WEBVTT - How JPMorgan Became Such a Force in Active ETFs 0:00:05.760 --> 0:00:06.400 Welko our Jollins. 0:00:06.400 --> 0:00:08.320 I'm Joel Webber and I'm Eric Balchutas. 0:00:12.280 --> 0:00:14.520 We got a big deal in the podcast today. I'm 0:00:14.520 --> 0:00:15.360 excited about this one. 0:00:15.640 --> 0:00:15.840 Yeah. 0:00:15.880 --> 0:00:18.720 We needed to counterweight. The last two were a little 0:00:19.560 --> 0:00:23.200 off the cuff and we needed something heavier and deeper. 0:00:23.239 --> 0:00:25.720 We needed a heavyweight. We did. So we're going to 0:00:25.760 --> 0:00:29.080 be joined by George Gatch, who's the CEO of JP 0:00:29.240 --> 0:00:32.280 Morgan Asset Management. I'm excited about this one in part 0:00:32.320 --> 0:00:36.720 because JP Morgan has become such a big force in 0:00:36.760 --> 0:00:39.600 the ETF industry relatively quickly. 0:00:40.400 --> 0:00:44.639 Yeah, and active in general. People don't realize that when 0:00:44.680 --> 0:00:46.720 you look at all the active mutual funds and ETFs 0:00:46.720 --> 0:00:49.279 and you add it all together. JP Morgan is now 0:00:49.400 --> 0:00:54.440 fourth after Capital Group, Fidelity and Vanguard, and they've come 0:00:54.520 --> 0:00:56.600 up from like eighth in only a couple of years, 0:00:56.640 --> 0:01:02.160 passing Pimpco DFA T. I mean these are heavyweight firms. 0:01:02.200 --> 0:01:04.400 People may not know that. I think they think of 0:01:04.480 --> 0:01:07.399 JP Morgan, they think of bank more so than asset management. 0:01:07.440 --> 0:01:11.720 But that is some powerhouse surge there, and they have 0:01:11.920 --> 0:01:15.640 taken in about four times more in inflows than any 0:01:15.640 --> 0:01:18.880 other active shop. So they are on fire when it 0:01:18.920 --> 0:01:22.080 comes to active and it really was embracing the ETF. 0:01:22.319 --> 0:01:25.120 The ETF is the majority of those flows, although their 0:01:25.200 --> 0:01:27.759 mutual funds are actually treading water, which is which helps 0:01:27.800 --> 0:01:29.680 because they don't have to offset any outflows in the 0:01:29.720 --> 0:01:32.399 mutual funds. Really, and the ETFs have been a big hit. 0:01:32.480 --> 0:01:36.000 They've got a couple. They've got the biggest stock active 0:01:36.000 --> 0:01:39.080 ETF and the biggest bond active ETF in the world. 0:01:39.880 --> 0:01:42.759 Who knew muscle, that's what we call that. So joining 0:01:42.840 --> 0:01:47.400 us in this episode George Gatch of JP Morgan's asset management, 0:01:49.840 --> 0:01:54.600 this time on Trillions, the new heavyweight. George, Welcome to Trillions. 0:01:54.760 --> 0:01:56.760 Oh, thank you, gentlemen. Great to be here. 0:01:56.800 --> 0:01:59.200 Okay, So when people think of JP Morgan, I think 0:01:59.360 --> 0:02:01.200 most of the time they think of Jamie Diamond and 0:02:01.240 --> 0:02:04.919 the bank. Can you just describe how, how and where 0:02:05.000 --> 0:02:09.440 the asset management part came from and how you've become 0:02:09.480 --> 0:02:10.919 such a dominant force so quickly. 0:02:11.240 --> 0:02:14.160 Yeah. Well, I think Jamie would refer to us as 0:02:14.200 --> 0:02:19.520 the hidden gem within JP Morgan. We've been managing money 0:02:19.560 --> 0:02:23.240 for a long long time, well over a century in fact, 0:02:23.280 --> 0:02:25.480 if you replay the tapes a little bit in the 0:02:25.560 --> 0:02:29.240 seventies during the trust banks JP Morgan Morgan guarantee trust 0:02:29.280 --> 0:02:32.880 with the largest asset manager in the world. So we're 0:02:32.919 --> 0:02:35.600 on a mission to regain that position as being the 0:02:35.639 --> 0:02:39.720 best asset manager. We have eighty five hundred employees that 0:02:39.919 --> 0:02:43.320 do only one thing, manage other people's money. One of 0:02:43.320 --> 0:02:49.639 the largest commitments to research, fundamental research, and we differentiate 0:02:49.639 --> 0:02:53.400 our size by being exclusively focused on active management. And 0:02:53.400 --> 0:02:56.079 I think as we