WEBVTT - The Revolution 0:00:00.240 --> 0:00:08.920 So since then you become something of the foremost. I 0:00:08.960 --> 0:00:10.639 don't know about that, but I do. I do work 0:00:10.640 --> 0:00:12.920 a lot in the e TF space. Of all the 0:00:12.920 --> 0:00:14.840 e t F s out there, right, there's two thousand, 0:00:14.920 --> 0:00:17.520 one hundred, just give us a ballpark. How many do 0:00:17.560 --> 0:00:20.239 you think you helped sort of birth through the legal 0:00:20.280 --> 0:00:23.239 process to make it to market a number and then 0:00:23.280 --> 0:00:28.280 an asset waiting. I had no idea. Um. For instance, 0:00:28.280 --> 0:00:30.840 I helped the first eye shares, and there were forty 0:00:30.880 --> 0:00:33.040 of them when we first did the eye shares. Okay, 0:00:33.040 --> 0:00:35.960 so that's but I didn't But I didn't represise to fifty. 0:00:36.560 --> 0:00:42.680 We're already about the whole industry. What else miccap, Spider, diamonds, diamonds, gold, 0:00:42.800 --> 0:00:47.599 all the all the pressures. Yeah, g l D pre shares. Um, 0:00:47.880 --> 0:00:52.240 we're about already. Can we hit fifty? Let me think 0:00:53.159 --> 0:00:58.440 I'm sure I'm looking market vectors, any swab, no Sandguard, Vanguard, 0:00:58.760 --> 0:01:05.040 Oh jesus, Okay, now we're a This is trillions presents 0:01:05.200 --> 0:01:08.080 the E t F story. I'm Joe Webber, editor of 0:01:08.120 --> 0:01:18.520 Bloomberg Business Week in the early two thousand's, after webs 0:01:18.560 --> 0:01:20.920 becomes part of I Shares and it really begins to 0:01:20.959 --> 0:01:24.959 take off. Innovation in the E t F space is inevitable, 0:01:25.560 --> 0:01:28.720 and as you just heard from Kathleen Mariarty, she ushered 0:01:28.720 --> 0:01:30.759 in many of these innovations in the form of new 0:01:30.800 --> 0:01:35.400 ETFs which are still relevant today. Dave Nodded, longtime managing 0:01:35.480 --> 0:01:38.760 director at et F dot Com, says that in terms 0:01:38.800 --> 0:01:43.640 of et F history, spy definite innovation webbs really more 0:01:43.760 --> 0:01:47.280 of a mainstreaming of an existing innovation LQT. I think 0:01:47.319 --> 0:01:50.520 a genuine innovation which prize opened the door. Bruce Levin 0:01:50.680 --> 0:01:53.920 is a senior strategy advisor to a Story Advisors, but 0:01:54.080 --> 0:01:56.880 he was running product development at I Shares when it 0:01:57.000 --> 0:02:00.720 first launched fixed income ETFs, including it is considered to 0:02:00.840 --> 0:02:04.280 sort of be the spy of fixed income l q D, 0:02:05.240 --> 0:02:08.079 the first corporate bond ETF. The bond market, of course, 0:02:08.160 --> 0:02:11.960 is a whole another thing, because it's an intransparent market 0:02:12.040 --> 0:02:16.079 where you don't have that ability just you know, put 0:02:16.120 --> 0:02:18.120 in a picker and get a quote on a bond. 0:02:18.320 --> 0:02:20.040 He said, this also took a while to get the 0:02:20.160 --> 0:02:22.200 SEC on board with the product, but once we got 0:02:22.240 --> 0:02:26.960 the SEC comfortable that not only was it going to work, 0:02:27.040 --> 0:02:29.560 but we were actually going to provide a benefit to 0:02:29.680 --> 0:02:34.160 the market by creating of security that was a reference 0:02:34.240 --> 0:02:36.600 point for where these these things to trade. I think 0:02:36.800 --> 0:02:38.680 they liked that idea, and I think it's been very 0:02:38.760 --> 0:02:46.520 successful as a result, Levine said, like the sec investors 0:02:46.560 --> 0:02:49.200 were slow to warm initially. He says it was only 0:02:49.280 --> 0:02:53.240 the most sophisticated advisors who liked these fixed income products. 