Speaker 1: Welcome to Trillions. I'm Joel Weber and I'm America Belts Eric.
Speaker 1: I find you yet again on the road. Where is
Speaker 1: it this? I'm in uh the D terminal of the
Speaker 1: Miami Airport, waiting for my flight back from the big
Speaker 1: e t F conference called Exchange. Um, and I am
Speaker 1: I'm weary. I'm tired, I'll be honest, but I had
Speaker 1: I had fun and I met a lot of people
Speaker 1: and reconnected with a bunch of people. Um, but tip
Speaker 1: as usual, I'm I'm exhausted on the way home. So
Speaker 1: you went to Miami to talk about e t F
Speaker 1: s instead of Bitcoin, I'm surprised. Yeah, well it's funny.
Speaker 1: There was a Bitcoin conference the week before, so there
Speaker 1: were some people who were at both. The world's are
Speaker 1: merging a little bit. But yeah, it was the e
Speaker 1: t F conference. So you're in Miami. You did this
Speaker 1: et F conference and this is gonna be another special
Speaker 1: episode of Trillion. Yeah. So they had a special room
Speaker 1: in the conference where they had six different podcasts to
Speaker 1: a live episode. UM. Other ones that were in the
Speaker 1: mix where Animal Spirits, UM, the med favorite Show and
Speaker 1: Flirting with Models, So you know, good company. These are
Speaker 1: popular podcasts with smart people. So I was happy to
Speaker 1: be in the mixed trillions. You weren't there obviously, so
Speaker 1: Katie Gray felt sort of filled in and you know,
Speaker 1: played your part. She was great as usual. It was
Speaker 1: great hanging out with her at the conference as well.
Speaker 1: And then we got two guests. We got Jeremy Schwartz
Speaker 1: and Wisdom treat and Perth Toll from Life and Liberty
Speaker 1: Indexes who was famously from the Freedom ETF which is
Speaker 1: doing very well. And Jeremy has China in their funds
Speaker 1: and Jeremy's Wisdom Tree ets also never got rid of Russia,
Speaker 1: and so I thought, let's have a little friendly debate
Speaker 1: about whether you should own China, Russia and some of
Speaker 1: these other authority authoritarian countries. Perth, obviously we know where
Speaker 1: she stands there, not in her fund and that's what
Speaker 1: we did. We had a kind of friendly debate and
Speaker 1: there was a point where they both started talking back
Speaker 1: and forth for maybe a good like I don't know,
Speaker 1: six minutes, which is what we wanted. Um. But we
Speaker 1: brow some other stuff too, but mostly that was the discussion.
Speaker 1: It's time on trillions, the big emerging markets debate. Welcome
Speaker 1: to trillions. I'm Eric thought tunis. I'm Katie Kryfeld, filling
Speaker 1: in for Joel Webber, who couldn't be with us. He's
Speaker 1: stuck in New York City where the weather is not
Speaker 1: as good. Um, but we miss him, and uh we will.
Speaker 1: I think Joel and I might actually have done an
Speaker 1: intro before you're hearing me here. So Katie, thank you
Speaker 1: for filling in. Absolutely. I was honored when you asked.
Speaker 1: Let me just say that, so thrilled to be here.
Speaker 1: You're a regular on the show anyway, so yeah, you know,
Speaker 1: but to put on my jewel Webber hats pretty huge. Um. Well,
Speaker 1: how do you like the conference so far? What have
Speaker 1: you learned? Nuts? I've actually I have shaken so many
Speaker 1: hands over the past I don't know six hours in
Speaker 1: terms of what I've learned. I'm going to get back
Speaker 1: to you on that. Well, you've moderated like two panels, nothing,
Speaker 1: nothing of interest. I'm worried about inflation. Okay, yeah, yeah,
Speaker 1: do you hear Gunlock's presentation, I'm worried about everything. After
Speaker 1: I realize, Um, so I spoke with Michael Sonenshein of
Speaker 1: Gray Scale. I think our panel ended at nine or
Speaker 1: maybe it ended at ten. I didn't realize that Gunlock
Speaker 1: immediately followed us, like immediately like brush past him. So
Speaker 1: that was pretty cool. Yeah, when this conference was in
Speaker 1: Hollywood two and a half years ago, backstage, we ran
Speaker 1: into Derek Jeter and took one of the most famous
Speaker 1: photos within our little et F community of Todd Rosenbluth.
Speaker 1: Looks like he was pitching something to Derek Jeter. Who
Speaker 1: was You got to see the photo. But anyway, Yeah,
Speaker 1: sometimes you meet some people backstage. I actually met Sam
Speaker 1: Hanky backstage. Do you know who that is? I should,
Speaker 1: and I don't anybody know who Sam Hanky is. Yeah.
Speaker 1: You ever heard the phrase trust the process? I certainly have.
Speaker 1: It's all coming together. He put the Sixers together and
Speaker 1: created that a concept of just sort of waiting picking
Speaker 1: high draft picks. Anyway, it was great to meet him,
Speaker 1: great to be here. Let's get on with the guests
Speaker 1: that we have. Um, So, look, I was thinking about
Speaker 1: who to get on this this program for this episode
Speaker 1: because it's live, there's I don't know about forty people
Speaker 1: in the audience which will take questions from after we
Speaker 1: get some questions to our panel of guests, not panelists,
Speaker 1: and I thought the WENI people who are interesting, argumentative,
Speaker 1: and good on stage, and that does narrow the list
Speaker 1: down a little bit, because you could have somebody who
Speaker 1: isn't any of those things and on a podcast, but
Speaker 1: when you're on stage, you kind of have to bring
Speaker 1: some firepower. So I have the two very good, perfect
Speaker 1: people for this Perth Toll of Life and Liberty Indexes.
Speaker 1: Is that the official name of your company? Okay, I
Speaker 1: got it all right. I always just say Perth Tolls
Speaker 1: of Freedom f R D M is the e t
Speaker 1: F that basically she runs. And Jeremy Schwartz of Wisdom
Speaker 1: Tree Welcome, guys, very argumentative. What's expected of us? So, Katie, um,
Speaker 1: we haven't even prepped for this, so you just jump
Speaker 1: in when you feel the urge. I'll start with a question.
