speaker 1: we launched our low Carbon Transition Readiness e t F 245 00:13:27,840 --> 00:13:31,000 Speaker 1: back in April. It was the largest et F launch 246 00:13:31,080 --> 00:13:33,960 Speaker 1: in US history, active or index, and it was an 247 00:13:34,000 --> 00:13:36,920 Speaker 1: active ETF. And so all of these things are pointing 248 00:13:37,000 --> 00:13:39,439 Speaker 1: to I think Eric, exactly what you're seeing and what 249 00:13:39,559 --> 00:13:41,800 Speaker 1: we're seeing, which is the e t F is a 250 00:13:42,240 --> 00:13:45,679 Speaker 1: is a better technology, it's a better wrapper, and it 251 00:13:45,760 --> 00:13:52,480 Speaker 1: can wrap all kinds of different public market investments. So 252 00:13:52,840 --> 00:13:55,000 Speaker 1: I want to talk about specific areas of growth and 253 00:13:55,360 --> 00:13:57,280 Speaker 1: and the one. The first one I want to ask 254 00:13:57,360 --> 00:14:00,079 Speaker 1: about is E s G because you Black Rock and 255 00:14:00,120 --> 00:14:02,000 Speaker 1: I Shares have been all in on E s G. 256 00:14:02,760 --> 00:14:05,319 Speaker 1: How big of an opportunity do you think remains in 257 00:14:05,400 --> 00:14:10,800 Speaker 1: that space for for influence. I think we're at very 258 00:14:11,000 --> 00:14:13,240 Speaker 1: very early stages of it. And I think we're at 259 00:14:13,360 --> 00:14:18,000 Speaker 1: very early stages of it, uh, despite the very significant 260 00:14:18,040 --> 00:14:20,200 Speaker 1: growth that we've experienced. So if you if you roll 261 00:14:20,240 --> 00:14:24,120 Speaker 1: back the clock Jewel, like three years ago, Uh, you know, 262 00:14:24,280 --> 00:14:28,320 Speaker 1: we had a dozen or two dozen different ETFs around 263 00:14:28,320 --> 00:14:31,880 Speaker 1: the world. We managed about ten eleven billion dollars in 264 00:14:31,920 --> 00:14:33,880 Speaker 1: those et f s and it was mostly a niche 265 00:14:34,000 --> 00:14:37,840 Speaker 1: category catering to a niche clientele that was interested in it. 266 00:14:38,040 --> 00:14:39,720 Speaker 1: And I don't think that was just us. I think 267 00:14:39,800 --> 00:14:43,320 Speaker 1: that was the the whole kind of area of sustainable 268 00:14:43,360 --> 00:14:46,320 Speaker 1: investing just a few years ago. And I think what 269 00:14:46,440 --> 00:14:50,080 Speaker 1: we've seen um uh and Larry think our CEO has 270 00:14:50,120 --> 00:14:54,560 Speaker 1: written pretty extensively about the tectonic shift in sustainable investing 271 00:14:54,840 --> 00:14:57,640 Speaker 1: and in climate investing that we're seeing as a firm. 272 00:14:57,960 --> 00:15:00,600 Speaker 1: But if you look to kind of the number rs today, 273 00:15:01,360 --> 00:15:04,200 Speaker 1: you know we're managing across index funds and E T 274 00:15:04,400 --> 00:15:06,640 Speaker 1: f s and globally kind of north of two hundred 275 00:15:06,680 --> 00:15:10,480 Speaker 1: billion dollars, and we're doing it across more than a 276 00:15:10,560 --> 00:15:13,440 Speaker 1: hundred and seventy different e t f s and index funds, 277 00:15:13,880 --> 00:15:16,080 Speaker 1: all in E s G and so if you dig 278 00:15:16,200 --> 00:15:19,360 Speaker 1: underneath it, what's really driving this growth from our perspective 279 00:15:20,400 --> 00:15:25,880 Speaker 1: is two or three things. One, there's very significant client demand, 280 00:15:25,920 --> 00:15:28,240 Speaker 1: and it was latent client demand. And it's not just 281 00:15:28,440 --> 00:15:30,480 Speaker 1: in Europe. We're seeing growth in the United States, We're 282 00:15:30,480 --> 00:15:32,600 Speaker 1: seeing growth in Japan. We're seeing growth all over the 283 00:15:32,680 --> 00:15:38,800 Speaker 1: world for different ways in which to adopt or get 284 00:15:38,840 --> 00:15:41,840 Speaker 1: into E s G investing. The second thing, which is 285 00:15:41,880 --> 00:15:43,960 Speaker 1: where the E t F comes in, is that clients 286 00:15:44,000 --> 00:15:47,560 Speaker 1: are really wanting choice, and that really drove our decision 287 00:15:47,640 --> 00:15:50,520 Speaker 1: around moving from a couple of dozen products to moving 288 00:15:50,560 --> 00:15:54,480 Speaker 1: to hundred and seventy plus because for many clients, they 289 00:15:54,560 --> 00:15:58,160 Speaker 1: had different pathways in which they wanted to adopt D 290 00:15:58,280 --> 00:16:01,600 Speaker 1: S G investing. Some wanted screen, some wanted optimized, some 291 00:16:01,760 --> 00:16:05,400 Speaker 1: wanted transition readiness, some wanted thematics. And I think the 292 00:16:05,520 --> 00:16:09,280 Speaker 1: third thing is they wanted that with transparency and with efficiency. 293 00:16:10,080 --> 00:16:13,920 Speaker 1: And so every t F WE manufacturer, including the active ones, 294 00:16:14,000 --> 00:16:17,160 Speaker 1: including all the s G ones. We have we believe 295 00:16:17,200 --> 00:16:20,120 Speaker 1: clear labeling on the package, but we have complete transparency 296 00:16:20,560 --> 00:16:22,880 Speaker 1: in terms of all the securities that are inside. We 297 00:16:23,200 --> 00:16:26,440 Speaker 1: were leaders and having complete transparency of all the E 298 00:16:26,640 --> 00:16:28,880 Speaker 1: s G scores, not just for E s G G 299 00:16:28,960 --> 00:16:31,280 Speaker 1: t f s, but for all of them. Uh. You know, 300 00:16:31,400 --> 00:16:33,840 Speaker 1: we've committed that we're going to publish things like implied 301 00:16:33,920 --> 00:16:36,600 Speaker 1: temperature rise by the end of this year UM, just 302 00:16:36,720 --> 00:16:39,560 Speaker 1: to enhance that. But I think you put the combination 303 00:16:39,880 --> 00:16:44,800 Speaker 1: of increased client demand, greater choice and benefits of the 304 00:16:44,880 --> 00:16:49,200 Speaker 1: wrapper UM, combined with our underlying investment thesis that that 305 00:16:50,000 --> 00:16:54,920 Speaker 1: Larry's articulated pretty publicly around these being good longer term 306 00:16:54,960 --> 00:16:59,080 Speaker 1: ways in which to invest, that that package just kind 307 00:16:59,120 --> 00:17:02,640 Speaker 1: of makes us leave that there is very very significant 308 00:17:02,680 --> 00:17:07,000 Speaker 1: growth to be had, even despite the pretty um significant 309 00:17:07,040 --> 00:17:10,399 Speaker 1: growth we've experienced in the past three years. So I 310 00:17:10,720 --> 00:17:15,760 Speaker 1: get the strategic vision for that, and I'm curious though 311 00:17:15,840 --> 00:17:19,399 Speaker 1: there's the consumer demand for it, there's the transparency that 312 00:17:19,480 --> 00:17:22,080 Speaker 1: you can provide, but then there's actually just this kind 313 00:17:22,080 --> 00:17:25,800 Speaker 1: of fundamental thing that I'm wondering how you all wrestle 314 00:17:25,880 --> 00:17:28,720 Speaker 1: with it, which is when you when you invest in this. 315 00:17:28,960 --> 00:17:31,679 Speaker 1: You know, you're you're it's all for better outcomes, right, 316 00:17:31,800 --> 00:17:34,680 Speaker 1: and you're envisioning a better world. But often the data 317 00:17:34,760 --> 00:17:39,080 Speaker 1: that underlies that doesn't actually you know, back that up necessarily. 