talk about our success in ets 0:02:56.200 --> 0:02:58.920 and more broadly and active, I think that's a key, 0:02:59.400 --> 0:03:01.799 key different trading point for us. 0:03:01.880 --> 0:03:04.320 And when did that ETF light bulb first go off 0:03:04.320 --> 0:03:04.560 for you? 0:03:05.240 --> 0:03:07.240 Well, you would have to have been blind to have 0:03:07.320 --> 0:03:09.959 not seen that ETFs were something that there was significant 0:03:10.000 --> 0:03:13.600 amount of demand in the industry. And so about ten 0:03:13.720 --> 0:03:16.840 years ago we said, we think this is a really 0:03:16.840 --> 0:03:21.280 important innovation and benefit for investors. It was at that 0:03:21.560 --> 0:03:25.320 time pretty much exclusive to passive but we thought we 0:03:25.360 --> 0:03:28.519 needed to develop expertise and capabilities, and so we launched 0:03:28.560 --> 0:03:33.320 our first ETFs, which were factor tilts essentially. So we're 0:03:33.320 --> 0:03:36.520 trying to bring some degree of differentiation to the market 0:03:36.600 --> 0:03:39.440 and we've been on a journey. One of the the 0:03:39.480 --> 0:03:42.680 important differentiats I said before, is our focus on active is. 0:03:42.680 --> 0:03:45.760 We had a debate within JP Morgan Asset Management about 0:03:45.960 --> 0:03:50.440 should we try to be a scale passet manager. And 0:03:50.480 --> 0:03:54.360 when I became CEO six years ago, I really made 0:03:54.400 --> 0:03:56.480 the decision that we're going to focus on our straints 0:03:57.440 --> 0:04:01.400 and put all of our resources in into active and 0:04:01.440 --> 0:04:04.040 that was represented in the investments we made in our 0:04:04.080 --> 0:04:07.800 ETF lineup. We do have some passive capabilities, but those 0:04:07.840 --> 0:04:12.400 are really building blocks for our active multi asset strategies, 0:04:12.440 --> 0:04:15.080 target date funds, and other things that we offer. 0:04:15.320 --> 0:04:19.159 So when you showed up six years ago and already 0:04:19.760 --> 0:04:24.240 Vanguard black Rock had the passive game like down, was 0:04:24.240 --> 0:04:26.840 it more of like there's an opportunity and active that 0:04:27.000 --> 0:04:29.440 those two have conceded and that's how we're going to 0:04:29.480 --> 0:04:31.840 show up. Or was it like we'll get to the 0:04:31.880 --> 0:04:34.360 passive stuff later, but we need something like a hallmark 0:04:34.440 --> 0:04:36.200 product to really distinguish ourselves. 0:04:36.440 --> 0:04:39.560 I mean, it's amazing we saw, which is this massive 0:04:39.640 --> 0:04:44.200 title wave of investors moving from active to passive and 0:04:44.240 --> 0:04:47.920 you can see that and flows in mutual funds, and 0:04:48.279 --> 0:04:51.760 that's also represented in the intellectual capital that many asset 0:04:51.800 --> 0:04:56.080 managers they focus their resourcing, their research on tracking markets, 0:04:57.200 --> 0:04:59.400 and they did a good job of it, and it 0:04:59.440 --> 0:05:02.840 was highly a feeling to investors. I saw that as 0:05:02.839 --> 0:05:07.000 an opportunity where we could help exploit the ability to 0:05:07.040 --> 0:05:10.440 outperform markets because there was simply less focus on it 0:05:10.480 --> 0:05:14.279 from most of our competitors. I also think there's this 0:05:14.440 --> 0:05:18.440 kind of cultural underpinning that's very powerful. To have eighty 0:05:18.520 --> 0:05:22.359 five hundred people that are all believe in the ability 0:05:22.440 --> 0:05:27.200 if you have sustainable sources of information, of an information 0:05:27.360 --> 0:05:31.600 advantage of the ability to outperform outperform markets. And that's 0:05:31.640 --> 0:05:35.920 important for our sales teams, it's important for our product development, operations, 0:05:36.160 --> 0:05:40.440 fund accounting, etc. Everyone believes that we have an advantage 0:05:40.480 --> 0:05:42.960 and we can exploit that to help people outperform markets. 