Speaker 1: I'm gonna start with just a broad question. I think
Speaker 1: this year really reminded us of why they're called the
Speaker 1: emerging markets. Right. They seem pretty mellow for a while
Speaker 1: and they just went crazy. Let me ask both of
Speaker 1: you guys this, why even invest in the emerging markets
Speaker 1: at all? I mean, you guys have different takes on them,
Speaker 1: but why even allocate to E M? Well, it's it's interesting.
Speaker 1: I think certainly the inflation is your main narrative, Katie,
Speaker 1: to your point that that's the big concern. And so
Speaker 1: you see growth stocks selling off everywhere. That's particularly true
Speaker 1: in e M uh now China growth in particulars where
Speaker 1: a lot of the hits came. But I think people
Speaker 1: view EM for the growth. Like so one of the
Speaker 1: reasons why e M should be favored is it comes
Speaker 1: back to valuations and fundamental growth. And so SMP at
Speaker 1: twenty times earnings is more expensive market. Broad emerging markets
Speaker 1: are cheaper called small twelve times earnings maybe for a
Speaker 1: broad e M index, and they've got populations that are
Speaker 1: growing faster theoretically earnings and sales that are growing faster.
Speaker 1: It's that combination of valuations and growth that's interesting. And
Speaker 1: you could see different ways of looking at you and
Speaker 1: have very different performances here. So we can get into
Speaker 1: all that. But value is working very very well in
Speaker 1: e M versus growth is what I would say, even
Speaker 1: like when it came in with heavy Russia. It's working
Speaker 1: very very well, and so we can we can get
Speaker 1: into all those things. Yeah, I would add there that
Speaker 1: in emerging markets right now especially UM in a crisis situation,
Speaker 1: you want to look at what are the safe havens
Speaker 1: right in this type of market? And um, you know,
Speaker 1: in the emerging markets, we're looking for markets that are
Speaker 1: coming from a very low low base, that have a
Speaker 1: high growth potential. And you know, we specifically want countries
Speaker 1: that have the you know, stronger institutions, rule of law,
Speaker 1: individual investor protections, and those I think are going to
Speaker 1: be the safe havens in them going forward. And actually
Speaker 1: I've in one of the panels I did this morning,
Speaker 1: we were talking with Michael Roni of Spider and he
Speaker 1: brought up small cap e M as a place that
Speaker 1: he really likes right now. And I don't often think
Speaker 1: about small cap YEM. I have to say that, but
Speaker 1: I mean, so an obvious question to follow up with
Speaker 1: to you, Jeremy is e M. We talked about it
Speaker 1: as a block U as basically this one singular trade.
Speaker 1: But within e M, what regions are you bullish on
Speaker 1: right now and where are you potentially avoiding? Well? So
Speaker 1: DGS is a small cap e M E T f
Speaker 1: R S fifteen year history. It has a dividend orientation
Speaker 1: to it, so it's very value based. So talk about
Speaker 1: value around the world. The pe on this basket is
Speaker 1: below nine times earnings, right, so this is single digit multiples.
Speaker 1: It's got average dividents of five broad EM is down
Speaker 1: nine this year or yeah, around nine percent, it's it's up,
Speaker 1: so it's sort of that's my point on value is
Speaker 1: working when growth is not. So that that is a
Speaker 1: eat example. It doesn't all have to be China tech.
Speaker 1: I mean, China tack is its own story that we
Speaker 1: can get into. But the small cap em it's a
Speaker 1: two billion dollar fund. It's one of our top inflows
Speaker 1: this year. You're seeing a lot of people embrace that.
Speaker 1: And I think it's one of the few places where
Speaker 1: a non cap weighted e t F is the largest
Speaker 1: et F in the world. Actually, I think I don't
Speaker 1: think there's a bigger non cap weighted ETF in t gs,
Speaker 1: so I think that's an interesting one. Also. Yeah, and um,
Speaker 1: since you brought up China, I think let's just go
Speaker 1: right there. I think that's one of the most interesting
Speaker 1: things to talk about. We'll get to Russia too, But
Speaker 1: um per um. You know, I think you really showed
Speaker 1: people with your fund um you know why. You know,
Speaker 1: governments are different in the emerging markets, and there's definitely
Speaker 1: been a mental shift. I feel obviously your fund is
Speaker 1: beating the e M by a lot because of some
Speaker 1: of this UM. But there's also when you you e
Speaker 1: t f s catch fire, they also need a narrative
Speaker 1: and psychological shift, and I feel like it's happening. UM.
Speaker 1: I'll let jeremy owner, but explain why you don't want
Speaker 1: China in your portfolio. Yeah. So we think on the
Speaker 1: country level, that governance factor, which we measure using personal
Speaker 1: and economic freedom variables that are from third party think
Speaker 1: tanks UM is the basis for all other kind of
Speaker 1: other kind of factors that you can put onto emerging
Speaker 1: markets or any other strategy. So in developed markets, you know,
Speaker 1: these these freedom metrics are all pretty high. Most developed
Speaker 1: markets are pretty free, the governance is pretty strong UM,
Speaker 1: and you don't really need to worry about that. But
Speaker 1: in emerging markets, the universe is so rife with autocracies.
Speaker 1: It is so there's so many, you know, countries like Russia, China,
Speaker 1: Saudi Arabia, Turkey, Egypt, um A, u A, so forth.
Speaker 1: So there are a lot of these autocracies. And when
Speaker 1: you market cap weight without regard to country level governance
Speaker 1: you are looking at and autocracies and your broad emerging
Speaker 1: markets allocation and that's just a lot of risk and
Speaker 1: China I think is the biggest risk in that allocation.
Speaker 1: It's currently about and you're broad emerging markets in disease.
Speaker 1: But I mean at its height it was about in August.
Speaker 1: That's come down since them because of market movement. So
Speaker 1: um going forward, you know, China has in its governance
Speaker 1: and policies reversed all of the policies that have made
Speaker 1: them prosperous and they are going full speed ahead on
Speaker 1: that reversal. So we think that's going to be a
Speaker 1: huge drag on emerging markets going forward. It's interesting. I mean,
Speaker 1: so it comes back to these big decisions and benchmarks.
Speaker 1: So M s c I, to your point, is now
Speaker 1: thirty percent China, and which is so if you're going
Speaker 1: to go to zero China and listen, there's now a
Speaker 1: whole category of e M X China al right, so
Speaker 1: you're seeing flows go to beta solutions. We have a
Speaker 1: filing for an e M X China without state owned companies,
Speaker 1: which is something Perthonite agree on. It will be agreeable
Speaker 1: on the x state owned factor. As a concept. Um.
