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Speaker 1: This is Masters in Business with Barry Ridholts on Bloomberg Radio.

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Speaker 1: This week on the podcast, I have an extra special guest.

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Speaker 1: His name is Jim Ross. He is known as the

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Speaker 1: father of the Spiders, the SMP five hundred UH e

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Speaker 1: t F which State Street has put out. It is

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Speaker 1: one of, if not the largest e t F, with

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Speaker 1: nearly three hundred billion dollars in assets under management. In

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Speaker 1: sp Y. There are also numerous Spider variations. You can

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Speaker 1: buy growth, you can buy value, you can buy sector,

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Speaker 1: you can buy all these very loci, which is their

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Speaker 1: low carbon version of the SMP five hundred. There are

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Speaker 1: trillions of dollars, literally trillions of dollars in various indices

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Speaker 1: that track UH what State Street does, and it's really

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Speaker 1: quite a fascinating business. He is also chairman of s

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Speaker 1: s g A, which is the State Street Global Advisors.

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Speaker 1: If you are remotely interested in things like the S

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Speaker 1: and P five ETFs the future of investing, I cannot

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Speaker 1: over emphasize how knowledgeable and influential Jim Ross is. He

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Speaker 1: won the Lifetime Achievement Award last year at et F

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Speaker 1: dot Com. I could go over his CV for hours.

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Speaker 1: The accolades don't stop. He is simply one of the

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Speaker 1: most insightful people whose career has taken so many fascinating

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Speaker 1: twists and has been really there at the formation of

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Speaker 1: a number of events that are still impacting us today. Uh.

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Speaker 1: I think you're just gonna love this conversation. So, with

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Speaker 1: no further ado, my conversation with Jim Ross. My extra

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Speaker 1: special guest today is Jim Ross. He is chairman of

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Speaker 1: the Global Spider Business at State Street. Spider is the

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Speaker 1: most widely held e t F with well over two

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Speaker 1: hundred billion dollars in assets. He is also chairman of

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Speaker 1: the board of s s g A Fund Management, which

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Speaker 1: is the registered investment advisor arm of State Street. He

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Speaker 1: most recently was the recipient of the Lifetime Achievement Award

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Speaker 1: from e t F dot Com, which is a division

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Speaker 1: of the Chicago Board of Option Exchanges. Jim Ross, Welcome

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Speaker 1: to Bloomberg. Very thank you very much for having me.

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Speaker 1: Let's start with uh, pretty much at the beginning, you've

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Speaker 1: you've been at State Street since How did you find

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Speaker 1: your way to State Street? And what was your roll back?

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Speaker 1: So pretty straightforward, I would um, I started my career

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Speaker 1: in public County can very easily say hated it. Looking

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Speaker 1: for an exit path. After I got my certification, I

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Speaker 1: needed three years. That was three and a half years,

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Speaker 1: found an exit plan, took a job at State Street

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Speaker 1: career plan and by I'll talk to people about career planning.

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Speaker 1: I thought I'd be there two to three years. That

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Speaker 1: was my plan plan change. So I got the State

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Speaker 1: Street entry level job. New group they were setting up

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Speaker 1: called fund administration. They hired me. Could I could do

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Speaker 1: mutual fund financial statements for the most part, So the

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Speaker 1: accounting actually came in handy. The accounting background was important

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Speaker 1: back nine. Yes, So twenty five years later, after your

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Speaker 1: two year plan, uh, you're running more or less running

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Speaker 1: the largest et F there is. How did you go

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Speaker 1: from Hey, I'm going to start at State Street for

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Speaker 1: a couple of years to really chairman of of a

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Speaker 1: big department for them, and you really wear a couple

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Speaker 1: of hats there? How did these come about? So? Um,

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Speaker 1: I'd like to say summer it was hard work, persistent,

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Speaker 1: and somewhe was pure luck. That's a theme here. You know,

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Speaker 1: the role of random chance is always underestimated. So the

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Speaker 1: random chance was I was at State Street. I could

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Speaker 1: have gone different places I was in a group and

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Speaker 1: it was a new group, so there wasn't a lot

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Speaker 1: of work yet. Right into how big a shop was

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Speaker 1: State Street State Stage were still probably at the time logist, custodian, um, lodgist,

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Speaker 1: custody accounting agent in the world. But fund administration was

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Speaker 1: brand new. This is a new service they were adding.

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Speaker 1: And I was probably the tenth person hide into this group.

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Speaker 1: So new division, large storied firm, new division, new business.

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Speaker 1: Kind of like, not a lot of clients yet that

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Speaker 1: were taken on this service, so really not a lot

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Speaker 1: of work for me to do. I came out of

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Speaker 1: public County House. I used to working seventy nine hours

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Speaker 1: a week. I was losing my mind, Parry, so you're

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Speaker 1: working forty hours and really a lot of mind sweeper

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Speaker 1: and pretty much I was working forty hours. I probably

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Speaker 1: had twenty hours with the work to do. Um, so

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Speaker 1: would you do to fill the time? I went to

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Speaker 1: one of my bosses and said, hey, if you have anything.

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Speaker 1: It was kind of a strange situation. My boss had

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Speaker 1: been out, so I went to my boss. Boss said, listen,

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Speaker 1: you have anything, give it to me. I I just

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Speaker 1: I'm looking for stuff. At some point and these were

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Speaker 1: a whole bunch of people working really hot on a

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Speaker 1: project like day and night. I had no idea what

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Speaker 1: it was. But a month later he looks, hey, Jim, come,

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Speaker 1: oh yeah, we need help on this. It was the

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Speaker 1: originally TF Spy. Yeah, and that's no, no, this is

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Speaker 1: this is this is two months into my career. They've

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Speaker 1: been working on this for a couple of years. They

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Speaker 1: brought me over for one specific reason. They were about

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Speaker 1: to getting closer to launch and they needed someone to

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Speaker 1: do the first set of financial statements. And like, Jim

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Speaker 1: has that experience perfect, you know, So I like say,

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Speaker 1: I got invited in because hey, I asked for more,

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Speaker 1: but which kind of They just needed some help and

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Speaker 1: I was I get a lot of credit for Spy,

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Speaker 1: and I'm gonna be very honest, yeah, I deserve very

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Speaker 1: little of it. You have been called various names, like

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Speaker 1: the father of the Spiders, and every time I see

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Speaker 1: someone say that to you, you swatted away and say no, no, no.

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Speaker 1: I was a late addition to a team. I was

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Speaker 1: a very late addition to a team. Um. I think

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Speaker 1: my smartest move wasn't getting involved in that. My smartest

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Speaker 1: move was staying involved in that and I get asked

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Speaker 1: that question all the time, and a lot folks moved

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Speaker 1: on to different things. I got offer different roles over

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Speaker 1: the time, like why didn't you leave my God, this

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Speaker 1: was more interesting than my day job. I was meeting

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Speaker 1: traders on Wall Street and never had done that. I

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Speaker 1: never knew really what the stock exchange was, to be

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Speaker 1: completely honest with you, wasn't I don't see myself as

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Speaker 1: kind of an investment guy. I kind of grew up

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Speaker 1: and kind of the county world then kind of moved

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Speaker 1: out of the product world and did a lot of

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Speaker 1: different things, but I stayed involved. So at the time,

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Speaker 1: State Street a Gilant custodian, a Gilant administrator. How does

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Speaker 1: how at the time did State Streets see their competitors

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Speaker 1: and what made them think, Hey, let's let's go into

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Speaker 1: some asset management. Well, I mean, at the time we

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Speaker 1: did have an asset management on so we had State

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Speaker 1: what is now State Street Global Advisor. At the time,

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Speaker 1: it was called an asset management division of State Street Bank.

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Speaker 1: Horrible name for national manager, but um A M D

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Speaker 1: and any. At the time, it was very much it

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Speaker 1: was a passip shop. So in effect, what we did

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Speaker 1: with spiders in spy. The original SPY was we combine

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Speaker 1: what's a street did well the Costian County and transaction

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Speaker 1: processing and S s G A, which became S s

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Speaker 1: G A. I probably got renamed that year maybe the

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Speaker 1: probably right around then we brought the asset management. But

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Speaker 1: let's remember one thing. The American Stock Exchange came to

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Speaker 1: us with this idea. Really they said, hey, you guys

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Speaker 1: are buying all these individual stocks once you put it

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Speaker 1: in an E T F rapper or did we not

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Speaker 1: know the name ETF back then? Um, the name ETF

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Speaker 1: was not known. Um, there's different iterations of what is

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Speaker 1: now spider, different names, different things we were calling index receipts,

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Speaker 1: depositories or whatever. So there's a lot of different names

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Speaker 1: back then. But it was really kind of you know,

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Speaker 1: they had this idea. It kind of came out of

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Speaker 1: the crash of eight seven where the SEC said, listen,

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Speaker 1: portfolio didn't insurance didn't work. By the way, none of

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Speaker 1: this at the time I understood, um, and we're trying

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Speaker 1: to find something. Nate most who was head of product

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Speaker 1: development at the American Stock Exchange think at the time

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Speaker 1: he was in his early seventies, came up with this idea,

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Speaker 1: if we can put somehow securitize something that will trade

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Speaker 1: on the exchange, and they only care about trading on

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Speaker 1: the exchange. Um. So, basically we came up with the

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Speaker 1: idea of they came up with the f take the

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Speaker 1: SMP five stocks, everyone knows what's in it, tell everyone's

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Speaker 1: into every day, be fully transparent, and move the securities

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Speaker 1: in kind, which was novel at that time. You know,

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Speaker 1: one or two times you might do something unique there,

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Speaker 1: but every day moving five hundred stocks at the time

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Speaker 1: was was new. Let's talk a little bit about spiders,

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Speaker 1: because the numbers are really quite mind blowing. Sp Y,

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Speaker 1: the stock symbol for the spider. SMP five Investment Trust

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Speaker 1: has two hundred forty billion dollars in assets less I looked,

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Speaker 1: it's by far the most widely held d t F

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Speaker 1: and if you look at the next closest SMPTF, it's

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Speaker 1: less than half the size. How did the spies become

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Speaker 1: go to SPF. Yeah, it's a great question. There's a

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Speaker 1: couple of really good reasons. Um. One, we were first.

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Speaker 1: That always helps. So there was the first mover, definitely

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Speaker 1: a first mover advantage, and it was by seven years, right,

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Speaker 1: because we all we you hear two different versions of that.

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Speaker 1: The second mass gets the cheese. The pioneers are the

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Speaker 1: ones with their arrows arrows in their back. But that

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Speaker 1: hasn't really seemed to impact this in a significant way. Well,

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Speaker 1: the SPY has a few advantages. One it's it's not

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Speaker 1: just that it was first. It had established trading volume.

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Speaker 1: I mean today Spy by dollar weighted volume is the

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Speaker 1: most liquid equity security in the world. That's amazing. Um,

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Speaker 1: it trades and there's some fun stats on this. It's

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Speaker 1: traded at a penny wise spread for twelve years every day.

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Speaker 1: So the difference between the bit they esk is one

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Speaker 1: cent one cent and most folks and trade inside of that.

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Speaker 1: It trade five point five time more than Apple. Um

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Speaker 1: and from a hundred million shares to day. What sort

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Speaker 1: of volume do you do? It turns over, it can

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Speaker 1: turn over and once again that changes all the time,

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Speaker 1: but it can turn over fifteen billion dollars in nassets today. UM,

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Speaker 1: I think the you know the one stat that I

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Speaker 1: hear that I love. I mean, there's the Apple stat

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Speaker 1: which is good. You take the next like eighteen ETFs

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Speaker 1: eighteen largest ETFs combined, and they don't have the same

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Speaker 1: trading bline. It's obviously go to liquidity product for the marketplace.