0:05:43.600 --> 0:05:45.920 So I've been watching you for years. I saw you 0:05:46.000 --> 0:05:49.760 guys come in and I saw the passive first sort 0:05:49.800 --> 0:05:52.320 of the beta knockoffs. They did okay, there was some 0:05:52.360 --> 0:05:56.440 BYO money, but then JEPPI to me, really changed everything 0:05:56.480 --> 0:05:58.720 in gp JPST. That's the bond in the stock when 0:05:58.720 --> 0:06:02.440 they're the biggest. What I've found interesting and what I 0:06:02.520 --> 0:06:05.320 think this is my theory on why it has worked 0:06:05.360 --> 0:06:09.080 so well because you came in and really made an 0:06:09.080 --> 0:06:11.800 impact on something that people were kind of writing off 0:06:11.839 --> 0:06:15.080 a little bit. Most of these big asset managers, they 0:06:15.080 --> 0:06:17.359 were like, hey, let's come out with like free index 0:06:17.400 --> 0:06:20.760 funds like Fidelity, just to offset the active outflows. So 0:06:20.760 --> 0:06:23.560 we look like we're you know, in business still versus 0:06:23.600 --> 0:06:26.640 just bleeding out slowly. But you guys are like, no, 0:06:26.680 --> 0:06:29.200 we can make active work. One thing you did that 0:06:29.279 --> 0:06:32.800 I think takes guts though, is the expense ratios. To me, 0:06:33.680 --> 0:06:36.919 they are they feel fair. You know. A lot of 0:06:36.920 --> 0:06:39.119 the problem with the active management is it's like ninety 0:06:39.120 --> 0:06:41.480 basis points. It's largely S and P five hundred stocks. 0:06:42.040 --> 0:06:44.320 They came in jep's thirty five BIPs. That's the same 0:06:44.360 --> 0:06:46.520 as the R six class of your mutual fund, which 0:06:46.560 --> 0:06:49.880 is the cheapest class. So in essence, they're giving the 0:06:50.040 --> 0:06:53.440 ETF investors sort of the cheaper share class of the 0:06:53.520 --> 0:06:56.880 mutual fund. Not only that, you get fundamental stock picking. 0:06:57.440 --> 0:06:59.960 There's an options overlay, so there's a lot of legwork involved. 0:07:00.800 --> 0:07:03.479 And it's JP Morgan. So I'm thinking of an advisor always. 0:07:03.480 --> 0:07:06.080 I'm always in their brain going does this seem like 0:07:06.080 --> 0:07:07.360 a good deal. It's like they can go to their 0:07:07.360 --> 0:07:08.680 client now and say, look, I'm going to get you 0:07:08.800 --> 0:07:11.720 JP Morgan. That'll that's really cool. That's lucky you have that. 0:07:11.880 --> 0:07:13.920 A lot of firms don't. I'm going to get you 0:07:13.920 --> 0:07:16.560 in options overlay. And it's just like it's going to 0:07:16.640 --> 0:07:19.200 take the ball down a little bit, YadA YadA. It 0:07:19.320 --> 0:07:21.880 feels fair at thirty five BIPs, and I think that's 0:07:21.960 --> 0:07:22.800 part of the magic. 0:07:22.800 --> 0:07:26.840 Would you agree, Yeah, no, absolutely, you know, and I 0:07:26.880 --> 0:07:29.720 think we all know, and we've looked at other industries 0:07:29.800 --> 0:07:33.520 and other firms. If you don't evolve and adjust your 0:07:33.560 --> 0:07:38.080 business model to the changing needs of investors financial advisors, 0:07:38.120 --> 0:07:41.200 your business will with her. And so you know, we 0:07:41.360 --> 0:07:47.960 made decisions to build products we think that, from both 0:07:47.960 --> 0:07:52.480 a pricing and an investment standpoint, have a highly differentiated 0:07:52.600 --> 0:07:58.720 offer relative to others. Now, we didn't apply the strategy 0:07:58.800 --> 0:08:02.240 of a covered call options only in an ETF. We 0:08:02.280 --> 0:08:04.800 actually did it first in a mutual fund. So what 0:08:04.840 --> 0:08:07.280 we're doing is bringing our best ideas that we have 0:08:07.360 --> 0:08:10.560 in mutual funds, separately managed accounts, what we've run for institutions, 0:08:10.560 --> 0:08:13.200 and then putting them in an ETF and then going 0:08:13.200 --> 0:08:16.200 through a process of how do we price that relative 0:08:16.200 --> 0:08:18.760 to the value that we're adding to investors. And the 0:08:18.840 --> 0:08:21.720 great thing about ETFs is there's very few little friction 