Speaker 1: But the China bet to, I think it is a
Speaker 1: big leap to go all the way to zero UM.
Speaker 1: I mean, they're certainly a lot of talk about being uninvestable. Right,
Speaker 1: So for a while energy was uninvestable as a sector.
Speaker 1: When oil went negative, you're hearing, well, you know, it's
Speaker 1: it's uninvestable, and that's exactly when you wanted to be investing.
Speaker 1: I feel like some of that narrative is happening around
Speaker 1: China now that everybody's saying it's it's quote unquote uninvestable.
Speaker 1: Yet the companies are growing like four times. If you
Speaker 1: look at some of the China tech companies are growing
Speaker 1: four times the SMP at multiples that are less than
Speaker 1: the SMP. So it's it becomes that becomes the inherent
Speaker 1: thing is is they are they actually trying to make
Speaker 1: these companies completely unprofitable. There they are putting their hands
Speaker 1: on these companies, there's no question about it. UM. But
Speaker 1: often when you hear it's completely on investable, that's when
Speaker 1: you time to go Okay, So you're looking at this
Speaker 1: value play, right, it's a well the growth characteristics combined
Speaker 1: with their valuations make it an interesting combination all right,
Speaker 1: So I'm gonna I'm gonna counter that if you look
Speaker 1: at the freer markets, you can do value place in
Speaker 1: the free markets where you have investor protections, where you
Speaker 1: have rule of law. But in a market like China,
Speaker 1: if you look at the mc h I INDE, that's
Speaker 1: the ms c I China on shore and offshore, very
Speaker 1: complete picture of China investing um since inception in the
Speaker 1: cumulative return is now approaching zero percent. So that's a
Speaker 1: time of extreme growth in China from now. That was
Speaker 1: a time when it really opened up from the policies
Speaker 1: of bysmal policies under MAO where tens of millions of
Speaker 1: people died and famine. Um. I've seen someone that is
Speaker 1: at this conference. Another firm used the term Great Lead
Speaker 1: Forward for marketing purposes. The Great Lead Forward killed tens
Speaker 1: of millions of people. So no, please don't use that
Speaker 1: for marketing. First of all, and second of all, Um,
Speaker 1: those policies were reversed to you know, not so bad policies,
Speaker 1: and that is what caused this great growth in China
Speaker 1: the last thirty and forty years. That was an increase
Speaker 1: in economic freedom. And now they are reversing all of
Speaker 1: those policies. If you got zero per cent during a
Speaker 1: period of extreme growth, good luck going forward. So back
Speaker 1: in the nineties, like of it was all state owned companies.
Speaker 1: Now you could say all of China. There's definitely a
Speaker 1: bit narrative that all of China is a state owned company.
Speaker 1: So you could say, can is there anything a private company? Right?
Speaker 1: So there are people we have that discussion with all
Speaker 1: the time. We have c X as c R China
Speaker 1: state owned, and I get that view, Like I'm not
Speaker 1: gonna completely argue with that view, um, but they are
Speaker 1: position as private companies and they do have fact like
Speaker 1: if you just look at the fundamentals of the companies,
Speaker 1: they are growing sales a year for the last three years, um.
Speaker 1: And so there becomes a valuation number where if they
Speaker 1: don't make these a zero that they are at trapped.
Speaker 1: You know, they could be good good investments. Is the
Speaker 1: point I would come back with. I do agree with
Speaker 1: the non state owned aspect of what he's saying here
Speaker 1: for freer markets now in markets like China, yes, I
Speaker 1: do agree that most companies are all companies actually are
Speaker 1: state owned. In fact, there's a law an article actually
Speaker 1: says all company information is considered a state secret and
Speaker 1: we can't share. And that's what the audit problem that
Speaker 1: we're having now with the p C O B. But
Speaker 1: in a place like China where they can come in
Speaker 1: overnight and just say okay, you guys are nonprofits now,
Speaker 1: like they did with the education companies last year, there's
Speaker 1: no way an investor could recover from that. And it's
Speaker 1: very similar to what we see in Russia. In fact,
Speaker 1: with the freedom metrics that we use from the Cat
Speaker 1: Institute and the Fraser Institute, a a combination of seventy
Speaker 1: nine variables encompassing personal and economic freedoms, China ranks worse
Speaker 1: than Russia. So this is great. I have to say,
Speaker 1: like I'm already really loving this, and I've asked one question,
Speaker 1: but Jeremy, listening to you, describe sort of the valuation
Speaker 1: opportunity that you see here in Perth. Hearing your counter that, Okay,
Speaker 1: China isn't a free society. You don't know what's going
Speaker 1: to happen to you know, your investments, things can change overnight.
Speaker 1: I'm curious do you at all consider, you know, f
Speaker 1: R D M a E s G fund from that standpoint? Yeah,
Speaker 1: So we have two type to investors, and some people
Speaker 1: are both like myself on both. Um we have one
Speaker 1: that is wanting to align their values for freedom and
Speaker 1: human rights UM in emerging markets and and that's one
Speaker 1: type investor. And we have one type investor that believes
Speaker 1: that freer markets will outperform. And we have seen twenty
Speaker 1: outperformance over e M since inception. Um so, so that
Speaker 1: is another type of invest Now, we don't always promise
Speaker 1: that kind of out performance, just very stark right now
Speaker 1: because of what has happened in the market. UM So,
Speaker 1: don't expect that going forward, I would say, but I
Speaker 1: do expect freer countries to outperform because they have more
Speaker 1: sustainable growth, they recover faster from draw downs, and they
Speaker 1: have better allocation of personal and economic capital, so they
Speaker 1: use their capital more efficiently and have less capital flight
Speaker 1: and capital destruction. UM So, yeah, I do consider it
Speaker 1: kind of an E s G product. We don't sell
Speaker 1: ourselves that way because we don't use company level s
Speaker 1: G metrics. But what we found is that on the
Speaker 1: country level, UM, when that G is in place, that
Speaker 1: the S and the E on both the country level
Speaker 1: and the security level level tends to take care of
Speaker 1: itself and we have an A rating from MSCI on
Speaker 1: y s G actually far fund. Okay, let's move to Russia. Um.