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Speaker 1: It's not just about a buying whole product. This is

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Speaker 1: a liquidity product. It's used for as an alternative to

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Speaker 1: Fugere's a lot of different uses to it, very flexible,

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Speaker 1: so it's fairly low costs. What's the internal expense ratio

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Speaker 1: expense reussus about not a little a little of a

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Speaker 1: nine basis points? Is anybody even close to that amongst

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Speaker 1: the tfs? Because E t F s there's a broad range.

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Speaker 1: You could pay over a hundred basis points. You could

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Speaker 1: pay no basis points for e t F of ETFs

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Speaker 1: that they themselves have have an internal expense ratio. How

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Speaker 1: much of an advantage is nine bits versus everybody else?

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Speaker 1: I think once you get into the single basis point,

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Speaker 1: you know that differential if it's nine or five or something.

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Speaker 1: It's really especially a product like spy where a lot

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Speaker 1: of folks are using it for the liquidity and trading

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Speaker 1: it daily, so they're not buying and holding it for

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Speaker 1: five years. There might be for five minutes. The expense

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Speaker 1: ratio is not necessarily a factor in that decision making

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Speaker 1: that makes sense, and the expense ratio is a function

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Speaker 1: of the costs of running it, and you're constantly so

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Speaker 1: your trading desk has to constantly be rejiggering and arbitraging

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Speaker 1: all the underlying the four hundred and sixty stocks in

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Speaker 1: the SMB five hundred. Well in the interest, I do

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Speaker 1: think there's actually five. There isn't there has been for

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Speaker 1: some time now, um. But I think the interesting about

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Speaker 1: that is actually the portfolio management side of this from

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Speaker 1: an et F perspective, well relatively straightforward, because every day

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Speaker 1: when that fund goes up with down its eyes, and

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Speaker 1: it can go up and down billions of dollars a day,

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Speaker 1: we don't trade that. It comes to us in kind

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Speaker 1: and we deliver it out in kind. So the portfolio

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Speaker 1: managers when they read jigger, it's really around index changes,

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Speaker 1: which is every June, I believe quarterly on the SMP. Uh,

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Speaker 1: it's quarterly on the SMP it's Russell two thousand, that's

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Speaker 1: every June. So once a how big an event is

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Speaker 1: the SMP five hundred rebalancing, It all depends on whether

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Speaker 1: or not there's just you know kind of up, you know,

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Speaker 1: changing of capital stuff. Maybe some corporate actions is not

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Speaker 1: the time when they have UM. But if if there's

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Speaker 1: a read, you know, if there's a add and delete,

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Speaker 1: that can be a relatively significant advantage. That's what I

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Speaker 1: am I thinking that's June or October. The ad delete

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Speaker 1: is that once it can be it can be any

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Speaker 1: time Barry it's announced, it announced in advantage, it can

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Speaker 1: be any time. UM. Do you guys get any sort

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Speaker 1: of heads up or is it you want in your

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Speaker 1: email and it's like, oh, I guess we've got work

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Speaker 1: to do today. We get the same heads up the

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Speaker 1: entire marketplace, yes, which is usually in advance, you know,

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Speaker 1: more than a few days, so you can't plan for it.

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Speaker 1: And like I said, the portfolio management team that runs

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Speaker 1: that runs indexing for some of the largest, most sophisticated

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Speaker 1: investors in the world. So this is the kind of

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Speaker 1: what they do for living. Is their bread and buttle.

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Speaker 1: How big is your trading desk that handles spy and

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Speaker 1: everything else. We have a pretty sizable equity trading desk

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Speaker 1: and a pretty sizeable portfolio management team has dedicated to this.

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Speaker 1: The you know, they're we're one of the largest passive

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Speaker 1: invest investment managers in the world. So we we we

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Speaker 1: we look at this as there's not anas science to it,

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Speaker 1: and some people, you know, some folks will say, how

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Speaker 1: we can do that on a Excel spread seat. We

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Speaker 1: do not really can This isn't all that readily? Well,

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Speaker 1: let me ask you the question is supposed to putting

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Speaker 1: my uninformed opinion in how readiably replaceable? Are some of

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Speaker 1: the things that the team does with software algorithms and

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Speaker 1: and bots or are they using algorithms as part of

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Speaker 1: of what they do. They're using algorithm and technology and

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Speaker 1: improving it every day to make our process more efficient

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Speaker 1: and more effective. And we'll continue to do that. I

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Speaker 1: have been doing that as long as I've been involved

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Speaker 1: with them, and we'll continue to do that. It's the

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Speaker 1: way of the world. They do that to find better

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Speaker 1: ways to continue to deliver um the performance that we

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Speaker 1: want to deliver. And so I mentioned nine bibs. Do

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Speaker 1: you guys ever feel any pressure on the price side

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Speaker 1: from Vanguard of black Rock or any of the other

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Speaker 1: large competitors out there or is it not not all

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Speaker 1: that important? You know? I think listen, fee feed compression

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Speaker 1: is actually a very it's a real live thing in

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Speaker 1: the industry is not just on spy. So obviously across

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Speaker 1: our et F business, we have more than a hundred

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Speaker 1: and forty plus ETFs in the US two D globally,

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Speaker 1: so we see that around the globe feed compression fee,

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Speaker 1: you know, feature fee business. So you you definitely want

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Speaker 1: to look at it. You know, I think there's certain

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Speaker 1: areas where you have certain products you feel very comfortable

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Speaker 1: with the fee is low enough to compete in as

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Speaker 1: areas where sometimes you do adjust pricing. It's just, um,

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Speaker 1: just the new reality. It's what everybody's dealing with. It's

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Speaker 1: also but you know, I mean the fun thing about

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Speaker 1: that is everyone's like, wow, jeez, that's tough on you

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Speaker 1: got it's tough on the business. We can live with that.

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Speaker 1: It's good for investors. There's a reason. That's the reason

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Speaker 1: that's more folks are buying ets is because the price

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Speaker 1: of them has come down in a variety of ways,

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Speaker 1: not just the expense ratio, but the big ass spreads

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Speaker 1: come in. You know, they're a lot tier because of

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Speaker 1: changes in equity market structure, and the commission rates have

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Speaker 1: welcome down. Commission rates are practically nothing these days. So

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Speaker 1: for nine basis points, and a seven dollar or a

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Speaker 1: five dollar transaction fee. You can own the entire s

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Speaker 1: and P five hundred and all. What. I don't know

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Speaker 1: what we are, but we four nineties something. How many

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Speaker 1: stocks have fallen out and haven't been replaced yet? I

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Speaker 1: don't know that they I mean, they do do do

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Speaker 1: a good job of trying to keep that up. So

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Speaker 1: it's pretty close to that. I know, the whelship five. Yeah, no,

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Speaker 1: that's no question that. That's because they try and get

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Speaker 1: every stock. But I think you know the great thing

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Speaker 1: about that is when you think about the E t

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Speaker 1: F side of this, you can make that investment. You

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Speaker 1: can buy and hold spy for ten years, twenty years.

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Speaker 1: You know exactly what it is, you know exactly what's

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Speaker 1: in it, you know what you're getting. Oh, you can

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Speaker 1: buy and hold that for five minutes, ten minutes, two days,

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Speaker 1: twenty days. That's what I love about thet F. It's

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Speaker 1: very flexible. It's not you know, we have you know,

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Speaker 1: I remember when we first started launching this, and you know,

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Speaker 1: hedge funds. Everyone's like, no mutual fund wants hedge funds,

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Speaker 1: And I'm I'm like, we cannot. We do? They help

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Speaker 1: with liquidity and liquidity matters these days. Let's talk a

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Speaker 1: little bit about some of the things that you and

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Speaker 1: State Street do besides the spiders. Uh, let's talk about

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Speaker 1: g l D. The Gold index when we're recording this, uh,

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Speaker 1: Midsummer gold has actually output form the SNP this year.

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Speaker 1: It's the first time that's happened since I want to say,

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Speaker 1: a few years. I'm doing it off the top of

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Speaker 1: my head. How has the advent of g l D

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Speaker 1: changed the entire gold market? You know, I think the

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Speaker 1: advantage g l D has really helped reinforce the gold

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Speaker 1: market was a great market before g l D. It's

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Speaker 1: a twenty four hour trading market. It's a very global market.

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Speaker 1: But what g l D was able to do was

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Speaker 1: to I call it, democratizing the ability to invest in gold.

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Speaker 1: Because prior to g l D, investors, retail investors had

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Speaker 1: very few ways to invest in goals. It was physical coins,

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Speaker 1: the costs were three or four or four all of it,

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Speaker 1: and it really wasn't so you know, frankly, retail investors

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Speaker 1: and even financial advisors didn't invest in gold. I I

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Speaker 1: have a pet theory that g l D just destroyed

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Speaker 1: the junior gold miners because what I want management risk, execution, risk, etcetera.

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Speaker 1: When I could just for eight bucks go by g

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Speaker 1: l D and there's my gold exposure. Yeah, I mean less.

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Speaker 1: I think it gave you a different way to get

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Speaker 1: exposure to gold. But it gave you exposure to pure gold.

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Speaker 1: I mean because the l D is backed by physical

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Speaker 1: gold interval. Now isn't g l D also back isn't

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Speaker 1: part of it um futures contracts as well? Or is

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Speaker 1: it only physical gold g l D physical gold with

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Speaker 1: a little little tiny bit of excess cash um but

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Speaker 1: gold they've sold pay expenses. But literally there is physical

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Speaker 1: gold bods interval backing g l D. There was very,

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Speaker 1: very important to the to the structure of the fund.

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Speaker 1: There was a wonderful article in the Wall Street Journal

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Speaker 1: about how g l D came about, I want to

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Speaker 1: say about five years ago, and really it was a

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Speaker 1: function of the World Gold Council. They say, hey, we

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Speaker 1: have all this excess inventory. Let's find a way to

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Speaker 1: get this out of our vaults into somebody else's hands.

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Speaker 1: And how what was that interaction like Queen State Street

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Speaker 1: and the World Gold Council, And were the spies helpful

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Speaker 1: in having you guys win that business, I would say,

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Speaker 1: so at this point in time we're talking. We started

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Speaker 1: working with them probably and to vote three into the

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Speaker 1: OH four and they had worked very much on the

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Speaker 1: concept and the idea. We're working very much with the

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Speaker 1: legal process. But the will Go Counsoles focus wasn't on

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Speaker 1: distributing E T F s UM, so they were looking

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Speaker 1: for a partner. I'm very happy that we became their

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Speaker 1: partner on this from a marketing and distribution standpoint. So

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Speaker 1: we had at the time Spy Sector, Spiders Diamonds, another

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Speaker 1: suite of BTF, so we had a you know hand

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Speaker 1: probably time probably t in a suite today it's all

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Speaker 1: over a hundred um. But we we looked at potnering

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Speaker 1: with the wild Gold console on g l D. We

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Speaker 1: thought the product structure work great. It was a that

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Speaker 1: was one where it was a close race to who

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Speaker 1: was going to get first. Very happy to say g

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Speaker 1: l he was first mockt on that and that's also

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Speaker 1: dominated like nothing else. Nobody's even close to them now.

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Speaker 1: It's been a really really strong product, and isn't it.

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Speaker 1: It's it's one of those products where it's really helped

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Speaker 1: investors be able to allocate to gold um as a

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Speaker 1: diverse fire in their portfolio, and depending on how they

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Speaker 1: have a view on that, they might have an overweight

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Speaker 1: to that, they might have an underweight to that. But

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Speaker 1: there's a strategic case for having an investment in gold.

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Speaker 1: I remember, now my reputation is a little bit of

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Speaker 1: a goldbug basher, but I remember being on television in

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Speaker 1: oh four oh five, and it wasn't long after g

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Speaker 1: LD had come out, and one of the anchors had said, so,

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Speaker 1: what does an investor do to heads themselves against inflation?

