Speaker 1: Boken to trians. I'm Joel Weber and I'm Eric bel Tunis.
Speaker 1: Eric would come to the end of twenty nineteen, which
Speaker 1: means the end of the decade. Yeah, the decade, that's
Speaker 1: the big one. I'm actually going out on New Year's
Speaker 1: Eve this year. Yeah, you got a babysitter. Congratulations. No,
Speaker 1: we're actually taking both the kids to this fun plex
Speaker 1: place crazy your own words, fun family vacation. Yeah, you
Speaker 1: can only have two of those three. Love that. Yeah
Speaker 1: that's pretty good. Yeah, Okay, so markets up at the
Speaker 1: end of the year. Market's way up for the decade,
Speaker 1: but we don't want to look back so much. On
Speaker 1: this episode is look forward. Yeah, a lot has happened
Speaker 1: this year, a lot of unexpected things, some expected things, um,
Speaker 1: and it's a good time to take stock of that,
Speaker 1: but also look forward to what you know, some of
Speaker 1: the smartest people who cover the industry are thinking about
Speaker 1: looking for and um getting ready for so joining us
Speaker 1: on this episode a couple of regulars, Rachel Evans of
Speaker 1: Bloomberg News and Todd rosen Bluth with c f r A,
Speaker 1: where he's the director of Mutual and Exchange Traded Fund Research.
Speaker 1: How many times have you been on the show, Todd,
Speaker 1: this is my fourth I think fourth or fifth time.
Speaker 1: I think you get a jacket when you hit the
Speaker 1: five times club or something year next year. Okay, you
Speaker 1: and Rachel might be neck and neck for most appearances.
Speaker 1: I think Rachel has you been. I think I'm I
Speaker 1: think I'm ahead of the game that Rachel. Okay, let's
Speaker 1: go eighties. You wanted eighties? Here you god, Rachel is
Speaker 1: Paul Simon whoever that was the first five times? Remember
Speaker 1: on SNL Tom Hanks was he became the second or
Speaker 1: Steve Martin might have been the second. So maybe you're
Speaker 1: the Steve Martin, but she's the first. Thank you, welcome
Speaker 1: to be here this time on Trilliance, the Year Ahead
Speaker 1: and the e t s. Okay, we've got a bunch
Speaker 1: of topics we want to run through. We want to
Speaker 1: start with flows, winners, losers, year decade. This kind of
Speaker 1: looks backwards more than forwards. Eric, I mean we're sure
Speaker 1: we want to do this? Yeah, I mean you have
Speaker 1: to look back to get a ground of where you're going.
Speaker 1: I'll just throw some numbers out and then you guys
Speaker 1: tell me what you thought. I mean, obviously, fixed income
Speaker 1: punched way above its weight. Why rates fell, I mean,
Speaker 1: fixed income definitely takes some money anyway, but rates falling
Speaker 1: is huge because it means bond prices go up, so
Speaker 1: that's a big boost for fixed income. Equity had a
Speaker 1: slow start, but it's coming back as taught as you know,
Speaker 1: sweating because we have a bet um equity holding its own.
Speaker 1: And I think also International probably had an underwhelming year,
Speaker 1: but is had a little late run. But overall, I
Speaker 1: think international is probably the weak spot among all the assets. Well,
Speaker 1: I think, just to give Eric credit for giving us
Speaker 1: the compliment for choosing fixed income, fixed income ETFs have
Speaker 1: more money going in for the first time in a decade.
Speaker 1: As Eric mentioned, it's a small part, it's of the pie.
Speaker 1: As we're doing this now, there's about a fourteen billion
Speaker 1: dollar lead for fixed income ETFs that doesn't have been
Speaker 1: in an environment when the equity markets are up more.
Speaker 1: And yes, Eric and I have a bet on this.
Speaker 1: I brought my chop six to be able to commemorate
Speaker 1: the fact that we're in the fixed income camp right now. Look,
Speaker 1: we have a sushi lunch bet Okay, I'm gonna get
Speaker 1: the salmon Lover special with a dessert of green tea
Speaker 1: ice cream, and then you're gonna pay for my part
Speaker 1: in this case, Yes, I will. I might even I
Speaker 1: might even splurge on some saki. I don't know. We'll
Speaker 1: say yea. But here's what Todd, here's what Todd is
Speaker 1: sweating about that he will not mention is right now,
Speaker 1: fixed income has a fourteen billion dollar lead on equities.
Speaker 1: But equity this year, Yes, on average, equity has taken
Speaker 1: thirty five billion more than fixed fixed income each December.
Speaker 1: So you do the math. So I'll do the math,
Speaker 1: and at some point we'll move and bring Rachel into
Speaker 1: this conversation. But I'm enjoy watching the But but let's
Speaker 1: just put it in perspective. Equity versus fixed income flows
Speaker 1: has been two to one for the last five years.
Speaker 1: This is rare and it's something we should be celebrating.
Speaker 1: And even if and I think fixing InCom will still
Speaker 1: be ahead, even if equity does what it typically does,
Speaker 1: that's still reason to celebrate. Fixing. Comm ETFs as we
Speaker 1: look into are going to remain a key part of
Speaker 1: the portfolio. And I think we're gonna have another rending
Speaker 1: year in twenty the way that we had in two
Speaker 1: thousand nineteen. But I think that's a good point. Like,
Speaker 1: I mean, if we're looking at the next couple of years,
Speaker 1: the next decade, even I think this is kind of
Speaker 1: like sort of fixed income sort of coming of age moment.
Speaker 1: You know, we haven't seen it kind of taking in
Speaker 1: the big flows and short you know, the rate outlook
Speaker 1: definitely kind of has a role in exactly where we're
Speaker 1: seeing flows going this year. But just in terms of
Speaker 1: how people are using fixed in com ETFs, the use
Speaker 1: of fixing comm ets has really broadened over the last
Speaker 1: eighteen months two years. You're seeing people using bondy tfs
Speaker 1: and ladders as a kind of laddering sort of strategy
Speaker 1: that previously was looking at single bonds. You're seeing institutions
Speaker 1: using them. You're seeing hedge funds and other kind of
Speaker 1: sophisticated traders using for hedging and sort of swaps. So
Speaker 1: I think kind of fixed in com ETFs are really
Speaker 1: sort of going to be the whether the growth is
Speaker 1: in the next decade. We've seen an awful lots of
Speaker 1: kind of equity so dominant in the kind of the
Speaker 1: previous sort of decades. I think looking forward, fixed income
Speaker 1: is is certainly an area where we could see some growth.
Speaker 1: Next topic returns. Yeah. I mean, well, first of all,
Speaker 1: just the SMP being up. I know it doesn't feel
Speaker 1: like it, but that is an amazing year. I used
Speaker 1: to refer to seventeen as utopia. This was even better.