318 00:17:39,160 --> 00:17:42,800 Speaker 1: You know, like there are companies who are contributing to 319 00:17:43,119 --> 00:17:46,720 Speaker 1: climate change but might get a positive score. How do 320 00:17:46,800 --> 00:17:49,320 Speaker 1: you reconcile that? You know, we come back to this 321 00:17:49,440 --> 00:17:54,080 Speaker 1: point about choice, about transparency and giving the right metrics 322 00:17:54,800 --> 00:17:58,280 Speaker 1: to our clients to be able to help inform them. 323 00:17:58,560 --> 00:18:00,280 Speaker 1: And so let me just give you two contra asked 324 00:18:00,320 --> 00:18:02,399 Speaker 1: to kind of bring out kind of some of these 325 00:18:02,480 --> 00:18:05,960 Speaker 1: things around it. Some of our clients will say, we 326 00:18:06,119 --> 00:18:09,000 Speaker 1: just don't want these sectors or these types of companies 327 00:18:09,040 --> 00:18:13,080 Speaker 1: in our portfolio, and that's great. We can actually create 328 00:18:13,200 --> 00:18:15,600 Speaker 1: and we have a whole suite of ETFs which screen 329 00:18:15,680 --> 00:18:19,199 Speaker 1: out and and and have that. So if you if 330 00:18:19,240 --> 00:18:23,119 Speaker 1: you didn't want, for example, um, certain energy sectors, certain 331 00:18:23,160 --> 00:18:26,240 Speaker 1: fossil fuel sectors in it, we got ETFs to do that. 332 00:18:27,359 --> 00:18:29,399 Speaker 1: There are other clients who would say, and this was 333 00:18:29,920 --> 00:18:33,000 Speaker 1: inherent in the clients that invested in our low carbon 334 00:18:33,080 --> 00:18:39,040 Speaker 1: transition readiness it said, look, even if you exclude these 335 00:18:39,040 --> 00:18:43,080 Speaker 1: stocks from one's portfolio, you haven't really solved the broader problem. 336 00:18:43,640 --> 00:18:46,120 Speaker 1: And the broader problem is, how do you help companies 337 00:18:46,200 --> 00:18:49,439 Speaker 1: that want to invest in a greener transition. They may 338 00:18:49,480 --> 00:18:51,760 Speaker 1: be big carbon emitters today, but they want to lower 339 00:18:51,880 --> 00:18:55,840 Speaker 1: their carbon lower their carbon footprint and they want, if 340 00:18:55,880 --> 00:18:59,000 Speaker 1: you will, investment incentive to do that, and they're willing 341 00:18:59,080 --> 00:19:03,720 Speaker 1: to show the reduction over time, and they've invested in 342 00:19:03,800 --> 00:19:08,920 Speaker 1: things like our Low Carbon Transition Readiness ETF, where the 343 00:19:09,040 --> 00:19:13,159 Speaker 1: carbon footprint of that is is focused on companies that 344 00:19:13,320 --> 00:19:17,200 Speaker 1: do have that may have higher footprints today but are 345 00:19:17,480 --> 00:19:21,800 Speaker 1: committed to reducing them over time. And so those are 346 00:19:21,840 --> 00:19:25,960 Speaker 1: two very different sets of clients with different sets of objectives, 347 00:19:26,480 --> 00:19:28,520 Speaker 1: and so their portfolios may be different. But if we 348 00:19:28,600 --> 00:19:31,720 Speaker 1: give them the choice, if we give them the transparency 349 00:19:31,800 --> 00:19:34,280 Speaker 1: so they know exactly what they're getting, and we give 350 00:19:34,359 --> 00:19:36,679 Speaker 1: them the metrics to make sure that their choices are 351 00:19:36,720 --> 00:19:39,760 Speaker 1: informed as possible, that's the service that we think that 352 00:19:39,840 --> 00:19:42,560 Speaker 1: we're doing to the clients, even though they have very 353 00:19:42,600 --> 00:19:46,920 Speaker 1: different pathways around how they want to invest their money. 354 00:19:48,200 --> 00:19:50,719 Speaker 1: So we talked earlier a little bit about the hundreds 355 00:19:50,760 --> 00:19:52,760 Speaker 1: of millions of clients you have, and we touched on 356 00:19:53,400 --> 00:19:56,199 Speaker 1: on retail and how e t s are so much 357 00:19:56,240 --> 00:19:59,480 Speaker 1: bigger than than the meme stock moment. And I want 358 00:19:59,520 --> 00:20:03,000 Speaker 1: to ask another question kind of in that same vein, 359 00:20:03,080 --> 00:20:07,080 Speaker 1: which is the potential for institutional investment. And when you 360 00:20:07,160 --> 00:20:10,680 Speaker 1: think about that that as a trend, how how much 361 00:20:10,920 --> 00:20:13,760 Speaker 1: more potential for growth is there from the institutional side, 362 00:20:13,800 --> 00:20:15,920 Speaker 1: since you know, again retail get got a lot of 363 00:20:15,960 --> 00:20:18,479 Speaker 1: buzz this year, but like going forward, how about how 364 00:20:18,480 --> 00:20:21,119 Speaker 1: about institutional? Yeah, no, it's a great question, Joel. And 365 00:20:21,200 --> 00:20:23,639 Speaker 1: it's it's important to remember that our roots were an 366 00:20:23,680 --> 00:20:28,399 Speaker 1: institutional right the first client that that Mackott introduced fifty 367 00:20:28,480 --> 00:20:32,040 Speaker 1: years ago as an institutional client. Uh. And and and 368 00:20:32,160 --> 00:20:34,720 Speaker 1: I think and within the E t F kind of 369 00:20:34,840 --> 00:20:39,560 Speaker 1: piece of the business, Uh that one of the really 370 00:20:39,640 --> 00:20:42,520 Speaker 1: important shifts that's happened in a in a positive way 371 00:20:42,560 --> 00:20:46,119 Speaker 1: among the star institutional clients was really catalyzed back in 372 00:20:47,680 --> 00:20:50,200 Speaker 1: So if you think about all the stresses that the 373 00:20:50,240 --> 00:20:54,600 Speaker 1: whole marketplace, uh, that E t F s, particularly BONDI 374 00:20:54,720 --> 00:20:58,440 Speaker 1: tfs went through back in the spring of and you 375 00:20:58,520 --> 00:21:01,399 Speaker 1: think about how they performed kind of through all of 376 00:21:01,480 --> 00:21:03,640 Speaker 1: that stress. And I'm happy to talk about it, We've 377 00:21:03,680 --> 00:21:06,760 Speaker 1: written about it. We're proud about how they performed under 378 00:21:06,840 --> 00:21:11,240 Speaker 1: that market stress. But importantly what happened was that many 379 00:21:11,320 --> 00:21:15,760 Speaker 1: institutional investors that hadn't yet adopted bondy tfs in particular, 380 00:21:16,480 --> 00:21:21,639 Speaker 1: saw their resiliency, saw their ability to withstand market stresses, 381 00:21:21,800 --> 00:21:25,040 Speaker 1: be able to still have the ample liquidity that they did, 382 00:21:25,200 --> 00:21:29,320 Speaker 1: be able to still trade exceptionally well. And and even 383 00:21:29,359 --> 00:21:33,000 Speaker 1: the most skeptical institutional investors have become clients. And so 384 00:21:33,560 --> 00:21:35,560 Speaker 1: you know, if you if you sort of turned the 385 00:21:35,640 --> 00:21:38,440 Speaker 1: old narrative of index investing kind of on its head, 386 00:21:38,480 --> 00:21:41,679 Speaker 1: and Eric, you talked about the blurring of index and active, 387 00:21:42,520 --> 00:21:45,000 Speaker 1: but now eight of the top ten active managers in 388 00:21:45,040 --> 00:21:48,159 Speaker 1: the United States use our e t f s as 389 00:21:48,240 --> 00:21:51,480 Speaker 1: part of their active investment