0:02:53.560 --> 0:02:56.600 Like everything with ETFs, once people understood what they were 0:02:56.680 --> 0:03:01.079 getting and they toe dipped, they he went back. You know, 0:03:01.200 --> 0:03:04.400 once you've thought and got comfortable with something like an LQD, 0:03:05.120 --> 0:03:08.519 you're not going to try to assemble individual bonds on 0:03:08.720 --> 0:03:11.880 fifty companies for a small amount of money, which is 0:03:11.919 --> 0:03:15.320 never gonna do that, not says l q D was 0:03:15.440 --> 0:03:18.640 one of the most significant launches in et F history. 0:03:18.800 --> 0:03:21.120 It's not like there was a huge leap of faith 0:03:21.600 --> 0:03:24.720 required from a regulatory standpoint to launch l q D. 0:03:25.160 --> 0:03:27.880 What was required was that same leap of faith from 0:03:27.960 --> 0:03:31.480 the dealer community to be the other side of the trade. 0:03:31.680 --> 0:03:35.440 There was no question that portfolio managers and institutions and 0:03:35.520 --> 0:03:38.240 advisers would want to buy corporate bonds in a more 0:03:38.280 --> 0:03:40.920 convenient package, because buying corporate bonds was a pain in 0:03:41.000 --> 0:03:44.280 the ass. So yeah, by all means they were a 0:03:44.400 --> 0:03:47.240 ton of demand for it. But getting the dealer community 0:03:47.320 --> 0:03:49.920 to show up and do creation redemption, the ability to 0:03:50.000 --> 0:03:52.880 do um cash and lou for part of the baskets 0:03:52.920 --> 0:03:55.720 because some stuff might not trade well enough, All of 0:03:55.800 --> 0:03:59.800 that stuff was really just a feat on the street, 0:04:00.960 --> 0:04:03.360 you know, ground effort to make that happen, a little 0:04:03.360 --> 0:04:05.560 bit like trying to get somebody elected who may not 0:04:05.640 --> 0:04:07.440 be that well known. You had to go out and 0:04:07.560 --> 0:04:10.480 knock on doors and get these dealers to understand that, yeah, 0:04:10.760 --> 0:04:14.560 creation redemption was going to work in the bond market. Uh. 0:04:14.680 --> 0:04:17.640 And that I think was what really opened up people's 0:04:17.640 --> 0:04:22.200 eyes to what E T s could become. And another 0:04:22.279 --> 0:04:25.640 significant launch in that early two thousand's was Vanguard's first 0:04:25.680 --> 0:04:30.760 et F, the Vanguard Index Participation Receipts or VIPERS. I 0:04:30.839 --> 0:04:35.000 think it was more psychologically significant and maybe almost spiritually 0:04:35.120 --> 0:04:44.160 significant than it was from any markets perspective. Viper poisonous snake. This, 0:04:44.320 --> 0:04:48.720 as you'll recall, is Vanguard founder Jack Bogel. In some ways, 0:04:48.760 --> 0:04:52.560 Bogel played a significant role in the ETS creation by 0:04:52.600 --> 0:04:55.719 giving Nate Most feedback when Most was first dreaming about 0:04:55.760 --> 0:04:59.279 what would become spy. Spy was also priced to compete 0:04:59.320 --> 0:05:02.760 with Vanguard expense ratio from the very beginning, but no that. 0:05:02.920 --> 0:05:06.679 Bogel has remained an outspoken critic of ETFs ever since. 0:05:07.000 --> 0:05:08.760 Well in e t F is just another form of 0:05:08.760 --> 0:05:12.440 index fun, a sort of bastardized form for the one 0:05:12.480 --> 0:05:15.360 of a better word. Bogel says it's hard to pinpoint 0:05:15.480 --> 0:05:17.880 his reaction to VI first it was eighteen years ago, 0:05:18.480 --> 0:05:20.920 but he says he could understand why it happened. So 0:05:22.320 --> 0:05:24.840 there we are had to They looked at it, and 0:05:24.920 --> 0:05:26.400 many looked at as a way to get into the 0:05:26.440 --> 0:05:31.760 brokerage business, which I thought was not catastrophic. But you know, 0:05:31.960 --> 0:05:37.000 our our original premise was build a better mousetrap in 0:05:37.040 --> 0:05:40.120 the world, will be a path your door, And all 0:05:40.120 --> 0:05:44.720 of a sudden we were out there hunting money's other work. Uh. 0:05:44.920 --> 0:05:53.760 And so it didn't warm my heart. I don't refe 0:05:54.000 --> 0:05:57.160 