Speaker 1: Didn't feel like it, but obviously you didn't have to
Speaker 1: do much. This whole decade was just basically like by
Speaker 1: the market, you know people call it. So it's been
Speaker 1: very easy to make money. And of course there's some
Speaker 1: high flyers. Todd, you want to guess what the best
Speaker 1: performer was over the past ten years? Was it XBI
Speaker 1: the biotech ets He follows me on Twitter. Um, no,
Speaker 1: I did my research, did you? I did my research
Speaker 1: showing up? Okay, hey man, hat tip to you. That's right.
Speaker 1: XBI equalated biotech biotechs relentless. It's one of those areas
Speaker 1: that's just defied the high flying odds. Usually you high
Speaker 1: fly for a year or two and then you're in
Speaker 1: the tank the next year. Biotech is very persistent. So
Speaker 1: but outside of that, you've had some people come and go,
Speaker 1: but mostly it's been a beta, beta decade. Yeah, but
Speaker 1: I also is interesting when we looked at this year
Speaker 1: and then the ten years. So this year ten, which
Speaker 1: is a solar e TF that invest Goo offers. I
Speaker 1: keep thinking of it as Guggenheim, but it's the investigal
Speaker 1: product now is actually among the worst performers if you
Speaker 1: look back at decade, So you know, just be careful
Speaker 1: when you're choosing some of these high flyers and expecting
Speaker 1: that they're going to continue to perform. Well, we've seen
Speaker 1: it with some of them, and semiconductors are on the
Speaker 1: top of both charts, but there's a number of ETFs
Speaker 1: that are bounced around quite a bit when you get
Speaker 1: more niche with these industry oriented ets What other losers
Speaker 1: stand out? Yeah, the lisers for me, I was I
Speaker 1: was looking this morning at the moment at this point
Speaker 1: in the MJ is one of the worst performers of
Speaker 1: the year, which is really really interesting. Marijuana it's like
Speaker 1: such a kind of growth industry and it almost it's
Speaker 1: kind of like sort of you think it might be
Speaker 1: more correlated with biotech, just sort of given a lot
Speaker 1: of it's sort of related kind of like health and
Speaker 1: medical kind of innovations. But MJ has been doing very
Speaker 1: badly this year, and it would actually be a second
Speaker 1: year of losses. So cannabis it may be kind of
Speaker 1: a long time trend that maybe kind of a long
Speaker 1: time investment story there, but this year and last year
Speaker 1: it really hasn't been the case. And one interesting thing
Speaker 1: about cannabis though, despite that, you know, really rough for
Speaker 1: telling you it's not thirty or something. UM, it's pretty
Speaker 1: much retained a good amount of it hasn't really seen
Speaker 1: much outflows. This is a good sign, and it's also
Speaker 1: just remarkable. Normally, when you have these high flyers, the
Speaker 1: money sort of follows the performance. But here, yeah, I mean, okay,
Speaker 1: all right, all right, well we'll we'll let we'll, we'll
Speaker 1: let that slide. You can. You can't talk about cannabis
Speaker 1: ets without a pune jumping in too quickly. Well, I
Speaker 1: will say, I do think some people forgot they bought it.
Speaker 1: I mean, and I'm not I'm kidding, but I'm not kidding.
Speaker 1: I also think it's the area that people are in
Speaker 1: for long term. But that's kind of interesting. Another area
Speaker 1: that I thought was interesting that UM symbolized the comeback
Speaker 1: from two eight is a home builders I t b
Speaker 1: it just like a month ago past. It's two thousand
Speaker 1: seven high point. So it made this huge, huge trip
Speaker 1: down like the Grand Canyon, it's finally come back up.
Speaker 1: So homebuilders kind of like close the gap on that
Speaker 1: story of the financial crisis. And well it's the other
Speaker 1: strong perform The other peer in that group is x
Speaker 1: HB And it's a thousand basis point difference between I
Speaker 1: t B and x HB. So two similar sounding et
Speaker 1: f s they're both working at. You would have still
Speaker 1: made a lot of money if you held those products,
Speaker 1: but a big difference because the exposure between those products
Speaker 1: are different. As we've talked about on prior Rillians podcasts
Speaker 1: that I've been on. You love that, but I thought
Speaker 1: we're supposed to just pick on the cheapest e t F.
Speaker 1: Isn't that the rule? Yeah, you're asking me that we
Speaker 1: had c F. A would certainly disagree with with going
Speaker 1: against the cheapest of the largest ETF and focusing on
Speaker 1: looking what's inside the portfolio. Yeah. Actually, you want to
Speaker 1: get Todd's great on panels, but the way to get
Speaker 1: him started is just to say talk about everybody going
Speaker 1: to the cheapest ttfs. Well, and we can do that, uh,
Speaker 1: and then we can certainly I think we have on
Speaker 1: the plan to talk about actively managed e t f
Speaker 1: s and whether or not they're going to be a
Speaker 1: star in the next decade. Next topic, let's talking about
Speaker 1: the league table for a second. So the league table,
Speaker 1: we're looking kind of who's taken in the most flows
Speaker 1: this year, and there aren't really any great surprises at
Speaker 1: the top, you know, black Rock is still kind of dominant,
Speaker 1: followed by Vanguard, but the one that really stood out
Speaker 1: to me actually is a little bit lower down in
Speaker 1: the in the table, which is DWS, which is Deutsche
Speaker 1: Banks are newly rebranded or not that newly rebranded asset
Speaker 1: management a unit. They are poised to snap three years
Speaker 1: of outflows. So they have been really struggling over the
Speaker 1: last few years because so much of their assets were
Speaker 1: in FX hedge products and that stopped really kind of
Speaker 1: being something attractive in or so this year they are
Speaker 1: looking to actually take in inflows and that seems to
Speaker 1: be mostly attributable to h y LB, which is a
Speaker 1: high yield et F that's pretty cheap and that they
Speaker 1: launched with kind of quite a bit of a plum
Speaker 1: a few years back, and also U S s G,
Speaker 1: which is an e s G product so they've really
Speaker 1: been riding those two funds to actually coming back to
Speaker 1: having inflows for the first time in three years. League
Speaker 1: Table jumps out at you, Well, they're bright spot. I
Speaker 1: mean so two ends of the spectrum. SCHWAB, which is
Speaker 1: everybody in this room and probably listening knows, made an
Speaker 1: acquisition recently of t D a Merra trade. SCHWAB is
Speaker 1: not approved but not improved UH, and so we probably
Speaker 1: won't we won't see the impact from a flow standpoint
Speaker 1: until late but they are the number three provider in
Speaker 1: terms of flows this year UH, then the fifth largest provider.
Speaker 1: It's just a sign that low cost products continue to resonate.
Speaker 1: And then Goldman Sachs UH is top ten flows perspective,
Speaker 1: them catching up with what JP Morgan has done. UH.
Speaker 1: And Goldman is doing this even without having their low
Speaker 1: cost suite of ETFs that are in the hopper that
Speaker 1: are going to come out in and they've got some
Speaker 1: advisory parts of the business that will likely do well.
Speaker 1: So we've seen money going into GSLC, we've seen it
Speaker 1: going into some of their bond products as well, and
Speaker 1: I think they're a player to watch in the next
Speaker 1: decade um. Yeah, and you know, I kind of divide
Speaker 1: the E T F fishers into two camps. Was early guys,
Speaker 1: you know, like so you've got black Rock, State Street
Speaker 1: and Guard they taken almost like eight percent of the money.