process. In many cases those 390 00:21:51,480 --> 00:21:54,640 Speaker 1: are bondy tfs, and they're using it for liquidity, they're 391 00:21:54,720 --> 00:21:57,720 Speaker 1: using it for lower transaction costs, they're using it to 392 00:21:57,840 --> 00:22:00,159 Speaker 1: be able to access certain corners of the mark get 393 00:22:00,280 --> 00:22:02,880 Speaker 1: much more easily and much more cheaply than the otherwise 394 00:22:02,920 --> 00:22:05,800 Speaker 1: code if they held the bonds. But I think that's 395 00:22:05,840 --> 00:22:08,960 Speaker 1: a It isn't in the hundred million stat but it's 396 00:22:09,000 --> 00:22:14,119 Speaker 1: certainly a area that we're very, very focused on. And 397 00:22:14,359 --> 00:22:16,520 Speaker 1: and It's certainly an area that isn't talked about as 398 00:22:16,600 --> 00:22:19,400 Speaker 1: much because it's almost it almost turns on its head 399 00:22:19,440 --> 00:22:22,040 Speaker 1: the old notion of active versus index, or even active 400 00:22:22,080 --> 00:22:25,600 Speaker 1: and index, which is that active managers are using e 401 00:22:25,680 --> 00:22:28,960 Speaker 1: t s as part of their active investment process. And 402 00:22:29,040 --> 00:22:31,520 Speaker 1: I think that's an area that we're seeing expansion not 403 00:22:31,640 --> 00:22:34,840 Speaker 1: just with other active managers, but we're seeing it with 404 00:22:34,920 --> 00:22:37,720 Speaker 1: insurance companies, We're seeing it with pension plans, We're seeing 405 00:22:37,760 --> 00:22:41,600 Speaker 1: it with other large pools of assets that, especially in 406 00:22:41,640 --> 00:22:45,040 Speaker 1: the bond market, are just finding it too antiquated or 407 00:22:45,080 --> 00:22:48,520 Speaker 1: too non transparent or too expensive, but they're finding the 408 00:22:49,160 --> 00:22:51,960 Speaker 1: opposite to be the case when they're able to access 409 00:22:52,000 --> 00:22:54,720 Speaker 1: the bond market through ts. So that's a whole other 410 00:22:54,840 --> 00:22:58,239 Speaker 1: area that we're we're very, very focused on, even if 411 00:22:58,280 --> 00:23:01,879 Speaker 1: it isn't captured in the hundred million h So you 412 00:23:02,000 --> 00:23:04,840 Speaker 1: touched on the bond market, and I always say, bond 413 00:23:04,920 --> 00:23:08,440 Speaker 1: ETFs let people trade bonds like stocks. Everybody likes the 414 00:23:08,480 --> 00:23:12,160 Speaker 1: way equities trade. ETFs have standardized and made everything trade 415 00:23:12,200 --> 00:23:15,240 Speaker 1: like an equity and it's a beautiful thing. Um. We 416 00:23:15,400 --> 00:23:17,680 Speaker 1: have part of our outlook next year, we have the 417 00:23:17,800 --> 00:23:19,879 Speaker 1: five point oh era of e t f s and 418 00:23:20,000 --> 00:23:23,440 Speaker 1: digital assets, and there's just such a hunger out there. 419 00:23:24,200 --> 00:23:26,080 Speaker 1: You just described it. With the bond market, it's very 420 00:23:26,160 --> 00:23:30,480 Speaker 1: parallel to trade crypto in an e t F UM 421 00:23:30,760 --> 00:23:33,080 Speaker 1: because of all the benefits you just named in the 422 00:23:33,119 --> 00:23:36,359 Speaker 1: way that's difficult advisors don't want to go into the exchanges, 423 00:23:37,160 --> 00:23:40,720 Speaker 1: and the way the bond etf really helped some people 424 00:23:40,800 --> 00:23:43,160 Speaker 1: get access to bonds and it just made it easy. 425 00:23:44,320 --> 00:23:47,120 Speaker 1: I feel like that's going to happen with crypto ultimately. 426 00:23:47,240 --> 00:23:49,400 Speaker 1: And I gotta think there's gonna be a black rock 427 00:23:49,440 --> 00:23:55,040 Speaker 1: total crypto market e t F in five years maybe less. Yeah, 428 00:23:55,440 --> 00:23:57,400 Speaker 1: what I would say to that, And and I think 429 00:23:57,480 --> 00:24:01,160 Speaker 1: the just come back to the bond piece in a moment. 430 00:24:01,240 --> 00:24:03,720 Speaker 1: I think there's a really interesting parallel here are between 431 00:24:03,760 --> 00:24:06,879 Speaker 1: that and digital assets. But I do think the bondy 432 00:24:06,960 --> 00:24:10,200 Speaker 1: t F uh, and you know, I think we're we're 433 00:24:10,240 --> 00:24:11,920 Speaker 1: coming up. I think next year will be our twentieth 434 00:24:11,960 --> 00:24:14,760 Speaker 1: anniversary of the first bondy TF ever launched. That's the 435 00:24:14,800 --> 00:24:17,680 Speaker 1: good thing about having products. It's always someone's birthday or 436 00:24:17,680 --> 00:24:20,159 Speaker 1: anniversary kind of around it. But next year is the 437 00:24:20,200 --> 00:24:22,639 Speaker 1: twentieth anniversary of the first bondy t F which we 438 00:24:22,800 --> 00:24:28,520 Speaker 1: launched and uh and and it's become and it is 439 00:24:28,600 --> 00:24:31,680 Speaker 1: a modernizing force in the bond market, is bringing transparency, 440 00:24:31,760 --> 00:24:34,320 Speaker 1: and it's bringing on exchange pricing, and it's bringing liquidity 441 00:24:34,960 --> 00:24:37,800 Speaker 1: and and so it's a real innovation kind of in there. 442 00:24:38,480 --> 00:24:43,920 Speaker 1: Digital assets is clearly at a much earlier stage, uh 443 00:24:44,200 --> 00:24:48,040 Speaker 1: in the evolution. But I certainly in the believer in 444 00:24:48,720 --> 00:24:55,359 Speaker 1: the disruptive capability of decentralist finance, of stable coins and 445 00:24:55,640 --> 00:25:02,959 Speaker 1: of um uh cryptocurrencies to the entire financial marketplace itself. 446 00:25:03,080 --> 00:25:04,960 Speaker 1: That you can't see it here because on my desk 447 00:25:05,040 --> 00:25:08,080 Speaker 1: and there's a podcast. But I just met with a 448 00:25:08,480 --> 00:25:11,159 Speaker 1: professor at Duke named Cam Harvey has written a very 449 00:25:11,200 --> 00:25:15,720 Speaker 1: good book called Defy and the Future of Finance. And 450 00:25:15,800 --> 00:25:18,320 Speaker 1: I'm a believer that the future of finance is here, 451 00:25:18,960 --> 00:25:23,240 Speaker 1: uh in the decentralized capabilities around it. I think cryptocurrencies 452 00:25:23,280 --> 00:25:26,560 Speaker 1: are one kind of application of it, and certainly not 453 00:25:26,720 --> 00:25:30,600 Speaker 1: the most profound of all the different applications when you 454 00:25:30,640 --> 00:25:33,960 Speaker 1: start to think about decentralized finance. And so we we 455 00:25:34,119 --> 00:25:38,280 Speaker 1: are reading for launch a thematic et F which will 456 00:25:38,320 --> 00:25:41,640 Speaker 1: have blockchain and the ability for people to be able 457 00:25:41,680 --> 00:25:44,639 Speaker 1: to access companies that are active in this space, just 458 00:25:44,800 --> 00:25:47,240 Speaker 1: as my son is able to access kind of you know, 459 00:25:47,400 --> 00:25:51,520 Speaker 1: robotics autonomous vehicles in some of the other uh E 460 00:25:51,640 --> 00:25:54,840 Speaker 1: t f s, And in terms of like actual crypto 461 00:25:55,160 --> 00:25:58,280 Speaker 1: E t f s, I think that we want to 462 00:25:58,359 --> 00:26:01,119 Speaker 1: make sure that whatever we do, whatever we put our 463 