recall feeling bothered about him, and I even, to be 0:05:57.240 --> 0:06:01.440 quite blunt about it, said, you know, I'd probably have 0:06:01.600 --> 0:06:06.320 done it too. I think the real kicker for the 0:06:06.440 --> 0:06:12.200 Vipers coming online was it signaled to individual investors and 0:06:12.440 --> 0:06:17.760 to a growing class of Vanguard focused advisors that e 0:06:17.920 --> 0:06:21.040 t F s were okay, and I think that that 0:06:21.200 --> 0:06:27.640 sort of anointment by somebody as revered as Vanguard really 0:06:27.760 --> 0:06:31.280 opened the door for a huge rush into these products 0:06:31.360 --> 0:06:34.280 by core asset allocation advisors, which is really what drove 0:06:34.320 --> 0:06:38.160 all the growth in the two thousand's. Soon after Vipers 0:06:38.200 --> 0:06:41.240 comes to market, Power Shares launches in two thousand three, 0:06:41.760 --> 0:06:43.920 and the power Shares brand is where we first get 0:06:44.000 --> 0:06:46.640 the concept of smart beta ETFs in a big way. 0:06:47.360 --> 0:06:50.359 Bruce Bond, who had previously been the head of marketing 0:06:50.520 --> 0:06:54.920 at Muvine, was leading the launch. Bond says he'd seen 0:06:55.040 --> 0:06:57.240 all kinds of product packaging in the e t F 0:06:57.360 --> 0:07:00.839 space and he knew what the problems were for all 0:07:01.000 --> 0:07:03.679 the different products, and that's when I started to say, Okay. 0:07:04.400 --> 0:07:06.160 At the time, there were no active e t s 0:07:07.040 --> 0:07:08.720 and I looked at it and I said, well, what 0:07:08.960 --> 0:07:11.960 is an index? An index is a group of stocks 0:07:12.000 --> 0:07:14.520 that track something, right, it doesn't matter what it is, 0:07:14.680 --> 0:07:18.120 so um now it has there's certain requirements and index 0:07:18.240 --> 0:07:20.480 has to have in order to be replicated by an 0:07:20.560 --> 0:07:23.160 e t F. But at the time they were all benchmarks, 0:07:23.160 --> 0:07:27.000 and you know, just static cap weighted or dollar rated 0:07:27.120 --> 0:07:29.320 or what you know. However, their waiting scheme was but 0:07:30.280 --> 0:07:32.600 we looked at it and said, well, why wouldn't we 0:07:32.800 --> 0:07:37.160 create an index of stocks that are intelligently selected using 0:07:37.240 --> 0:07:41.320 a quantitative methodology, and we will build an index out 0:07:41.400 --> 0:07:45.960 of a stocks a rank stocks rather than just all stocks, 0:07:46.680 --> 0:07:49.760 and we'll have it waited like the market, so it 0:07:49.800 --> 0:07:52.880 will look like the market from awaiting exposure standpoint, but 0:07:53.000 --> 0:07:55.480 we'll do that with quality securities rather than just all securities. 0:07:56.520 --> 0:07:59.920 And that's when the intellidux was born. And that's when 0:08:00.360 --> 0:08:05.160 really intelligent indexing or smart beta or whatever you want 0:08:05.200 --> 0:08:07.920 to call it. That was the birth of that whole movement. 0:08:09.600 --> 0:08:12.920 He says people really hadn't thought creatively about what an 0:08:12.960 --> 0:08:16.080 index actually was. And he says it was hard getting 0:08:16.080 --> 0:08:18.440 power Shares off the ground. So we had to convince 0:08:18.480 --> 0:08:22.360 something an intelligent index, quantitatively derived was better, you know, 0:08:22.560 --> 0:08:26.440 like an index with value. It was better than just 0:08:26.560 --> 0:08:29.200 a benchmark that floated along out there. And then we 0:08:29.320 --> 0:08:31.480 had to also convince them, you know, of who power 0:08:31.520 --> 0:08:33.920 shares was, and what an e t F is, and 0:08:34.320 --> 0:08:36.320 and y an e t F the structure is. We're 0:08:36.400 --> 0:08:38.360 going through all this to get the value through it 0:08:39.520 --> 0:08:42.800 from a tax standpoint and a cost an efficiency standpoint, 0:08:43.200 --> 0:08:46.679 not exaust The power shares products are so important because 0:08:46.720 --> 0:08:49.520 we first started seeing evangelism for smart beta et s 0:08:49.920 --> 0:08:52.560 and the form of ROB are not at a sticker 0:08:52.920 --> 0:08:56.679 pr F. I think PRF is notable because it brings 0:08:56.800 --> 0:08:59.200 with it ROB or not even more so than whatever 0:08:59.240 --> 0:09:01.160 it's doing in the method adology, and ROB are not 0:09:01.520 --> 0:09:06.240 was and remains such an advocate of a smart data methodology. 