Speaker 1: Right then you've got the Wall Street banks, which were
Speaker 1: sort of like the freshman maybe six years ago, Goldman,
Speaker 1: JP Morgan, Deutsche Bank. They do very well. They do.
Speaker 1: They do better than some of these by side firms
Speaker 1: that have come in um like a leg Mason or
Speaker 1: an open Him before they got acquired, or Hartford they do.
Speaker 1: Those guys get maybe four, you know, three or four billion.
Speaker 1: But the Wall Street banks have been very good about
Speaker 1: seeing the writing on the wall and sort of being
Speaker 1: their own little van guards in certain ways, in particular
Speaker 1: JP Morgan. So I think most issuers now realize you
Speaker 1: have to have some line of dirt cheap products to
Speaker 1: just get in the door, get your call answer, get
Speaker 1: advisor's interest, and then you try to maybe sprinkle in
Speaker 1: some of the more expensive exotic stuff. And they have
Speaker 1: quickly followed that template, which is basically the Vanguard I
Speaker 1: shares template, and it's working. So as you go down
Speaker 1: you're gonna see I think the next decade I think
Speaker 1: a JP Morgan, Goldman, UM, You're gonna see a lot
Speaker 1: of vertical integration, uh you know, Fidelity, JP Morgan, Goldman, Vanguard,
Speaker 1: Schwab and these guys are going to have the platforms
Speaker 1: and the advisors also that's just gonna suck in money
Speaker 1: to their own e t f s And so I
Speaker 1: don't see anything changing, big getting bigger UM and a
Speaker 1: lot of the issuers sort of you know, you know
Speaker 1: b y o A to an extent, you know, bring
Speaker 1: your own assets up using their other arms to just
Speaker 1: pull flows into their own funds. Okay, next topic, because
Speaker 1: the fee wars are totally over right, not even close,
Speaker 1: not even close. Let's just clear that all the time.
Speaker 1: It makes a nice headline. If anybody here rights headlines
Speaker 1: are is connected to headlines, please let me know about that.
Speaker 1: Uh So, let's just recap a bit of what happened
Speaker 1: this year. We had the first zero fee e t
Speaker 1: F that came to market from so far. We had
Speaker 1: negative fee e t s from Salt Financial. We had
Speaker 1: JP Morgan coming in at two basis points, and to
Speaker 1: some extent seeming like a bit of a disappointment because
Speaker 1: there was a possibility that they might go to zero.
Speaker 1: We've seen Vanguard bring pricing down, We've seen things coming down.
Speaker 1: We're only in the middle of it, and I think it,
Speaker 1: as we mentioned, Goldman is coming out, they're not. They're
Speaker 1: not coming out with low cost ETFs and being at
Speaker 1: a premium. JP Morgan has a an EFA based product
Speaker 1: that's been filed. If it's going to take share, it
Speaker 1: has to be seven basis points are less because that's
Speaker 1: what I EFA. What is that? What is EVA mar Yeah?
Speaker 1: Developed markets, so Europe, Australia, Japan, you know far Yeah,
Speaker 1: that's it, so you know, developed, none developed, non US markets.
Speaker 1: But I got stumped on that one. I was ready for,
Speaker 1: like tickers, I wasn't gonna be able to be prepared
Speaker 1: for you. It is funny like you can use an
Speaker 1: acreative so much and then someone asks you what it
Speaker 1: stands for. Is possible not to know? But I think
Speaker 1: I think Todds right as well, just in terms of
Speaker 1: kind of like the few will continuing, Like I think
Speaker 1: it's it's going to broaden. You know, we're already seeing
Speaker 1: it EFA products potentially, but also high yield. We've seen
Speaker 1: kind of like big fee cuts in certain hi yield products.
Speaker 1: This year, thematics are starting to kind of like trend
Speaker 1: not towards zero per se, but they're getting significantly cheaper.
Speaker 1: There's still a significant number of places where we could
Speaker 1: see fee cuts that kind of like see fee compression
Speaker 1: sort of happening before we really get to rock bottom
Speaker 1: or or what about below bottom when people continue to
Speaker 1: pay you. Yeah, I mean we we've already seen the
Speaker 1: first fund that was well, it's not gathered assets. That's
Speaker 1: that's the thing that surprised me. I was expecting we
Speaker 1: would have seen more money going into these products. Distribution
Speaker 1: remains a bit of a challenge and a brand name
Speaker 1: that isn't as well known. But I don't think we're
Speaker 1: gonna I think we're going to see we should see
Speaker 1: more of these products. Instead of closing the doors, you
Speaker 1: should just rebate the fee and hope to get someone
Speaker 1: in before closing the doors if it doesn't work. And
Speaker 1: also I'd argue the fee wars have spread to the
Speaker 1: commission free trading that was essentially part of the fee war,
Speaker 1: and it's spreading to advisors. You know, Schwab and Schwab
Speaker 1: this year announced they're going to be an advisor where
Speaker 1: they're going to give you a subscription services almost like Netflix,
Speaker 1: and you add up the math, it's very very low
Speaker 1: cost um. I don't see this really stopping for a
Speaker 1: long time. I would argue that it's almost just beginning.
Speaker 1: Next what's the future of smart beta. I'm very bullish
Speaker 1: on smart beta. I think smart beta is here to stay.
Speaker 1: It's just about cross the trillion dollars and that's that's
Speaker 1: a trillion dollars the hard way. That's a trillion dollars
Speaker 1: in the terror dome, you know, after tax picky advisor
Speaker 1: money um and I think, look, Pete, not everybody wants
Speaker 1: to just get the the index right. A good group
Speaker 1: of people who want to outperform. The problem for active
Speaker 1: managers is they want it cheap, rules based and tax efficient,
Speaker 1: and that's smart beta. Us m V is a great
Speaker 1: example the low vall minimum all et F from I
Speaker 1: shares what is it, fifteen basis points, So it's under
Speaker 1: that magical twenty basis point figure where most of the
Speaker 1: flows go and you get a chance to do something better,
Speaker 1: maybe a higher sharp ratio. You can talk to your
Speaker 1: clients about something that's a little more you know, sophisticated.
Speaker 1: UM I am very bullish on this. It's just a
Speaker 1: great deal. The value proposition is there. I think investors
Speaker 1: have been bullish on it. It's now the third most
Speaker 1: popular HTF in terms of flows having a great year.
Speaker 1: It's you know, having what side of the pie is
Speaker 1: that now the pie? But that's about where it's been.