00:26:01,160 --> 00:26:03,159 Speaker 1: brand on, whether it's the black Rock brand or the 464 00:26:03,200 --> 00:26:07,560 Speaker 1: I Shares brand, doesn't matter. It's to the highest standards 465 00:26:07,640 --> 00:26:11,560 Speaker 1: that people expect. And that means from a regulatory point 466 00:26:11,600 --> 00:26:13,520 Speaker 1: of view, from a liquidity point of view, from a 467 00:26:13,600 --> 00:26:17,520 Speaker 1: transparency point of view, and so I expect as the 468 00:26:17,640 --> 00:26:22,400 Speaker 1: regulatory environment becomes clearer and as the underlying liquidity dynamics 469 00:26:22,440 --> 00:26:26,399 Speaker 1: in that marketplace become more to our satisfaction, that some 470 00:26:26,560 --> 00:26:29,040 Speaker 1: of those dynamics will work in our favor. And so 471 00:26:29,080 --> 00:26:31,440 Speaker 1: if you put a five year horizon on it, err, yeah, 472 00:26:31,680 --> 00:26:34,240 Speaker 1: like I think so. If you put the next month 473 00:26:34,320 --> 00:26:39,360 Speaker 1: horizon on it, I don't think so. So I'm really 474 00:26:39,440 --> 00:26:42,520 Speaker 1: curious about this and and your interest in a space 475 00:26:42,640 --> 00:26:47,000 Speaker 1: like defy. There's certain players in the world who are huge. 476 00:26:47,160 --> 00:26:50,680 Speaker 1: You're one of them. This could be an existential moment 477 00:26:50,800 --> 00:26:54,959 Speaker 1: for finance. Right, How did someone like you who has 478 00:26:55,040 --> 00:26:58,439 Speaker 1: to wrestle with strategy for I Shares Black Rock, how 479 00:26:58,520 --> 00:27:01,240 Speaker 1: do you make sure that you don't miss out on 480 00:27:01,680 --> 00:27:04,760 Speaker 1: something that could be totally transformational. Yeah, I look. I 481 00:27:05,320 --> 00:27:10,600 Speaker 1: think the I look at at the centralized finance and 482 00:27:10,760 --> 00:27:15,040 Speaker 1: all of its various applications as an opportunity, and I 483 00:27:15,119 --> 00:27:17,359 Speaker 1: look at it as an opportunity first and foremost for 484 00:27:17,440 --> 00:27:20,359 Speaker 1: our clients. And and a lot of the ways in 485 00:27:20,440 --> 00:27:23,840 Speaker 1: which we've grown I Shares, just to take BTF example, 486 00:27:24,680 --> 00:27:28,680 Speaker 1: but you can abstract it to indexation more broadly, is 487 00:27:28,760 --> 00:27:32,600 Speaker 1: by reducing frictions in the system in order to benefit 488 00:27:32,640 --> 00:27:35,600 Speaker 1: our clients. We have the benefit that our only business model, 489 00:27:35,640 --> 00:27:38,119 Speaker 1: our business model is a fiduciary business models. Everything we 490 00:27:38,200 --> 00:27:41,520 Speaker 1: do is on behalf of other people's money. We don't 491 00:27:41,560 --> 00:27:44,800 Speaker 1: have kind of you know, other businesses beyond that. And 492 00:27:44,960 --> 00:27:48,960 Speaker 1: so if we're completely focused on how do we reduce frictions, 493 00:27:49,320 --> 00:27:52,120 Speaker 1: the frictions maybe a commission barrier on a self directed 494 00:27:52,200 --> 00:27:55,680 Speaker 1: platform in Germany or in the United States. The frictions 495 00:27:55,760 --> 00:27:58,520 Speaker 1: may be the lack of transparency in the bond market. 496 00:27:59,000 --> 00:28:03,399 Speaker 1: The frictions maybe it's really expensive, the underlying financial plumbing 497 00:28:03,520 --> 00:28:06,440 Speaker 1: of mutual funds or e t f S actually is 498 00:28:06,560 --> 00:28:11,600 Speaker 1: quite antiquated and expensive, and if decentralized finance over time 499 00:28:11,680 --> 00:28:14,760 Speaker 1: is able to do that in a better, cheaper, more 500 00:28:14,840 --> 00:28:18,280 Speaker 1: efficient way, that's fantastic because that's like the basis on 501 00:28:18,400 --> 00:28:21,560 Speaker 1: which much of our growth has come from, which is 502 00:28:21,840 --> 00:28:25,520 Speaker 1: from reducing frictions to benefit clients. And so the reason 503 00:28:25,600 --> 00:28:31,200 Speaker 1: I get excited about um decentralized finance, including the currency 504 00:28:31,280 --> 00:28:34,719 Speaker 1: aspects of it, is because of that ability to reduce friction. 505 00:28:35,359 --> 00:28:37,159 Speaker 1: And the reason why I see it as an opportunity 506 00:28:37,320 --> 00:28:39,160 Speaker 1: for black Rock is that we're able to do it 507 00:28:39,240 --> 00:28:42,920 Speaker 1: for the benefit of our clients. And a large part 508 00:28:43,440 --> 00:28:45,880 Speaker 1: of how we've gotten as far as we have is 509 00:28:46,040 --> 00:28:48,680 Speaker 1: by if we make it easier and we reduce barriers 510 00:28:48,800 --> 00:28:51,840 Speaker 1: and we think about our clients interests first, and foremost 511 00:28:52,960 --> 00:28:56,360 Speaker 1: good things generally happen. And I think that even that 512 00:28:56,520 --> 00:28:59,400 Speaker 1: we may all speculate or disagree about is it five years, 513 00:28:59,440 --> 00:29:02,440 Speaker 1: ten years to twenty years, twenty five years out, there's 514 00:29:02,480 --> 00:29:05,720 Speaker 1: something really really compelling in the underlying technology case. I 515 00:29:05,760 --> 00:29:08,960 Speaker 1: think of decentralized finance that we are very focused on 516 00:29:12,040 --> 00:29:15,840 Speaker 1: and and and very focused around how and in which 517 00:29:15,960 --> 00:29:28,640 Speaker 1: pockets are the best pockets for us to participate. UM. Okay, 518 00:29:28,720 --> 00:29:31,560 Speaker 1: so pockets and D five is a great segue to 519 00:29:31,840 --> 00:29:34,400 Speaker 1: what a que Another question I have, which is direct 520 00:29:34,440 --> 00:29:37,440 Speaker 1: indexing or custom indexing. UM, you guys do offer this. 521 00:29:37,920 --> 00:29:39,800 Speaker 1: For those who don't know what that really means, is 522 00:29:39,840 --> 00:29:42,080 Speaker 1: that instead of using the e t F we're a 523 00:29:42,160 --> 00:29:45,080 Speaker 1: mutual fund, you would just own all the stocks UM. 524 00:29:45,320 --> 00:29:48,600 Speaker 1: And the benefit of that, they say, UM, is that 525 00:29:48,840 --> 00:29:52,000 Speaker 1: you can custom d index, Like if you don't want 526 00:29:52,040 --> 00:29:53,840 Speaker 1: Microsoft for some reason, or you want to e s 527 00:29:53,920 --> 00:29:55,760 Speaker 1: G if I it, you can do that. It's like 528 00:29:56,320 --> 00:29:58,880 Speaker 1: you know, like a tailor made suit or something. UM. 529 00:29:59,520 --> 00:30:01,440 Speaker 1: The other thing is you can do more tax loss 530 00:30:01,560 --> 00:30:05,480 Speaker 1: harvesting because there's more losses to mess with UM, and 531 00:30:05,560 --> 00:30:09,239 Speaker 1: so there's some tax health opportunity. So advisors also are 532 00:30:09,320 --> 00:30:11,720 Speaker 1: motivated to use this because I think they're feeling a 533 00:30:11,760 --> 00:30:14,480 Speaker 1: little nervous that, hey, if every advisor is in like 534 00:30:14,680 --> 00:30:18,400 Speaker 1: four Core Vanguard or I sharees et F S, how 535 00:30:18,520 --> 00:30:21,400 Speaker 1: can I be different And so the need to differentiate 536 00:30:21,480 --> 00:30:24,320 Speaker 1: I think is might drive some people there that said 537 00:30:25,080 --> 00:30:27,360 Speaker 1: it seems to be going in the opposite direction of simple, 538 00:30:27,520 --> 00:30:29,920 Speaker 1: cheap and passive. It's it's kind of active it's a 539 00:30:29,920 --> 00:30:33,640 Speaker 1: little more expensive, UM, and it's it makes your portfolio complicated. 