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Speaker 1: And my answer was, well, you could buy the gold

385
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Speaker 1: DTF it's g l D. And everybody looked at me

386
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Speaker 1: like I had two heads. Now everybody is totally plugged in.

387
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Speaker 1: And I remember, was it two thousand ten or two

388
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Speaker 1: thousand and eleven, g l D briefly past spiders as

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Speaker 1: the biggest CTF in the world, arguably quite the cell

390
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Speaker 1: signal for gold at that point. Um, well, there was

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Speaker 1: a lot going on at that point, remember that, if

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Speaker 1: I'm correct the exact time here on. That was the

393
00:21:07,840 --> 00:21:10,720
Speaker 1: concern about the US downgrade of the debt. There was

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Speaker 1: a lot of things going on in the world. Or

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Speaker 1: two was eleven, but post crisis as post crisis, I

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Speaker 1: think it was eleven, but it was either tenor eleven.

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Speaker 1: I'm pretty sure it was eleven. But that that was

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Speaker 1: I was you know, t LD is a great product,

399
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Speaker 1: it was fantastic, but to have it the largest et

400
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Speaker 1: F in the world was a little strange when you

401
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Speaker 1: think about kind of the broader equity world. Um so,

402
00:21:34,760 --> 00:21:36,239
Speaker 1: I think, you know, from that perspective, is a lot

403
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Speaker 1: of dynamics in the market place. I'm not sure it

404
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Speaker 1: was a sustu on gold. I think it was just

405
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Speaker 1: a overall what was going on in the world at

406
00:21:42,280 --> 00:21:45,560
Speaker 1: that point in time makes makes sense. And when we

407
00:21:45,640 --> 00:21:48,399
Speaker 1: look at the total value of gold as an asset

408
00:21:48,560 --> 00:21:52,040
Speaker 1: versus the equity markets, it's just totally dwarf the equity

409
00:21:52,119 --> 00:21:55,080
Speaker 1: markets are giant. Yeah, exactly, That's that was one my point,

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Speaker 1: Like the t o D has a purpose in a

411
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Speaker 1: place in a portfolio, but it should be the largest

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Speaker 1: et from the world. I'm not so sure. So so

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Speaker 1: let's talk about some of the multi factor e t

414
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Speaker 1: f s that are out there. What do you think

415
00:22:09,000 --> 00:22:12,000
Speaker 1: of these? And I'm really curious as as the process,

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Speaker 1: We'll talk about the process later. What do you think

417
00:22:15,240 --> 00:22:18,119
Speaker 1: about these single and multi factor e t f s

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00:22:18,720 --> 00:22:22,000
Speaker 1: that are becoming increasingly popular? You know, I think listen,

419
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Speaker 1: I think it's it's very straightforward to me. You have

420
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Speaker 1: to know how they work. Are you committed to for

421
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Speaker 1: the long term? Because they work, whether it's single factor,

422
00:22:31,680 --> 00:22:35,520
Speaker 1: multi factor, they're meant to work over an entire market cycle.

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Speaker 1: And my my premise on them is that's fine. If

424
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Speaker 1: you're an investor, you've done your due diligence, understand the product,

425
00:22:42,119 --> 00:22:45,600
Speaker 1: Understand what it's not going to keep up with whatever

426
00:22:45,720 --> 00:22:48,159
Speaker 1: the benchmark index might be, that might be market cap.

427
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Speaker 1: Where I worry about this from an investor standpoint because

428
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Speaker 1: institutions have been using these factors to invest for quite

429
00:22:56,200 --> 00:22:58,680
Speaker 1: a while now, but they have long term views and

430
00:22:58,760 --> 00:23:01,600
Speaker 1: convictions are worried. What I worry about fromn end investor

431
00:23:01,640 --> 00:23:04,520
Speaker 1: standpoint is that they see this, Oh, this is something new,

432
00:23:04,600 --> 00:23:08,000
Speaker 1: it seems like it's great, and oh it's under performing,

433
00:23:08,640 --> 00:23:11,960
Speaker 1: you know, und of performing in a running market, which

434
00:23:12,080 --> 00:23:15,480
Speaker 1: should do so they sell it exactly when they need

435
00:23:15,600 --> 00:23:17,959
Speaker 1: low ball. So it's really one of those From an

436
00:23:18,000 --> 00:23:20,280
Speaker 1: investor standpoint, do you educate, you know, do you do

437
00:23:20,400 --> 00:23:23,160
Speaker 1: diligence do your education, understand the products, whether it's single

438
00:23:23,240 --> 00:23:26,760
Speaker 1: factor multi factor. Obviously multi factor is really trying to

439
00:23:26,840 --> 00:23:28,520
Speaker 1: package them together for you, and there's a couple of

440
00:23:28,520 --> 00:23:32,160
Speaker 1: different ways you can do that. But understand what you're

441
00:23:32,160 --> 00:23:34,720
Speaker 1: investing in because you know what you own. No, no,

442
00:23:35,000 --> 00:23:37,000
Speaker 1: I mean it's you know, it's basic, but you know

443
00:23:37,080 --> 00:23:40,440
Speaker 1: what you won't understand your long term goal and what

444
00:23:40,520 --> 00:23:42,760
Speaker 1: you're trying to do to get there. Let's talk about

445
00:23:43,320 --> 00:23:46,639
Speaker 1: some of the more interesting trends that we see UH

446
00:23:46,760 --> 00:23:50,879
Speaker 1: in investing these days. Smart beta is Some people have

447
00:23:51,000 --> 00:23:55,000
Speaker 1: criticized that as a marketing slogan. Other people have called

448
00:23:55,080 --> 00:23:58,840
Speaker 1: it fundamental indexing. What do you guys think of this? Uh,

449
00:23:59,040 --> 00:24:02,000
Speaker 1: you know, I think it's term. It tries to capture

450
00:24:02,040 --> 00:24:05,360
Speaker 1: a lot of different things. I've had different debates within

451
00:24:05,440 --> 00:24:07,320
Speaker 1: that firm. We're an investment firm, so we debate a

452
00:24:07,359 --> 00:24:09,600
Speaker 1: lot of things around different things. And I had someone

453
00:24:09,640 --> 00:24:11,879
Speaker 1: tell me, Jim, if you want to call what we do,

454
00:24:12,640 --> 00:24:16,120
Speaker 1: you want to call anything that's not market cap indexing

455
00:24:16,200 --> 00:24:19,960
Speaker 1: smart beta, you can't. That means we have a huge

456
00:24:20,000 --> 00:24:22,120
Speaker 1: business in it because we have products like the Dow

457
00:24:22,640 --> 00:24:27,760
Speaker 1: which is not actually price weighted. You could make as

458
00:24:27,760 --> 00:24:31,000
Speaker 1: an alternative index that's smart beta. Now, I think that's

459
00:24:31,000 --> 00:24:33,520
Speaker 1: a little bit of a stretch. Um it is, it's

460
00:24:33,520 --> 00:24:35,560
Speaker 1: a term I I look at it. It's most of

461
00:24:35,600 --> 00:24:37,600
Speaker 1: the cases you're looking at smart beta. It's about factor

462
00:24:39,000 --> 00:24:41,920
Speaker 1: and it's about you know, you were buying earnings or

463
00:24:42,280 --> 00:24:46,720
Speaker 1: diving end growth or some other metric. I mean. The

464
00:24:46,800 --> 00:24:48,960
Speaker 1: interesting is divind in ets has been around for a

465
00:24:49,320 --> 00:24:51,439
Speaker 1: heck of a lot longer than the term smart beta,

466
00:24:52,320 --> 00:24:56,359
Speaker 1: but they're now seen as smart. So this is an

467
00:24:56,440 --> 00:25:00,639
Speaker 1: odd question. You mentioned the diamonds. Then names that you

468
00:25:00,760 --> 00:25:05,680
Speaker 1: guys come up with for um marketing, things like the

469
00:25:05,840 --> 00:25:08,560
Speaker 1: SMP five hundred in the Dow. I mean, the SMP

470
00:25:08,720 --> 00:25:11,960
Speaker 1: spiders commercials. Those are great. I mean it's clear that

471
00:25:13,200 --> 00:25:15,400
Speaker 1: it's not what you expect. It sticks in your mind.

472
00:25:15,800 --> 00:25:17,879
Speaker 1: How do you not remember spiders when you see a

473
00:25:17,880 --> 00:25:21,080
Speaker 1: little spider crawling on the screen. The same thing with

474
00:25:21,400 --> 00:25:25,199
Speaker 1: the Dow Jones diamonds being the Dow Jones Industrial Average,

475
00:25:25,240 --> 00:25:28,240
Speaker 1: which is what d i A stands for. But again,

476
00:25:28,560 --> 00:25:32,000
Speaker 1: how does that process of coming up with here's what

477
00:25:32,119 --> 00:25:34,320
Speaker 1: the index is, here's what the name is, here's our

478
00:25:34,400 --> 00:25:38,440
Speaker 1: marketing campaign. They all seem to flow seamlessly into each other. Yeah,

479
00:25:38,640 --> 00:25:41,520
Speaker 1: you know, you know, Listen, everything evolves over time. Um,

480
00:25:41,960 --> 00:25:44,360
Speaker 1: you go back to the early days a spy, it's

481
00:25:44,400 --> 00:25:49,199
Speaker 1: a different kind of spider scared some people, right, It's

482
00:25:49,400 --> 00:25:52,960
Speaker 1: often it's a uh so we I think we've seen

483
00:25:53,040 --> 00:25:55,120
Speaker 1: different things. Listen, there's a lot of work that goes

484
00:25:55,200 --> 00:25:58,640
Speaker 1: in trying to understand kind of from a product development standpoint,

485
00:25:58,920 --> 00:26:01,000
Speaker 1: we spent a lot of time of my product innovation

486
00:26:01,040 --> 00:26:04,159
Speaker 1: and really making sure where we were responsible in the

487
00:26:04,160 --> 00:26:07,159
Speaker 1: products we're developing. We're not perfect, No one's perfect like this,

488
00:26:07,680 --> 00:26:09,440
Speaker 1: but you kind of look at it and say, Okay,

489
00:26:09,680 --> 00:26:11,320
Speaker 1: we want to make sure anything we're gonna put our

490
00:26:11,400 --> 00:26:14,640
Speaker 1: name on we own, we're gonna be behind it, We're

491
00:26:14,680 --> 00:26:17,760
Speaker 1: gonna make sure we have a marketing strategy around it. Um.

492
00:26:18,359 --> 00:26:20,359
Speaker 1: You know a unique thing that happens in no space,

493
00:26:20,440 --> 00:26:22,200
Speaker 1: which I think is a little different than the traditional

494
00:26:22,800 --> 00:26:25,720
Speaker 1: asset management mutual fund spaces. We all have ticket symbols.

495
00:26:26,359 --> 00:26:28,959
Speaker 1: Take a symbols matter, So you try and see if

496
00:26:28,960 --> 00:26:31,720
Speaker 1: you can come up with a unique ticker symbol. There

497
00:26:32,040 --> 00:26:36,919
Speaker 1: is a a number of academic studies that have shown

498
00:26:37,080 --> 00:26:40,359
Speaker 1: that a ticker symbol that's a word has a tendency

499
00:26:40,400 --> 00:26:43,040
Speaker 1: to do better than a ticker symbol. That's just random letters.