Speaker 1: Well the pie is continue with the pies to keep
Speaker 1: up alone. Yeah, i'd say a fifth yeah, yeah, but
Speaker 1: we and what we're seeing is this year we're seeing
Speaker 1: even though people shouldn't be buying just on past performance,
Speaker 1: they will buy based on past performance. And two thousand
Speaker 1: nineteen has been a good year for some of these
Speaker 1: flagship products. Us m V is keeping up with the
Speaker 1: broader market, lower risk and yet outperforming some of the
Speaker 1: multi factor e t s. I mentioned g SLC earlier,
Speaker 1: but O mf L, which is an investo multi factor
Speaker 1: product John Hancock's multi factor product j h mL on
Speaker 1: that one is also performing. I think if you're going
Speaker 1: to pay a little bit more than a market cap
Speaker 1: weighted portfolio, you want to hope that you're going to
Speaker 1: keep up with a broader benchmark and perhaps even beat it.
Speaker 1: And that's working out in many cases. This year and
Speaker 1: that sets up well for for the future. Yeah, I
Speaker 1: think it's it's gonna be interesting to so see how
Speaker 1: these products to continue to evolved because a lot of
Speaker 1: sort of the main kind of areas for for creating
Speaker 1: products have now been taken. But the key thing from
Speaker 1: my perspective is to make sure people keep looking under
Speaker 1: the hurt that should speak to you to your kind
Speaker 1: of focused taught on this as well, because a lot
Speaker 1: of these smart beta products are very different to one another,
Speaker 1: yet they sound very similar. You know, we've talked about
Speaker 1: this in the past with people a way that they're
Speaker 1: calculating value from one product to another is quite different.
Speaker 1: So I think it's just important these products and you
Speaker 1: have those returns and that can be that to eric
Speaker 1: shiny object effects that can kind of let lure people in.
Speaker 1: But if you if you are buying one of these products,
Speaker 1: you should know exactly how they are calculating the particular
Speaker 1: fact that you're looking for exposure to. Um. My colleague
Speaker 1: Ethanacios in London did a study on the rolling twelve
Speaker 1: month return of value et f s and found that
Speaker 1: they normally have a twenty percent gap in one year returns,
Speaker 1: which is still pretty significant. But in two thousand nine,
Speaker 1: when value came roaring back, there was a nine percent
Speaker 1: gap between the best performing value et F and the
Speaker 1: and the worst. That is astonishing to me, and I
Speaker 1: have a theory that right now a lot of the
Speaker 1: value and smart baty e t F to get them
Speaker 1: money are the ones that look most like the market.
Speaker 1: They have a lot of beta low tracking error. I
Speaker 1: think when there's a sell off for some turmoil where
Speaker 1: value comes roaring back, the more pure ones will have
Speaker 1: their shiny object moment and have their day in the sun.
Speaker 1: But as Rachel mentioned, what goes up usually comes down,
Speaker 1: and I think that now would be the time maybe
Speaker 1: to look at a more pure one, given that beta
Speaker 1: has had this long run. But most people again look
Speaker 1: in the past, and they keep buying the sort of
Speaker 1: water down value ETFs like VTV and i w D
Speaker 1: shiny objects thematic ETFs. Let's talk about that for a second.
Speaker 1: We talked about pot already, but there's some other ones.
Speaker 1: We'll just put it in perspective twenty. About twenty billion
Speaker 1: dollars are in thematic oriented e t s and there's
Speaker 1: about a hundred and twenty or so of these products
Speaker 1: they get a lot of attention because of as you mentioned,
Speaker 1: the shiny objects. So we now have six cannabis ETFs.
Speaker 1: We had one when the year started. They're all underperforming
Speaker 1: the broader market because the socks inside them have have
Speaker 1: done poorly. We've got a whole range of video gaming
Speaker 1: oriented ets. Look at him, I knew he's gonna trash
Speaker 1: on the video games. I'm saying, there's three hundred and
Speaker 1: fifty large cap quality ets. Do we need a three
Speaker 1: D fifty first? Though, I'm not complaining that we have
Speaker 1: these products. I think what's great about it is, as
Speaker 1: as Rachel talked about earlier, what is inside these portfolios
Speaker 1: is quite different. The definitions between a product like NERD
Speaker 1: and E s p O and Gamer, they're performing quite
Speaker 1: different because they are quite different from what's inside. So
Speaker 1: thematic is a great area to invest from the longer term.
Speaker 1: And you've got some mid size and larger players that
Speaker 1: have that are playing within this space. No pun intended,
Speaker 1: and but what we are seeing is that how they
Speaker 1: interpret the theme can be quite different. And so when
Speaker 1: you have more only one of them that you just
Speaker 1: buy that product. But when you've got four or five
Speaker 1: or six of them then the homework is needed. Well,
Speaker 1: I just hearn a little bit of on the on
Speaker 1: the whole kind of UM thematic complex if from a
Speaker 1: UM but just because the assets have been relatively static
Speaker 1: this year. I mean, we did see this really exponential
Speaker 1: rise like for a couple of years, and then over
Speaker 1: the last sort of eighteen months or so, it's kind
Speaker 1: of plateau. We've seen a little bit of a drop
Speaker 1: with the market, a little bit of a rise as
Speaker 1: the market picked up, but it's it's pretty steady with
Speaker 1: where we were this time last year. And I think
Speaker 1: that's a little bit of a question mark really for
Speaker 1: for kind of issuers that have been coming out with
Speaker 1: these products, like how do you actually keep gaining assets?
Speaker 1: Has this reached the top for now? Like the the
Speaker 1: ideas are all there, they're all good ideas and have
Speaker 1: a kind of truthiness to them in terms of like
Speaker 1: what's going to be going up in the future, but
Speaker 1: they're they're not actually sort of like really bringing in
Speaker 1: assets in the way that they were when you talk
Speaker 1: about that plateau. And I think that's interesting. UM Robotics
Speaker 1: to me sticks out that definitely got a haircut this
Speaker 1: year in assets because the performance faltered, think it had
Speaker 1: four or five billion outstand like one or two, and
Speaker 1: I think that's sort of what happens. They'll they'll rise,
Speaker 1: they'll get X amount of dollars and then half leaves,
Speaker 1: and so that's part of the sort of topsy turvy
Speaker 1: nature of thematic ETFs what they do though that A
Speaker 1: couple of things I think they're the advantage of is
Speaker 1: a you can understand them. The truthiness is definitely something
Speaker 1: you need to worry about, and how they're designed. But
Speaker 1: advisors having conversations, as our guest two weeks ago or
Speaker 1: a month ago called it conversation alpha. An advisor can
Speaker 1: talk about a story with and that's good for the advisor.
Speaker 1: So that may not even be a natural reason to
Speaker 1: buy it, but that's just a reality. So I think
Speaker 1: that conversations happening on these areas a lot of times.
Speaker 1: They don't track stocks that are in the big indexis
Speaker 1: takes a lot for a big index to take in
Speaker 1: a new stock, so you can capture an area before.
Speaker 1: And the third thing is we talked about XBI is
Speaker 1: the best performer in the decade. It's a hundred percent
Speaker 1: more than IBB, which is the other biotech ETF that
Speaker 1: market cap weights, and a big reason is M and
Speaker 1: a pop um if these things go to mid and
Speaker 1: small caps a lot of times in the marijuana has
Speaker 1: had this a couple of times, they will own just
Speaker 1: randomly own a small cap that gets bought. So you
Speaker 1: have a little M and A action in there, which
Speaker 1: I think is an underrated part of them. But that's it.
