WEBVTT - Hot Takes: The Outlook for ETFs in 2020 0:00:05.760 --> 0:00:08.639 Boken to trians. I'm Joel Weber and I'm Eric bel Tunis. 0:00:12.360 --> 0:00:14.920 Eric would come to the end of twenty nineteen, which 0:00:14.960 --> 0:00:17.600 means the end of the decade. Yeah, the decade, that's 0:00:17.600 --> 0:00:19.119 the big one. I'm actually going out on New Year's 0:00:19.120 --> 0:00:22.360 Eve this year. Yeah, you got a babysitter. Congratulations. No, 0:00:22.440 --> 0:00:25.320 we're actually taking both the kids to this fun plex 0:00:25.360 --> 0:00:31.640 place crazy your own words, fun family vacation. Yeah, you 0:00:31.640 --> 0:00:33.280 can only have two of those three. Love that. Yeah 0:00:33.320 --> 0:00:36.720 that's pretty good. Yeah, Okay, so markets up at the 0:00:36.760 --> 0:00:38.839 end of the year. Market's way up for the decade, 0:00:39.120 --> 0:00:40.559 but we don't want to look back so much. On 0:00:40.600 --> 0:00:44.120 this episode is look forward. Yeah, a lot has happened 0:00:44.440 --> 0:00:47.960 this year, a lot of unexpected things, some expected things, um, 0:00:48.000 --> 0:00:49.960 and it's a good time to take stock of that, 0:00:50.040 --> 0:00:53.159 but also look forward to what you know, some of 0:00:53.200 --> 0:00:55.280 the smartest people who cover the industry are thinking about 0:00:55.320 --> 0:00:58.840 looking for and um getting ready for so joining us 0:00:58.920 --> 0:01:01.520 on this episode a couple of regulars, Rachel Evans of 0:01:01.520 --> 0:01:06.680 Bloomberg News and Todd rosen Bluth with c f r A, 0:01:06.880 --> 0:01:10.480 where he's the director of Mutual and Exchange Traded Fund Research. 0:01:10.840 --> 0:01:12.240 How many times have you been on the show, Todd, 0:01:12.640 --> 0:01:15.400 this is my fourth I think fourth or fifth time. 0:01:15.440 --> 0:01:17.240 I think you get a jacket when you hit the 0:01:17.240 --> 0:01:21.280 five times club or something year next year. Okay, you 0:01:21.360 --> 0:01:24.000 and Rachel might be neck and neck for most appearances. 0:01:24.000 --> 0:01:26.760 I think Rachel has you been. I think I'm I 0:01:26.760 --> 0:01:28.960 think I'm ahead of the game that Rachel. Okay, let's 0:01:28.959 --> 0:01:31.880 go eighties. You wanted eighties? Here you god, Rachel is 0:01:31.959 --> 0:01:36.800 Paul Simon whoever that was the first five times? Remember 0:01:36.800 --> 0:01:39.240 on SNL Tom Hanks was he became the second or 0:01:39.360 --> 0:01:41.680 Steve Martin might have been the second. So maybe you're 0:01:41.720 --> 0:01:45.199 the Steve Martin, but she's the first. Thank you, welcome 0:01:45.200 --> 0:01:51.200 to be here this time on Trilliance, the Year Ahead 0:01:51.400 --> 0:01:55.360 and the e t s. Okay, we've got a bunch 0:01:55.360 --> 0:01:57.240 of topics we want to run through. We want to 0:01:57.280 --> 0:02:01.960 start with flows, winners, losers, year decade. This kind of 0:02:01.960 --> 0:02:04.400 looks backwards more than forwards. Eric, I mean we're sure 0:02:04.440 --> 0:02:06.360 we want to do this? Yeah, I mean you have 0:02:06.440 --> 0:02:08.840 to look back to get a ground of where you're going. 0:02:09.200 --> 0:02:10.679 I'll just throw some numbers out and then you guys 0:02:10.720 --> 0:02:13.440 tell me what you thought. I mean, obviously, fixed income 0:02:13.520 --> 0:02:16.000 punched way above its weight. Why rates fell, I mean, 0:02:16.000 --> 0:02:18.440 fixed income definitely takes some money anyway, but rates falling 0:02:18.520 --> 0:02:20.840 is huge because it means bond prices go up, so 0:02:20.880 --> 0:02:23.840 that's a big boost for fixed income. Equity had a 0:02:23.880 --> 0:02:26.600 slow start, but it's coming back as taught as you know, 0:02:26.880 --> 0:02:30.560 sweating because we have a bet um equity holding its own. 0:02:30.840 --> 0:02:34.400 And I think also International probably had an underwhelming year, 0:02:34.440 --> 0:02:37.000 but is had a little late run. But overall, I 0:02:37.000 --> 0:02:41.440 think international is probably the weak spot among all the assets. Well, 0:02:41.480 --> 0:02:44.079 I think, just to give Eric credit for giving us 0:02:44.080 --> 0:02:47.760 the compliment for choosing fixed income, fixed income ETFs have 0:02:47.960 --> 0:02:51.079 more money going in for the first time in a decade. 