Speaker 1: And by the way, I like just go into debate
Speaker 1: mode that I like that. I would just stand back
Speaker 1: like an old school presidential debate. You guys, just go
Speaker 1: at it. Um, let's talk about Russia. I mean, obviously
Speaker 1: everybody's seen what's happened. Russia has gotten dropped from all
Speaker 1: the major indexes, and it's basically those stocks are worth
Speaker 1: nothing basically. Um. But you know, Jeremy, talk about what
Speaker 1: happens if I don't know, there's a resolution, how's all
Speaker 1: this come back to normal? So they've been dropped from
Speaker 1: the major indexes besides for Wisdom Trees, UM. So we
Speaker 1: have not So you haven't dropped them. We have not
Speaker 1: dropped them from the indexes, um, partly because you're I
Speaker 1: think the question some people ask is are they now
Speaker 1: in the funds? They're being marked zero? Okay, you can't
Speaker 1: trade these stocks, So even the removal is symbolic. Okay.
Speaker 1: So it's it's like a statement that we are against
Speaker 1: Russia and we're not. We're not pro Russia at Wisdom Trede.
Speaker 1: That's not what I'm saying at all, but I saying
Speaker 1: these securities may not be valued at zero. And as CEO,
Speaker 1: I'm responsible for assuring we get the best value for
Speaker 1: our funds. And if they're not necessarily valued at zero,
Speaker 1: should you make that symbolic statement today? And so this
Speaker 1: comes back to this E S G question. There's no
Speaker 1: question about it. Um. But so today they're still in
Speaker 1: the indexes we'll have to We don't have a rebound,
Speaker 1: so there's nothing to do today. Our next rebound is
Speaker 1: in November, which is where I'll get even more interesting, um,
Speaker 1: if nothing is resolved or they're not worth more than zero.
Speaker 1: But we haven't made that statement. But we also think
Speaker 1: about like what are the other Are there other countries
Speaker 1: like a China that becomes an issue and and and
Speaker 1: at thirty of the market, it's so much you'd say
Speaker 1: it's a bigger issue. Um. What's interesting is our fund
Speaker 1: that had the most Russia coming into this year was
Speaker 1: d E M High dividend Value. The PS and these
Speaker 1: baskets are six times earnings. It's up to on the
Speaker 1: year when the markets down ten, the S ANDPS down seven.
Speaker 1: So despite being overweight Russia that's now being valued at zero,
Speaker 1: it's still up to which is just telling you how
Speaker 1: strong the value rotation has been UM. But also those
Speaker 1: things may not be worth zero. So that's one of
Speaker 1: the reason why we haven't the reason why we haven't
Speaker 1: kicked it out. Yeah, it's interesting RSX stopped trading van
Speaker 1: Neck with the exchange said you can't trade it. I'm
Speaker 1: have a feeling Vane would would actually prefer to trade.
Speaker 1: I know if I owned RSX UM, I would rather
Speaker 1: just hang in there and wait then have it just
Speaker 1: liquidated it like a dollar or zero um per. Obviously
Speaker 1: this to pivot to you on this UM you know
Speaker 1: we're you know Russia has it ever been in your fund?
Speaker 1: We have never owned Russia, China, Saudi Arabia, Egypt, Turkey,
Speaker 1: or any of the other autocracies. And that's just a
Speaker 1: natural result of the freedom waiting. So our job is
Speaker 1: to find the best opportunities in emerging markets for our investors,
Speaker 1: and we believe those opportunities exist in the freer markets.
Speaker 1: If you have a company that's trying to do good,
Speaker 1: for example, in a freer market versus an un free market.
Speaker 1: In a freer market, they're going to be rewarded and
Speaker 1: incentivized to provide the best value for their clients. That
Speaker 1: is how they compete by making other people's lives better.
Speaker 1: In another free market, you're going to be rewarded by
Speaker 1: gaining the favor of the government. Your entire job is
Speaker 1: to curry favor with the government. And that is why
Speaker 1: a lot of Wall Street firms want to be there
Speaker 1: right now, because if they get the favor of the government,
Speaker 1: that's a monopoly, and the government's going to keep all
Speaker 1: your competitors out, even if they offer a better value.
Speaker 1: So we're here to provide investors with access to markets
Speaker 1: that have the conditions in place to support and encourage
Speaker 1: companies that are willing to put their own, their stakeholders,
Speaker 1: and their customers interests first ahead of those of the state.
Speaker 1: And so we think those are the better opportunities. So
Speaker 1: we don't want to be in countries like Russia, where
Speaker 1: the state's interests always come first. Can I do a
Speaker 1: bad host thing and go back to China? Okay, so, jeremy,
Speaker 1: I am curious. I mean it feels like every few
Speaker 1: months we get worried about potential delisting of Chinese companies
Speaker 1: of the A D r S. I would just love
Speaker 1: to know how you approach that at Wisdom Trade, because
Speaker 1: it feels like, again we're in one of those modes
Speaker 1: where that's a concern for sure. Um. So I say
Speaker 1: a few things. One is we have a woman, Leechen Rent,
Speaker 1: who we had hired away from Vanguard, and she I
Speaker 1: think produces I think some of the best commentary on
Speaker 1: what's happening in China. So I encourage everybody to follow
Speaker 1: Lee chen Um in that regard. She's been on top
Speaker 1: of a lot of what she sees as the narrative
Speaker 1: versus the reality on the ground. One of the things
Speaker 1: we did in our indexes we did add more A shares,
Speaker 1: so we now have about a third A shares in
Speaker 1: our indexes. So we had were migrating away from the
Speaker 1: US listings where we could. We had been early on
Speaker 1: going from Ali Baba US to Ali Baba Hong Kong,
Speaker 1: so we've been moving towards all of those places. It's
Speaker 1: one of those questions, should you have the US listings.
Speaker 1: Recently there were some headlines saying that they were resolving
Speaker 1: the tensions in the Chinese stocks. Flew Um, I'm not
Speaker 1: sure they're completely resolving the tensions, UM, and so I
Speaker 1: think there's more of the to play out. So we'll
Speaker 1: we're gonna continue to migrate towards the Hong Kong away
Speaker 1: from the US. There will be sensitive information they don't
Speaker 1: want in the US listings. UM. So that that's gonna
Speaker 1: be one of those When did you start that process,
Speaker 1: that migration. It's interesting we were ahead of M S
Speaker 1: C I and having Ali Baba, and then we were
Speaker 1: ahead and moving. I think over we're trying to stay
Speaker 1: a little bit ahead on that, but we at each rebalance.