Speaker 1: I do think they'll be niche. But remember everybody's on
Speaker 1: and on on about E s G that has Third
Speaker 1: Team billion. This has about fifty, So I think fifties
Speaker 1: pretty significant. But yeah, it's nowhere near like say a
Speaker 1: smart beta with a trillion. Okay, let's let's use that
Speaker 1: moment to transition to s G S. Let me start,
Speaker 1: because I'm so hot on this right now. Look, I've
Speaker 1: been in this a lot. I have found that E.
Speaker 1: S G. We've always look at the assets and like,
Speaker 1: why aren't they gaining assets? That's been a question we've
Speaker 1: But recently I've looked at the actual stocks in the
Speaker 1: in the E t F and I've found something that's
Speaker 1: just stunning to me that just apparently nobody really knows about,
Speaker 1: which is there's a lot of stocks that don't make
Speaker 1: these funds that you would shock people. I think Amazon
Speaker 1: semi shocker. And then that brings to the question is
Speaker 1: how many people who are thinking of E s G
Speaker 1: are willing to forego the next Amazon that's a thousand
Speaker 1: percent gain over ten years in order to sort of
Speaker 1: do good. I think there's a lot of slacktivists or
Speaker 1: tourists who probably don't have the stomach to withstand what
Speaker 1: could be potential in the performance. Another example is Berkshire Hathaway.
Speaker 1: Warren buff has just said I'm not filling out your questionnaires.
Speaker 1: His board is not independent, but he says independent boards
Speaker 1: aren't really independent either. He makes some good points, and
Speaker 1: Berkshire is unless e s GT S and Exxon and
Speaker 1: who doesn't want Warren Buffett in their portfolio. These exclusions
Speaker 1: bring up really interesting questions about the metrics used and
Speaker 1: what's in what's out, And I think there's a lot
Speaker 1: to sort out here. And you know, they could outperform,
Speaker 1: but they could also underperforming. You have to be ready. Well,
Speaker 1: the same screens that are being done now for E
Speaker 1: s G are being the same approach to it is
Speaker 1: being done for value oriented et F. You know, VTV
Speaker 1: value UH In undervalued securities or growth oriented ones, you
Speaker 1: don't get the full market, and you are likely to
Speaker 1: underperform or outperform based on what's inside the portfolio. So yes,
Speaker 1: we knew that what's inside these et f s is
Speaker 1: not the broader market. But what I think is appealing
Speaker 1: about some of the newer products that have come to
Speaker 1: market that we don't have that longer track record. You
Speaker 1: mentioned the DWS product U S s g H s
Speaker 1: U s L, which is another I shares product that's
Speaker 1: tracking the same m M s C I index, s
Speaker 1: n P E which is another product that's tracking the
Speaker 1: S and P index. They're more inclusionary and so companies
Speaker 1: make it into the portfolio as opposed to companies being
Speaker 1: excluded from the portfolio. They're more sector diversified, and they
Speaker 1: cost nine ten eleven basis points, so they're close to
Speaker 1: the overall market from an index perspective. They're gonna be
Speaker 1: niche initially, the same way that some of these thematic
Speaker 1: oriented ones are. I think we can't get our too
Speaker 1: far ahead of it as to how much money is
Speaker 1: going to go in, but we are going to see
Speaker 1: more money going in as people care about this are
Speaker 1: you supposed to use this in place of your whole
Speaker 1: equity portion of your portfolio? Well, I think over time
Speaker 1: that there are people who are doing that versus then again,
Speaker 1: it's so crucial to understand what you don't own. If
Speaker 1: you use it as an overlay, then what's the point
Speaker 1: because then you already own those other stocks anyway. And
Speaker 1: so I think the difference between E s G and
Speaker 1: and a factor focus fund is that the factor focus
Speaker 1: fund is is looking at something that's very measurable. You know,
Speaker 1: it's look, let say, kind of you know, whether a
Speaker 1: stock is undervalued versus the rest of the market, and
Speaker 1: it's looking at sort of price to earnings or something
Speaker 1: like this. You know, these these E s G funds
Speaker 1: are are largely based on ratings, and the ratings of
Speaker 1: these companies is actually pretty oblique, Like it's quite hard
Speaker 1: to find out exactly what criteria and exactly how certain
Speaker 1: kind of like factors and how a company is managed
Speaker 1: or what it does rolls up to this overall rating
Speaker 1: and how that then gets incorporated and into an index.
Speaker 1: Believe me, I've tried to figure out. It's quite complicated.
Speaker 1: So I think there is kind of like a few
Speaker 1: question marks there about kind of how some sort of
Speaker 1: companies sort of like end up being sort of very
Speaker 1: low rated and others end up being very high rated,
Speaker 1: and then how that's been kind of like package altogether.
Speaker 1: Like certainly, like you know, this year, we've seen kind
Speaker 1: of huge amounts of inflows into EARSC funds, but it
Speaker 1: is really kind of like those those big funds that
Speaker 1: have kind of like marketing powerhouses behind them, you know,
Speaker 1: your black rocks, your DWS is that really can kind
Speaker 1: of like throw money and making sure these funds are
Speaker 1: in the right place. And let's not forget that those
Speaker 1: two funds, which are now I think the second and
Speaker 1: the third biggest EARSC funds in e t f s
Speaker 1: in the in the US, are both backed by I
Speaker 1: think it's a finished pension fund. So we're not talking
Speaker 1: about a huge amount of kind of retail or diversify
Speaker 1: money coming in. It's still fairly sort of sporadic investment
Speaker 1: in these products. Next worries about e t f s
Speaker 1: are those going to go away? So you know, I'm
Speaker 1: in research and a lot of the analysts I work
Speaker 1: with they'll kind of like you know, kind of complain
Speaker 1: a little bit about earning season, because it's like the
Speaker 1: same thing every quarter, the earnings. They get busier, they
Speaker 1: gotta work a little longer, and I'm like, myth busting
Speaker 1: is my earnings. Because about once a quarter someone says
Speaker 1: something and then everybody forwards me the email. I'm like, okay,
Speaker 1: let me write our sort of response. The last one
Speaker 1: was Michael Burry. This was a huge one, and everybody
Speaker 1: thinks this guy is great, right, this is the guy
Speaker 1: Christian Bill portrayed the big short. He even said they're
Speaker 1: the next cdo, which was just really damning, and that
Speaker 1: was one of the worst I've heard in a while.
Speaker 1: But um, I wouldn't expect this to slow down. I
Speaker 1: think to a degree. There's some that are going to
Speaker 1: take be be taken more seriously, like Michael Burry. Um,
Speaker 1: and there's some that I think you need to just say, Okay,
Speaker 1: this is a guy from this active shop who's like
Speaker 1: one time there was a guy who called them weapons
Speaker 1: of mass destruction and I looked at who the source
Speaker 1: of the article was, a guy un performing his index
Speaker 1: by and I'm like, all right, come on, like this
Speaker 1: guy probably shouldn't be the guy quoted on this that
Speaker 1: said you know, like I said, I do think E
Speaker 1: t F s you gotta there's a couple of things
Speaker 1: that are more legitimate. They could be brought up less,
Speaker 1: but the illegitimate ones seemed to get brought up more.