0:02:51.360 --> 0:02:54.160 As Eric mentioned, it's a small part, it's of the pie. 0:02:54.480 --> 0:02:56.880 As we're doing this now, there's about a fourteen billion 0:02:56.919 --> 0:03:00.200 dollar lead for fixed income ETFs that doesn't have been 0:03:00.639 --> 0:03:02.760 in an environment when the equity markets are up more. 0:03:03.919 --> 0:03:05.800 And yes, Eric and I have a bet on this. 0:03:05.880 --> 0:03:08.640 I brought my chop six to be able to commemorate 0:03:08.680 --> 0:03:13.200 the fact that we're in the fixed income camp right now. Look, 0:03:13.240 --> 0:03:15.560 we have a sushi lunch bet Okay, I'm gonna get 0:03:15.560 --> 0:03:18.440 the salmon Lover special with a dessert of green tea 0:03:18.480 --> 0:03:20.320 ice cream, and then you're gonna pay for my part 0:03:20.400 --> 0:03:22.760 in this case, Yes, I will. I might even I 0:03:22.880 --> 0:03:24.880 might even splurge on some saki. I don't know. We'll 0:03:24.919 --> 0:03:30.519 say yea. But here's what Todd, here's what Todd is 0:03:30.560 --> 0:03:33.160 sweating about that he will not mention is right now, 0:03:33.280 --> 0:03:36.160 fixed income has a fourteen billion dollar lead on equities. 0:03:36.440 --> 0:03:41.240 But equity this year, Yes, on average, equity has taken 0:03:41.280 --> 0:03:44.280 thirty five billion more than fixed fixed income each December. 0:03:44.600 --> 0:03:46.520 So you do the math. So I'll do the math, 0:03:46.560 --> 0:03:48.640 and at some point we'll move and bring Rachel into 0:03:48.640 --> 0:03:51.640 this conversation. But I'm enjoy watching the But but let's 0:03:51.680 --> 0:03:54.400 just put it in perspective. Equity versus fixed income flows 0:03:54.480 --> 0:03:57.240 has been two to one for the last five years. 0:03:57.600 --> 0:04:00.000 This is rare and it's something we should be celebrating. 0:04:00.200 --> 0:04:02.720 And even if and I think fixing InCom will still 0:04:02.720 --> 0:04:05.640 be ahead, even if equity does what it typically does, 0:04:06.520 --> 0:04:09.040 that's still reason to celebrate. Fixing. Comm ETFs as we 0:04:09.080 --> 0:04:11.920 look into are going to remain a key part of 0:04:11.920 --> 0:04:14.480 the portfolio. And I think we're gonna have another rending 0:04:14.560 --> 0:04:16.600 year in twenty the way that we had in two 0:04:16.640 --> 0:04:18.479 thousand nineteen. But I think that's a good point. Like, 0:04:18.480 --> 0:04:21.280 I mean, if we're looking at the next couple of years, 0:04:21.320 --> 0:04:23.400 the next decade, even I think this is kind of 0:04:23.440 --> 0:04:25.839 like sort of fixed income sort of coming of age moment. 0:04:25.880 --> 0:04:27.839 You know, we haven't seen it kind of taking in 0:04:27.839 --> 0:04:30.000 the big flows and short you know, the rate outlook 0:04:30.080 --> 0:04:32.520 definitely kind of has a role in exactly where we're 0:04:32.520 --> 0:04:34.279 seeing flows going this year. But just in terms of 0:04:34.279 --> 0:04:36.880 how people are using fixed in com ETFs, the use 0:04:36.880 --> 0:04:39.360 of fixing comm ets has really broadened over the last 0:04:39.400 --> 0:04:42.559 eighteen months two years. You're seeing people using bondy tfs 0:04:42.640 --> 0:04:45.040 and ladders as a kind of laddering sort of strategy 0:04:45.040 --> 0:04:48.760 that previously was looking at single bonds. You're seeing institutions 0:04:48.839 --> 0:04:50.960 using them. You're seeing hedge funds and other kind of 0:04:50.960 --> 0:04:54.240 sophisticated traders using for hedging and sort of swaps. So 0:04:54.279 --> 0:04:56.080 I think kind of fixed in com ETFs are really 0:04:56.120 --> 0:04:58.120 sort of going to be the whether the growth is 0:04:58.160 --> 0:05:00.360 in the next decade. We've seen an awful lots of 0:05:00.440 --> 0:05:03.160 kind of equity so dominant in the kind of the 0:05:03.320 --> 0:05:05.799 previous sort of decades. I think looking forward, fixed income 0:05:05.880 --> 0:05:07.960 is is certainly an area where we could see some growth. 