0:08:22.240 --> 0:08:26.400 relative to revenue share or transfer agency costs or other things, 0:08:26.440 --> 0:08:28.559 so it allows us to do it at a price 0:08:28.600 --> 0:08:31.880 point where then financial advisors can make the decisions to 0:08:32.120 --> 0:08:35.480 add fees for the services they're providing. And so what 0:08:35.559 --> 0:08:38.760 this has really done is seeing the disconnecting between manufacturing 0:08:39.800 --> 0:08:44.840 and the costs associated with manufacturing versus services related to 0:08:44.920 --> 0:08:49.559 advice and financial planning and other components of high value 0:08:49.559 --> 0:08:53.160 added things that advisors do themselves. And I think that's 0:08:52.559 --> 0:08:56.680 one of the reasons that ETFs has grown so rapidly, 0:08:56.679 --> 0:08:59.800 both in passive and active, which is you see this 0:09:00.280 --> 0:09:04.600 movement towards fee based programs and away from transactional revenue 0:09:04.640 --> 0:09:08.320 sharing and other things that's good for investors, and so 0:09:08.400 --> 0:09:10.640 we're playing to that theme and the way that we 0:09:10.720 --> 0:09:12.120 price in service products. 0:09:12.760 --> 0:09:15.679 I will say, you make that sound easy, but over 0:09:15.720 --> 0:09:19.440 the years, I think the fun companies that are just 0:09:19.559 --> 0:09:23.120 fun companies, it is tougher for them. I see them 0:09:23.160 --> 0:09:26.800 sometimes try to make the ETF industry come to their 0:09:27.040 --> 0:09:29.959 on their terms and it doesn't work. You kind of 0:09:30.040 --> 0:09:32.120 have to meet the ETF industry on its terms, and 0:09:32.120 --> 0:09:33.040 I thought JPM was. 0:09:32.960 --> 0:09:35.000 Like Judo a little bit, like we're going to use 0:09:35.000 --> 0:09:37.840 the energy and like redirect it a little bit rather 0:09:37.880 --> 0:09:40.079 than take it head on. If you like that, I've 0:09:40.080 --> 0:09:41.480 brought Olympic sports in here. 0:09:41.800 --> 0:09:44.280 I like metaphors. I don't know about that one, but 0:09:44.920 --> 0:09:49.800 it's it's hopefully everybody listening understands. That flew over my 0:09:49.840 --> 0:09:52.680 head a little bit. But the idea of having a 0:09:52.720 --> 0:09:56.480 bank where asset management is a portion of the revenue, 0:09:56.960 --> 0:10:01.640 and obviously Jamie Diamond has all these other groups making money. 0:10:01.920 --> 0:10:04.200 There's a lot of things to work on and so 0:10:04.800 --> 0:10:08.040 it's not like the whole thing depends on this one 0:10:08.240 --> 0:10:12.160 mutual fund revenue stream. So you can make that ETF 0:10:12.240 --> 0:10:14.360 leap a little easier because it does involve us a 0:10:14.400 --> 0:10:17.440 little bit of self cannibalization. Although if you get enough assets, 0:10:17.480 --> 0:10:20.200 you win in the end. But it's been tough for 0:10:20.440 --> 0:10:23.800 the traditional nineties er mutual fund company to do that 0:10:23.840 --> 0:10:27.120 because this is all they have. And I don't know, 0:10:27.240 --> 0:10:29.160 do you feel like that that you work in this 0:10:29.280 --> 0:10:33.240 gigantic diversified bank type company. Does it give you a 0:10:33.240 --> 0:10:35.439 little more freedom or is that more just the Jamie 0:10:35.480 --> 0:10:38.360 Diamond management thing to just let you do what you 0:10:38.440 --> 0:10:41.400 need to do, because I don't feel like others are 0:10:41.440 --> 0:10:44.800 given the keys so much as you guys were in 0:10:44.880 --> 0:10:48.000 terms of pricing it and being able to sort of 0:10:48.000 --> 0:10:50.440 maybe go a little cheaper than you probably would like to. 0:10:51.960 --> 0:10:55.960 The way I think about it is the asset management 0:10:56.000 --> 0:11:02.440 business is to serve investor, and we are measured to 0:11:02.480 --> 0:11:06.280 compete with the best asset managers in the world. That's 0:11:06.280 --> 0:11:09.480 the way the board and that's the way Jamie judges 0:11:09.520 --> 0:11:14.320 us with us, and we have the ability