500
00:26:43,800 --> 00:26:46,480
Speaker 1: And that's just the behavioral side of it. Um what

501
00:26:46,640 --> 00:26:50,440
Speaker 1: other what other ticket symbols? You guys don't do moved,

502
00:26:50,520 --> 00:26:52,720
Speaker 1: do you? We don't do move, although it's it's a

503
00:26:52,840 --> 00:26:55,399
Speaker 1: very good symbol. Um. Yeah, I think listen, I think

504
00:26:55,480 --> 00:26:57,840
Speaker 1: you gotta wear immune. Listen, this too tis too piece

505
00:26:57,960 --> 00:27:00,000
Speaker 1: this you don't want to buy any TF go ahead

506
00:27:00,000 --> 00:27:01,520
Speaker 1: the cool ticket symbol, right do you want to make

507
00:27:01,520 --> 00:27:03,320
Speaker 1: sure you understand the et F and not online and

508
00:27:03,359 --> 00:27:06,200
Speaker 1: where it fits for you, but it can help get

509
00:27:06,240 --> 00:27:09,560
Speaker 1: your attention, and so you think about sector spoders. We

510
00:27:10,080 --> 00:27:12,399
Speaker 1: every everything in sective side of thoughts out with Xcel

511
00:27:12,920 --> 00:27:15,800
Speaker 1: right now that back in the time, that's what we did,

512
00:27:16,119 --> 00:27:18,480
Speaker 1: so how we designed a spreadsheet. So but if you

513
00:27:18,880 --> 00:27:20,879
Speaker 1: you know, if you're a trader, you know what actual

514
00:27:20,960 --> 00:27:23,200
Speaker 1: F is. You know what actually is you know, you

515
00:27:23,320 --> 00:27:25,640
Speaker 1: know that's that's the financial sector spot in the energy

516
00:27:25,680 --> 00:27:28,320
Speaker 1: sector spider. But no one calls him by the whole name.

517
00:27:28,440 --> 00:27:30,200
Speaker 1: And sometimes you just have to get a little lucky

518
00:27:30,320 --> 00:27:32,200
Speaker 1: with the name. I remember when the e t F

519
00:27:32,800 --> 00:27:36,080
Speaker 1: hack came out and then a month later, Sony Pictures

520
00:27:36,240 --> 00:27:38,640
Speaker 1: was hacked and suddenly it was in the news every

521
00:27:38,720 --> 00:27:41,440
Speaker 1: day and that became a billion dollar et F. That's

522
00:27:41,440 --> 00:27:44,359
Speaker 1: the power, that's the power of a name. Um. What

523
00:27:44,720 --> 00:27:50,000
Speaker 1: about market capitalization? We look at the way UM a

524
00:27:50,080 --> 00:27:51,960
Speaker 1: lot of E t F and a lot of indexing,

525
00:27:52,040 --> 00:27:57,000
Speaker 1: passive indexing is done. It's cap weighted. There's been some criticism,

526
00:27:57,160 --> 00:28:00,520
Speaker 1: some pushback on that. What what What is the official

527
00:28:00,560 --> 00:28:03,439
Speaker 1: state street view on cap waiting? I don't know if

528
00:28:03,480 --> 00:28:05,720
Speaker 1: I want to give official state street view on that.

529
00:28:05,760 --> 00:28:08,359
Speaker 1: I'm gonna give my view of even better. But I

530
00:28:08,440 --> 00:28:11,440
Speaker 1: think pretty straightforward. You know, cap wait is pride and true.

531
00:28:11,560 --> 00:28:14,720
Speaker 1: It's been around for a very long time. It's kind

532
00:28:14,760 --> 00:28:17,040
Speaker 1: of what indexing styt of that. I think some of

533
00:28:17,080 --> 00:28:21,240
Speaker 1: the things you're seeing today have emerged because of technology. Honestly,

534
00:28:21,680 --> 00:28:23,560
Speaker 1: I'm not sure you could have isolated some of the

535
00:28:23,640 --> 00:28:27,400
Speaker 1: factors today as easily as you can and then execute

536
00:28:27,440 --> 00:28:29,680
Speaker 1: on top next you on top of fifteen twenty years ago.

537
00:28:29,760 --> 00:28:32,640
Speaker 1: So technology has helped you allowed you to do other things.

538
00:28:32,720 --> 00:28:35,399
Speaker 1: But market cap, when you think about it, it's a

539
00:28:35,480 --> 00:28:39,240
Speaker 1: very straightforward thing. It makes sense, you know, and the

540
00:28:39,400 --> 00:28:42,120
Speaker 1: self balances to self balances, you know what I worry

541
00:28:42,160 --> 00:28:44,960
Speaker 1: about from an investor standpoint, and sometimes investors will take

542
00:28:45,240 --> 00:28:48,080
Speaker 1: you know, they'll just mismash things together, and you really

543
00:28:48,120 --> 00:28:50,440
Speaker 1: have to lens through and make sure you understand what

544
00:28:50,560 --> 00:28:52,760
Speaker 1: you own because even though you might have the SMP

545
00:28:52,920 --> 00:28:55,520
Speaker 1: five hundred, and if you have the SMP five hundred,

546
00:28:55,600 --> 00:28:58,720
Speaker 1: the Russell too and some mid cap you might have overlapped,

547
00:28:59,320 --> 00:29:01,240
Speaker 1: you know, so you really want to understand kind of

548
00:29:01,280 --> 00:29:04,480
Speaker 1: where you're you know, what your overall portfolio looks like.

549
00:29:04,640 --> 00:29:07,640
Speaker 1: If you can get a portfolio portfolio analyze that shows

550
00:29:07,720 --> 00:29:10,080
Speaker 1: all of it, because some people will buy, you know,

551
00:29:10,200 --> 00:29:12,920
Speaker 1: I have this active lodge cap fund, this other active

552
00:29:13,000 --> 00:29:15,440
Speaker 1: MidCap fund that's really a lodge cap fund. I'll have

553
00:29:15,560 --> 00:29:17,840
Speaker 1: spy and what you find out you have if you

554
00:29:17,920 --> 00:29:22,320
Speaker 1: have multiple duplay your portfolios. Do you think they're diversified,

555
00:29:22,400 --> 00:29:25,120
Speaker 1: but they really have a giant That ven diagram of

556
00:29:25,200 --> 00:29:28,800
Speaker 1: overlap is is tremendous. So so let's talk a little

557
00:29:28,840 --> 00:29:33,480
Speaker 1: bit about UM E s G, which is probably um

558
00:29:33,840 --> 00:29:37,200
Speaker 1: the hottest new or not so new UH theme and

559
00:29:37,320 --> 00:29:42,400
Speaker 1: investing Environmental, social and governance. You have five separate ETFs

560
00:29:43,040 --> 00:29:46,280
Speaker 1: UH in that space, if not more since we last

561
00:29:46,320 --> 00:29:51,440
Speaker 1: looked UH the e t F SHE, which is focused

562
00:29:51,480 --> 00:29:55,280
Speaker 1: on companies that are UM either run by women or

563
00:29:55,400 --> 00:30:00,400
Speaker 1: have diverse diversification across their corporate board with women or

564
00:30:00,520 --> 00:30:06,200
Speaker 1: other women female related UM governance issues, is about three

565
00:30:06,320 --> 00:30:09,680
Speaker 1: hundred and thirty million dollars. Is that about right? Where's

566
00:30:09,720 --> 00:30:12,120
Speaker 1: the demand for these sort of products coming from? Because

567
00:30:12,160 --> 00:30:15,680
Speaker 1: it really seems to be the hot new thing. So

568
00:30:15,800 --> 00:30:17,360
Speaker 1: I mean the demand is coming from a lot of

569
00:30:17,400 --> 00:30:20,840
Speaker 1: different places depending on the type of E s G products.

570
00:30:20,880 --> 00:30:24,760
Speaker 1: So the Gender Diversity ETFC was a product that we

571
00:30:24,840 --> 00:30:30,120
Speaker 1: did with UM Calister So California Teachers Pension UM. That's

572
00:30:30,200 --> 00:30:32,040
Speaker 1: very interesting that they came to you and said, hey,

573
00:30:32,440 --> 00:30:34,480
Speaker 1: we have an idea. We need to check off this

574
00:30:34,640 --> 00:30:37,520
Speaker 1: box which we can't really do cheaply elsewhere. Can you

575
00:30:37,600 --> 00:30:39,760
Speaker 1: guys develop this way? And it wasn't It was interesting.

576
00:30:39,760 --> 00:30:41,600
Speaker 1: It was really based on the research. So they came

577
00:30:41,680 --> 00:30:43,880
Speaker 1: to us, can you do a research project around this?

578
00:30:44,640 --> 00:30:46,440
Speaker 1: Like the research, we had to get deep into the

579
00:30:46,520 --> 00:30:48,440
Speaker 1: research because some of the research is really just looking

580
00:30:48,480 --> 00:30:51,400
Speaker 1: at corporate board seats and that's nice to have, but

581
00:30:51,680 --> 00:30:54,160
Speaker 1: an easy thing to a company to fix this is

582
00:30:54,280 --> 00:30:56,360
Speaker 1: really going down in the company and saying where is

583
00:30:56,440 --> 00:31:00,280
Speaker 1: your you've seen your management, your executive management, and how

584
00:31:00,400 --> 00:31:02,760
Speaker 1: diverse is it? And it stats that you can get.

585
00:31:03,280 --> 00:31:05,400
Speaker 1: That's one of the challenges with these things. Typetimes like,

586
00:31:05,720 --> 00:31:07,960
Speaker 1: you know, it sounds great, but if you can't get

587
00:31:08,080 --> 00:31:10,320
Speaker 1: to the core data, it's hard to build a product

588
00:31:10,320 --> 00:31:12,600
Speaker 1: around it. Because we worked very hot with them on

589
00:31:12,840 --> 00:31:15,479
Speaker 1: the research around this and then turn it into an

590
00:31:15,480 --> 00:31:19,960
Speaker 1: index that we feel can continually update and get to

591
00:31:20,000 --> 00:31:21,920
Speaker 1: the exposure that we're trying to get to. And and

592
00:31:22,080 --> 00:31:26,760
Speaker 1: the academic research on gender diversity says corporations that have

593
00:31:27,000 --> 00:31:30,400
Speaker 1: their board of directors, the seenior management they're hiring that

594
00:31:30,720 --> 00:31:34,720
Speaker 1: is more diverse than the average company actually do better

595
00:31:34,880 --> 00:31:38,240
Speaker 1: than the index. That's what the research showed. What other

596
00:31:38,320 --> 00:31:41,680
Speaker 1: stuff tends to do better than than the than the index.

597
00:31:42,000 --> 00:31:48,160
Speaker 1: What other research is they're showing different themes actually generate alpha.

598
00:31:48,800 --> 00:31:51,280
Speaker 1: So it's challenging. So it's challenging. Might think of the

599
00:31:51,360 --> 00:31:55,200
Speaker 1: whole kind of board, you know, governance area. You know,

600
00:31:55,320 --> 00:31:59,280
Speaker 1: we're very active in governance as a firm because we

601
00:31:59,360 --> 00:32:01,120
Speaker 1: think it's right for the folks who invest in us,

602
00:32:01,160 --> 00:32:04,320
Speaker 1: and we think we're trying to produce a better long

603
00:32:04,480 --> 00:32:07,640
Speaker 1: term outcome for the investor, it's not a short term view.

604
00:32:08,160 --> 00:32:12,120
Speaker 1: The unique thing about being a large passive index player

605
00:32:12,840 --> 00:32:15,920
Speaker 1: is an active manager can look at a company and say,

606
00:32:15,960 --> 00:32:18,360
Speaker 1: I don't think they're taking the long term view on

607
00:32:19,400 --> 00:32:22,640
Speaker 1: you know, the environment right, and it's gonna hurt their

608
00:32:22,680 --> 00:32:28,160
Speaker 1: company's profits and sell it. We as an index provider,

609
00:32:28,640 --> 00:32:31,120
Speaker 1: can't sell that company even if we have the same view,

610
00:32:31,600 --> 00:32:34,840
Speaker 1: So we engage with it on our concerns, whether it's

611
00:32:34,960 --> 00:32:38,640
Speaker 1: diversity of the board, gender diversity, all diversity, or if

612
00:32:38,680 --> 00:32:42,120
Speaker 1: it's around some of their views on social programs or

613
00:32:42,200 --> 00:32:45,840
Speaker 1: long term views on the environment we have. We we

614
00:32:46,160 --> 00:32:49,920
Speaker 1: look at our responsibility from a corporate governor standpoint. To

615
00:32:50,040 --> 00:32:53,680
Speaker 1: engage makes a lot of sense. Um although you lose

616
00:32:53,760 --> 00:32:55,520
Speaker 1: the stick of saying and if you know we're not

617
00:32:55,560 --> 00:32:59,080
Speaker 1: happy with your answers, we're gonna sell, but you still

618
00:32:59,160 --> 00:33:02,240
Speaker 1: have the ability to vote proxies and do other things.