Speaker 1: They're distorting fundamentals. Everybody's going to their weak hands. The
Speaker 1: opposite seems to be true. So look that people are
Speaker 1: gonna worry. I think they're not perfect. You have to
Speaker 1: decide what you would buy the stocks and bonds yourself,
Speaker 1: use a mutual fund or using E t F and
Speaker 1: then take it from there. Rachel, Yeah, I mean I
Speaker 1: think this is kind of a sign that the ETF
Speaker 1: industry is being such a success. Really, you know, it's
Speaker 1: past four point two trillion an asset, and I think
Speaker 1: active managers you know, obviously see that and I'll certainly
Speaker 1: to some extent threatened by that. So this, I mean,
Speaker 1: this is the fact that people question kind of the
Speaker 1: basis of the industry. I think it is actually a
Speaker 1: positive thing because the more people talk about this, the
Speaker 1: more opportunity is there are to educate about what are
Speaker 1: the real and what are that the potentially not real
Speaker 1: risks out there. So I kind of us of all
Speaker 1: these question marks as being a positive, and I think,
Speaker 1: you know, any sort of attempt to kind of you know,
Speaker 1: dial those back would be bad for the industry. It's
Speaker 1: good to have people that are asking those questions, holding
Speaker 1: the institute to account and making people educate in a
Speaker 1: more articulate and more thorough manner to actually make sure
Speaker 1: that everyone's the questions are addressed. Wow, Rachel had a
Speaker 1: cup of sunshine this morning, because I love the opportunity
Speaker 1: to educate and have a rational conversation. But eats distorting
Speaker 1: the market, and weapons and mass destruction, those are not
Speaker 1: things that normally you get said. Macy's is one of
Speaker 1: the worst performing stocks this year. It's in the SMP
Speaker 1: five hundred. It's down something like You've got semiconductor stocks
Speaker 1: that are have doubled this year, also in the same
Speaker 1: SMP five index. If money is driving and distorting the
Speaker 1: price of these stocks, that God help these companies. If
Speaker 1: they were not part of the SMP five index and
Speaker 1: they weren't being propped up by by having ownership within I,
Speaker 1: v V and v OH, the market is not being
Speaker 1: distorted by the et F. It's gonna be interesting to
Speaker 1: see what happens. And in a downturn. I mean, because
Speaker 1: there is this whole kind of and some people would
Speaker 1: say this is a myth about this idea that you know,
Speaker 1: a t s haven't been tested yet. Now I think
Speaker 1: the jury is a little bit out on that. We
Speaker 1: have definitely seen tests. However, until we see something of
Speaker 1: the kind of magnitude of Lehman, and no one is
Speaker 1: going to be satisfied that the test was big enough
Speaker 1: for that when the assets have been large enough. So
Speaker 1: I think it's gonna be interesting if we do see
Speaker 1: a correction to see how the market does, because it
Speaker 1: might put some of those concerns to bed or show
Speaker 1: that there are market structure issues that still need to
Speaker 1: be fixed. Post August. Yeah, I would agree with that.
Speaker 1: I also think that mutual funds in a downturn, it's
Speaker 1: going to get interesting. Those are the bond funds have
Speaker 1: gone into more liquid stuff to outperform. That's gonna be
Speaker 1: tough to sell. And also think just generally, people who
Speaker 1: were are in active mutual funds were likely put there
Speaker 1: by their broker, and people who bought an e t
Speaker 1: F for an index fund bought it themselves, and I
Speaker 1: think they're going to have a little more loyalty, and
Speaker 1: that's why you tend to see them not panic in
Speaker 1: a downturn. So far we've seen them largely hang in UM.
Speaker 1: In fact, they'll take in money net, So I do
Speaker 1: think that matters. The loyalty and the commitment to that
Speaker 1: low cost long term story I think is stronger. I
Speaker 1: think active mutual funds you could see some really wild
Speaker 1: things happen if all the boomers who were already you know,
Speaker 1: getting up there in age, plus the market downturn, I'll
Speaker 1: try to sell their what fifteen trillion of ACTI mutual
Speaker 1: funds or a portion of it. That's a lot more
Speaker 1: selling than a t F S could ever drum up.
Speaker 1: Talking of things closing, let's talk about et F closures
Speaker 1: as well as launches. What's left a lot of closures
Speaker 1: this year. Death is a part of the part of
Speaker 1: the industry. It's just this part of life. Death is
Speaker 1: part of life, and UM I salute it. I think
Speaker 1: it's good to get these UM non traded duds off
Speaker 1: the market because if you put a market order in overnight,
Speaker 1: it's possible you get hit at a bad price in
Speaker 1: the morning. So I just clear them out, except you know, admit,
Speaker 1: defeat um, and there's a lot more. I think also
Speaker 1: the fee war that Todd mentioned earlier in the year
Speaker 1: has scared investor issuers, made them think twice. I think
Speaker 1: the spaghetti bazooka or cannon that Ben Johnson from Morning
Speaker 1: Star free is a great phrase. I think it's kind
Speaker 1: of turned more into a rifle. I think they are
Speaker 1: throwing spaghett at the wall, but it's a little more
Speaker 1: targeted these days, a little more thoughtful. The launches just
Speaker 1: don't seem as as wild as they were, so I
Speaker 1: think that's just maturing industry. Well. A couple of things
Speaker 1: to add to that. One is that we used to
Speaker 1: be roughly three years before in et F would have
Speaker 1: a chance and then see what would happen uh, and
Speaker 1: we're seeing that sped up to some extent. There's e
Speaker 1: t F that have launched in two thousand nineteen that
Speaker 1: are already will be closed by the end of two
Speaker 1: thousand nineteen. That's a very short shelf life that's out there.
Speaker 1: But we did we ran some data using what we
Speaker 1: rate at c f r A, and there's a hundred
Speaker 1: and seventy five e t F s that are more
Speaker 1: than three years old. That have less than fifty million
Speaker 1: in assets under management, which is sort of the threshold,
Speaker 1: right which it tends to be the ballpark where it is,
Speaker 1: you know, fifty or a hundred million. You know, it
Speaker 1: tends to be the thresholds where it is. So these
Speaker 1: are products that have had it hands for success that
Speaker 1: have not been able to do. So there's some wine
Speaker 1: ups that are out there that probably would shock people
Speaker 1: that that still have a place on the shoulder. Could
Speaker 1: be a calling. I think there's going to be an
Speaker 1: ongoing calling. And as asset managers decide what are their
Speaker 1: priorities for and as we get to it the new active,
Speaker 1: non transparent ETFs that are coming out, if you if
Speaker 1: you offer those or you plan to offer those, and
Speaker 1: you offer some of these products that have no money
Speaker 1: in it, you want to put your bang where your
Speaker 1: buck is. Yeah, And I think that's kind of a positive, right,
Speaker 1: you know, if we start to see less froth in
Speaker 1: the industry, I mean Derek's it's like it's kind of
Speaker 1: a pruning of the industry more than kind of like
Speaker 1: a sign of failure. But we were seeing some pretty
Speaker 1: kind of crazy launches out there. Some of them are
Speaker 1: still in the market, and I think, you know, any
Speaker 1: kind of like sort of reckoning where we see some
Speaker 1: of those slightly more out their products sort of curved,
Speaker 1: it has got to be kind of a positive in
Speaker 1: terms of the long term outlook for ETFs and making
Speaker 1: sure that people are in sensible smart investment strategies rather
Speaker 1: than fats speed round Bitcoin. We're gonna see an e
Speaker 1: t f UM. James safered on my team is up
Speaker 1: to odds. I'm I'd be in that ballpark because the
Speaker 1: SEC just approved an interval fund that uses futures. I
Speaker 1: think if they do approve, then they might start with
Speaker 1: the futures et Fdhlia Blast came out with some interesting
Speaker 1: comments that said, every time I've given odds, it hasn't happened.