Speaker 1: We've been taking those type of steps in the last
Speaker 1: two years. Okay, so look, we just went over the
Speaker 1: two big problem children and E M. And I think
Speaker 1: you've heard, you know from both sides. I want to
Speaker 1: actually talk about some things you guys have in common
Speaker 1: and so per, let's let's look at F R D M.
Speaker 1: Here's an E T F that had forty four million
Speaker 1: dollars a year ago. It just hit two hundred millions.
Speaker 1: So congratulations, UM the first I think the first hundred
Speaker 1: million is the hardest. I'm sure you can detest that. UM.
Speaker 1: And I guess I just want to talk about, like
Speaker 1: what you're experiencing as somebody who because I think a
Speaker 1: lot of people have ideas for a t F S.
Speaker 1: So you're one person with one idea and one E
Speaker 1: t F. How are you getting the word out? And
Speaker 1: how much is it fish jumping in the boat now
Speaker 1: versus you having to hustle down every dollar? So this morning,
Speaker 1: I've learned that I have a reputation for pushing product hard.
Speaker 1: So I don't know if that's part of it. What
Speaker 1: else are you supposed to do? Yeah, so I am
Speaker 1: the only one, UM pushing the product hard. But you
Speaker 1: know what, the whole time, I've never been alone UM
Speaker 1: here at this conference. I mean this is the biggest
Speaker 1: one of the biggest et F conferences, maybe to replace
Speaker 1: the other one. UM. You know, it's all everybody that
Speaker 1: I've seen since I've been here has been a part
Speaker 1: of our success. And you guys everybody else that has,
Speaker 1: you know, given us their platform to to tell the story.
Speaker 1: And I think that the E t F industry is
Speaker 1: just very welcoming to new stories like this, UM, and
Speaker 1: I'm very grateful for that. So, UM, I do kind
Speaker 1: of want to address what to be a bad guest
Speaker 1: what Jeremy said on his last answer about China, though,
Speaker 1: if I could like revert back, I like it. I
Speaker 1: like it. Go ahead. Humanative, that's what we are, that's
Speaker 1: here so uh so, so you know, talking about the
Speaker 1: China narratives versus actual policy action. UM. You know, right
Speaker 1: now we're seeing a shut down in Shanghai. Um, it's
Speaker 1: a very tragic situation, and there's more COVID cases than
Speaker 1: in there were in Wuhan, and we're seeing zero deaths.
Speaker 1: Now that's just not that believable to me. So if
Speaker 1: you don't even have correct data, I don't know how
Speaker 1: many PhDs you know you you can use to justify um,
Speaker 1: any of the data that that we use for investing
Speaker 1: or impact purposes coming out of China. I mean, they're
Speaker 1: saying that the stocks jumped the day that the government
Speaker 1: said that they would support or um support the the
Speaker 1: you know, listing rules in the US. But PRC National
Speaker 1: Intelligence Law Article seven, which was in acted in two
Speaker 1: thousand seventeen, what das seeing BALFA is the Chinese name
Speaker 1: for that. I mean that that it says all of
Speaker 1: the company's information are state secrets, and so I just
Speaker 1: don't see how they could comply with Chinese law. And
Speaker 1: also comp I with American law when they are saying
Speaker 1: these these things to try to boost at the stock
Speaker 1: market at a time when the capital is fleeing China
Speaker 1: for this reason. Well, we agree that the listing standards
Speaker 1: wasn't as rosy as what what they what the headlines
Speaker 1: were reading. We were telling people that don't go that
Speaker 1: far as what they're saying. Um, Lee Chen is saying
Speaker 1: now that the Shankhai situation is actually getting better than
Speaker 1: what's being popularly reported. So she's she's on the Shankhai
Speaker 1: is gonna get unlocked down soon in the next few days,
Speaker 1: like I don't know the exact time, like, but she's
Speaker 1: she's saying that when starting to turn the corner. Um,
Speaker 1: I'm gonna be a good host and bring us out
Speaker 1: of the depths of the details of China which are
Speaker 1: fascinating and we see the images and it's it's wild again.
Speaker 1: Like I said, I think people's psyches have changed a
Speaker 1: little in this topic for sure. Um. But I want
Speaker 1: to go back as to you guys issuers, because a
Speaker 1: lot of issuers in the room here and at the conference,
Speaker 1: and and I think at home people are sort of
Speaker 1: are you curious about what it's like to have a
Speaker 1: hit product. And Jeremy, Um, I remember four or five,
Speaker 1: well maybe some times flying maybe six seven years ago,
Speaker 1: you were like the bell of the ball here because
Speaker 1: d x J was like on fire. That's the Japan
Speaker 1: hedge DTF. It was like one of those perfect moments
Speaker 1: where it like fit the narrative, the returns were awesome,
Speaker 1: and it I think it was the biggest inflow et
Speaker 1: F one year, beating i VV all the vanguards. I mean,
Speaker 1: that's that never happens, right. Obviously h E d J
Speaker 1: was another one. That's the Europe hedge. So this currency
Speaker 1: hedge fad was like the hula hoop for a while.
Speaker 1: I mean everybody was in it. I remember being at
Speaker 1: a conference in Texas and this guy's like, yeah, the
Speaker 1: boss slacks the d x J, and I was like, man,
Speaker 1: this thing is sweeping the country. Um now those two
Speaker 1: aren't even in your top ten by assets now. Obviously
Speaker 1: it was this huge ride up and down. Talk about
Speaker 1: that experience and you know what what you're trying to
Speaker 1: do to get things back on track with those former
Speaker 1: rock stars. That's interesting today as a firm, we have
Speaker 1: about eighty billion globally we're the most diversified we've ever been.
Speaker 1: We had, you know, acquired a firm in Europe which
Speaker 1: is very commodities heavy. So like today are a u
Speaker 1: M is up on the year. When how many asset
Speaker 1: managers with a large scale presence can say that when
Speaker 1: the marks are down ten percent, bonds are down even
Speaker 1: more so where like where the most eperside we've ever been.