0:09:06.480 --> 0:09:09.440 All right there, RAFFI waiting scheme in there that we've 0:09:09.679 --> 0:09:14.160 for the first time sort of had our are evangelists. 0:09:14.360 --> 0:09:17.000 The person you could put on radio or person you 0:09:17.040 --> 0:09:19.680 can put on television would sit there and talk about 0:09:19.720 --> 0:09:21.800 smart beta, whether they were using that phrase or not. 0:09:22.080 --> 0:09:24.800 Are not says. The term smart beta has been commondeered 0:09:24.800 --> 0:09:29.320 by the industry to encompass practically anything, so smart beta 0:09:30.040 --> 0:09:32.800 now spans a whole array of strategies, some of which 0:09:32.840 --> 0:09:34.800 are smart, some of which are not at all smart, 0:09:35.280 --> 0:09:37.599 some of which break the link with price and have 0:09:37.840 --> 0:09:42.599 the structural rebalancing alpha of the original smart beta concepts, 0:09:43.240 --> 0:09:47.000 and some of them chase fads, chase bubbles, and are 0:09:47.120 --> 0:09:51.800 the antithesis of smart. But smart Beta has grown hand 0:09:51.880 --> 0:09:54.679 in glove with the t F community because the E 0:09:54.760 --> 0:09:59.640 t F community, well, fourteen years ago it was boring, 0:10:00.080 --> 0:10:04.959 had a bunch of capuited indices. The only exciting thing 0:10:05.559 --> 0:10:09.959 in that whole domain was sector funds. All right, well 0:10:10.040 --> 0:10:17.280 that's not very interesting. And so once fundamental index was 0:10:17.760 --> 0:10:22.440 adapted to e t S, the doors swung wide open 0:10:23.360 --> 0:10:27.679 for a whole array of strategies. And I applaud the 0:10:28.480 --> 0:10:33.480 product proliferation that's happened there. Why shouldn't investors have a 0:10:33.600 --> 0:10:37.640 wide array of choices. So, after we have bonds and 0:10:37.720 --> 0:10:40.240 smart Beta plus some major growth in the E t 0:10:40.360 --> 0:10:43.720 F space, g l D is the next logical innovation, 0:10:44.040 --> 0:10:47.959 Although the intellectual property to make it happen required yet 0:10:48.000 --> 0:10:50.880 another leap of faith and yet another bunch of structural 0:10:51.000 --> 0:10:58.400 shenanigans not exist. The people behind structuring g LD gold 0:10:58.880 --> 0:11:01.960 really did have to re invent the wheel. The way 0:11:02.080 --> 0:11:04.880 g l D works from an investor's perspective is, hey, 0:11:04.920 --> 0:11:06.480 it's just like everything else. You just buy it, you 0:11:06.520 --> 0:11:09.640 get exposure to gold under the hood. It's doing all 0:11:09.720 --> 0:11:12.360 sorts of stuff no other structure has ever had to do. 0:11:12.840 --> 0:11:15.040 All it had to create a whole way of accounting 0:11:15.120 --> 0:11:18.080 based on ounces. It was literally a whole new accounting 0:11:18.120 --> 0:11:20.600 methodology that you could never get away within a traditional 0:11:20.679 --> 0:11:23.040 Fortiact fund. They had to come up with a new 0:11:23.080 --> 0:11:26.200 trust structure in order to make that happen. They had 0:11:26.440 --> 0:11:30.800 a whole another gap of creation redemption problems to solve. 