Speaker 1: So um, you didn't give him? You give James God,
Speaker 1: I feel like I come every time and I got
Speaker 1: asked this question and my answer still is the SEC
Speaker 1: doesn't seem comfortable. I don't think they're gonna get any
Speaker 1: more comfortable about fraud. So no, I don't think it's
Speaker 1: gonna happen in WOWO. Well, it's good. We'll see what happens.
Speaker 1: We'll have Todd back if it happens. Okay, the answererce,
Speaker 1: what is that. I'm gonna throw this to Rachel. She's
Speaker 1: the source of the term, and I love. I think
Speaker 1: it's gonna happen. Good dame, We're making it happen. Making
Speaker 1: the name, not the success. That's a whole different stat
Speaker 1: is active non transparent UM so active non transparent answers.
Speaker 1: I'm trying to get this to be a thing because
Speaker 1: it's like spiders and vipers, you know. UM. It is
Speaker 1: basically kind of the idea that you can sell an
Speaker 1: exchange trade of fund that doesn't disclose its holdings every day.
Speaker 1: So instead of kind of the daily transparency that we
Speaker 1: sort of see from most ETFs are currently out there,
Speaker 1: you would have kind of more of a mutual fund
Speaker 1: esque disclosure. Now, there are a few models out there
Speaker 1: that would kind of give different ways of doing that.
Speaker 1: Typically they fall into kind of like the proxy model,
Speaker 1: which we've just seen approved Fidelity t row Blue Tractor,
Speaker 1: and the Texas UM all the kind of indicative value
Speaker 1: model that Presidian has been pushing. We obviously had dam
Speaker 1: a capon a few months ago now to kind of
Speaker 1: talk about that. So those are kind of like that.
Speaker 1: The models are out there. We are expecting to see
Speaker 1: the first funds launched in Q one of next year.
Speaker 1: And the big question from my perspective is really kind
Speaker 1: of like whether we see investors kind of moving into
Speaker 1: these products. I think there are some philosophical questions about
Speaker 1: whether investors really want to go into active now if
Speaker 1: they're not there already, and of how sort of putting
Speaker 1: in an e t F wrapper will make it more
Speaker 1: or less appealing. So that's a nice transition to there's
Speaker 1: some regulatory stuff on the horizon here. How do you
Speaker 1: think that's going to implicate? Uh, what are the implications
Speaker 1: for that stuff? Well, we believe that we're going to
Speaker 1: see success. I think that we've we've got the approvals
Speaker 1: so far. We think we're gonna make it's gonna be
Speaker 1: easier to launch in e t F than it ever
Speaker 1: was beforehand with the et F rule going into effect
Speaker 1: at the end of this year. And we think that
Speaker 1: firms like Fidelity, like tiro Price, that have strong brands
Speaker 1: in active management, that already are a relatively low cost provider,
Speaker 1: that have strong track records, they're going to be able
Speaker 1: to have some success with these products. You know, Fidelity
Speaker 1: gathered three billion dollars of money into their E t
Speaker 1: F s in two thousand nineteen without their flagship active
Speaker 1: equity strategies being available. We think they're going to have
Speaker 1: that and then some going forward, right, but that fidelity,
Speaker 1: it's only three billion b those A lot of those
Speaker 1: are the cheap sector ones, low cost, which brings me
Speaker 1: to the three reasons ants will struggle. Number one, Active
Speaker 1: transparent already exists, been around for ten years, and all
Speaker 1: through those ten years they now have managed to scrape
Speaker 1: up point four percent of totally t F assets. It's
Speaker 1: it's like nothing. Nearly every dimond flows goes to E
Speaker 1: E t F charging twenty basis points are less. These
Speaker 1: are all going to be above that important line. Number three,
Speaker 1: A trillion of outflows from active equity mutual funds over
Speaker 1: the past few years alone. Those are really hard, almost insurmountable.
Speaker 1: And then there's the anecdotal. When I talk to advisors,
Speaker 1: they'll say, yeah, look, um, I know some managers will
Speaker 1: perform each year, some funds will do better. But the
Speaker 1: problem is I don't know ahead of time who that
Speaker 1: will be. And by if I chase ones that already
Speaker 1: did a lot of times, they won't persist and then
Speaker 1: I'll lose more because I bought at the top. And
Speaker 1: so the persistence has become such a damning mental state,
Speaker 1: uh for the advisors. So whether the hard data matches
Speaker 1: that mental mindset from advisors and night Like I said,
Speaker 1: there's probably a couple of hits, but I see largely
Speaker 1: a lot of struggle. And we've seen big issuers come
Speaker 1: to the ETF industry and get humbled. Well, we've also
Speaker 1: seen big issues come to the t F market and
Speaker 1: use their scale to their advantage because to do that,
Speaker 1: but like a JP Morgan and a Goldman, it's a
Speaker 1: largely because they followed the vanguard model to a degree.
Speaker 1: If you're coming in with ants at fifty basis points
Speaker 1: since your value or growth active fund, that's a whole
Speaker 1: different story. Who's been successful with that? That's the thing.
Speaker 1: We haven't seen that. So your ten years of history.
Speaker 1: The providers that were out there a long time ago
Speaker 1: in the active equity space are not providers that are
Speaker 1: household names that have for that. Who's a household name?
Speaker 1: You mean the brands, not the people, the brands, the brands.