Speaker 1: So a lot of the core business has been like
Speaker 1: a forty five degree line trendline, but then you have
Speaker 1: that blip, as you said, like the blip higher, blip
Speaker 1: back down. They're now about four billion combined from their
Speaker 1: peaks of like forty billion combined. So it's amazing to
Speaker 1: have witness the rocket ship in the we call the hangover.
Speaker 1: I mean, what's interesting is the the end today is
Speaker 1: back to the all time low levels that when dctually
Speaker 1: was at its peak and people just haven't been caring,
Speaker 1: which is which is a very interesting dynamic. So on
Speaker 1: our team we call that the second play at the Apple.
Speaker 1: And it just seems like it doesn't happen if you
Speaker 1: look at funds from the nineties and the eighties, and
Speaker 1: these trends usually when the when the trade comes back.
Speaker 1: People just they just are in at the second time.
Speaker 1: But you're right, you do have what four or five
Speaker 1: billion and you had you know, if you just erase
Speaker 1: the up and down, it looks like a nice little growth.
Speaker 1: Any more questions for open up to the artist. I
Speaker 1: have a question, UM, I do want to ask about
Speaker 1: f R d M. This is a question that I'm
Speaker 1: going to steal from Todd Rosenbluth. Actually, I'm curious what
Speaker 1: countries are on the cusp of getting added to your
Speaker 1: e t F because I mean, we've talked a lot
Speaker 1: about what isn't in there. I love to know what
Speaker 1: could make it into their Yeah, So I'm gonna start
Speaker 1: with what countries are in there currently. So the top
Speaker 1: four countries, which are always typically the top four, these
Speaker 1: don't change very much, is Taiwan, South Korea, Turkey, and
Speaker 1: Poland and Chili and Poland. UM, I don't know if
Speaker 1: you with tydes of notice. Chili is benefited from UM
Speaker 1: the commodities trade since the beginning of the Ukraine crisis,
Speaker 1: and UM, Poland has been on the forefront of fighting
Speaker 1: for freedom, helping Ukraine. UM in that in that sense
Speaker 1: that we're very proud of that Um. Now the country
Speaker 1: is on the CUSP. There are several India was in
Speaker 1: in two thousand twenty left in two thousand twenty one.
Speaker 1: Got dropped because of several things. They increased the repression
Speaker 1: of their cashmere peoples, they had more media repression from
Speaker 1: the government, and they blacked out internet in places that
Speaker 1: had protests. So due to those human rights issues, their
Speaker 1: score dropped in two thousand twenty and they were dropped
Speaker 1: from the index. Now they're very much on the CUSP
Speaker 1: and could come in at any point. Brazil is on
Speaker 1: the CUSP currently in could go out at any point. Um. Malaysia, Thailand,
Speaker 1: and Columbia are some other countries that are on the CUSP.
Speaker 1: On the CUSP. These countries, Uh, it's interesting the e
Speaker 1: M and they get graduate to the bigger indices. In
Speaker 1: your case, it's a whole different kind of graduation. Um.
Speaker 1: All right, um, look, let's let's have some fun here. Everybody. Somebody,
Speaker 1: if you have a question, raise your hand and there's
Speaker 1: a mic that you can use. But if you we
Speaker 1: can't get the mic, I'll just repeat the question. So
Speaker 1: somebody out there help me and break the ice. Is
Speaker 1: Todd Rosen blues In the room nature racy. Come on, somebody,
Speaker 1: come on, come on. You can even ask them like
Speaker 1: their favorite movie, uh or maybe their favorite stocks. Oh,
Speaker 1: here we go. Thank you? All right? Hold on, yes,
Speaker 1: hold on, let me repeat it. Because what percentage of
Speaker 1: the value trade in the emerging markets is directly related
Speaker 1: to commodities. So I mentioned two different funds, So d
Speaker 1: e M was high dividend e M And to the
Speaker 1: point on how different markets are today, I mean, there
Speaker 1: was a point when in two thousand and eight commodities
Speaker 1: energy materials are like a third of MSc E margin marketing.
Speaker 1: Today it's it's small double digits in D E M.
Speaker 1: It's it's close to between energy and material so it's
Speaker 1: it's it's a high number UM. So it's a big
Speaker 1: part of that. D G asked this small cap which
Speaker 1: is a value part that was also positive on the
Speaker 1: year when the end is downten UM is not so
Speaker 1: commodity centric. It's more it has some of the Taiwan
Speaker 1: that Perth was mentioning Korea, it's got India. It's sort
Speaker 1: of a broader than commodities. Industrial is local manufacturing, but
Speaker 1: so not as much in the commodity sectors. It's a
Speaker 1: little bit of both, but in d em in particular
Speaker 1: very high. Yes, sir, Okay, what do you think that
Speaker 1: will happen? I picked the wrong were my I should
Speaker 1: have won more T shirt today, Um, Jeremy talking about yes.
Speaker 1: So here's the question is who and when? Well, I
Speaker 1: guess when will the spot bit koiny TF be approved
Speaker 1: and who will be the big winner? Whoever's out first
Speaker 1: is basically an instant billionaire. They can just go retire. UM.
Speaker 1: I know you guys want to be first, but we
Speaker 1: take that. We're trying hard. UM. We've added some features
Speaker 1: to our filings that Gensler is looking for. UM. The
Speaker 1: question is is there's any filing going to be in
Speaker 1: his in his mind with the exchanges, is to get
Speaker 1: a regulatory exchange where it could be traded, I think
Speaker 1: is one of the big question. But we were adding
Speaker 1: the forty Act features that he likes, trying to use
Speaker 1: a a bank custodian. That's different than some of the
Speaker 1: other filings. UM, but you know it's it's an open question.
Speaker 1: We're not waiting on him. We've been working on an
Speaker 1: indexing business, a direct indexing business. You're a lot about
Speaker 1: direct indexing. Equities and bonds, and there's number of platforms
Speaker 1: uh some here UM with former colleagues that Eric Dave
Speaker 1: Abner from Gemini in particular, that are can make it
Speaker 1: make it access to these products through a direct s
Speaker 1: m A uh. And so we're working on indexes for
Speaker 1: that type of application and and going beyond just the
Speaker 1: spot bitcoining. And you have products in Europe right where
Speaker 1: anything goes over there. You can launch a mid Were
Speaker 1: you the ones who undercut UM I forget who it was?