because it 0:11:14.360 --> 0:11:18.280 is a fiduciary business is a very important point, and 0:11:18.320 --> 0:11:22.800 we're hemetically sealed because of the conflicts that exists between 0:11:22.840 --> 0:11:25.200 the bank and the asset management. We can't trade in 0:11:25.240 --> 0:11:29.360 our ETFs with JP Morgan Chasing Company, but we have 0:11:29.440 --> 0:11:33.000 the ability to reach out and pull in the expertise 0:11:33.040 --> 0:11:36.320 and skills that are maybe difficult for other monoline asset 0:11:36.320 --> 0:11:41.560 management firms to get. Cyber technology, artificial intelligence that bank 0:11:41.600 --> 0:11:44.920 has since seventeen billion dollars a year on technology. We 0:11:45.040 --> 0:11:48.480 have the ability to pull in generative AI expertise to 0:11:48.520 --> 0:11:51.480 help apply that to managing managing money. So I would 0:11:51.480 --> 0:11:54.680 describe this as the best of both worlds. The other 0:11:54.720 --> 0:11:57.400 thing I would point out, which I think is important 0:11:57.440 --> 0:12:00.560 for us, is they're kind of two I think two 0:12:00.600 --> 0:12:06.480 ways that asset managers approcess. One is around marketing what's 0:12:06.520 --> 0:12:11.280 best to sell, and then you have others who are 0:12:11.720 --> 0:12:15.800 deep fiduciary managers where they lead from the investment standpoint, 0:12:15.800 --> 0:12:19.200 how do you generate returns for clients and a risk 0:12:19.240 --> 0:12:23.440 adjusted away. Some lean too much in one way, therefore 0:12:23.480 --> 0:12:26.200 haven't been able to adapt their product offering rap enough. 0:12:26.480 --> 0:12:29.079 Others lead the other way, and they end up producing 0:12:29.200 --> 0:12:32.640 products that don't aren't in the interest long term investing 0:12:32.720 --> 0:12:36.040 interest of investors. What I think we have been able 0:12:36.080 --> 0:12:39.920 to do is balance that decision making between a very 0:12:39.960 --> 0:12:44.679 strong investment led fraduciary culture and a very strong focus 0:12:44.760 --> 0:12:48.760 on investor needs and demands and adapting our product line 0:12:48.760 --> 0:12:52.960 and capability more rapidly, maybe than some of our competitors have. 0:13:00.640 --> 0:13:05.160 We talk about a lot how the ETF is a 0:13:05.280 --> 0:13:09.920 terror dome, the ETF industry is a terrordome, and that 0:13:10.400 --> 0:13:13.720 you know it's taxing, especially for all the juggernauts that 0:13:13.840 --> 0:13:16.200 have to compete with one another. What's it feel like 0:13:16.440 --> 0:13:18.880 to walk into the Terrordome every day and have to compete. 0:13:20.400 --> 0:13:22.400 Oh, it's great. I mean this is this is one 0:13:22.400 --> 0:13:25.240 of the most exciting areas of the industry. I mean 0:13:25.280 --> 0:13:31.040 the level of innovation. You pointed out the competition, and 0:13:31.160 --> 0:13:33.719 it is invigorating for our teams and my people. And 0:13:34.000 --> 0:13:37.200 I think that's one of the things because ETFs are 0:13:37.520 --> 0:13:39.160 maybe they've been around for a long time, but they're 0:13:39.200 --> 0:13:41.760 quite fresh as it relates to, you know, the active 0:13:41.800 --> 0:13:44.760 asset management space, and I think it's it's it's bad, 0:13:45.240 --> 0:13:49.079 you know, a degree of optimism and focus on the future, 0:13:49.280 --> 0:13:52.280 and the competition is awesome. You think about, like what 0:13:52.520 --> 0:13:55.120 the competition of the asset management space is meant for 0:13:55.160 --> 0:13:57.760 the quality of what investors get today, and the innovations 0:13:57.760 --> 0:14:01.200 that we've seen in mutual funds and separately managed tax 0:14:01.240 --> 0:14:05.760 optimization and all of that I think is calling in 0:14:05.800 --> 0:14:12.160 a seismic shift that's happening where ETFs will likely be 0:14:12.440 --> 0:14:16.480 the most important product and vehicle for individual investors and 0:14:16.559 --> 0:14:20.440 maybe institutions for the next decade. So I think it's 0:14:20.480 --> 0:14:21.520 incredibly exciting. 