0:05:08.120 --> 0:05:11.080 Next topic returns. Yeah. I mean, well, first of all, 0:05:11.160 --> 0:05:13.720 just the SMP being up. I know it doesn't feel 0:05:13.800 --> 0:05:16.160 like it, but that is an amazing year. I used 0:05:16.160 --> 0:05:19.120 to refer to seventeen as utopia. This was even better. 0:05:19.800 --> 0:05:22.000 Didn't feel like it, but obviously you didn't have to 0:05:22.000 --> 0:05:24.719 do much. This whole decade was just basically like by 0:05:24.720 --> 0:05:28.240 the market, you know people call it. So it's been 0:05:28.320 --> 0:05:30.039 very easy to make money. And of course there's some 0:05:30.120 --> 0:05:32.640 high flyers. Todd, you want to guess what the best 0:05:32.640 --> 0:05:35.640 performer was over the past ten years? Was it XBI 0:05:35.760 --> 0:05:39.599 the biotech ets He follows me on Twitter. Um, no, 0:05:39.720 --> 0:05:41.680 I did my research, did you? I did my research 0:05:42.040 --> 0:05:46.400 showing up? Okay, hey man, hat tip to you. That's right. 0:05:46.560 --> 0:05:50.960 XBI equalated biotech biotechs relentless. It's one of those areas 0:05:50.960 --> 0:05:53.800 that's just defied the high flying odds. Usually you high 0:05:53.800 --> 0:05:55.000 fly for a year or two and then you're in 0:05:55.000 --> 0:05:57.640 the tank the next year. Biotech is very persistent. So 0:05:57.880 --> 0:06:00.960 but outside of that, you've had some people come and go, 0:06:01.279 --> 0:06:03.880 but mostly it's been a beta, beta decade. Yeah, but 0:06:03.960 --> 0:06:05.920 I also is interesting when we looked at this year 0:06:05.960 --> 0:06:09.279 and then the ten years. So this year ten, which 0:06:09.320 --> 0:06:12.680 is a solar e TF that invest Goo offers. I 0:06:12.720 --> 0:06:15.360 keep thinking of it as Guggenheim, but it's the investigal 0:06:15.440 --> 0:06:18.520 product now is actually among the worst performers if you 0:06:18.600 --> 0:06:21.520 look back at decade, So you know, just be careful 0:06:21.560 --> 0:06:23.799 when you're choosing some of these high flyers and expecting 0:06:23.800 --> 0:06:25.839 that they're going to continue to perform. Well, we've seen 0:06:25.839 --> 0:06:27.719 it with some of them, and semiconductors are on the 0:06:27.760 --> 0:06:30.200 top of both charts, but there's a number of ETFs 0:06:30.200 --> 0:06:32.200 that are bounced around quite a bit when you get 0:06:32.200 --> 0:06:35.400 more niche with these industry oriented ets What other losers 0:06:35.440 --> 0:06:37.640 stand out? Yeah, the lisers for me, I was I 0:06:37.680 --> 0:06:39.800 was looking this morning at the moment at this point 0:06:39.839 --> 0:06:42.039 in the MJ is one of the worst performers of 0:06:42.080 --> 0:06:44.680 the year, which is really really interesting. Marijuana it's like 0:06:44.720 --> 0:06:46.520 such a kind of growth industry and it almost it's 0:06:46.600 --> 0:06:48.599 kind of like sort of you think it might be 0:06:48.640 --> 0:06:50.880 more correlated with biotech, just sort of given a lot 0:06:50.880 --> 0:06:53.040 of it's sort of related kind of like health and 0:06:53.279 --> 0:06:56.040 medical kind of innovations. But MJ has been doing very 0:06:56.040 --> 0:06:58.000 badly this year, and it would actually be a second 0:06:58.080 --> 0:07:00.359 year of losses. So cannabis it may be kind of 0:07:00.360 --> 0:07:02.040 a long time trend that maybe kind of a long 0:07:02.120 --> 0:07:05.080 time investment story there, but this year and last year 0:07:05.240 --> 0:07:07.880 it really hasn't been the case. And one interesting thing 0:07:07.880 --> 0:07:11.160 about cannabis though, despite that, you know, really rough for 0:07:11.240 --> 0:07:15.080 telling you it's not thirty or