Speaker 1: So the brands that are act there, you're not mean
Speaker 1: blowing your manager into it. You're going to get the
Speaker 1: tax efficiency benefits. I've gone to many events that are
Speaker 1: held by asset managers that the primary audience are existing
Speaker 1: mutual fund investors, and they need to be educated about
Speaker 1: et s. The other thing you have is demographics. A
Speaker 1: lot of the big mutual fund esters are boomers who are,
Speaker 1: if anything, selling to give to millennials who are not
Speaker 1: mutual fund investors. So there's that other larger drink, you know,
Speaker 1: headwind on this whole situation. Eventually, if you label something
Speaker 1: as an e t F, those those millennials might be
Speaker 1: interested in it, whether it's active or paths. That's a
Speaker 1: good point. I think it's gonna be a distribution kind
Speaker 1: of challenge. Really. It's like it's it's going to be
Speaker 1: like the marketing tactic is going to be to emphasize
Speaker 1: how the strategies are different and how the content is
Speaker 1: superior to the pass if I would imagine. But I
Speaker 1: think in terms of the actual success, it's going to
Speaker 1: be can you get that into the hands of investors
Speaker 1: and present it in a way where it can compete
Speaker 1: alongside mutual funds which they may already own, or e
Speaker 1: t F so they may be a bit skeptical. Well,
Speaker 1: I think that's the challenge if I can real quickly
Speaker 1: on it is the distribution. So will brokerage platforms allow
Speaker 1: these to go sit side by side with the mutual
Speaker 1: funds alternatives? I hope that they will. I think that
Speaker 1: they're going to understand that this is a different product
Speaker 1: from the same asset manager that they were familiar with.
Speaker 1: But if they're not allowed on these brokerage pot forms,
Speaker 1: then you're gonna be the same thing, like the low
Speaker 1: salt ls LT product that's giving away money and still
Speaker 1: can't get money coming in the door. Um. I had
Speaker 1: a real quick one for for you guys, and you
Speaker 1: can weigh into dull if you want. Um yeah. Um.
Speaker 1: If we look at the top E T S by
Speaker 1: flows over the past decade, uh, this decade, it was
Speaker 1: I V V and VOO at number one and two.
Speaker 1: The in the outs or outs it was a SPY
Speaker 1: and e F A, and in the nineties it was
Speaker 1: SPY in qq Q. But largely the top five and
Speaker 1: ten lists haven't quite been the same. They've been different
Speaker 1: each decade. What's an E T F or two that
Speaker 1: you think could just end up being one of the
Speaker 1: leaders of the next decade. So I think A g
Speaker 1: G uh So this is I shares core bond ETF
Speaker 1: I mentioned earlier, bond etf are gaining market share. We
Speaker 1: think they're going to continue to gain market share, and
Speaker 1: you're going to see roughly at some point more of
Speaker 1: the asset allocation that you'd have with the equity and
Speaker 1: fixed income. Everybody owns the AGG. Whether you hate the
Speaker 1: egg or not. People still own NIAGG. It's from my
Speaker 1: shares and it's all costs, and I think it's going
Speaker 1: to be extremely popular in the next decade. I tend
Speaker 1: to time in with one. I'm not going to pick
Speaker 1: a favorite, because I shouldn't play favorites, but I would
Speaker 1: point out that, I mean, if you look at kind
Speaker 1: of like the top flow in takes this year, B N,
Speaker 1: D G, O V T T L T I E
Speaker 1: F and M b B and A G G just
Speaker 1: outside all kind of like big bond funds that have
Speaker 1: been kind of taking in significant flows. To my point earlier,
Speaker 1: I really do think like in the next decade is
Speaker 1: going to be about fixed income and people using that
Speaker 1: more and more. So I think some of those broad
Speaker 1: bond funds will be great for buying a hold investors.
Speaker 1: And I think you kind of also got to count
Speaker 1: out some of the ones that traders are going to use.
Speaker 1: If we do see kind of institutional and tactical traders
Speaker 1: kind of using e t F s more in place
Speaker 1: of kind of swaps and options and other kind of
Speaker 1: derivative type functions, then I think some of those products
Speaker 1: have the potential to end up with a lot of assets,
Speaker 1: you know, just because people are using them so frequently.
Speaker 1: And I'll trymem in with a couple, Um, you could
Speaker 1: see what going to like skip me there. Oh sorry, geez, geez, geez. Sorry,
Speaker 1: you know you were on your phone. I know, I
Speaker 1: know that's his research. So I actually think, um, you know,
Speaker 1: I know you're cool on the E S G thing
Speaker 1: that I think the between E t F s and
Speaker 1: the millennials and being able to actually like put your
Speaker 1: money and things you believe in. I don't know if
Speaker 1: it's gonna have like it might not take on agg
Speaker 1: I totally think you're right, it's probably one out there.
Speaker 1: But the fact that there are like low carbon E
Speaker 1: t F that track the benchmarks that they're up against
Speaker 1: and have a fraction of the carbon footprint at a
Speaker 1: moment in time when we we think that, you know,
Speaker 1: millennials are going to probably invest some money into causes
Speaker 1: that they believe in. I think that something like that,
Speaker 1: like that, what's the m s C I, the I shares,
Speaker 1: MSCI spy X. I think that's an interesting play. I
Speaker 1: don't think it's gonna be like a number one thing,
Speaker 1: but I think if it's like you're passionate about climate change,
Speaker 1: you actually have an ability to like invest in stuff
Speaker 1: thing that might feel good. That's a good out of
Speaker 1: the box answer. Um, it's inspired. I like it. I
Speaker 1: don't agree. Okay, I'm going with B y O A.
Speaker 1: I think you're gonna have this vertical integration and like
Speaker 1: six big companies start to control most of America's money,
Speaker 1: and I think you could see s c h X,
Speaker 1: the Schwab large cap sort of rise above and really
Speaker 1: start to challenge the eye shares and vanguards of the world.
Speaker 1: I also think you could see something like a beat towel,
Speaker 1: which is the anti beta. It's possible the whole next
Speaker 1: decade is just rough and things that are supposed to
Speaker 1: go up when the market goes down go up. Maybe
Speaker 1: some alternatives you could have gold up there. I will
Speaker 1: bet you will come back here in ten years and
Speaker 1: I will have the susy lunch of my dreams that
Speaker 1: beat Howe will not be within the top ten of
Speaker 1: the list. I will pay for that lunch. Okay, yeah,
Speaker 1: I don't think so either. I'm saying something that does
Speaker 1: the opposite of the market. I'm not s h something
Speaker 1: could be a deep value. Who knows value, by the way,
Speaker 1: is just do for a long, long stretch, We'll see.
Speaker 1: I'm just saying something out of the box that's um,
Speaker 1: you know, not what you'd expect, not the cheap beta,
Speaker 1: typical fair. And on that note, we have another year
Speaker 1: decade since seeing him. In ten years, it's just an
Speaker 1: interesting visable. I can't get out of that in my head.
Speaker 1: It's like I have no hair. Now it's gonna have hair.
Speaker 1: It's gonna be swinging. Todd Rachel thanks for joining us, Trillian,
Speaker 1: thanks for listening to Trillions. Until next time. You can
Speaker 1: find us on the Bloomberg Terminal, Bloomberg dot com, Apple Podcast, Spotify,
Speaker 1: and Warbelis you like to listen, We'd love to hear
Speaker 1: from you. We're on Twitter. I'm at Joel Webber Show.
Speaker 1: He's at Eric Faltrins. You can find Rachel at Rachel
Speaker 1: Evans Undersport, n Y. And you can find Todd rosen
Speaker 1: Blues at Todd c f R. Trillions is produced by
Speaker 1: Magnus Hendrickson. Francesca Levy is the head of Bloomberg podcast
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