619
00:33:02,720 --> 00:33:06,040
Speaker 1: So companies, I assume are somewhat cooperative. When State Street

620
00:33:06,080 --> 00:33:08,960
Speaker 1: comes and says, hey, we have these concerns. How receptive

621
00:33:09,040 --> 00:33:11,160
Speaker 1: is corporate management? I think you know what we have

622
00:33:11,320 --> 00:33:14,440
Speaker 1: found is they're very receptive and we want to work

623
00:33:14,480 --> 00:33:16,240
Speaker 1: with them on a long term so we're not gonna

624
00:33:16,520 --> 00:33:18,520
Speaker 1: We're not the you know, we're not in this going

625
00:33:18,560 --> 00:33:20,720
Speaker 1: to I'm saying, hey, we have these concerns, what do

626
00:33:20,760 --> 00:33:23,120
Speaker 1: you gonna do about it tomorrow? You're not You're not activists,

627
00:33:23,120 --> 00:33:26,280
Speaker 1: investors demanding boards. Exactly, We're in there saying, give us

628
00:33:26,320 --> 00:33:28,160
Speaker 1: you a long term view on this. Here's our long

629
00:33:28,320 --> 00:33:31,680
Speaker 1: term view. How can we continue to work together. But yeah,

630
00:33:31,760 --> 00:33:34,040
Speaker 1: the you know, the the stick there is that we

631
00:33:34,200 --> 00:33:36,920
Speaker 1: vote proxies. What are the e t f s that

632
00:33:37,040 --> 00:33:40,160
Speaker 1: State Street has that addresses people who are concerned about

633
00:33:40,200 --> 00:33:43,120
Speaker 1: the environment, and what do you expect the long term

634
00:33:43,240 --> 00:33:45,640
Speaker 1: demand for these products to look like in the future.

635
00:33:46,240 --> 00:33:48,760
Speaker 1: So we we most of that today has been focused on.

636
00:33:48,840 --> 00:33:51,280
Speaker 1: Once again, it gets to what do you have good

637
00:33:51,400 --> 00:33:54,880
Speaker 1: data on that you can actually build an index, honor

638
00:33:54,920 --> 00:33:57,400
Speaker 1: an investment strategy on UM. So we do try and

639
00:33:57,440 --> 00:33:59,600
Speaker 1: look at that from the long term. We have focused

640
00:33:59,640 --> 00:34:02,160
Speaker 1: We have a PARTICT that is low combon that really

641
00:34:02,320 --> 00:34:06,000
Speaker 1: is you know, a subset of the core SMP five.

642
00:34:06,720 --> 00:34:09,120
Speaker 1: What's the ticker symbol on the low carbon ETF low

643
00:34:09,200 --> 00:34:12,719
Speaker 1: see low s makes sense UD good. And then we

644
00:34:12,800 --> 00:34:17,000
Speaker 1: have spy X, which is really focused on cobbon free

645
00:34:17,960 --> 00:34:21,520
Speaker 1: UM A fossil Yeah, what's the what's the difference? So, uh,

646
00:34:22,520 --> 00:34:26,359
Speaker 1: spy X is no oil companies, no coal companies, nothing

647
00:34:26,480 --> 00:34:30,600
Speaker 1: that is carbon based, whereas lo SEE is really trying

648
00:34:30,640 --> 00:34:33,799
Speaker 1: to get you to that same core benchmark return by

649
00:34:34,200 --> 00:34:38,200
Speaker 1: underwaiting cobbon producers but not completely limited. It's a waiting

650
00:34:38,280 --> 00:34:41,959
Speaker 1: shift as a waiting shift versus an exclusionary And which

651
00:34:42,360 --> 00:34:46,040
Speaker 1: which is better spy X, which is bigger, spy extra

652
00:34:46,480 --> 00:34:49,560
Speaker 1: low C. I think low C today is a little

653
00:34:49,560 --> 00:34:51,600
Speaker 1: bit bigger. But the better is a hard one to

654
00:34:51,680 --> 00:34:55,920
Speaker 1: say because low se fit's a little bit better into

655
00:34:56,120 --> 00:34:58,400
Speaker 1: your asset out case. And if you're an institutional investor,

656
00:34:58,560 --> 00:35:01,239
Speaker 1: because you still want to get exposed. Um, you don't

657
00:35:01,280 --> 00:35:03,440
Speaker 1: necessarily want to make a big bet one way or

658
00:35:03,440 --> 00:35:06,600
Speaker 1: the other if anyone is more. If you're an investor

659
00:35:06,640 --> 00:35:10,200
Speaker 1: that fundamentally believes that's where you want to invest, which

660
00:35:10,239 --> 00:35:11,640
Speaker 1: is what a lot of the s G is, this

661
00:35:11,760 --> 00:35:14,520
Speaker 1: is where my mind is. We see this more with

662
00:35:14,640 --> 00:35:17,000
Speaker 1: institutions in Europe than we see even in the US day.

663
00:35:17,520 --> 00:35:20,680
Speaker 1: That's that's quite fascinating. We also tend to see that

664
00:35:21,760 --> 00:35:26,800
Speaker 1: with millennial and youthful investors and admittedly small part of

665
00:35:26,960 --> 00:35:30,680
Speaker 1: the current market, but hey, that's probably where things are

666
00:35:30,719 --> 00:35:34,279
Speaker 1: going ten twent thirty years from now. Um, So what

667
00:35:34,360 --> 00:35:38,840
Speaker 1: about business risk? You guys obviously have massive exposure to

668
00:35:38,960 --> 00:35:41,759
Speaker 1: the market. What does it mean if the market takes

669
00:35:41,800 --> 00:35:44,759
Speaker 1: a twenty or thirty percent correction? Does that mean you're

670
00:35:44,880 --> 00:35:49,800
Speaker 1: revenues for dropping by a substantial amount? And we're a

671
00:35:49,880 --> 00:35:52,800
Speaker 1: revenue based organism. I mean we're an asset based organization

672
00:35:52,880 --> 00:35:55,960
Speaker 1: in many ways now S s g A is a

673
00:35:56,000 --> 00:35:59,040
Speaker 1: pretty diversified business, and that we have fixed income, we

674
00:35:59,120 --> 00:36:01,600
Speaker 1: have cash, and we have equity. We obviously have g

675
00:36:01,760 --> 00:36:04,399
Speaker 1: l D so in some cases when some of those

676
00:36:04,440 --> 00:36:06,319
Speaker 1: are coming off, some of the other things we're going up.

677
00:36:06,680 --> 00:36:10,359
Speaker 1: But yeah, in general, when the market, if and when

678
00:36:10,400 --> 00:36:12,320
Speaker 1: the market goes down like that, we feel pressure on

679
00:36:12,440 --> 00:36:15,880
Speaker 1: a revenue side, no question. And you mentioned earlier the

680
00:36:16,040 --> 00:36:19,759
Speaker 1: VIX and some of the low volatility products. Um, we

681
00:36:20,040 --> 00:36:24,600
Speaker 1: have a tremendous amount of political volatility, but we really

682
00:36:24,719 --> 00:36:30,120
Speaker 1: haven't seen all that much uh market volatility. Uh we

683
00:36:30,400 --> 00:36:33,800
Speaker 1: we The day after the fire and fury Trump remark

684
00:36:33,880 --> 00:36:37,480
Speaker 1: about North Korea, the market opened down fairly substantially. I

685
00:36:37,560 --> 00:36:40,160
Speaker 1: think we closed down thirty points on the DAW yesterday,

686
00:36:40,200 --> 00:36:42,719
Speaker 1: which is which is nothing. It's a tick. How do

687
00:36:42,800 --> 00:36:45,279
Speaker 1: you guys look at this and and and what what,

688
00:36:45,440 --> 00:36:47,759
Speaker 1: if anything do you do about it? I think you know,

689
00:36:48,719 --> 00:36:50,719
Speaker 1: what we try and do best is in most it's

690
00:36:50,719 --> 00:36:52,719
Speaker 1: really just make sure our clients inform about what I've

691
00:36:52,800 --> 00:36:54,640
Speaker 1: used on the market, what we think about it as

692
00:36:54,680 --> 00:36:58,160
Speaker 1: a firm um communicate as much as we can, you know,

693
00:36:58,600 --> 00:37:01,880
Speaker 1: I think the reality is is what you see in

694
00:37:01,960 --> 00:37:05,920
Speaker 1: political you know, instability in some cases does not necessarily

695
00:37:05,960 --> 00:37:07,800
Speaker 1: drive the market. The markets can be driven on the

696
00:37:07,840 --> 00:37:10,879
Speaker 1: fundamental unlying stocks and the long term views of those

697
00:37:10,960 --> 00:37:14,640
Speaker 1: companies for the most part. And once again, there's always

698
00:37:14,640 --> 00:37:16,920
Speaker 1: a potential that there's, ah, you know, something going on

699
00:37:16,960 --> 00:37:20,200
Speaker 1: in the world from a politically not not even political,

700
00:37:20,280 --> 00:37:22,200
Speaker 1: but just you know, anything can happen in the world.

701
00:37:22,200 --> 00:37:24,360
Speaker 1: We can be a market shock, and you try and

702
00:37:24,800 --> 00:37:26,880
Speaker 1: think about those, you know, the black swan, gray swan,

703
00:37:26,920 --> 00:37:28,680
Speaker 1: whatever you want to call them, Try and think about

704
00:37:28,719 --> 00:37:31,240
Speaker 1: those and make sure they're part of your overall investment

705
00:37:31,280 --> 00:37:35,319
Speaker 1: strategy and plan that you've thought about that. The fact

706
00:37:35,360 --> 00:37:38,360
Speaker 1: the market can go down um where we sometimes and

707
00:37:39,239 --> 00:37:41,480
Speaker 1: this recent run that folks haven't really seen a lot

708
00:37:41,520 --> 00:37:43,560
Speaker 1: of that but you know, I think it's important for

709
00:37:43,600 --> 00:37:45,799
Speaker 1: folks to make sure you you're still looking at your

710
00:37:45,880 --> 00:37:49,640
Speaker 1: long term outcome and understanding why you have the diversigation

711
00:37:49,719 --> 00:37:51,800
Speaker 1: you have them. Hopefully you're rebalancing at different points. And

712
00:37:52,200 --> 00:37:53,880
Speaker 1: someone mentioned the other day that we now have an

713
00:37:54,040 --> 00:37:59,280
Speaker 1: entire generation of traders that has never experienced the rising environment,

714
00:37:59,360 --> 00:38:03,160
Speaker 1: which is which is pretty funny. Um last market related question,

715
00:38:04,440 --> 00:38:07,680
Speaker 1: there is a general sense from a number of quarters

716
00:38:07,800 --> 00:38:11,880
Speaker 1: that markets in the US are overvalued. How do you

717
00:38:11,960 --> 00:38:16,040
Speaker 1: look at valuations and what can you guys do about

718
00:38:16,120 --> 00:38:19,640
Speaker 1: that as a product manager? So I'm not sure that

719
00:38:19,719 --> 00:38:22,080
Speaker 1: the lot we can do about that as a product manager.

