1 00:00:06,000 --> 00:00:06,720 Speaker 1: Welcome to Trillions. 2 00:00:06,720 --> 00:00:09,280 Speaker 2: I'm Joel Webber and I'm Eric Belchunas. 3 00:00:12,600 --> 00:00:15,040 Speaker 1: Eric, we have not done a mail bag episode in 4 00:00:15,080 --> 00:00:17,440 Speaker 1: a really long time, and people have questions. 5 00:00:18,480 --> 00:00:21,479 Speaker 2: Yeah, and we have all kinds of vacation schedules that 6 00:00:21,520 --> 00:00:23,360 Speaker 2: we're managing around, so this is a good time to 7 00:00:23,480 --> 00:00:25,239 Speaker 2: just phone one in. 8 00:00:25,360 --> 00:00:29,800 Speaker 1: Joel, Well, when we never phone anything in, I happen 9 00:00:29,880 --> 00:00:32,000 Speaker 1: to be remote in the off while we're recording this, 10 00:00:32,080 --> 00:00:35,640 Speaker 1: and I'm still gonna ask some questions on behalf of 11 00:00:36,800 --> 00:00:39,400 Speaker 1: many of our listeners and some of your Twitter followers 12 00:00:39,400 --> 00:00:42,559 Speaker 1: and your LinkedIn followers and anybody else who had some 13 00:00:42,680 --> 00:00:45,600 Speaker 1: questions that they want to get answered to help us 14 00:00:46,600 --> 00:00:48,360 Speaker 1: wade through some of the weeds. We're also going to 15 00:00:48,360 --> 00:00:51,720 Speaker 1: be joined by Athanasio Sarah Figus, an ETF analyst with 16 00:00:51,720 --> 00:00:58,800 Speaker 1: Bloomberg Intelligence, this time on Trillians bail Bag. Athanasos, Welcome 17 00:00:58,800 --> 00:00:59,440 Speaker 1: back to Trillions. 18 00:01:00,040 --> 00:01:01,040 Speaker 3: Hey, thanks for having me on. 19 00:01:01,680 --> 00:01:03,400 Speaker 1: Okay, so you know how this works. We've asked for 20 00:01:03,400 --> 00:01:05,479 Speaker 1: a bunch of questions and we're going to rattle through 21 00:01:05,480 --> 00:01:08,480 Speaker 1: as many of them as we can this episode. You're 22 00:01:08,520 --> 00:01:11,720 Speaker 1: going to hop in whenever warranted. Eric, the first question, 23 00:01:11,800 --> 00:01:14,840 Speaker 1: I'm going to ask of you comes from John Andrew 24 00:01:14,880 --> 00:01:19,959 Speaker 1: Carter Junior, who asked, what's the next big tech innovation 25 00:01:20,560 --> 00:01:25,360 Speaker 1: in exchange traded funds that will affect the way I invest? 26 00:01:27,680 --> 00:01:29,360 Speaker 2: I mean i'd have to go with eat the ETF 27 00:01:29,360 --> 00:01:32,760 Speaker 2: share class which is coming out this summer, probably later 28 00:01:32,840 --> 00:01:37,759 Speaker 2: this summer or early fall, where a mutual fund will 29 00:01:37,800 --> 00:01:39,880 Speaker 2: just be able to bolt on an ETF share class. 30 00:01:40,080 --> 00:01:43,399 Speaker 2: Only Vanguard does that currently, but there's I think over 31 00:01:43,520 --> 00:01:49,160 Speaker 2: sixty different active managers that have filed for this basically 32 00:01:49,360 --> 00:01:54,280 Speaker 2: exception to a rule, and if they get approved, which 33 00:01:54,280 --> 00:01:57,919 Speaker 2: we heard they will, we're looking at basically all mutual 34 00:01:57,920 --> 00:01:59,560 Speaker 2: funds will I mean not all of them, but a 35 00:01:59,600 --> 00:02:01,840 Speaker 2: lot of them. You'll be able to just transfer from 36 00:02:01,880 --> 00:02:04,440 Speaker 2: your mutual fund share to your ETF share. So I 37 00:02:04,480 --> 00:02:06,640 Speaker 2: think for people out there who are you know, have 38 00:02:06,680 --> 00:02:09,799 Speaker 2: been wanting to leave and not have a tax hit 39 00:02:09,840 --> 00:02:12,840 Speaker 2: when they leave, they can now do that and it 40 00:02:12,919 --> 00:02:15,200 Speaker 2: should be very interesting. I think it will be a 41 00:02:15,720 --> 00:02:18,840 