something. UM, it's pretty 0:07:15.160 --> 0:07:17.480 much retained a good amount of it hasn't really seen 0:07:17.560 --> 0:07:20.440 much outflows. This is a good sign, and it's also 0:07:20.520 --> 0:07:22.480 just remarkable. Normally, when you have these high flyers, the 0:07:22.480 --> 0:07:28.680 money sort of follows the performance. But here, yeah, I mean, okay, 0:07:28.720 --> 0:07:32.400 all right, all right, well we'll we'll let we'll, we'll 0:07:32.440 --> 0:07:34.600 let that slide. You can. You can't talk about cannabis 0:07:34.640 --> 0:07:38.240 ets without a pune jumping in too quickly. Well, I 0:07:38.520 --> 0:07:40.960 will say, I do think some people forgot they bought it. 0:07:41.080 --> 0:07:43.560 I mean, and I'm not I'm kidding, but I'm not kidding. 0:07:43.800 --> 0:07:45.520 I also think it's the area that people are in 0:07:45.560 --> 0:07:49.000 for long term. But that's kind of interesting. Another area 0:07:49.040 --> 0:07:52.800 that I thought was interesting that UM symbolized the comeback 0:07:52.840 --> 0:07:55.120 from two eight is a home builders I t b 0:07:55.760 --> 0:07:59.000 it just like a month ago past. It's two thousand 0:07:59.040 --> 0:08:02.400 seven high point. So it made this huge, huge trip 0:08:02.440 --> 0:08:05.240 down like the Grand Canyon, it's finally come back up. 0:08:05.280 --> 0:08:08.120 So homebuilders kind of like close the gap on that 0:08:08.200 --> 0:08:11.840 story of the financial crisis. And well it's the other 0:08:11.880 --> 0:08:13.800 strong perform The other peer in that group is x 0:08:13.960 --> 0:08:17.080 HB And it's a thousand basis point difference between I 0:08:17.240 --> 0:08:20.240 t B and x HB. So two similar sounding et 0:08:20.400 --> 0:08:22.320 f s they're both working at. You would have still 0:08:22.320 --> 0:08:24.360 made a lot of money if you held those products, 0:08:24.600 --> 0:08:27.200 but a big difference because the exposure between those products 0:08:27.200 --> 0:08:30.120 are different. As we've talked about on prior Rillians podcasts 0:08:30.120 --> 0:08:31.640 that I've been on. You love that, but I thought 0:08:31.640 --> 0:08:33.520 we're supposed to just pick on the cheapest e t F. 0:08:33.559 --> 0:08:36.880 Isn't that the rule? Yeah, you're asking me that we 0:08:36.920 --> 0:08:39.960 had c F. A would certainly disagree with with going 0:08:40.000 --> 0:08:42.640 against the cheapest of the largest ETF and focusing on 0:08:42.679 --> 0:08:45.360 looking what's inside the portfolio. Yeah. Actually, you want to 0:08:45.360 --> 0:08:47.440 get Todd's great on panels, but the way to get 0:08:47.480 --> 0:08:49.880 him started is just to say talk about everybody going 0:08:49.880 --> 0:08:52.959 to the cheapest ttfs. Well, and we can do that, uh, 0:08:53.000 --> 0:08:54.440 and then we can certainly I think we have on 0:08:54.559 --> 0:08:56.760 the plan to talk about actively managed e t f 0:08:56.880 --> 0:08:58.400 s and whether or not they're going to be a 0:08:58.480 --> 0:09:01.600 star in the next decade. Next topic, let's talking about 0:09:01.600 --> 0:09:03.840 the league table for a second. So the league table, 0:09:03.840 --> 0:09:05.720 we're looking kind of who's taken in the most flows 0:09:06.000 --> 0:09:08.720 this year, and there aren't really any great surprises at 0:09:08.720 --> 0:09:10.720 the top, you know, black Rock is still kind of dominant, 0:09:10.720 --> 0:09:12.959 followed by Vanguard, but the one that really stood out 0:09:13.000 --> 0:09:15.400 to me actually is a little bit lower down in 0:09:15.440 --> 0:09:17.840 the in the table, which is DWS, which is Deutsche 0:09:17.920 --> 0:09:20.800 Banks are newly rebranded or not that newly rebranded asset 0:09:20.800 --> 0:09:24.960 management a unit. They are poised to snap three years 0:09:24.960 --> 0:09:28.040 of outflows. So they have been really struggling over the 0:09:28.080 --> 0:09:30.400 last few years because so much of their assets were 0:09:30.400 --> 0:09:33.360 in FX hedge products and that