0:14:21.600 --> 0:14:23.560 Yeah, do it you like to compete against you? 0:14:25.240 --> 0:14:26.880 I feel sorry for them. 0:14:27.000 --> 0:14:29.440 Actually, that's a good segue. I have a good example 0:14:29.640 --> 0:14:32.400 of what I think of one of the We always 0:14:32.400 --> 0:14:37.240 look for these interesting matchups inside different categories. And you 0:14:37.280 --> 0:14:40.760 know I titled this Vanguard versus JP Morgan grabbed the popcorn. 0:14:41.400 --> 0:14:43.080 So JP Morgan popcorn for that. 0:14:43.280 --> 0:14:45.640 Yeah, I mean this is really interesting to me. JP 0:14:45.720 --> 0:14:49.800 Morgan launched a high yield active bond e tf JPHY. 0:14:50.520 --> 0:14:53.720 It's seeded with two billion, which is unheard of. 0:14:54.040 --> 0:14:54.640 Pretty good start. 0:14:54.760 --> 0:14:58.480 That's a good start. You're already the biggest one. Nice 0:14:58.640 --> 0:15:01.760 just like that's like born on home plate right there. Now. 0:15:02.440 --> 0:15:05.560 A couple of weeks later, Vanguard filed for an active 0:15:05.640 --> 0:15:09.400 junk bond ETF and everybody had been writing them off 0:15:09.440 --> 0:15:11.680 because people had thought they would file for a drunk 0:15:11.720 --> 0:15:14.200 bond ETF at some point. Everybody wanted them to because 0:15:14.200 --> 0:15:16.520 they have a mutual fund, and they never did. And 0:15:16.600 --> 0:15:19.920 I think you got them to launch, in my opinion, 0:15:20.440 --> 0:15:24.760 because they see the numbers. Vanguard is nineteenth in active 0:15:24.960 --> 0:15:28.760 ETF and they're not nineteenth in anything. That probably pisses 0:15:28.800 --> 0:15:31.440 them off. And they see you come in, you're cleaning up, 0:15:31.440 --> 0:15:34.920 you're running circles around them, and you're bab basically biting 0:15:34.960 --> 0:15:37.800 at their heels right now in third place of overall active, 0:15:38.680 --> 0:15:41.840 so that I really I can't ever say I've seen 0:15:41.920 --> 0:15:45.320 Vanguard look a little nervous, but this looks like that. 0:15:46.440 --> 0:15:50.880 Because Vanguard is a great firm and obviously huge innovator 0:15:51.000 --> 0:15:54.040 in ETF space. The way I think about it, three 0:15:54.160 --> 0:16:01.680 trillion dollars in fixed income ETFs globally, five percent of 0:16:01.720 --> 0:16:06.720 that is indexed passive. This is a space where the 0:16:06.800 --> 0:16:13.120 average manager outperforms the market. So I think investors have 0:16:14.280 --> 0:16:17.720 loved the ETF package and therefore have gone down that 0:16:17.840 --> 0:16:21.160 path of allocating to fixed income, and now that their 0:16:21.200 --> 0:16:26.880 world class capabilities active capabilities in ETFs, I think we're 0:16:26.880 --> 0:16:30.160 going to see a massive shift. And what we did 0:16:30.400 --> 0:16:33.960 was we went to one of our largest clients, one 0:16:34.000 --> 0:16:38.040 of the most sophisticated asset owners in the world, and 0:16:38.160 --> 0:16:40.960 asked them whether they wanted to participate in us launching 0:16:41.280 --> 0:16:43.960 a high yield ETF. And that shows the strengths of 0:16:44.000 --> 0:16:49.200 our traditional institutional business and relationship. On day one, the 0:16:49.240 --> 0:16:55.000 ETF had four hundred and fifty positions source from our 0:16:55.200 --> 0:16:59.680 credit and portfolio management capabilities. So as an investor, if 0:16:59.720 --> 0:17:01.800 you can into our fund on its first day, you 0:17:01.800 --> 0:17:06.760 would have be fully diversified UH in the in the 0:17:06.800 --> 0:17:09.960 sectors and securities that we think are our most attractive. 0:17:10.640 --> 0:17:12.840 It's a great thing. I never thought I would see 0:17:12.880 --> 0:17:15.439 the day where we were able to launch a e 0:17:15.560 --> 0:17:17.280 t F and have it be the largest et F 0:17:17.359 --> 0:17:20.119 in the category on day on day one. It's a 0:17:20.119 --> 0:17:21.040 great position to be in. 0:17:21.920 --> 0:17:25.560 I want to talk about JEPY because we mentioned earlier 0:17:25.720 --> 0:17:31.240 JP Morgan Equity Premium income ETF that has just crushed it. 0:17:31.359 --> 0:17:37.400 And can you dissect why JEFPY has been such a success. 