Speaker 1: Twenty one shares maybe on a Huolka dot etf So
Speaker 1: we launched a few. So yeah, we were early bitcoin
Speaker 1: ether baskets. We have a fifty fifty, We have an
Speaker 1: add coins large cap. We did Polka Dot, Salana and
Speaker 1: Cardano three of them. So yeah, you're doing a lot
Speaker 1: of the katie. You probably have e tp s for tokens.
Speaker 1: I haven't even heard about yet. So I have heard
Speaker 1: about Polka dot well, I think there's a fee war
Speaker 1: already on Polka dot ETPs in the Europe. In Europe,
Speaker 1: and we don't have a spot e t F. Hence
Speaker 1: my my shirt that I made specifically, I'm surprised aren't
Speaker 1: carrying it. Around here. It's dirty. I sweat a lot yesterday.
Speaker 1: It's hot here. Um, okay, anyone else question? Yeah, sure,
Speaker 1: in the back. Yeah, I'll be a bad audience number
Speaker 1: and take the conversation back to a previous topic. I
Speaker 1: like it you raised currency hedging and developed markets, but
Speaker 1: actually curious about how both of you think about emerging markets.
Speaker 1: And when you are bullish about an emerging market, is
Speaker 1: it more the currency, is that the actual equities? Is
Speaker 1: it both? How they interacting? What do you think about that?
Speaker 1: All it? So the question is currency hedging typically used
Speaker 1: in international developed like Japan in Europe? What about em
Speaker 1: do you guys like to apply currency hedging there? Um?
Speaker 1: Given the cost? So I've been big on saying in
Speaker 1: developed markets a it's a better than free option to hedge.
Speaker 1: And I say it's a better than free option because
Speaker 1: in general you're paid to hedge as a US investor,
Speaker 1: particularly now, is the FEDS raising rates in the Bank
Speaker 1: of Japan's negative, the CBS negative, Swiss is very negative,
Speaker 1: and so you have this huge positive carry. And I
Speaker 1: wrote a piece on on Monday talking about how the
Speaker 1: dollar is like the most negatively correlated asset to the
Speaker 1: sp five hundred more negatively than BOX. So like why
Speaker 1: people like to bet on these currencies going up forever,
Speaker 1: which I call on compensated US I don't understand that,
Speaker 1: So that goes back to that question. UM. In e M, though,
Speaker 1: it's not better than free option. You have to pay
Speaker 1: the carry, and the carry is high on average, and
Speaker 1: the very high um like Brazil height to double digit rates,
Speaker 1: so then you've gotta be breaking even. You got the
Speaker 1: currencies go down by more than that ten percent and
Speaker 1: carry on average, which is a tougher proposition. So I'd
Speaker 1: say EM has been different. If you're gonna do it,
Speaker 1: be very tactical, dynamic on time in terms of timing
Speaker 1: those things. We did launch a family of dynamic hedging
Speaker 1: type things to try to help with that, to manage
Speaker 1: to cost better and also to try to use factors
Speaker 1: in developed world to do that as well. Um, but
Speaker 1: it's not the same in e M as in developed
Speaker 1: I mean, EM currencies are up this year with the
Speaker 1: carry when the dollar is up. So it's another fascinating proposition. Yeah,
Speaker 1: we don't specifically hedge currencies in our product, but what
Speaker 1: we do have is a metric for sound money. So
Speaker 1: we're gonna be in the markets that have more sound
Speaker 1: monetary policies that have had less inflation historically. UM. And
Speaker 1: we actually have investors who have told me they're investing
Speaker 1: because the freer markets have less currency risk, and so
Speaker 1: that's one of the main risks in EM that we
Speaker 1: do address through that sound money metric. Good question one
Speaker 1: or two more? I think you had one up here? No,
Speaker 1: oh you, I couldn't. I did, I did that? That?
Speaker 1: That must have been their question. Oh yeah, is that
Speaker 1: you Jeremy? Okay, alright, Hi, I haven't. I haven't seen
Speaker 1: Hi yet. I just saw you just now for the
Speaker 1: first time. Okay, Hey, I have a question for Perth UM.
Speaker 1: How is how much interest has your product been garnering
Speaker 1: from E S G allocators and UM and UM and
Speaker 1: E S G seeking institutions because it seems like your
Speaker 1: product is the most based on the most fundamental G
Speaker 1: of all. Yeah, question is how much is Perth's product
Speaker 1: f R d M been creating interest from institutions? UM
Speaker 1: And that's a great question because I would also add
Speaker 1: on to that, do you fear an institution liking your
Speaker 1: idea and then just doing it on their own. We're
Speaker 1: using someone else or having someone else make the product
Speaker 1: for them. Yeah. So we actually most of the product
Speaker 1: right now, I would say the entire a U S
Speaker 1: is retail and retail advisors. UM. I would say of
Speaker 1: that most of them are in it for the potential
Speaker 1: outperformance in emerging markets that are more free. UM. But
Speaker 1: we do have a lot more interest from institutions now
Speaker 1: that we're big enough to to get institutional attention and
Speaker 1: money and UM we have seen a lot of that.
Speaker 1: We were you know, started and starting to get invited
Speaker 1: to respond to our piece, which I'm very loath to
Speaker 1: do just because it's a massive, massive process and we're
Speaker 1: still pretty small. UM. But you know, maybe as we
Speaker 1: grow will do more of that. UM. We have had
Speaker 1: some institutions that have asked us for our proprietary methodologies
Speaker 1: and things like that. UM. And so so yeah, I
Speaker 1: think there is always the concern, hey, are you just
Speaker 1: trying to do this for yourself? UM, But I think
Speaker 1: for the most part they've seen our kind of track record.
Speaker 1: We have that almost three year as of next month's
Speaker 1: track record UM. And as institutions adapt more to I
Speaker 1: think ETS they will be more open to it. We
Speaker 1: do also license our in us to institutions. Um, some
Speaker 1: that are y s G doing additional y s G overlays.