stopped really kind of 0:09:33.360 --> 0:09:37.280 being something attractive in or so this year they are 0:09:37.280 --> 0:09:39.839 looking to actually take in inflows and that seems to 0:09:39.880 --> 0:09:42.720 be mostly attributable to h y LB, which is a 0:09:42.800 --> 0:09:45.480 high yield et F that's pretty cheap and that they 0:09:45.559 --> 0:09:47.280 launched with kind of quite a bit of a plum 0:09:47.360 --> 0:09:49.599 a few years back, and also U S s G, 0:09:49.800 --> 0:09:52.040 which is an e s G product so they've really 0:09:52.040 --> 0:09:54.440 been riding those two funds to actually coming back to 0:09:54.559 --> 0:09:58.320 having inflows for the first time in three years. League 0:09:58.320 --> 0:10:00.520 Table jumps out at you, Well, they're bright spot. I 0:10:00.559 --> 0:10:04.040 mean so two ends of the spectrum. SCHWAB, which is 0:10:04.080 --> 0:10:06.480 everybody in this room and probably listening knows, made an 0:10:06.480 --> 0:10:09.680 acquisition recently of t D a Merra trade. SCHWAB is 0:10:09.720 --> 0:10:12.240 not approved but not improved UH, and so we probably 0:10:12.240 --> 0:10:14.400 won't we won't see the impact from a flow standpoint 0:10:14.679 --> 0:10:19.160 until late but they are the number three provider in 0:10:19.240 --> 0:10:22.319 terms of flows this year UH, then the fifth largest provider. 0:10:22.320 --> 0:10:25.280 It's just a sign that low cost products continue to resonate. 0:10:25.280 --> 0:10:29.880 And then Goldman Sachs UH is top ten flows perspective, 0:10:29.960 --> 0:10:32.760 them catching up with what JP Morgan has done. UH. 0:10:32.760 --> 0:10:35.560 And Goldman is doing this even without having their low 0:10:35.600 --> 0:10:38.000 cost suite of ETFs that are in the hopper that 0:10:38.080 --> 0:10:40.920 are going to come out in and they've got some 0:10:41.520 --> 0:10:44.000 advisory parts of the business that will likely do well. 0:10:44.080 --> 0:10:47.880 So we've seen money going into GSLC, we've seen it 0:10:47.920 --> 0:10:49.720 going into some of their bond products as well, and 0:10:49.760 --> 0:10:51.880 I think they're a player to watch in the next 0:10:51.880 --> 0:10:54.080 decade um. Yeah, and you know, I kind of divide 0:10:54.080 --> 0:10:56.960 the E T F fishers into two camps. Was early guys, 0:10:57.040 --> 0:10:59.720 you know, like so you've got black Rock, State Street 0:10:59.720 --> 0:11:02.560 and Guard they taken almost like eight percent of the money. 0:11:02.679 --> 0:11:05.600 Right then you've got the Wall Street banks, which were 0:11:05.600 --> 0:11:08.360 sort of like the freshman maybe six years ago, Goldman, 0:11:08.440 --> 0:11:11.560 JP Morgan, Deutsche Bank. They do very well. They do. 0:11:11.640 --> 0:11:13.720 They do better than some of these by side firms 0:11:13.760 --> 0:11:15.960 that have come in um like a leg Mason or 0:11:16.000 --> 0:11:19.000 an open Him before they got acquired, or Hartford they do. 0:11:19.200 --> 0:11:21.520 Those guys get maybe four, you know, three or four billion. 0:11:21.880 --> 0:11:24.360 But the Wall Street banks have been very good about 0:11:24.360 --> 0:11:26.959 seeing the writing on the wall and sort of being 0:11:27.000 --> 0:11:29.160 their own little van guards in certain ways, in particular 0:11:29.280 --> 0:11:32.640 JP Morgan. So I think most issuers now realize you 0:11:32.640 --> 0:11:35.240 have to have some line of dirt cheap products to 0:11:35.360 --> 0:11:37.160 just get in the door, get your call answer, get 0:11:37.160 --> 0:11:39.640 advisor's interest, and then you try to maybe sprinkle in 0:11:39.679 --> 0:11:42.440 some of the more expensive exotic stuff. And they have 0:11:42.679 --> 0:11:46.079 quickly followed that template, which is basically the Vanguard I 0:11:46.120 --> 0:11:48.640 shares template, and it's working. So as you go down 0:11:48.760 --> 0:11:51.240 you're gonna see I think the next decade I think 0:11:51.240 --> 0:11:54.080 a JP Morgan, Goldman, UM, You're gonna see a lot 0:11:54.120 --> 