540 00:30:34,280 --> 00:30:36,920 Speaker 1: That's the debate. I have a lot and we're slightly 541 00:30:37,000 --> 00:30:39,480 Speaker 1: barish on direct indexing relative to the hype. We think 542 00:30:39,480 --> 00:30:41,840 Speaker 1: maybe five temper cent market share in the next five 543 00:30:41,920 --> 00:30:45,840 Speaker 1: or ten years. It will have what say you, I think, 544 00:30:46,000 --> 00:30:47,920 Speaker 1: first of all, if you take a step back and 545 00:30:48,400 --> 00:30:52,920 Speaker 1: and custom custom separate account in disease, it's actually how 546 00:30:52,960 --> 00:30:55,840 Speaker 1: we got started in this business. UH. And if you 547 00:30:55,960 --> 00:30:59,680 Speaker 1: look at you know, our separate account business, which is 548 00:30:59,680 --> 00:31:04,000 Speaker 1: about equivalent size to our et F business, is something 549 00:31:04,080 --> 00:31:07,480 Speaker 1: that we've been doing for institutions, including in customized form 550 00:31:08,400 --> 00:31:13,480 Speaker 1: UH for decades now. And UH the application and it 551 00:31:13,560 --> 00:31:15,720 Speaker 1: was about a year ago that we purchased a Perio, 552 00:31:17,200 --> 00:31:19,760 Speaker 1: which was a real pioneer, we thought in the US 553 00:31:19,840 --> 00:31:22,920 Speaker 1: high net worth in the US wealth market in in 554 00:31:23,040 --> 00:31:25,960 Speaker 1: applying those same techniques that we've been doing for institutions 555 00:31:26,080 --> 00:31:29,720 Speaker 1: for high net worth investors within the United States. And 556 00:31:29,840 --> 00:31:33,800 Speaker 1: so the thesis underneath it was a bullish thesis which 557 00:31:33,840 --> 00:31:38,720 Speaker 1: were which has you know, proven itself out in our opinion. 558 00:31:39,600 --> 00:31:42,240 Speaker 1: But at the same time, all of these co exist 559 00:31:42,440 --> 00:31:46,440 Speaker 1: in a much broader ecosystem and so like the really 560 00:31:46,520 --> 00:31:49,000 Speaker 1: interesting thing and when we were involved in the due 561 00:31:49,040 --> 00:31:51,760 Speaker 1: diligence and you looked at, you know, some of their 562 00:31:51,840 --> 00:31:54,520 Speaker 1: top clients, they were big asheres clients at the same 563 00:31:54,600 --> 00:31:59,200 Speaker 1: time because in many cases, custom s m a s 564 00:31:59,680 --> 00:32:03,960 Speaker 1: work compliments in a broader portfolio that included alternatives and 565 00:32:04,120 --> 00:32:07,720 Speaker 1: included ETFs. And so even for the same client, even 566 00:32:07,800 --> 00:32:12,080 Speaker 1: for the same same institution or individual, they wanted some 567 00:32:12,280 --> 00:32:16,360 Speaker 1: of the convenience, simplicity, lower cost kind of aspects that 568 00:32:16,440 --> 00:32:21,000 Speaker 1: et f s had had provided, and they wanted custom 569 00:32:21,080 --> 00:32:23,960 Speaker 1: features kind of inherent in their portfolio as well. And 570 00:32:24,080 --> 00:32:26,560 Speaker 1: so that's very much what we're seeing when we see 571 00:32:27,120 --> 00:32:30,520 Speaker 1: in US wealth clients moved towards fee based or fee 572 00:32:30,520 --> 00:32:34,080 Speaker 1: based portfolios. UM. They certainly buy e t f s, 573 00:32:34,120 --> 00:32:37,640 Speaker 1: and about half of their portfolios kind of moved towards ETFs. 574 00:32:38,080 --> 00:32:42,200 Speaker 1: They buy UM custom indices or they buy separate i'd 575 00:32:42,240 --> 00:32:47,240 Speaker 1: call it custom separate accounts UH, and that's been about 576 00:32:47,280 --> 00:32:50,400 Speaker 1: ten to fifteen percent of the portfolio. They're also buying 577 00:32:50,440 --> 00:32:53,280 Speaker 1: alternatives and clean mutual fund share classes and the like 578 00:32:54,000 --> 00:32:55,800 Speaker 1: to really be able to think about what do they 579 00:32:55,880 --> 00:32:58,480 Speaker 1: want in the overarching portfolio. And so even for a 580 00:32:58,520 --> 00:33:03,000 Speaker 1: given client, it's rarely been a binary choice of one 581 00:33:03,080 --> 00:33:05,720 Speaker 1: way versus the other way, and it's really been a 582 00:33:05,800 --> 00:33:09,600 Speaker 1: mix of different capabilities. And I think that that's really 583 00:33:09,640 --> 00:33:12,240 Speaker 1: the bet that we're making, which is that a client's 584 00:33:12,280 --> 00:33:15,360 Speaker 1: gonna want choice. Client's gonna want lots of different vehicles, 585 00:33:16,080 --> 00:33:17,880 Speaker 1: and but what they're really gonna want is they're going 586 00:33:17,920 --> 00:33:22,240 Speaker 1: to want things that you know, give them great efficiency, 587 00:33:22,560 --> 00:33:26,360 Speaker 1: whether that's for taxes or total expenses or both. Be 588 00:33:26,480 --> 00:33:29,400 Speaker 1: able to give them kind of strong after tax returns 589 00:33:29,880 --> 00:33:31,880 Speaker 1: and be able to give them a portfolio which does 590 00:33:31,960 --> 00:33:34,840 Speaker 1: what they want over the long term. E t F 591 00:33:35,160 --> 00:33:39,240 Speaker 1: the value proposition they bring is just so strong, liquid 592 00:33:39,400 --> 00:33:44,320 Speaker 1: tax efficient three basis points. And you know, I know 593 00:33:44,680 --> 00:33:47,680 Speaker 1: there's some hype around direct index thing that it's going 594 00:33:47,720 --> 00:33:50,480 Speaker 1: to completely sort of like disrupt et f s and 595 00:33:51,280 --> 00:33:54,400 Speaker 1: UM It could well covered if it does. But every 596 00:33:54,480 --> 00:33:57,080 Speaker 1: year that the flows just aren't there. They're they're very 597 00:33:57,160 --> 00:33:59,920 Speaker 1: mild compared to the flowethon we see an e t F. 598 00:34:00,040 --> 00:34:02,840 Speaker 1: So I guess do you see them if E t 599 00:34:03,000 --> 00:34:06,200 Speaker 1: F s a of the whole um fund pie right 600 00:34:06,200 --> 00:34:10,040 Speaker 1: now and mutual funds are sixty how what what that? 601 00:34:10,400 --> 00:34:12,960 Speaker 1: What might that pie look like in ten years. Yeah, 602 00:34:13,040 --> 00:34:17,279 Speaker 1: I think directing in there. Yeah, I think direct indexing 603 00:34:17,760 --> 00:34:21,160 Speaker 1: will be one. And you're just talking about us, well, 604 00:34:21,239 --> 00:34:25,480 Speaker 1: so the U S Wells marketplace, you're talking about us US. Yeah. Look, 605 00:34:25,520 --> 00:34:29,279 Speaker 1: it's a um, it's a it's gonna be one of 606 00:34:29,800 --> 00:34:33,000 Speaker 1: many different important parts of a portfolio. I personally think 607 00:34:33,080 --> 00:34:36,840 Speaker 1: that ETFs are going to be half of any portfolio 608 00:34:36,920 --> 00:34:39,680 Speaker 1: in a fee based kind of world. Um. I think 609 00:34:39,719 --> 00:34:42,840 Speaker 1: direct indexing is going to be you know, ten fifteen percent. 