0:11:31.040 --> 0:11:33.959 And much like how l q D gave people access 0:11:34.000 --> 0:11:37.439 to a very difficult to buy security corporate bonds, not 0:11:37.760 --> 0:11:40.640 says g l D really opened up gold as an 0:11:40.679 --> 0:11:43.480 asset class. Prior to that, the only people who really 0:11:43.520 --> 0:11:47.240 thought about gold as a portfolio asset were either sort 0:11:47.280 --> 0:11:49.400 of hedge funds that could afford to be, you know, 0:11:49.520 --> 0:11:52.400 buying certificated golden large amounts where they could be afford 0:11:52.440 --> 0:11:55.200 to be buying directly in the London volume market, um 0:11:55.440 --> 0:11:59.280 central banks, uh, you know, maybe major corporate treasuries that 0:11:59.360 --> 0:12:02.680 were trying to shelter money. But but it wasn't something 0:12:02.800 --> 0:12:05.679 that the average investor thought of it as a portfolio acid. 0:12:05.720 --> 0:12:07.280 If anything, you thought of it as sort of a 0:12:07.480 --> 0:12:10.160 rainy day collectible that you literally stuck in a safe 0:12:10.200 --> 0:12:13.120 in the basement. It got to a billion dollars in 0:12:13.280 --> 0:12:15.240 three days. That's a record. As you know it's the 0:12:15.440 --> 0:12:18.839 I called the Joe DiMaggio hitting still the standing record 0:12:19.120 --> 0:12:21.240 easily is it? You know what number two is? Can 0:12:21.280 --> 0:12:26.400 you guess? Yeah? That's true? Nerd nerds him right there. 0:12:26.600 --> 0:12:29.480 Hardly anybody knows that I thought MJ might break it. 0:12:29.600 --> 0:12:32.280 But the performance it was on Pace D and D 0:12:32.480 --> 0:12:34.080 was like a week or two, two and a half months, 0:12:34.400 --> 0:12:36.600 was it? Really? That's that's why it's the hitting streak. 0:12:41.360 --> 0:12:44.520 Bomb Tool says that gold really helped demonstrate the vehicle 0:12:44.679 --> 0:12:47.160 use of the E t F. E t F s 0:12:47.240 --> 0:12:50.360 are rappers, right, cases into which you put something. The 0:12:50.480 --> 0:12:55.280 case is agnostic. What became wonderful about the case is 0:12:55.360 --> 0:12:58.000 that we could put anything into it. It could hold 0:12:58.120 --> 0:13:00.640 gold because you would deposit gold into it and you'd 0:13:00.679 --> 0:13:02.800 have the shares. It would be a proxy for gold, 0:13:03.280 --> 0:13:06.200 and then you became silver. And then we did currencies, 0:13:06.240 --> 0:13:09.360 and we did all kinds of things. And part of it, 0:13:09.640 --> 0:13:12.839 the reason for it is by doing all of this, 0:13:13.040 --> 0:13:15.719 at the end of the game, if a person had 0:13:15.760 --> 0:13:20.120 twenty dollars, they could have a real assid allocation model 0:13:20.160 --> 0:13:25.559 as opposed to exposure to a couple of stocks. And 0:13:25.679 --> 0:13:28.280 since the realization that these vehicles are so effective in 0:13:28.320 --> 0:13:31.880 many spaces. Each have grown immensely over the past decade. 0:13:32.440 --> 0:13:34.959 To give you a sense, they were at six and 0:13:35.000 --> 0:13:38.280 two thousand eight and since then they've grown sixfold to 0:13:38.520 --> 0:13:42.440 three point six trillion. This growth can provide a lot 0:13:42.480 --> 0:13:45.360 of opportunity for investors, but it can also feel like 0:13:45.440 --> 0:13:49.480 a lot are not. Likens it to being overwhelmed with 0:13:49.559 --> 0:13:51.720 choices at the grocery store, but if you see too 0:13:51.800 --> 0:13:54.440 much variety, your eyes started to start to glaze over 0:13:54.520 --> 0:13:56.200 and you wonder what the heck am I going to buy? 0:13:57.240 --> 0:14:01.920 We're in sort of that situation in in ets today. 