720
00:38:22,080 --> 00:38:24,440
Speaker 1: I think what we try and do is ensure that

721
00:38:24,560 --> 00:38:28,160
Speaker 1: we have a diversified set of products. So when our

722
00:38:28,280 --> 00:38:31,719
Speaker 1: clients want to diversify, if they if they believe that

723
00:38:31,880 --> 00:38:34,000
Speaker 1: there's a long term view. And we saw this shift,

724
00:38:34,280 --> 00:38:37,120
Speaker 1: you know, we saw this shift into you know, strong

725
00:38:37,200 --> 00:38:40,440
Speaker 1: into the US after the election and shift into much

726
00:38:40,520 --> 00:38:42,800
Speaker 1: more of a Europe looks a little more attractive. You

727
00:38:42,800 --> 00:38:44,239
Speaker 1: look at et F flows, you can see a lot

728
00:38:44,280 --> 00:38:46,160
Speaker 1: of things. If you look at Broady E t F

729
00:38:46,239 --> 00:38:48,320
Speaker 1: industry flows, you can see a lot of trendits that

730
00:38:48,360 --> 00:38:51,480
Speaker 1: played through from the markets where people want to shifting

731
00:38:51,560 --> 00:38:53,600
Speaker 1: some of their some of the bats I'm gonna call

732
00:38:53,640 --> 00:38:58,160
Speaker 1: it UM towards Europe E M Europe EM is definitely

733
00:38:58,360 --> 00:39:01,080
Speaker 1: You're probably more Europe initially, probably a little more M now.

734
00:39:01,400 --> 00:39:03,719
Speaker 1: So I think we see that playing out in the marketplace.

735
00:39:04,040 --> 00:39:06,000
Speaker 1: My goal is kind of somebody who has a broad

736
00:39:06,080 --> 00:39:09,040
Speaker 1: diverse products set, is to ensure that we have products

737
00:39:09,080 --> 00:39:11,560
Speaker 1: for our investors that they can use if they want

738
00:39:11,560 --> 00:39:14,920
Speaker 1: to shift. We're not telling necessary folks to shift, you know.

739
00:39:15,000 --> 00:39:16,680
Speaker 1: Our goal is really to make sure we pride them

740
00:39:16,719 --> 00:39:20,120
Speaker 1: with the information, engage with them about what their options are.

741
00:39:20,680 --> 00:39:23,120
Speaker 1: And they're the ones they're gonna direct, you know, whether

742
00:39:23,120 --> 00:39:25,239
Speaker 1: they want to shift their client's assets. That's probably work

743
00:39:25,360 --> 00:39:28,680
Speaker 1: very closely with. You know, financial advisors and investors are

744
00:39:28,800 --> 00:39:30,520
Speaker 1: on the club. Can you stick around a little bit,

745
00:39:30,640 --> 00:39:34,919
Speaker 1: we'll we'll keep talking about all things UH et F related. Sure,

746
00:39:35,440 --> 00:39:37,560
Speaker 1: we have been speaking with Jim Ross. He is the

747
00:39:37,680 --> 00:39:40,759
Speaker 1: chairman of the State Street Spider Global Group as well

748
00:39:40,840 --> 00:39:44,480
Speaker 1: as chairman of s s G as Asset Management ARM.

749
00:39:45,160 --> 00:39:48,000
Speaker 1: If you enjoy this conversation, be sure and check out

750
00:39:48,080 --> 00:39:54,120
Speaker 1: our full podcast. You can find that on Bloomberg dot com, Apple, iTunes, SoundCloud,

751
00:39:54,320 --> 00:39:57,880
Speaker 1: and wherever fine podcasts are sold. We love your comments,

752
00:39:58,120 --> 00:40:02,719
Speaker 1: feedback and suggestions right to us at m IB podcast

753
00:40:02,840 --> 00:40:06,240
Speaker 1: at Bloomberg dot net. You can find my daily columns

754
00:40:06,280 --> 00:40:08,960
Speaker 1: on Bloomberg View dot com. Check me out on Twitter

755
00:40:09,440 --> 00:40:13,520
Speaker 1: at rid Halts. I'm Barry Ridholts. You're listening to Masters

756
00:40:13,560 --> 00:40:29,040
Speaker 1: in Business on Bloomberg Radio. Welcome to the podcast. Thank

757
00:40:29,080 --> 00:40:31,480
Speaker 1: you Jim for doing this. I've really been looking forward

758
00:40:31,560 --> 00:40:36,080
Speaker 1: to this, UH for a long time. Thank you very

759
00:40:36,120 --> 00:40:39,320
Speaker 1: much for having me my pleasure, your legend in the industry,

760
00:40:39,400 --> 00:40:44,120
Speaker 1: and this entire um library would be incomplete without without

761
00:40:44,200 --> 00:40:46,560
Speaker 1: you in it. So so let's talk a little bit

762
00:40:46,560 --> 00:40:49,279
Speaker 1: about some of our our favorite questions. Things that UH

763
00:40:49,800 --> 00:40:53,320
Speaker 1: I really like. What's the most important thing people don't

764
00:40:53,400 --> 00:40:56,880
Speaker 1: know about your background? That's an interesting question. There's a

765
00:40:56,920 --> 00:40:58,600
Speaker 1: lot of things I don't want people to know about

766
00:40:58,600 --> 00:41:01,560
Speaker 1: my background. I happen to have a dossier here. Yeah,

767
00:41:02,120 --> 00:41:04,040
Speaker 1: you were in Russia recently, weren't No, no, no, no.

768
00:41:04,600 --> 00:41:06,520
Speaker 1: I have the captain for a really bad basketball team

769
00:41:06,560 --> 00:41:08,439
Speaker 1: in high school. But that doesn't really matter. You don't

770
00:41:08,480 --> 00:41:11,080
Speaker 1: strike me as a basketball player. You look you're you're

771
00:41:11,080 --> 00:41:13,319
Speaker 1: a solid guy. You look more like a football player

772
00:41:13,800 --> 00:41:16,320
Speaker 1: undred and sixty pound point guard in high school. But

773
00:41:16,400 --> 00:41:18,440
Speaker 1: that's really I've changed a little bit all the time.

774
00:41:18,600 --> 00:41:21,279
Speaker 1: I think, you know, I think the one and I'll

775
00:41:21,320 --> 00:41:24,200
Speaker 1: say it, the one that I I think people probably

776
00:41:24,239 --> 00:41:26,760
Speaker 1: don't know about background. I got involved in NETF somewhat

777
00:41:26,800 --> 00:41:29,600
Speaker 1: by accident, and I got a lot more credit for

778
00:41:29,680 --> 00:41:32,960
Speaker 1: spy than I deserve. You've every time I've seen you

779
00:41:33,040 --> 00:41:37,239
Speaker 1: speak publicly, you practically open with that. So no one

780
00:41:37,360 --> 00:41:41,600
Speaker 1: could ever accuse you of taking um credit for something

781
00:41:41,760 --> 00:41:44,000
Speaker 1: that that you don't deserve. Let's let's talk about some

782
00:41:44,120 --> 00:41:47,319
Speaker 1: of your mentors. Who are the people who really influenced

783
00:41:47,360 --> 00:41:51,040
Speaker 1: your career. You know, there's been quite a few. I

784
00:41:51,120 --> 00:41:53,600
Speaker 1: think of mentors, and it's like sometimes when somebody has

785
00:41:53,600 --> 00:41:55,480
Speaker 1: like I just had this one mentum my whole career.

786
00:41:56,239 --> 00:41:58,760
Speaker 1: I think I probably, you know, my first mentors, probably

787
00:41:58,760 --> 00:42:01,960
Speaker 1: my dad got a lot from him. Um. But I

788
00:42:02,040 --> 00:42:04,640
Speaker 1: think I look at mentorship is I've taken things from

789
00:42:04,640 --> 00:42:08,000
Speaker 1: different folks. I've worked with good and bad over the years.

790
00:42:08,320 --> 00:42:11,440
Speaker 1: You know, different styles. Um, you know, I take a

791
00:42:11,480 --> 00:42:13,279
Speaker 1: little bit the folks who first hired me a State

792
00:42:13,320 --> 00:42:17,279
Speaker 1: street cat Cooglo. Glen Francis gave me a great opportunity,

793
00:42:17,320 --> 00:42:18,759
Speaker 1: so I give them a lot of credit. I've learned

794
00:42:18,760 --> 00:42:22,160
Speaker 1: different things from them over the years. Um one for

795
00:42:22,320 --> 00:42:24,960
Speaker 1: sure was the CEO of S S g A for

796
00:42:25,160 --> 00:42:27,080
Speaker 1: the years for early years I was there, which just

797
00:42:27,120 --> 00:42:30,959
Speaker 1: Tim Hobbitt Um who unfortunately passed away on the job

798
00:42:31,080 --> 00:42:35,520
Speaker 1: in two thousand three. So but he was one who

799
00:42:35,520 --> 00:42:37,160
Speaker 1: I took a lot of from. Like I said, I've

800
00:42:37,200 --> 00:42:38,680
Speaker 1: worked for a lot of different folks. I've seen a

801
00:42:38,680 --> 00:42:40,560
Speaker 1: lot of different styles. So part of what I try

802
00:42:40,600 --> 00:42:45,680
Speaker 1: and do is understand different folks style, take the good,

803
00:42:46,280 --> 00:42:48,600
Speaker 1: maybe not take some of their bad. So I've worked

804
00:42:48,640 --> 00:42:52,240
Speaker 1: with folks who have you know, hot timbers, but they're passionate. Okay,

805
00:42:52,320 --> 00:42:54,080
Speaker 1: well I want to take the passionate side. I don't

806
00:42:54,160 --> 00:42:56,319
Speaker 1: really have a temper all that month. So you're try

807
00:42:56,360 --> 00:42:58,040
Speaker 1: and learn from different things. But though I think in

808
00:42:58,080 --> 00:43:00,160
Speaker 1: mentorship is kind of like That's how I've on it

809
00:43:00,200 --> 00:43:02,480
Speaker 1: over the years. Different folks I know have different mentors.

810
00:43:02,880 --> 00:43:05,719
Speaker 1: I've had colleagues that I've looked at his mentors. Um

811
00:43:05,880 --> 00:43:08,239
Speaker 1: that's been straight peers of mine because I like the

812
00:43:08,280 --> 00:43:11,080
Speaker 1: way they do things. I've learned from them that. That's

813
00:43:11,160 --> 00:43:15,960
Speaker 1: quite that's quite fascinating. Um, what investors have influenced the

814
00:43:16,040 --> 00:43:18,960
Speaker 1: way you approach your job? You know, it's funny. I'm

815
00:43:18,960 --> 00:43:21,799
Speaker 1: not I'm not a core investment guy. I didn't come

816
00:43:21,920 --> 00:43:24,440
Speaker 1: up with that. I didn't read about investment. I'm not

817
00:43:24,480 --> 00:43:27,080
Speaker 1: sure how knew Warren Buffett was twenty years ago, to

818
00:43:27,120 --> 00:43:29,160
Speaker 1: be completely honest with you, So I don't want to

819
00:43:29,200 --> 00:43:32,319
Speaker 1: sit here in bs and that what's his name? Who?

820
00:43:33,040 --> 00:43:36,440
Speaker 1: Warren Buffett? Right? I think I'm gonna be honest with you.

821
00:43:37,200 --> 00:43:39,200
Speaker 1: Twenty five years ago I kne Jimmy Buffett a lot

822
00:43:39,200 --> 00:43:41,319
Speaker 1: better than any Warren Buffett. And it turns out there

823
00:43:41,360 --> 00:43:44,200
Speaker 1: distant cousins. Yeah. So Um, but I think I learned

824
00:43:44,239 --> 00:43:46,880
Speaker 1: most of my investment frankly from working in the industry

825
00:43:46,920 --> 00:43:49,239
Speaker 1: at State Street and S S G. A. That's where

826
00:43:49,239 --> 00:43:51,279
Speaker 1: I kind of got the passion A for E. T. S,

827
00:43:51,400 --> 00:43:55,120
Speaker 1: but B for you know, the ability to use passive

828
00:43:55,160 --> 00:43:57,680
Speaker 1: product to get to the outcome, which is different than

829
00:43:57,800 --> 00:44:01,600
Speaker 1: passive versus active. In my vore, do you and a

830
00:44:01,960 --> 00:44:06,520
Speaker 1: quick digression, is everything that State Street does is it

831
00:44:06,880 --> 00:44:10,239
Speaker 1: in house or do you have require things from the outside?