610 00:34:42,960 --> 00:34:45,520 Speaker 1: I think alternatives are going to be ten ftcent. I 611 00:34:45,560 --> 00:34:48,440 Speaker 1: think clean mutual funds or even just you know, if 612 00:34:48,480 --> 00:34:51,359 Speaker 1: you will, unmanaged securities, maybe maybe holding up the rest 613 00:34:51,440 --> 00:34:55,080 Speaker 1: of it. And I'm fond of talking. I'm sure many 614 00:34:55,080 --> 00:34:56,560 Speaker 1: of your guests are fond of talking about how the 615 00:34:56,920 --> 00:34:59,080 Speaker 1: how the e t F has totally disrupted the mutual 616 00:34:59,160 --> 00:35:02,800 Speaker 1: fund and and e t F is the default investment 617 00:35:02,920 --> 00:35:05,720 Speaker 1: vehicle kind of of this century, just like the mutual 618 00:35:05,760 --> 00:35:08,920 Speaker 1: fund was of the last century. The mutual fund is 619 00:35:08,960 --> 00:35:11,600 Speaker 1: close to a hundred years old in a couple of years. 620 00:35:12,080 --> 00:35:14,520 Speaker 1: But last time I checked, there's still five six times 621 00:35:14,560 --> 00:35:16,320 Speaker 1: the assets and mutual funds as there are in the 622 00:35:16,320 --> 00:35:19,799 Speaker 1: E t f s. And so even though BTF has 623 00:35:19,800 --> 00:35:21,759 Speaker 1: been disrupting the mutual fund for the better part of 624 00:35:21,840 --> 00:35:25,399 Speaker 1: thirty years, there's still a really big uh mutual fund 625 00:35:25,480 --> 00:35:27,960 Speaker 1: business out there. And and I think the best way 626 00:35:28,040 --> 00:35:29,960 Speaker 1: to think about this is not so much in binary 627 00:35:30,120 --> 00:35:32,960 Speaker 1: terms that one takes over the other as it might 628 00:35:33,200 --> 00:35:35,960 Speaker 1: in if you think about like generations of phones or 629 00:35:36,040 --> 00:35:40,400 Speaker 1: you think about generations of of computers, that many of 630 00:35:40,480 --> 00:35:45,160 Speaker 1: these things exist for different purposes in a portfolio, uh, 631 00:35:45,560 --> 00:35:47,840 Speaker 1: and and it's how do you blend them into portfolio? 632 00:35:47,880 --> 00:35:50,600 Speaker 1: And that's the US wealth case versus even if you 633 00:35:50,680 --> 00:35:53,640 Speaker 1: think about things like DC plans, I mean, DC plans 634 00:35:54,120 --> 00:35:57,120 Speaker 1: have mutual funds in them, much to my frustration, they 635 00:35:57,160 --> 00:36:00,000 Speaker 1: don't typically have ETFs in them because there's a technology 636 00:36:00,000 --> 00:36:02,840 Speaker 1: you barrier to having ETFs in many different for a 637 00:36:02,960 --> 00:36:06,080 Speaker 1: one K record keeping platforms kind of within there. So 638 00:36:06,120 --> 00:36:08,880 Speaker 1: there's a big embedded base of mutual funds there that 639 00:36:09,280 --> 00:36:13,200 Speaker 1: that that's kind of got barriers, which aren't you know, uh, 640 00:36:13,360 --> 00:36:15,680 Speaker 1: that they have to do with technology and infrastructure more 641 00:36:15,760 --> 00:36:17,360 Speaker 1: than they have to do with anything else. And so 642 00:36:17,480 --> 00:36:20,359 Speaker 1: I think you're going to have these millions and tens 643 00:36:20,400 --> 00:36:23,400 Speaker 1: of millions and you know, maybe even a hundred hundreds 644 00:36:23,440 --> 00:36:26,600 Speaker 1: of millions of clients, all making lots of different choices. 645 00:36:26,680 --> 00:36:29,839 Speaker 1: Some of them want hyper customization, some of them want 646 00:36:30,040 --> 00:36:32,520 Speaker 1: ease and simplicity, some of them want a bit of 647 00:36:32,600 --> 00:36:35,719 Speaker 1: both to be able to manage across the portfolio. And 648 00:36:35,800 --> 00:36:38,560 Speaker 1: what you're really seeing is the marketplace at work with 649 00:36:38,719 --> 00:36:45,040 Speaker 1: all the um imperfections, irrationalities, human behavioral biases kind of 650 00:36:45,120 --> 00:36:47,719 Speaker 1: all happening all at the same time. And our main 651 00:36:47,800 --> 00:36:49,920 Speaker 1: goal is black Rock, is that are we there to 652 00:36:50,000 --> 00:36:52,680 Speaker 1: be able to serve the client in the way they 653 00:36:52,760 --> 00:36:55,000 Speaker 1: want to be served And so do they want a 654 00:36:55,120 --> 00:36:57,440 Speaker 1: custom s m A as part of their portfolio? Yeah, 655 00:36:57,520 --> 00:36:59,400 Speaker 1: we think probably, and we think there's a really important 656 00:36:59,400 --> 00:37:01,520 Speaker 1: market to serve of been there, which is why we 657 00:37:02,400 --> 00:37:05,000 Speaker 1: ended up, you know, partner with a Perio to kind 658 00:37:05,040 --> 00:37:06,839 Speaker 1: of help us on the journey. Are they gonna want 659 00:37:06,880 --> 00:37:09,520 Speaker 1: e T F s? Absolutely, And if you look at 660 00:37:09,640 --> 00:37:12,040 Speaker 1: kind of just the flows this year and the hopefully 661 00:37:12,080 --> 00:37:15,120 Speaker 1: the flows next year and the flows for the next decades, 662 00:37:15,239 --> 00:37:17,919 Speaker 1: that'll that'll prove it out and there'll be new things 663 00:37:18,000 --> 00:37:21,480 Speaker 1: that will evolve in the marketplace that uh that you know, 664 00:37:21,640 --> 00:37:24,360 Speaker 1: as we get more comfortable that we can meet the 665 00:37:24,440 --> 00:37:28,200 Speaker 1: standards that clients expect of us, things like digital assets 666 00:37:28,840 --> 00:37:32,719 Speaker 1: that will also be kind of elements of people's portfolio. 667 00:37:32,800 --> 00:37:35,600 Speaker 1: So all of this is just a fluid changing marketplace 668 00:37:36,160 --> 00:37:39,799 Speaker 1: as opposed to something binary, you know, moving that one 669 00:37:39,880 --> 00:37:42,600 Speaker 1: eradicates the other. I think these all coexist based on 670 00:37:42,719 --> 00:37:46,480 Speaker 1: different client needs and preferences. So I want to talk 671 00:37:46,520 --> 00:37:50,600 Speaker 1: about model portfolios. And I think you you heard about it, 672 00:37:50,640 --> 00:37:53,920 Speaker 1: but Eric and I did this UH show show on 673 00:37:54,040 --> 00:37:59,040 Speaker 1: a quick take called called Trillions Presents et F Mastership. 