0:17:38.359 --> 0:17:42.000 And also were there any other names that you considered 0:17:42.000 --> 0:17:42.520 for the ticker? 0:17:44.119 --> 0:17:48.800 We're always wondering about the best, the best, the best tickers. 0:17:49.200 --> 0:17:51.960 I mean, I think this is you know, as I 0:17:51.960 --> 0:17:54.080 said before, this is not a strategy that was first 0:17:54.080 --> 0:17:57.960 in the ets. It came to our mutual fund lineup first, 0:17:58.640 --> 0:18:02.000 UH and and it all fors the investors the opportunity 0:18:02.040 --> 0:18:06.240 to get their toe in the water, get allocation to 0:18:06.440 --> 0:18:10.000 the upside potential of equities, but at the same time 0:18:10.119 --> 0:18:17.680 generate very attractive income and have some less volatility and delivers. 0:18:17.680 --> 0:18:21.159 So I think it's an idea that has applications to 0:18:21.440 --> 0:18:24.760 every asset class. I think it's a core position over 0:18:24.800 --> 0:18:28.520 the over the long term, as we see volatility spike, 0:18:28.680 --> 0:18:32.520 you're likely to see greater demand for these types of products. 0:18:32.720 --> 0:18:36.800 In markets like today, where you have UH momentum in 0:18:37.840 --> 0:18:41.560 stock prices, it's likely to be something that's not the 0:18:41.560 --> 0:18:44.119 first the first choice, but over time in a market cycle. 0:18:44.160 --> 0:18:47.800 I think these strategies and we've obviously replicated it not 0:18:47.880 --> 0:18:50.200 just an S and P five hundred which JEFP. We've 0:18:50.200 --> 0:18:52.800 done it in Nasdaq stocks with j E p Q. 0:18:53.880 --> 0:18:57.440 We've also applied a similar strategy to our hedged equity. 0:18:58.000 --> 0:19:00.679 We have one for US strategy and we also have 0:19:00.800 --> 0:19:08.080 one for an international strategy called OLAH. So I think 0:19:08.119 --> 0:19:11.760 these types of products that give you equity exposures either 0:19:12.840 --> 0:19:17.080 downside protection or high levels of income will continue to 0:19:17.119 --> 0:19:19.800 be quite attractive. We launched them around the world Canada 0:19:20.840 --> 0:19:24.199 our product range and USETS in Europe. We were the 0:19:24.280 --> 0:19:28.520 first to list a active ETF strategy in Hong Kong 0:19:28.560 --> 0:19:31.560 two weeks ago, which is actually a replica of jeffs. 0:19:31.640 --> 0:19:35.560 So this is an error where we're seeing demand globally 0:19:35.600 --> 0:19:37.480 around the world to these types of strategies. 0:19:38.080 --> 0:19:40.080 If you look at Europe, I was just in Europe 0:19:40.080 --> 0:19:41.960 a couple of weeks ago, and Henry showed me the 0:19:42.080 --> 0:19:44.480 active ETFs there. JP Morgan is like in a league 0:19:44.480 --> 0:19:48.399 of their own, so like here there obviously right up 0:19:48.440 --> 0:19:52.399 there there's a couple good active ETF managers, although some 0:19:52.480 --> 0:19:54.920 of them take money from the mutual funds, so they 0:19:54.960 --> 0:19:56.800 offset when you look at the boat. That's why when 0:19:56.840 --> 0:19:58.600 I looked at your numbers in terms of mutual fund 0:19:58.600 --> 0:20:01.720 plus ETF, it was very impressive because your mutual funds 0:20:01.720 --> 0:20:04.400 were able to at least eke out a little bit 0:20:04.400 --> 0:20:07.399 of flows, which is not the norm. JEPQ, which is 0:20:07.440 --> 0:20:10.280 the one you mentioned. It's jetp's little brother, except it's 0:20:10.280 --> 0:20:13.480 a little more feisty because the cues have more volatility. 0:20:13.520 --> 0:20:17.120 So it seems like to me that jepq's double any 0:20:17.160 --> 0:20:19.200 other of your ETFs and flows this year. So it's 0:20:19.240 --> 0:20:21.800 kind of like it hasn't surpassed JETPI in assets, but 0:20:21.840 --> 0:20:25.000 it's it's getting, you know, it's taking in more money. 