832
00:44:10,600 --> 00:44:12,839
Speaker 1: We do something, so we have some partnership. We will

833
00:44:12,920 --> 00:44:16,000
Speaker 1: hire subadvisors in different areas. We've done that in ETF business.

834
00:44:16,360 --> 00:44:18,680
Speaker 1: We have a great partnership there with Double Line for

835
00:44:18,800 --> 00:44:23,920
Speaker 1: core fixed income, GSL Blackstone for bank loans, MFS for equities,

836
00:44:23,960 --> 00:44:26,200
Speaker 1: and frankly now Vinan from UNI. So we do we

837
00:44:26,320 --> 00:44:28,920
Speaker 1: do have a We do that in certain segments. We

838
00:44:29,040 --> 00:44:32,320
Speaker 1: also manufacture both active return streams within the firm and

839
00:44:32,480 --> 00:44:37,800
Speaker 1: passive return streams. Obviously that's interesting. So this is everybody's

840
00:44:37,840 --> 00:44:42,320
Speaker 1: favorite question, what are some of your favorite books? So

841
00:44:42,400 --> 00:44:44,919
Speaker 1: I'm gonna be honest here. My wife gave me an idea.

842
00:44:45,040 --> 00:44:47,440
Speaker 1: I chose not to take it, which was look up

843
00:44:47,520 --> 00:44:49,880
Speaker 1: what Donald's answer was for this. I don't read a

844
00:44:49,960 --> 00:44:52,160
Speaker 1: lot if I tend to read, and I'm sitting here

845
00:44:52,160 --> 00:44:53,320
Speaker 1: in New York City, So I just want to be

846
00:44:53,360 --> 00:44:55,600
Speaker 1: honest about this. It tends to be about some of

847
00:44:55,640 --> 00:44:59,320
Speaker 1: the Red Sox or Patriot success stories, um so books

848
00:44:59,320 --> 00:45:01,560
Speaker 1: on the two thousand four Red Sox. I enjoyed that year,

849
00:45:01,920 --> 00:45:04,120
Speaker 1: didn't enjoy being a game seven and two thousand three

850
00:45:04,640 --> 00:45:11,960
Speaker 1: um two thousand three um who who? Just uh my?

851
00:45:12,200 --> 00:45:17,680
Speaker 1: My biggest Red Sox um recollection was the game against

852
00:45:17,719 --> 00:45:22,000
Speaker 1: the Mets in it was the eighty six World Series

853
00:45:23,040 --> 00:45:26,920
Speaker 1: old that that stayed with you, that stayed with me,

854
00:45:27,120 --> 00:45:31,160
Speaker 1: that hurt still hurts. And and at this point have

855
00:45:31,360 --> 00:45:33,560
Speaker 1: we have we all accepted the flake gate is a

856
00:45:33,600 --> 00:45:36,560
Speaker 1: real thing or no, that that went nowhere with Tom Brady,

857
00:45:37,000 --> 00:45:39,480
Speaker 1: I have no idea what you're talking about. Oh no,

858
00:45:39,560 --> 00:45:41,000
Speaker 1: I know what you're talking about. No idea what you're

859
00:45:41,000 --> 00:45:44,480
Speaker 1: talking about. I don't think it's real at all. A right, Um,

860
00:45:44,760 --> 00:45:48,120
Speaker 1: so let's let's talk about the overall investment industry. What

861
00:45:48,239 --> 00:45:52,960
Speaker 1: are some of the most significant changes since you've joined. God,

862
00:45:53,520 --> 00:45:55,399
Speaker 1: there's been a lot of change. I mean, I think

863
00:45:55,560 --> 00:45:58,759
Speaker 1: change is constant in this world, constant this industry. You know,

864
00:45:58,920 --> 00:46:02,280
Speaker 1: I think we've seen just the way people can invest

865
00:46:02,640 --> 00:46:05,880
Speaker 1: has changed dramatically, you know, huge, huge difference. You know.

866
00:46:05,920 --> 00:46:08,080
Speaker 1: I think about, you know, going back twenty five years ago,

867
00:46:08,120 --> 00:46:10,680
Speaker 1: and this is I sho laugh at this, but you

868
00:46:11,480 --> 00:46:13,680
Speaker 1: years ago. One of the things you're broker did for

869
00:46:13,760 --> 00:46:17,319
Speaker 1: you is you won't usually individual stocks. Sometimes you might

870
00:46:17,360 --> 00:46:19,520
Speaker 1: call him up and say, hey, what's this stock doing

871
00:46:19,600 --> 00:46:21,799
Speaker 1: to because you couldn't see the price. You didn't want

872
00:46:21,800 --> 00:46:23,680
Speaker 1: to wait till the next day. We take it for

873
00:46:23,760 --> 00:46:26,879
Speaker 1: granted that you could look at any price in four

874
00:46:26,920 --> 00:46:29,200
Speaker 1: hours a day. That wasn't how it used to be.

875
00:46:29,520 --> 00:46:32,520
Speaker 1: But I look at you know, commissions have compressed, you know,

876
00:46:33,400 --> 00:46:36,760
Speaker 1: how you invest in, how you work with the financial

877
00:46:36,800 --> 00:46:39,439
Speaker 1: advisor has probably gone from commission based to fee based.

878
00:46:39,560 --> 00:46:42,640
Speaker 1: As far as that world, what you pay to buy

879
00:46:42,680 --> 00:46:45,759
Speaker 1: and sell stocks, ets, anything has come down. You know.

880
00:46:45,920 --> 00:46:47,480
Speaker 1: I go back to the days where as a single

881
00:46:47,560 --> 00:46:50,600
Speaker 1: specialist they owned the book, you know, and spy traded

882
00:46:50,640 --> 00:46:54,359
Speaker 1: it thirty cents spreading. That's what we knew. Spy trades

883
00:46:54,440 --> 00:46:57,880
Speaker 1: less and a penny spread today. Um, so you get commissioned.

884
00:46:57,960 --> 00:46:59,480
Speaker 1: I think that's kind of some of the good things

885
00:47:00,080 --> 00:47:02,120
Speaker 1: some of the bad things. I think from an investor standpoint,

886
00:47:02,600 --> 00:47:04,279
Speaker 1: it's got a lot more complex, there's a lot more

887
00:47:04,320 --> 00:47:06,960
Speaker 1: products out there. You need to do your due diligence

888
00:47:07,000 --> 00:47:11,400
Speaker 1: to invest, and so naturally the next question is what

889
00:47:11,560 --> 00:47:13,959
Speaker 1: are the next shifts? What do you see happening within

890
00:47:14,080 --> 00:47:17,759
Speaker 1: the industry that people may not be anticipated. Yeah, you know,

891
00:47:17,960 --> 00:47:20,840
Speaker 1: it's it's always easy to look back and see what's happened,

892
00:47:20,840 --> 00:47:24,600
Speaker 1: and try and look forward and say here's my great prediction. Um,

893
00:47:25,320 --> 00:47:27,680
Speaker 1: but I've seen a lot of things, and I continue

894
00:47:27,680 --> 00:47:30,440
Speaker 1: to see improvements going on in the marketplace, the way

895
00:47:30,480 --> 00:47:33,640
Speaker 1: people invest, the way they think. I look at technology,

896
00:47:34,280 --> 00:47:36,680
Speaker 1: and you know, I'm looking at this broadly, not just

897
00:47:36,920 --> 00:47:41,920
Speaker 1: around robo advice, but you see people buying managed portfolios

898
00:47:42,000 --> 00:47:44,680
Speaker 1: that way. Um, it's just and it's just a way.

899
00:47:44,680 --> 00:47:47,360
Speaker 1: I think younger investors want to be able to do

900
00:47:47,520 --> 00:47:51,320
Speaker 1: it directly. I think they at times want to get advice.

901
00:47:51,360 --> 00:47:53,279
Speaker 1: So I think that's going to continue to shift. I

902
00:47:53,320 --> 00:47:56,680
Speaker 1: also think there's you know, long term, I think there

903
00:47:56,760 --> 00:47:59,600
Speaker 1: could be more tech disruption in the financial space. I

904
00:47:59,640 --> 00:48:02,080
Speaker 1: think where you know, we're kidding us off if we

905
00:48:02,120 --> 00:48:05,280
Speaker 1: don't think that there's folks looking at the asset management

906
00:48:05,320 --> 00:48:07,719
Speaker 1: space and the broader financial space to say these is

907
00:48:07,800 --> 00:48:09,520
Speaker 1: a piece of that that we can play in that

908
00:48:09,600 --> 00:48:12,239
Speaker 1: will be good for us. And I'm a technology from

909
00:48:12,800 --> 00:48:15,520
Speaker 1: what was what was Jeff Bezos line? Your margin is

910
00:48:15,600 --> 00:48:18,840
Speaker 1: my opportunity, Yeah, no, no doubt about it. So so

911
00:48:19,480 --> 00:48:22,759
Speaker 1: we've been talking about all your successes. Tell us about

912
00:48:22,800 --> 00:48:24,719
Speaker 1: a time you failed and what you learned from that.

913
00:48:25,239 --> 00:48:28,160
Speaker 1: Oh God, I failed a lot, um, I filed a

914
00:48:28,239 --> 00:48:30,279
Speaker 1: ton of So I mean that in a good way

915
00:48:30,600 --> 00:48:34,040
Speaker 1: because big part of my career has been launching product.

916
00:48:34,120 --> 00:48:37,440
Speaker 1: And if you don't take risks and fail, you're not

917
00:48:37,480 --> 00:48:39,640
Speaker 1: gonna have success. If you wait to try and think

918
00:48:39,719 --> 00:48:42,279
Speaker 1: you have everything right, first of all, you probably gonna

919
00:48:42,280 --> 00:48:44,239
Speaker 1: beat the market by about five years and you're gonna

920
00:48:44,239 --> 00:48:46,640
Speaker 1: figure out what not what's right or wrong. So UM

921
00:48:46,880 --> 00:48:49,680
Speaker 1: I have different products over the years. Um One of

922
00:48:49,719 --> 00:48:52,280
Speaker 1: them famous when I worked on called the OH strip

923
00:48:52,840 --> 00:48:55,839
Speaker 1: never hear of it, No Yep, triple os, great ticker, Oh,

924
00:48:57,200 --> 00:49:00,399
Speaker 1: great ticker idea from the marketplace, so idea a friend

925
00:49:00,440 --> 00:49:03,360
Speaker 1: of mine solving a problem because at the time the

926
00:49:03,480 --> 00:49:06,840
Speaker 1: NASDAC stocks didn't have a close for the S and

927
00:49:06,880 --> 00:49:08,680
Speaker 1: P and it was a problem for the traders. So

928
00:49:08,800 --> 00:49:10,239
Speaker 1: he was a trader Tim this is gonna be a

929
00:49:10,280 --> 00:49:14,080
Speaker 1: great et f we develop it, we launched it, Nozac

930
00:49:14,160 --> 00:49:16,520
Speaker 1: fixed the problem. Six months later the product now we're

931
00:49:16,560 --> 00:49:19,520
Speaker 1: trying to stella out as a tech stock and a tists.