674 00:37:59,400 --> 00:38:03,520 Speaker 1: We had you share, that's right, dah. It was a 675 00:38:03,560 --> 00:38:06,040 Speaker 1: great guest other than just show Keith mac It was 676 00:38:06,120 --> 00:38:09,359 Speaker 1: my second favorite show that you all hosted. I thought 677 00:38:09,400 --> 00:38:14,200 Speaker 1: that was a great appreciate it. Um Uh. Eric allegedly 678 00:38:14,480 --> 00:38:17,799 Speaker 1: cooks uh holiday dinners and you know, I'm still waiting 679 00:38:17,840 --> 00:38:19,480 Speaker 1: on an invite, but you know what, we'll find out 680 00:38:19,680 --> 00:38:22,799 Speaker 1: more about that later. Um. But I want to ask 681 00:38:22,920 --> 00:38:26,239 Speaker 1: just about model portfolios and like what's your vision for 682 00:38:26,360 --> 00:38:29,479 Speaker 1: them strategically and where where are you at now versus 683 00:38:29,560 --> 00:38:32,439 Speaker 1: where where you think the that space could go? Yeah, 684 00:38:32,840 --> 00:38:35,239 Speaker 1: and and and I think model portfolios also gets to 685 00:38:35,320 --> 00:38:38,279 Speaker 1: the the the essence of the discussion. Eric you and 686 00:38:38,360 --> 00:38:40,320 Speaker 1: I were having a few minutes minutes ago around the 687 00:38:40,400 --> 00:38:44,040 Speaker 1: US wealth landscape, which is that this is a vast 688 00:38:44,200 --> 00:38:48,080 Speaker 1: by our estimations, it's just short of five trillion dollars, 689 00:38:48,560 --> 00:38:51,719 Speaker 1: So it certainly deserves a place in the Trillions podcast 690 00:38:52,200 --> 00:38:55,799 Speaker 1: kind of series. And it's vast, and it's not necessarily 691 00:38:56,040 --> 00:38:59,959 Speaker 1: always easily understood, because you know, we have a model 692 00:39:00,120 --> 00:39:03,279 Speaker 1: business in black Rock where we have a group of 693 00:39:03,320 --> 00:39:07,719 Speaker 1: portfolio managers who manage black Rock model portfolios. But if 694 00:39:07,760 --> 00:39:09,560 Speaker 1: you think of it in the context of that five 695 00:39:09,640 --> 00:39:16,239 Speaker 1: trillion dollar market, you know, it's about five or even 696 00:39:16,320 --> 00:39:18,720 Speaker 1: less in the single digit percentage points of that total 697 00:39:19,000 --> 00:39:23,719 Speaker 1: marketplace that we look at. There are many different other 698 00:39:23,800 --> 00:39:28,080 Speaker 1: asset managers that will run models of of model portfolios, 699 00:39:28,160 --> 00:39:31,160 Speaker 1: including having a significant portion of ice shares in them. 700 00:39:31,640 --> 00:39:33,759 Speaker 1: There are many of our wealth management clients that will 701 00:39:33,840 --> 00:39:37,040 Speaker 1: run model portfolios that will have significant portions of ice shares. 702 00:39:37,680 --> 00:39:39,920 Speaker 1: And then there are I A S and wealth managers 703 00:39:39,960 --> 00:39:44,680 Speaker 1: that are customizing models all over which will have components 704 00:39:44,719 --> 00:39:46,719 Speaker 1: of ice shares, and it will have components of custom s, 705 00:39:46,880 --> 00:39:48,640 Speaker 1: m as and and the likes. This is this is 706 00:39:48,680 --> 00:39:54,279 Speaker 1: a vast ecosystem, and we think that it's going to grow. 707 00:39:54,600 --> 00:39:57,239 Speaker 1: Our own projections are that you know, four or five 708 00:39:57,280 --> 00:39:59,520 Speaker 1: trillion dollar marketplace is going to be a ten trillion 709 00:39:59,560 --> 00:40:02,879 Speaker 1: dollar goold place. And you can look at that through 710 00:40:02,960 --> 00:40:05,800 Speaker 1: the lens of the growth of fee based wealth across 711 00:40:05,880 --> 00:40:08,759 Speaker 1: the United States. And what we've seen is that as 712 00:40:08,800 --> 00:40:11,719 Speaker 1: advisers move more and more to fee based wealth, they're 713 00:40:11,760 --> 00:40:16,600 Speaker 1: moving to model portfolios, and they're differentiating themselves um in 714 00:40:16,760 --> 00:40:19,719 Speaker 1: part based off of the portfolio and and customizing the 715 00:40:19,760 --> 00:40:23,880 Speaker 1: portfolio to the client's needs and aspirations, but also in 716 00:40:24,000 --> 00:40:26,759 Speaker 1: part because it allows them to focus more time on 717 00:40:26,920 --> 00:40:30,480 Speaker 1: the relationship development aspects of their business model. And that 718 00:40:30,560 --> 00:40:34,680 Speaker 1: could mean intergenerational wealth transfer, it could mean setting up trusts, 719 00:40:34,719 --> 00:40:38,040 Speaker 1: it could be understanding of family's entire situation and all 720 00:40:38,080 --> 00:40:42,600 Speaker 1: the complexities well beyond the investment complexities. And so from 721 00:40:42,640 --> 00:40:45,520 Speaker 1: an I shares point of view, we look at all 722 00:40:45,680 --> 00:40:49,200 Speaker 1: parts of the model infrastructure as potential clients. Certainly, there's 723 00:40:49,280 --> 00:40:52,640 Speaker 1: a black rock models that include ETFs. That's a small 724 00:40:52,719 --> 00:40:55,880 Speaker 1: part of the overall kind of piece. Uh, there's a 725 00:40:56,080 --> 00:41:00,719 Speaker 1: much larger piece, which is other asset managers, wealth managers, 726 00:41:00,920 --> 00:41:04,440 Speaker 1: advisors who are using I shares as component parts of 727 00:41:04,520 --> 00:41:08,360 Speaker 1: their overall model portfolio, and that piece, from our estimations, 728 00:41:08,480 --> 00:41:11,600 Speaker 1: is like two to three times the size and growing 729 00:41:12,080 --> 00:41:14,959 Speaker 1: of the parts that are just kind of the black 730 00:41:15,040 --> 00:41:20,360 Speaker 1: Rock model portfolios. And and we're sufficiently optimistic that, you know, 731 00:41:20,440 --> 00:41:22,839 Speaker 1: if you think about all kinds of model portfolios, it's 732 00:41:22,840 --> 00:41:25,400 Speaker 1: about a third of our flows in the United States. 733 00:41:26,239 --> 00:41:28,040 Speaker 1: We expect it's going to be about half of our 734 00:41:28,120 --> 00:41:30,440 Speaker 1: flows from a U S I shares point of view 735 00:41:30,960 --> 00:41:33,399 Speaker 1: over the next four or five years. And so more 736 00:41:33,440 --> 00:41:35,480 Speaker 1: and more of our I shares are going to be bought, 737 00:41:36,000 --> 00:41:38,480 Speaker 1: not like my kids buy them, which is a single ticker, 738 00:41:39,000 --> 00:41:41,440 Speaker 1: either for a price or for a theme, but they're 739 00:41:41,480 --> 00:41:44,879 Speaker 1: really just bought as a component part of a much 740 00:41:44,920 --> 00:41:48,239 Speaker 1: broader portfolio. Uh. And it could be for a reason 741 00:41:48,320 --> 00:41:51,600 Speaker 1: around thematics or E s G or lower cost or 742 00:41:51,719 --> 00:41:54,160 Speaker 1: lower carbon, or a whole series of things that the 743 00:41:55,440 --> 00:41:59,200 Speaker 1: the the I shares can now do one of the 744 00:41:59,280 --> 00:42:01,799 Speaker 1: things that you have not done. But we are very 745 00:42:01,920 --> 00:42:05,760 Speaker 1: bullish on his conversions from mutual fund basically immediately converting 746 00:42:05,800 --> 00:42:07,840 Speaker 1: to an e t F d f A has done it. 747 00:42:08,120 --> 00:42:11,200 Speaker 1: JP Morgan has done it. We're predicting a trillion worth 748 00:42:11,239 --> 00:42:13,680 Speaker 1: of conversions in the next ten years with hundreds of funds. 