0:20:26.200 --> 0:20:28.520 I think the idea here is if you write call 0:20:28.600 --> 0:20:31.520 options on the cues, what you do is you give 0:20:31.600 --> 0:20:34.919 up extreme upside, but what you get in return is 0:20:34.960 --> 0:20:37.959 some income. So it yields eleven percent that income can 0:20:38.040 --> 0:20:41.080 actually buffer the downside a little, so in essence, it's 0:20:41.119 --> 0:20:44.359 like diet cues in a way, and that to me 0:20:45.359 --> 0:20:49.520 is a strong selling point that is somewhat performance proof 0:20:49.520 --> 0:20:51.359 because if you have a year where you underperform the cues, 0:20:51.840 --> 0:20:54.199 the value proposition is still there because a lot of 0:20:54.200 --> 0:20:56.840 older investors are like, I'm happy to give up a 0:20:56.840 --> 0:20:58.760 little upside. I really I've made a lot of money 0:20:59.200 --> 0:21:02.800 and that deal they strike with an issuer like jep 0:21:02.880 --> 0:21:06.639 Q or JETPY, it's a brilliant concept because it doesn't 0:21:06.680 --> 0:21:11.359 totally rely on performance year to year like say other ETFs. 0:21:12.000 --> 0:21:15.760 Do I have that right? Yeah? Absolutely. I think this 0:21:15.920 --> 0:21:18.440 is why these strategies are so durable because I think 0:21:18.480 --> 0:21:21.440 the demand for these types of products of high income, 0:21:21.800 --> 0:21:25.240 exposure to equity markets, and less volatility. I think that's 0:21:25.280 --> 0:21:27.360 a theme that we're going to see to continue continue 0:21:27.400 --> 0:21:29.639 to play out. Now. It is the number one selling 0:21:29.760 --> 0:21:32.680 product that we have year to date, and I think 0:21:32.680 --> 0:21:34.800 there is an important point relative to kind of our 0:21:34.840 --> 0:21:37.320 strategy around this. If you look at we got into 0:21:37.359 --> 0:21:42.760 the business and saw strong flows through these derivative income 0:21:42.920 --> 0:21:47.080 strategies JETP and jep Q, and through our short duration 0:21:47.160 --> 0:21:51.320 fixed income JPST, which is the largest fixed income ETF 0:21:51.440 --> 0:21:54.560 in the business. But over the last two years, more 0:21:54.600 --> 0:21:57.680 than half of our total flows have been in other products. 0:21:58.200 --> 0:22:01.200 And I think that's what I see. I'm so encouraged 0:22:01.240 --> 0:22:06.280 about the strength of active fixed income, which I mentioned 0:22:06.480 --> 0:22:10.920 mentioned before, our JPI, which is an income fixed income ETF, 0:22:11.040 --> 0:22:14.840 our Core Plus strategy, which is our best selling fixed 0:22:14.920 --> 0:22:17.040 income capabilities. I think that's what you're going to see 0:22:17.080 --> 0:22:19.680 happen in the in the industry is we're going to 0:22:19.720 --> 0:22:26.080 see more and more flows expanding into other into other 0:22:26.200 --> 0:22:31.040 areas as more investment capabilities become available. 0:22:31.840 --> 0:22:34.439 And you also you oversee everything, right, So you've got 0:22:34.520 --> 0:22:37.720 mutual funds ETF And I read a little bit about 0:22:37.720 --> 0:22:41.239 your push into alternatives. What does that mean? What for you? 0:22:41.280 --> 0:22:43.399 What is the push and alternatives? Black Rock says the 0:22:43.400 --> 0:22:45.920 same thing. I think some people like, what does that mean? 0:22:46.080 --> 0:22:47.959 And what kind of products door we expect? 0:22:48.160 --> 0:22:49.320 And does it mean crypto? 0:22:51.960 --> 0:22:53.120 Don't worry, I'll get there. 0:22:54.240 --> 0:23:01.760 So sixty forty diversified investing all alternatives to a diversified 0:23:01.800 --> 0:23:05.119 portfolio and new increase return and reduce risks not a 0:23:05.160 --> 0:23:08.720 new novel idea. It's been around for a long long time. 0:23:08.800 --> 0:23:12.600 We've provided those tools for our big institutional clients for 0:23:12.640 --> 0:23:17.159 a long long time, and we've got leading capabilities in 0:23:17.200 --> 0:23:20.840