932
00:49:19,920 --> 00:49:22,360
Speaker 1: It was a failure. So when I was versus the

933
00:49:22,440 --> 00:49:24,680
Speaker 1: q Q ces is that we tried for a little

934
00:49:24,680 --> 00:49:27,680
Speaker 1: bit that didn't really fly either. So when my rights

935
00:49:27,719 --> 00:49:31,239
Speaker 1: to everyone on failure, just feel quick, fail quick, feel quick,

936
00:49:31,400 --> 00:49:33,640
Speaker 1: learned from learn from it. Move on to the One

937
00:49:33,680 --> 00:49:35,719
Speaker 1: of the best comments a colleague of mine said to

938
00:49:36,000 --> 00:49:38,760
Speaker 1: a board member about me one day is Jim doesn't

939
00:49:38,760 --> 00:49:42,399
Speaker 1: lose sleep over the failures. He wonders why that wants

940
00:49:42,440 --> 00:49:45,759
Speaker 1: it a successful as successful that you're losing slip over

941
00:49:45,800 --> 00:49:48,719
Speaker 1: the winners, not the losers. That that's pretty funny. Um,

942
00:49:48,920 --> 00:49:51,399
Speaker 1: So tell us what you do to keep mentally fit?

943
00:49:51,600 --> 00:49:54,960
Speaker 1: What do you do to relax or for enjoyment outside

944
00:49:54,960 --> 00:49:57,080
Speaker 1: of the office. So I do a lot of different things.

945
00:49:57,160 --> 00:49:59,560
Speaker 1: I you know, mentally and physically. I have actually work

946
00:49:59,640 --> 00:50:01,600
Speaker 1: out lot one of that probably looks like I work out.

947
00:50:01,880 --> 00:50:04,440
Speaker 1: I have to. It's old muscle underneath. It's getting there

948
00:50:04,920 --> 00:50:07,360
Speaker 1: working on that. Um, I don't keep hurting things that

949
00:50:07,360 --> 00:50:11,319
Speaker 1: would be better. Yeah. By the way, it only gets

950
00:50:11,480 --> 00:50:14,200
Speaker 1: worse as you get, doesn't get better. I know, I

951
00:50:14,320 --> 00:50:17,400
Speaker 1: get knee issues and shoulder issues. But but we walked.

952
00:50:17,440 --> 00:50:18,880
Speaker 1: So my wife and I moved into the city a

953
00:50:18,920 --> 00:50:21,360
Speaker 1: few years ago. Everyone's like, uba bill is going to

954
00:50:21,400 --> 00:50:24,640
Speaker 1: go through the I don't have an uber bill, at

955
00:50:24,719 --> 00:50:26,960
Speaker 1: least not for in the city of Boston. We walk

956
00:50:27,000 --> 00:50:30,640
Speaker 1: everywhere here in New York. Yeah, you don't think about it. Um,

957
00:50:30,840 --> 00:50:32,600
Speaker 1: you know, other things listen. We have a house on

958
00:50:32,640 --> 00:50:34,160
Speaker 1: a lake in the hampsh to have a boat. I

959
00:50:34,200 --> 00:50:36,960
Speaker 1: play golf up there. Lots of family and friends up there,

960
00:50:37,040 --> 00:50:38,960
Speaker 1: So that's kind of how we like to enjoy ourselves.

961
00:50:39,600 --> 00:50:41,960
Speaker 1: And we're not against going out and having maybe a

962
00:50:42,040 --> 00:50:44,040
Speaker 1: cocktail and a nice meal here and there. Are you

963
00:50:44,080 --> 00:50:46,400
Speaker 1: a fisherman or a water ski or what do you

964
00:50:46,520 --> 00:50:48,000
Speaker 1: use the boat for? We use the boat more for

965
00:50:48,120 --> 00:50:50,520
Speaker 1: tooling around the lake. And then Nissa and nephews and

966
00:50:50,640 --> 00:50:53,799
Speaker 1: friends will throw off a tube and kick him around

967
00:50:53,800 --> 00:50:56,080
Speaker 1: the lake. So that's that's a that's a lot of fun.

968
00:50:56,239 --> 00:51:00,600
Speaker 1: I love to do the same thing. Um, let's let's

969
00:51:00,640 --> 00:51:04,640
Speaker 1: we talked earlier about mentors, and let's talk a little

970
00:51:04,640 --> 00:51:10,279
Speaker 1: bit about millennials and recent college graduates. What sort of

971
00:51:10,280 --> 00:51:12,440
Speaker 1: advice would you give to a millennial who came to

972
00:51:12,480 --> 00:51:15,320
Speaker 1: you and said, hey, I'm interested in the career of finance?

973
00:51:15,440 --> 00:51:17,560
Speaker 1: What what? What sort of response would you give them?

974
00:51:19,239 --> 00:51:21,759
Speaker 1: Try something different? Though I'm kidding, I know, I think, um,

975
00:51:22,360 --> 00:51:26,239
Speaker 1: you know the advice, you know, it's one of those

976
00:51:26,360 --> 00:51:28,399
Speaker 1: couple of things. And I have these conversations a lot

977
00:51:28,480 --> 00:51:31,480
Speaker 1: with different folks. Um, when I talked to folks earlier

978
00:51:31,480 --> 00:51:32,640
Speaker 1: in their career. One of the first thing I said,

979
00:51:32,640 --> 00:51:36,560
Speaker 1: I was like, don't freak out like this next decision

980
00:51:36,600 --> 00:51:38,160
Speaker 1: you make, but what you're gonna do in your first

981
00:51:38,239 --> 00:51:40,760
Speaker 1: job I after college, doesn't your final decision done your career?

982
00:51:41,280 --> 00:51:44,120
Speaker 1: So you know, I think, you know, I have good

983
00:51:44,160 --> 00:51:46,000
Speaker 1: friends of mine to think about their career and three

984
00:51:46,080 --> 00:51:47,759
Speaker 1: year increments and have a plan for all of it.

985
00:51:48,400 --> 00:51:51,040
Speaker 1: I planned none of it. You know, we've talked a

986
00:51:51,080 --> 00:51:53,680
Speaker 1: little bit about I got involved in Spy, I stayed

987
00:51:53,719 --> 00:51:57,920
Speaker 1: involved in it, became really successful et s crew. I

988
00:51:58,080 --> 00:51:59,920
Speaker 1: was there. It was really high. It did a lot

989
00:52:00,080 --> 00:52:02,720
Speaker 1: hot work there. But I mean the advice I give everyone,

990
00:52:02,800 --> 00:52:05,720
Speaker 1: which is kind of raise your hand. Like I asked

991
00:52:05,760 --> 00:52:07,640
Speaker 1: for more work, I got more work and ended up

992
00:52:07,680 --> 00:52:10,840
Speaker 1: being something incredible that no one anticipated it to be.

993
00:52:11,520 --> 00:52:14,759
Speaker 1: So raise your hand, work hot, do your job. I

994
00:52:14,840 --> 00:52:16,719
Speaker 1: say this folks all the time. You know, if I

995
00:52:16,800 --> 00:52:18,680
Speaker 1: have somebody who's been working for us for six months,

996
00:52:18,719 --> 00:52:20,480
Speaker 1: they say, hey, what's my next job? My couch? You

997
00:52:20,840 --> 00:52:22,560
Speaker 1: go to the job I hired you for, you know,

998
00:52:22,719 --> 00:52:25,840
Speaker 1: so you know, earned the right for that next step,

999
00:52:26,400 --> 00:52:28,640
Speaker 1: um and work hot. I mean, it's not this and

1000
00:52:28,719 --> 00:52:31,319
Speaker 1: this is now that complicated work. Hot do your job

1001
00:52:32,080 --> 00:52:34,839
Speaker 1: and learn your craft. You know. One of the things

1002
00:52:34,920 --> 00:52:36,759
Speaker 1: I did early on with the TF is I tried

1003
00:52:36,840 --> 00:52:39,120
Speaker 1: to make sure I understood as much of it as

1004
00:52:39,200 --> 00:52:41,799
Speaker 1: I could. I knew the back office side, I didn't

1005
00:52:41,880 --> 00:52:45,200
Speaker 1: understand trading. I can now have a conversation but equity

1006
00:52:45,200 --> 00:52:48,279
Speaker 1: market structure and trading. Maybe not with some of the

1007
00:52:48,360 --> 00:52:50,000
Speaker 1: best in the world, but I can hold my own.

1008
00:52:51,200 --> 00:52:54,239
Speaker 1: And and our final question, uh, what is it that

1009
00:52:54,360 --> 00:52:58,480
Speaker 1: you know about products et fs investing today that you

1010
00:52:58,600 --> 00:53:02,560
Speaker 1: wish you knew back in when you were getting rolling?

1011
00:53:05,360 --> 00:53:09,520
Speaker 1: Jeez ah, what what do I wish? I wish I

1012
00:53:09,719 --> 00:53:12,600
Speaker 1: knew Honestly, I wish you know, I wish we had

1013
00:53:12,680 --> 00:53:16,160
Speaker 1: seen the vision that they would become. We developed the

1014
00:53:16,239 --> 00:53:19,960
Speaker 1: original e t s with the intent of institutional trading firms.

1015
00:53:20,440 --> 00:53:23,680
Speaker 1: That was the design um. The adoption of them from

1016
00:53:23,840 --> 00:53:27,200
Speaker 1: the financial advisor and retail space has been virtually was

1017
00:53:27,320 --> 00:53:29,279
Speaker 1: not ever plan. So I think if I had known that,

1018
00:53:29,840 --> 00:53:32,080
Speaker 1: probably would have thought about that differently from a strategic

1019
00:53:32,120 --> 00:53:35,080
Speaker 1: standard point, from a job um, there's a lot of

1020
00:53:35,160 --> 00:53:37,879
Speaker 1: things I wish I knew new twenty five years ago.

1021
00:53:37,880 --> 00:53:40,520
Speaker 1: I wish, but I think from that perspectives, like, you know,

1022
00:53:40,520 --> 00:53:42,480
Speaker 1: I wish to new the global financial crisisally happening, I

1023
00:53:42,520 --> 00:53:44,440
Speaker 1: might have invested differently around that. You know, there's a

1024
00:53:44,440 --> 00:53:46,239
Speaker 1: lot of things you want to know, but I think

1025
00:53:46,360 --> 00:53:49,160
Speaker 1: the reality is is you're never gonna know everything, and

1026
00:53:49,280 --> 00:53:51,400
Speaker 1: the best thing when you're working in this world is

1027
00:53:51,400 --> 00:53:53,680
Speaker 1: to try and understand how best to shift when you are.

1028
00:53:54,640 --> 00:53:57,719
Speaker 1: We have been speaking with Jim Ross, chairman of the

1029
00:53:57,760 --> 00:54:02,360
Speaker 1: Global Spider business for State Street. If you enjoy this conversation,

1030
00:54:02,440 --> 00:54:04,120
Speaker 1: be sure and look Up an Inch or Down an

1031
00:54:04,160 --> 00:54:07,600
Speaker 1: Inch on Apple iTunes and you can see any of

1032
00:54:07,680 --> 00:54:11,279
Speaker 1: the other hundred and fifty such conversations that we've had.

1033
00:54:11,960 --> 00:54:16,440
Speaker 1: We love your comments, feedback and suggestions right to us

1034
00:54:16,640 --> 00:54:21,200
Speaker 1: at m IB podcast at Bloomberg dot net. I would

1035
00:54:21,239 --> 00:54:23,279
Speaker 1: be remiss if I did not thank all the people

1036
00:54:23,360 --> 00:54:28,279
Speaker 1: who helped put this UH podcast together. Taylor Riggs is

1037
00:54:28,320 --> 00:54:32,320
Speaker 1: our booker, Medina part Water is our audio engineer. Michael

1038
00:54:32,360 --> 00:54:35,880
Speaker 1: bat Nick is my head of research. I'm Barry Ridholtz.

1039
00:54:36,239 --> 00:54:39,600
Speaker 1: You've been listening to Masters in Business on Bloomberg Radio