0:14:02.000 --> 0:14:05.199 There are hundreds of smart bait e t s and 0:14:05.600 --> 0:14:08.920 a lot of them aren't smart. A lot of them 0:14:08.960 --> 0:14:13.360 are really pretty dumb ideas. We're looking at a world 0:14:13.440 --> 0:14:18.760 in which change happens gradually. People don't en mass pick 0:14:18.880 --> 0:14:22.120 up and move from one idea to another. Most of 0:14:22.200 --> 0:14:24.520 the growth in a U M and mutual funds has 0:14:24.520 --> 0:14:27.840 actually been on the e T S side, but most 0:14:27.920 --> 0:14:30.200 of the assets are still on the mutual fund side. 0:14:30.960 --> 0:14:36.680 These things change slowly, and just as the dinosaurs in 0:14:36.840 --> 0:14:43.520 Jurassic Park were big and powerful, they eventually got wiped out. 0:14:44.160 --> 0:14:48.440 The best new ideas will gain tractions slowly but surely, 0:14:48.920 --> 0:14:52.600 and the worst of the old ideas will lose ground 0:14:52.640 --> 0:14:56.280 slowly bit surely, but they'll still be powerful participants in 0:14:56.360 --> 0:14:59.480 the market in the interim, and that interim will last 0:15:00.040 --> 0:15:02.920 many years to come. I don't expect this to be 0:15:03.320 --> 0:15:07.400 a sudden see change, but I do do expect the 0:15:07.480 --> 0:15:11.240 evolution of recent years to continue. E t f s 0:15:11.440 --> 0:15:19.920 are a powerful tool and an investors stool kit. So 0:15:20.400 --> 0:15:23.720 where are et f s headed. Dave Nodding thinks the 0:15:23.920 --> 0:15:28.920 natural evolution is towards traditional active management, like how companies 0:15:28.960 --> 0:15:32.840 such as Fidelity or t rowe Price have skilled research 0:15:32.920 --> 0:15:35.800 teams that pick et f for other people. I think 0:15:35.880 --> 0:15:38.520 that's almost inevitable now. Whether those will be successful products 0:15:38.600 --> 0:15:40.800 or not, I don't know. I give kudos to the 0:15:40.880 --> 0:15:43.760 folks like David's advisors who really just come out and said, 0:15:43.880 --> 0:15:46.200 you know what, traditional active we pick stocks better than 0:15:46.280 --> 0:15:48.800 you do. Give us your money, and I admire the 0:15:48.880 --> 0:15:51.080 huts of that, whether they end up being right or wrong. 0:15:51.960 --> 0:15:54.320 I think what we're going to see is more um, 0:15:54.840 --> 0:15:57.520 whether we call them AI based funds, whether we call 0:15:57.600 --> 0:16:00.520 them smart beta funds. You know, we're seeing more and 0:16:00.600 --> 0:16:05.040 more of those strategies get launched and get some traction 0:16:05.120 --> 0:16:07.760 on the AI e Q launched pretty recently, got decent 0:16:07.800 --> 0:16:10.040 assets pretty much out of the gate couple a million bucks. 0:16:10.400 --> 0:16:15.000 So there is an appetite for these smarter smart beta products. 0:16:15.720 --> 0:16:19.720 I think will eventually abandon this moniker smart beta. I 0:16:19.760 --> 0:16:23.840 don't know anybody that actually likes likes that phrase. So 0:16:24.000 --> 0:16:26.520 we're going to just start calling these things quant active 0:16:26.680 --> 0:16:29.080 or quant funds, which is frankly what they've been all along. 0:16:32.840 --> 0:16:34.920 There are a lot of projections out there, not only 0:16:35.000 --> 0:16:37.920 about how ect we used like not I just explain, 0:16:38.560 --> 0:16:41.600 but also projections about how big these things can get. 0:16:42.880 --> 0:16:46.640 We talked about projections. P w C is like ten 0:16:46.720 --> 0:16:52.640 trillion in five years, State streets twenty five trillion. Yeah, 0:16:52.680 --> 0:16:55.880 that's that's even more aggressive than mine. I don't use 0:16:55.880 --> 0:16:59.120 the term aggressive, I use it less sober. And then 0:16:59.520 --> 0:17:01.080 and then we've for at thirty and thirty, which is 0:17:01.120 --> 0:17:04.280 thirty trillion. That's global. Those are global. Let's let's go 0:17:04.359 --> 0:17:06.680 with the global number we got. I forget what it 0:17:06.760 --> 0:17:10.479 is now, five and a half or six trillion. Where's 0:17:10.520 --> 0:17:13.119 this headed? Like, how far do you think the e 0:17:13.280 --> 0:17:17.000 t F can go? Where it doesn't again sort of 0:17:17.480 --> 0:17:21.760 eat up too much. Well, too much is a relative thing. 