749 00:42:14,200 --> 00:42:17,520 Speaker 1: Now that's only ten percent of all mutual funds. There's 750 00:42:17,560 --> 00:42:19,879 Speaker 1: been fifty seven billion though this year, and that's up 751 00:42:19,920 --> 00:42:23,040 Speaker 1: from nothing a year ago. Um, what's your take on 752 00:42:23,120 --> 00:42:25,800 Speaker 1: that this would be versus entering the E t F 753 00:42:25,920 --> 00:42:28,640 Speaker 1: world with a clone like product like the way Fidelity 754 00:42:28,680 --> 00:42:31,920 Speaker 1: Magellan came in with the Fidelity. Yeah. Look, I I 755 00:42:33,239 --> 00:42:36,080 Speaker 1: whether it's really set the world on fire? Yeah, I 756 00:42:36,480 --> 00:42:40,200 Speaker 1: I think these these whether it's conversions or redirections, you know, 757 00:42:41,000 --> 00:42:43,720 Speaker 1: vanguards different because it's a share class. But JP Morgan 758 00:42:43,840 --> 00:42:46,400 Speaker 1: and Dimensional did wholesale kind of shifts and have been 759 00:42:46,440 --> 00:42:49,480 Speaker 1: pretty public about it. I do think it's a trend, 760 00:42:50,400 --> 00:42:52,560 Speaker 1: whether it has the numbers you associated to it or not. 761 00:42:52,800 --> 00:42:55,520 Speaker 1: I think it's a It's clearly a trend which is 762 00:42:55,560 --> 00:42:57,680 Speaker 1: going to be measured in the hundreds of billions of 763 00:42:57,760 --> 00:43:02,279 Speaker 1: dollars over the the years. And for us, the way 764 00:43:02,320 --> 00:43:04,000 Speaker 1: that we look at it is that it's just the 765 00:43:04,080 --> 00:43:06,360 Speaker 1: next stage of growth of the E t F that 766 00:43:06,560 --> 00:43:09,560 Speaker 1: each of these different firms. The way that we look 767 00:43:09,640 --> 00:43:12,600 Speaker 1: at it is what they're what what's being declared across 768 00:43:12,719 --> 00:43:15,840 Speaker 1: the marketplaces. The t F is the default vehicle for 769 00:43:16,040 --> 00:43:20,560 Speaker 1: millions of investors to invest, and uh, and all the 770 00:43:20,640 --> 00:43:23,560 Speaker 1: benefits that are in the t F that have talked about, 771 00:43:24,320 --> 00:43:26,400 Speaker 1: People are moving more and more towards that. Some of 772 00:43:26,440 --> 00:43:27,840 Speaker 1: them do it through a launch, some of the do 773 00:43:28,000 --> 00:43:30,160 Speaker 1: through a conversion, some of them do it through a 774 00:43:30,280 --> 00:43:35,600 Speaker 1: redirection of their kind of internal flow around it. But 775 00:43:35,760 --> 00:43:37,960 Speaker 1: what the trend line is is that this is becoming 776 00:43:38,000 --> 00:43:40,719 Speaker 1: the default vehicle for how more and more people want 777 00:43:40,760 --> 00:43:43,600 Speaker 1: to invest. And we think that's great because it also 778 00:43:43,680 --> 00:43:47,280 Speaker 1: then moves to the point that we talked about earlier, 779 00:43:47,640 --> 00:43:51,640 Speaker 1: which is that they're not just moving to a singular 780 00:43:51,719 --> 00:43:54,680 Speaker 1: E t F. It's not just everyone moving everything and 781 00:43:54,760 --> 00:43:57,799 Speaker 1: converting everything to you know, I VV or an SMP 782 00:43:58,080 --> 00:44:03,040 Speaker 1: type exposure. It's it's basically a whole range of things 783 00:44:03,280 --> 00:44:08,040 Speaker 1: from pure indexation too, uh, you know, if you will, 784 00:44:08,160 --> 00:44:11,400 Speaker 1: quantitative or quasi index quasi active like some of the 785 00:44:11,480 --> 00:44:14,400 Speaker 1: E s G exposures, or some of the factor oriented 786 00:44:14,440 --> 00:44:19,320 Speaker 1: exposures that firms like demensional and moved towards even you know, 787 00:44:19,480 --> 00:44:23,719 Speaker 1: embracing traditional security selection wrapped in an E t F 788 00:44:24,480 --> 00:44:28,000 Speaker 1: and so both because it's becoming the investment vehicle of 789 00:44:28,120 --> 00:44:31,640 Speaker 1: choice and because it's really accelerating the shift that we 790 00:44:31,760 --> 00:44:35,120 Speaker 1: talked about, which is it's it's becoming a rapper for 791 00:44:35,160 --> 00:44:39,640 Speaker 1: all public securities. We think that's really exciting because again, 792 00:44:39,880 --> 00:44:42,839 Speaker 1: to go back to the beginning of this conversation, whether 793 00:44:42,880 --> 00:44:44,520 Speaker 1: you look at the e t F market as we do, 794 00:44:44,800 --> 00:44:47,319 Speaker 1: as three percent of the addressable, or you look at 795 00:44:47,400 --> 00:44:50,480 Speaker 1: it as you do, which is of the addressable of 796 00:44:50,600 --> 00:44:54,920 Speaker 1: regulated funds, that's still a vast opportunity to get more 797 00:44:54,960 --> 00:44:58,640 Speaker 1: and more people to adopt it. And and so you 798 00:44:58,760 --> 00:45:02,399 Speaker 1: know it also we mean more competition for us, which 799 00:45:02,480 --> 00:45:04,879 Speaker 1: is great. We welcome it because what we also think 800 00:45:05,000 --> 00:45:07,040 Speaker 1: is going to happen is it's going to mean that 801 00:45:07,160 --> 00:45:10,360 Speaker 1: the overall pie or the overall category is going to 802 00:45:10,520 --> 00:45:15,040 Speaker 1: expand at a very very rapid rate, which we're which 803 00:45:15,120 --> 00:45:18,320 Speaker 1: we're really exciting about continuing to lead and and and 804 00:45:18,480 --> 00:45:23,040 Speaker 1: continuing to kind of expand the universe. If you will, Okay, see, 805 00:45:23,600 --> 00:45:25,200 Speaker 1: I'm going to ask you a question that we ask 806 00:45:25,280 --> 00:45:29,840 Speaker 1: everyone who comes on on trillions. What is your favorite 807 00:45:29,880 --> 00:45:33,200 Speaker 1: E t F ticker that is not your own? Oh, 808 00:45:34,280 --> 00:45:38,399 Speaker 1: my favorite E t F ticker that is not my own. 809 00:45:40,040 --> 00:45:44,120 Speaker 1: I have a lot of interest in what arc is 810 00:45:44,200 --> 00:45:48,560 Speaker 1: doing in part because I think that they're really pioneering 811 00:45:48,680 --> 00:45:52,680 Speaker 1: the e t F as a transparent form for security selection, 812 00:45:53,800 --> 00:45:56,520 Speaker 1: and you know, they'll go up, they'll go down kind 813 00:45:56,560 --> 00:46:00,520 Speaker 1: of as as a security selection kind of goes. But 814 00:46:00,640 --> 00:46:04,200 Speaker 1: I think that's a really really interesting development that's happened 815 00:46:04,360 --> 00:46:07,160 Speaker 1: over the past I mean, they've been in business for 816 00:46:07,480 --> 00:46:10,000 Speaker 1: you know, six seven years, particularly over the past couple 817 00:46:10,040 --> 00:46:13,360 Speaker 1: of years. I think that's a really pioneering expansion. Certainly 818 00:46:13,440 --> 00:46:17,400 Speaker 1: one uh we're looking to expand ourselves into. But I 819 00:46:17,440 --> 00:46:20,640 Speaker 1: think that's a really interesting development in this blurring that 820 00:46:20,760 --> 00:46:23,480 Speaker 1: we talked about. Selen rom G, thank you so much 821 00:46:23,480 --> 00:46:26,120 Speaker 1: for joining us on Trillians. Thanks Cherl, Thanks Eric, Thank 822 00:46:26,160 --> 00:46:33,280 Speaker 1: you guys for having me. Thanks for listening to Trillions. 823 00:46:33,520 --> 00:46:35,760 Speaker 1: Until next time. You can find us on the Bloomberg Terminal, 824 00:46:36,040 --> 00:46:40,120 Speaker 1: Bloomberg dot com, Apple Podcast, Spotify, and wherever else you'd 825 00:46:40,120 --> 00:46:42,600 Speaker 1: like to listen. We'd love to hear from you. We're 826 00:46:42,680 --> 00:46:46,839 Speaker 1: on Twitter, I'm at Joel Webber Show. He's at Eric Falcinas. 827 00:46:47,600 --> 00:46:49,960 Speaker 1: This episode of Trilliance was produced by Magnets and Drumson. 828 00:46:50,400 --> 00:47:02,080 Speaker 1: Francesca Levy is the head of Bloomberg Podcast by the setter, 829 00:47:03,960 --> 00:47:05,600 Speaker 1: the saster,