0:11:58.840 of vertical integration, uh you know, Fidelity, JP Morgan, Goldman, Vanguard, 0:11:58.880 --> 0:12:01.760 Schwab and these guys are going to have the platforms 0:12:01.760 --> 0:12:04.360 and the advisors also that's just gonna suck in money 0:12:04.440 --> 0:12:06.520 to their own e t f s And so I 0:12:06.559 --> 0:12:10.599 don't see anything changing, big getting bigger UM and a 0:12:10.640 --> 0:12:13.520 lot of the issuers sort of you know, you know 0:12:13.600 --> 0:12:15.400 b y o A to an extent, you know, bring 0:12:15.400 --> 0:12:18.720 your own assets up using their other arms to just 0:12:19.000 --> 0:12:21.800 pull flows into their own funds. Okay, next topic, because 0:12:21.840 --> 0:12:25.000 the fee wars are totally over right, not even close, 0:12:25.640 --> 0:12:28.440 not even close. Let's just clear that all the time. 0:12:28.920 --> 0:12:31.600 It makes a nice headline. If anybody here rights headlines 0:12:31.600 --> 0:12:34.640 are is connected to headlines, please let me know about that. 0:12:34.960 --> 0:12:37.280 Uh So, let's just recap a bit of what happened 0:12:37.280 --> 0:12:39.400 this year. We had the first zero fee e t 0:12:39.559 --> 0:12:42.160 F that came to market from so far. We had 0:12:42.440 --> 0:12:45.839 negative fee e t s from Salt Financial. We had 0:12:45.880 --> 0:12:48.960 JP Morgan coming in at two basis points, and to 0:12:49.040 --> 0:12:51.560 some extent seeming like a bit of a disappointment because 0:12:51.559 --> 0:12:53.640 there was a possibility that they might go to zero. 0:12:54.080 --> 0:12:57.120 We've seen Vanguard bring pricing down, We've seen things coming down. 0:12:57.880 --> 0:12:59.880 We're only in the middle of it, and I think it, 0:13:00.120 --> 0:13:02.240 as we mentioned, Goldman is coming out, they're not. They're 0:13:02.280 --> 0:13:04.800 not coming out with low cost ETFs and being at 0:13:04.800 --> 0:13:09.079 a premium. JP Morgan has a an EFA based product 0:13:09.120 --> 0:13:11.880 that's been filed. If it's going to take share, it 0:13:11.920 --> 0:13:14.559 has to be seven basis points are less because that's 0:13:14.600 --> 0:13:20.120 what I EFA. What is that? What is EVA mar Yeah? 0:13:20.160 --> 0:13:26.760 Developed markets, so Europe, Australia, Japan, you know far Yeah, 0:13:26.840 --> 0:13:31.920 that's it, so you know, developed, none developed, non US markets. 0:13:31.920 --> 0:13:33.480 But I got stumped on that one. I was ready for, 0:13:33.559 --> 0:13:35.800 like tickers, I wasn't gonna be able to be prepared 0:13:35.840 --> 0:13:37.800 for you. It is funny like you can use an 0:13:37.800 --> 0:13:39.520 acreative so much and then someone asks you what it 0:13:39.559 --> 0:13:41.880 stands for. Is possible not to know? But I think 0:13:41.920 --> 0:13:43.480 I think Todds right as well, just in terms of 0:13:43.520 --> 0:13:45.600 kind of like the few will continuing, Like I think 0:13:45.600 --> 0:13:48.079 it's it's going to broaden. You know, we're already seeing 0:13:48.080 --> 0:13:51.360 it EFA products potentially, but also high yield. We've seen 0:13:51.400 --> 0:13:53.720 kind of like big fee cuts in certain hi yield products. 0:13:53.760 --> 0:13:56.440 This year, thematics are starting to kind of like trend 0:13:56.720 --> 0:13:59.720 not towards zero per se, but they're getting significantly cheaper. 0:14:00.000 --> 0:14:02.559 There's still a significant number of places where we could 0:14:02.600 --> 0:14:05.319 see fee cuts that kind of like see fee compression 0:14:05.400 --> 0:14:08.520 sort of happening before we really get to rock bottom 0:14:08.640 --> 0:14:11.520 or or what about below bottom when people continue to 0:14:11.520 --> 0:14:14.040 pay you. Yeah, I mean we we've already seen the 0:14:14.080 --> 0:14:17.839 first fund that was well, it's not gathered assets. That's 0:14:18.120 --> 0:14:20.080 that's the thing that surprised me. I was expecting we 0:14:20.120 --> 0:14:23.160 would have seen more money going into these products. Distribution 0:14:23.240 --> 0:14:25.280 remains a bit of a challenge and a brand name 0:14:25.880 --> 0:14:28.200 that isn't as well known. But I don't think we're 0:14:28.200 --> 0:14:29.800 gonna I think we're going to see we should see 0:14:29.800 --> 0:14:32.280 more of these products. Instead of closing the doors, you 0:14:32.320 --> 0:14:35.040 should just rebate the fee and hope to get someone 0:14:35.120 --> 0:14:37.120 in before closing the doors if it doesn't work. And 0:14:37.160 --> 0:14:40.360 also I'd argue the fee wars have spread to the 0:14:40.400 --> 0:14:43.840 commission free trading that was essentially part of the fee war, 0:14:44.280 --> 0:14:47.160 and it's spreading to advisors. You know, Schwab and Schwab 0:14:47.200 --> 0:14:49.600 this year announced they're going to be an advisor where 0:14:49.640 --> 0:14:52.000 they're going to give you a subscription services almost like Netflix, 0:14:52.280 --> 0:14:54.280 and you add up the math, it's very very low 0:14:54.320 --> 0:14:57.920 cost um. I don't see this really stopping for a 0:14:57.960 --> 0:15:01.400 long time. I would argue that it's almost just beginning. 0:15:01.960 --> 0:15:05.440 Next what's the future of smart beta. I'm very bullish 0:15:05.520 --> 0:15:07.960 on smart beta. I think smart beta is here to stay. 0:15:07.960 --> 0:15:11.680 It's just about cross the trillion dollars and that's that's 0:15:11.680 --> 0:15:14.120 a trillion dollars the hard way. That's a trillion dollars 0:15:14.160 --> 0:15:17.480 in the terror dome, you know, after tax picky advisor 0:15:17.520 --> 0:15:21.720 money um and I think, look, Pete, not everybody wants 0:15:21.760 --> 0:15:24.280 to just get the the index right. A good group 0:15:24.280 --> 0:15:27.360 of people who want to outperform. The problem for active 0:15:27.360 --> 0:15:31.240 managers is they want it cheap, rules based and tax efficient, 0:15:31.240 --> 0:15:33.320 and that's smart beta. Us m V is a great 0:15:33.320 --> 0:15:35.280 example the low vall minimum all et F from I 0:15:35.400 --> 0:15:38.680 shares what is it, fifteen basis points, So it's under 0:15:38.680 --> 0:15:41.240 that magical twenty basis point figure where most of the 0:15:41.280 --> 0:15:43.640 flows go and you get a chance to do something better, 0:15:43.720 --> 0:15:46.000 maybe a higher sharp ratio. You can talk to your 0:15:46.000 --> 0:15:48.840 clients about something that's a little more you know, sophisticated. 0:15:49.360 --> 0:15:51.400 UM I am very bullish on this. It's just a 0:15:51.400 --> 0:15:54.000 great deal. The value proposition is there. I think investors 0:15:54.040 --> 0:15:56.160 have been bullish on it. It's now the third most 0:15:56.200 --> 0:15:59.320 popular HTF in terms of flows having a great year. 0:15:59.440 --> 0:16:02.440 It's you know, having what side of the pie is 0:16:02.480 --> 0:16:06.120 that now the pie? But that's about where it's been. 0:16:06.760 --> 0:16:09.400 Well the pie is continue with the pies to keep 0:16:09.480 --> 0:16:14.200 up alone. Yeah, i'd say a fifth yeah, yeah, but 0:16:14.240 --> 0:16:16.800 we and what we're seeing is this year we're seeing 0:16:16.880 --> 0:16:19.720 even though people shouldn't be buying just on past performance, 0:16:19.800 --> 0:16:22.680 they will buy based on past performance. And two thousand 0:16:22.760 --> 0:16:24.600 nineteen has been a good year for some of these 0:16:24.760 --> 0:16:27.000 flagship products. Us m V is keeping up with the 0:16:27.040 --> 0:16:30.640 broader market, lower risk and yet outperforming some of the 0:16:30.720 --> 0:16:34.600 multi factor e t s. I mentioned g SLC earlier, 0:16:34.840 --> 0:16:38.120 but O mf L, which is an investo multi factor 0:16:38.200 --> 0:16:42.800 product John Hancock's multi factor product j h mL on 0:16:42.880 --> 0:16:45.240 that one is also performing. I think if you're going 0:16:45.280 --> 0:16:47.040 to pay a little bit more than a market cap 0:16:47.080 --> 0:16:49.200 weighted portfolio, you want to hope that you're going to 0:16:49.360 --> 