0:17:21.880 --> 0:17:23.560 I mean, you know in the US right now, ETF 0:17:23.640 --> 0:17:25.879 zone about what six percent of market cap, right, So 0:17:26.520 --> 0:17:30.400 could you double that and still not substantially impact market structure? Yeah? 0:17:30.480 --> 0:17:33.800 Could you quadruple that? Yeah? Right, So the idea that 0:17:33.880 --> 0:17:37.200 you can go from five trillion to twenty trillion doesn't 0:17:37.280 --> 0:17:40.320 scare me in the least, especially when we're talking about 0:17:40.840 --> 0:17:44.320 some of those assets going into enormously large markets like 0:17:44.880 --> 0:17:49.920 sovereign bonds and commodities and currencies and gold, right and 0:17:50.000 --> 0:17:52.960 not everything is a small cap equity fund, right, Not 0:17:53.080 --> 0:17:56.439 everything is emerging market local currency debt. So these assets 0:17:56.480 --> 0:17:59.560 are going to go into very large pools. And we're 0:17:59.560 --> 0:18:02.959 also in a market where issuance is growing faster than 0:18:03.000 --> 0:18:04.760 people talk about, Like and you just think about the 0:18:04.840 --> 0:18:07.520 corporate bondspace where everybody worries about the ETF is getting 0:18:07.520 --> 0:18:10.160 too big. Issuance is doubled in the last nine years. 0:18:10.359 --> 0:18:13.680 They're total outstanding debt, right, So you know, the e 0:18:13.800 --> 0:18:16.840 t F portion of that hasn't grown by percentage basis 0:18:16.920 --> 0:18:19.359 at all. It's just the fact that that there's just 0:18:19.480 --> 0:18:22.240 way more corporate debt out there, and so assuming that 0:18:22.320 --> 0:18:25.920 we don't have some radical global economic downturn that crushes 0:18:26.200 --> 0:18:31.040 asset values worldwide, twenty trillion seems like a completely reasonable number, 0:18:31.520 --> 0:18:36.560 you know, by we can't know if that growth will happen. 0:18:37.160 --> 0:18:40.600 But as my colleague Eric Baltunas points out, Nate most 0:18:41.000 --> 0:18:44.320 would most definitely be surprised if he were still alive. 0:18:44.680 --> 0:18:46.119 I don't think they think there would be three trillion. 0:18:46.160 --> 0:18:48.120 I don't think they think they be you know, six 0:18:48.160 --> 0:18:50.160 trillion worldwide. I don't think they'd think they're being et 0:18:50.320 --> 0:18:52.760 F in Iceland. I don't think they would think there'd 0:18:52.760 --> 0:18:55.119 be a t S tracking the things they do. I 0:18:55.200 --> 0:18:57.160 think some of the things et S track would actually 0:18:57.160 --> 0:19:00.600 worry them, you know, like Vick's futures. So you know, look, 0:19:00.680 --> 0:19:04.280 this industry has just exploded, and just like any evolutionary line, 0:19:04.960 --> 0:19:07.880 those lines run fast and they go into different places 0:19:08.680 --> 0:19:10.840 and it's interesting. You know, see, if we don't get Bloom, 0:19:10.880 --> 0:19:12.280 I can sort of just say what he told me. 0:19:12.400 --> 0:19:15.480 But you know what his his really great quote was 0:19:15.600 --> 0:19:17.800 is we're we're trying to make a great product, but 0:19:17.880 --> 0:19:25.199 it turned into in an entire industry, or more simply, 0:19:26.240 --> 0:19:28.200 can you imagine a world without the E t F 0:19:29.600 --> 0:19:39.080 any longer. No, probably not, I don't never. Thanks for 0:19:39.160 --> 0:19:41.840 listening to the et F Story until next time. You 0:19:41.880 --> 0:19:44.520 can find us on the Bloomberg Terminal, Bloomberg dot com, 0:19:44.800 --> 0:19:48.200 Apple Podcast, Spotify, and wherever else you like to listen. 0:19:49.320 --> 0:19:52.040 The et F Story is produced by Jordan's Bell, with 0:19:52.200 --> 0:19:56.320 some production help by Magnus Hendrickson. Francesca Levy is the 0:19:56.359 --> 0:20:01.320 head of Bloomberg Podcast. To say, the pilot sad that 0:20:01.359 --> 0:20:02.439 the triple to shake the BA