Speaker 1: So like the religious organizations, for example, will license the
Speaker 1: index and put their own overlays on top of our
Speaker 1: country weights. Um, so there is that option for them
Speaker 1: as well. Yes, alright over here, I want to take
Speaker 1: this up a level higher. So if you're talking to clients,
Speaker 1: I would love person Jeremy I for you guys to
Speaker 1: explain your kind of case at that most basic level. So,
Speaker 1: if you've decided to pull out of questionable countries and
Speaker 1: go full on, you know, freedom, how do you explain
Speaker 1: that decision to clients who might be worried about missing
Speaker 1: out on potential upsides? And if, on the other hand,
Speaker 1: you make the decision to stay in China or Russia
Speaker 1: or those countries, and you have clients who are concerned
Speaker 1: about that, how do you defend that decision or explain
Speaker 1: that position to clients. So kind of at the highest level,
Speaker 1: how do you justify those things outside of the nerds
Speaker 1: in this room? Yeah, So the question is if you
Speaker 1: went with Perth and you didn't have China, Russia and
Speaker 1: those countries started coming back and you underperformed, how do
Speaker 1: you deal with clients saying, oh, you know, I'm bummed
Speaker 1: we didn't we're under performing now. And then on Jeremy's side,
Speaker 1: what about now where you are underperforming because you have
Speaker 1: those countries and people might you know, I guess, how
Speaker 1: do you deal with the complainers? Jeremy's letting me go
Speaker 1: first on this because I have an unfair advantage. Right
Speaker 1: now we are seeing only people that are coming to
Speaker 1: be saying, wow, I thank you for making me look
Speaker 1: so smart. Thank you. You know my clients that the
Speaker 1: joy and relief of my clients when I tell them
Speaker 1: how we invested for them. Um So I am seeing
Speaker 1: the opposite of that right now. But in the past
Speaker 1: I have heard those um kind of objections to this
Speaker 1: type of strategy. How can you have no China? It's
Speaker 1: you know, second biggest market in the world, and you
Speaker 1: know it's freedom waiting, and that's that's what we do.
Speaker 1: This is the for people who believe in the benefits
Speaker 1: of freedom and want to capture that in their emerging markets. Allocations,
Speaker 1: you know, are returns are up. We're up since inception
Speaker 1: three years ago. Um e M is up in that
Speaker 1: same time period. So we don't have to defend the
Speaker 1: performance right now. Their time may come a time and
Speaker 1: I expect that when we will have to defend that performance.
Speaker 1: And it still comes down to that kind of freedom
Speaker 1: waiting that we we just can't de gate from that. That
Speaker 1: That is our strategy in our theme and so with
Speaker 1: some Tree, you know, we've been a factory investor. Our
Speaker 1: first funds launched in June of two thousand and six,
Speaker 1: all very value dividend base and then you had this
Speaker 1: huge growth market. So you know it was you were
Speaker 1: going into the headwind for a long time. I means finally,
Speaker 1: in a way you got a changing dynamic today. So
Speaker 1: we started where we launched high dividends and value and
Speaker 1: oh seven for e m UM, we didn't have the
Speaker 1: growthy option and as we started to about how do
Speaker 1: you get a core with a growth told that's when
Speaker 1: we started looking at state owned companies and we saw
Speaker 1: like an Ali Baba and these other China tech companies
Speaker 1: were the predominant of what e m growth was. And
Speaker 1: so we had launched these core products with a growth
Speaker 1: tilt being broad em with the the day don't tilt
Speaker 1: and when the China specific one and so a lot
Speaker 1: of it is the factor exposures you're trying to get
Speaker 1: so you know, eat broad em, that's core more growth
Speaker 1: oorent did you go X stay down value? You go
Speaker 1: for dividends, and you know they have different cases. One
Speaker 1: is if you think China is being discounted today, that
Speaker 1: being this uninvestable narrative, which is very true. I mean,
Speaker 1: that's that's the what you hear all the time. You say,
Speaker 1: you know, do you think there's actual value that and
Speaker 1: people are overly discounting that and that when becomes turned
Speaker 1: into an opportunity, or if you just think this inflation
Speaker 1: coming back to how Katie started that inflation is a
Speaker 1: key issue. Growth is going to be continued under pressure.
Speaker 1: That's where value dividends are really shining around the world,
Speaker 1: US E M broader national Uh, that factor has been
Speaker 1: the key factor and I think that's true in EM
Speaker 1: as well. All right, Katie, are you doing over there?
Speaker 1: Doing pretty good? It's fascinating. I will say I have
Speaker 1: learned a lot and it's great to I mean, this
Speaker 1: has been such a great panel. I'm glad that you
Speaker 1: I'm sorry podcast this is specifically not a panel, but
Speaker 1: it's great to get both perspectives on this topic, and
Speaker 1: we have a fun closing question that we ask all
Speaker 1: our guests. UM and I will start with Jeremy and
Speaker 1: then Perth. What is your favorite e t F ticker
Speaker 1: that is not your own favorite ticker? Not my own? Um,
Speaker 1: do I have any favorites? Are you are? You're that
Speaker 1: locked into wisdom for you don't even know what else exists.
Speaker 1: I'll give perth is sh out here. I mean, I
Speaker 1: like freedom. It's a good concept. I'll give a shout. Okay, Perth,
Speaker 1: you can't pick a wisdom tree ticker. It's just too
Speaker 1: it's too much. Yeah, okay, uh is moves still around.
Speaker 1: It is moves the most popular answer. By the way,
Speaker 1: what about meme is pretty good? Yeah, it's good. I'm
Speaker 1: just saying moves moves like the Mona Lisa of tickers.
Speaker 1: They just it's hard to beat that. Um. I also
Speaker 1: like verbs, so who is right? And there's also is
Speaker 1: Romo Romo And by the way, Romo is in the crowd,
Speaker 1: not Tony Tony. But by the way, as an Eagles fan,
Speaker 1: when I saw that you launched that it, I had
Speaker 1: to deal with that for a while. But now he's
Speaker 1: a good announcer. So is it's okay, but anyway, um,
Speaker 1: all right, well, I want to thank you guys for
Speaker 1: coming on. I want to thank you guys for attending
Speaker 1: and uh, great job. Thank you, thank you. Thanks for
Speaker 1: listening to Trillions. Until next time. You can find us
Speaker 1: on the Bloomberg Terminal, Bloomberg dot com, Apple Podcast, Spotify,
Speaker 1: and wherever else you'd like to listen. We'd love to
Speaker 1: hear from you. We're on Twitter. I'm at Joel Webber Show.
Speaker 1: He's at Eric Faltunas. This episode of Trillions was produced
Speaker 1: by Magnus Hendrickson. Francesca Levie is the head of Bloomberg
Speaker 1: podcast Spipe to the Theater and to