0:16:52.480 keep up with a broader benchmark and perhaps even beat it. 0:16:52.960 --> 0:16:54.960 And that's working out in many cases. This year and 0:16:55.000 --> 0:16:57.080 that sets up well for for the future. Yeah, I 0:16:57.120 --> 0:16:58.680 think it's it's gonna be interesting to so see how 0:16:58.680 --> 0:17:00.840 these products to continue to evolved because a lot of 0:17:00.840 --> 0:17:03.120 sort of the main kind of areas for for creating 0:17:03.120 --> 0:17:05.720 products have now been taken. But the key thing from 0:17:05.720 --> 0:17:07.640 my perspective is to make sure people keep looking under 0:17:07.640 --> 0:17:09.160 the hurt that should speak to you to your kind 0:17:09.160 --> 0:17:11.239 of focused taught on this as well, because a lot 0:17:11.280 --> 0:17:13.440 of these smart beta products are very different to one another, 0:17:13.560 --> 0:17:15.520 yet they sound very similar. You know, we've talked about 0:17:15.520 --> 0:17:17.000 this in the past with people a way that they're 0:17:17.000 --> 0:17:19.800 calculating value from one product to another is quite different. 0:17:19.840 --> 0:17:22.080 So I think it's just important these products and you 0:17:22.200 --> 0:17:24.719 have those returns and that can be that to eric 0:17:24.800 --> 0:17:27.119 shiny object effects that can kind of let lure people in. 0:17:27.400 --> 0:17:29.320 But if you if you are buying one of these products, 0:17:29.320 --> 0:17:32.600 you should know exactly how they are calculating the particular 0:17:32.600 --> 0:17:35.560 fact that you're looking for exposure to. Um. My colleague 0:17:35.560 --> 0:17:38.639 Ethanacios in London did a study on the rolling twelve 0:17:38.680 --> 0:17:40.440 month return of value et f s and found that 0:17:40.920 --> 0:17:44.240 they normally have a twenty percent gap in one year returns, 0:17:44.240 --> 0:17:46.600 which is still pretty significant. But in two thousand nine, 0:17:46.600 --> 0:17:49.720 when value came roaring back, there was a nine percent 0:17:49.840 --> 0:17:52.280 gap between the best performing value et F and the 0:17:52.400 --> 0:17:55.879 and the worst. That is astonishing to me, and I 0:17:55.920 --> 0:17:58.119 have a theory that right now a lot of the 0:17:58.240 --> 0:17:59.959 value and smart baty e t F to get them 0:18:00.000 --> 0:18:01.919 money are the ones that look most like the market. 0:18:02.359 --> 0:18:05.520 They have a lot of beta low tracking error. I 0:18:05.560 --> 0:18:08.600 think when there's a sell off for some turmoil where 0:18:08.680 --> 0:18:12.199 value comes roaring back, the more pure ones will have 0:18:12.240 --> 0:18:14.440 their shiny object moment and have their day in the sun. 0:18:14.480 --> 0:18:17.520 But as Rachel mentioned, what goes up usually comes down, 0:18:17.720 --> 0:18:20.280 and I think that now would be the time maybe 0:18:20.280 --> 0:18:22.960 to look at a more pure one, given that beta 0:18:22.960 --> 0:18:25.600 has had this long run. But most people again look 0:18:25.640 --> 0:18:27.199 in the past, and they keep buying the sort of 0:18:27.200 --> 0:18:30.600 water down value ETFs like VTV and i w D 0:18:37.160 --> 0:18:40.560 shiny objects thematic ETFs. Let's talk about that for a second. 0:18:40.600 --> 0:18:42.360 We talked about pot already, but there's some other ones. 0:18:42.800 --> 0:18:45.800 We'll just put it in perspective twenty. About twenty billion 0:18:45.840 --> 0:18:48.840 dollars are in thematic oriented e t s and there's 0:18:48.880 --> 0:18:51.400 about a hundred and twenty or so of these products 0:18:51.400 --> 0:18:54.440 they get a lot of attention because of as you mentioned, 0:18:54.480 --> 0:18:57.640 the shiny objects. So we now have six cannabis ETFs. 0:18:57.680 --> 0:19:00.840 We had one when the year started. They're all underperforming 0:19:00.880 --> 0:19:04.280 the broader market because the socks inside them have have 0:19:04.359 --> 0:19:07.080 done poorly. We've got a whole range of video gaming 0:19:07.160 --> 0:19:10.360