Speaker 2: drain from the mutual fund to the ETF, but that 42 00:02:18,880 --> 00:02:20,640 Speaker 2: money was probably going to go over there anyway. This 43 00:02:20,800 --> 00:02:24,119 Speaker 2: just makes it a little easier, more tax efficient, and lets 44 00:02:24,120 --> 00:02:27,280 Speaker 2: some of these old legacy active managers save a client 45 00:02:27,400 --> 00:02:30,920 Speaker 2: rather than losing one. So that's I would it's not 46 00:02:31,400 --> 00:02:33,760 Speaker 2: the most interesting tech innovation. I think that's what they're 47 00:02:33,760 --> 00:02:36,720 Speaker 2: talking about tech with the structure, would you do something different? 48 00:02:36,800 --> 00:02:39,200 Speaker 4: No, I think that's spot on. I was thinking maybe 49 00:02:39,280 --> 00:02:42,240 Speaker 4: like tokenization, which is like what Robinhood's trying to do. 50 00:02:42,680 --> 00:02:45,920 Speaker 4: They just announced that that could be something, you know, 51 00:02:46,080 --> 00:02:50,760 Speaker 4: maybe allowing access to things that were not able to 52 00:02:50,800 --> 00:02:54,440 Speaker 4: fit into the ETF, like private equity. But that might 53 00:02:54,480 --> 00:02:56,680 Speaker 4: be a tall order, right. ETFs give you a really 54 00:02:56,720 --> 00:02:59,040 Speaker 4: good deal. You have pretty much access to everything. But 55 00:02:59,160 --> 00:03:02,600 Speaker 4: I think that the tokenization stories can be around for 56 00:03:03,919 --> 00:03:04,360 Speaker 4: some time. 57 00:03:04,720 --> 00:03:08,720 Speaker 1: Okay, as long as we're talking about tokenization, Alvarro Martinez asks, 58 00:03:09,360 --> 00:03:13,880 Speaker 1: as tokenization of real world assets gains traction, how do 59 00:03:13,919 --> 00:03:19,679 Speaker 1: you envision tokenized ETFs transforming the traditional ETF structure, particularly 60 00:03:19,680 --> 00:03:25,280 Speaker 1: in terms of settlement efficiency, investor access, regulatory oversight. Could 61 00:03:25,320 --> 00:03:28,440 Speaker 1: this technology catalyze the emergence of twenty four to seven 62 00:03:28,480 --> 00:03:32,320 Speaker 1: ETF markets or fractional ownership beyond what's already achievable with 63 00:03:32,400 --> 00:03:33,240 Speaker 1: standard ETFs. 64 00:03:34,280 --> 00:03:39,240 Speaker 2: So it's very interesting, it's exciting to Robinhood just announced 65 00:03:39,240 --> 00:03:43,800 Speaker 2: their tokenizing everything for Europeans who want to get easier 66 00:03:43,840 --> 00:03:47,640 Speaker 2: access to US equities, and they even said, oh, we're 67 00:03:47,640 --> 00:03:51,560 Speaker 2: going to tokenize VU. But there's already a Vanguard SMPO 68 00:03:51,560 --> 00:03:54,000 Speaker 2: five underd ETF in Europe called v USA, which is 69 00:03:54,000 --> 00:03:57,560 Speaker 2: easily accessible and cheap. So I think, you know, when 70 00:03:57,600 --> 00:04:02,200 Speaker 2: you think about tokenization, what is it actually do? If anything, 71 00:04:02,320 --> 00:04:05,600 Speaker 2: it cleans up the back office a little. Using the blockchain, 72 00:04:05,960 --> 00:04:08,920 Speaker 2: you can have faster settlement times, you could do twenty 73 00:04:08,920 --> 00:04:11,440 Speaker 2: four to seven, But I mean, how many people really 74 00:04:11,480 --> 00:04:14,400 Speaker 2: need that. I think the big thing for tokenization is 75 00:04:14,440 --> 00:04:17,320 Speaker 2: for people who don't have access to a stock market, 76 00:04:17,400 --> 00:04:21,080 Speaker 2: right So for the developing countries, tokens can be a 77 00:04:21,080 --> 00:04:24,640 Speaker 2: life saver, especially stable coins, which are just basically tokenized dollars. 78 00:04:25,200 --> 00:04:28,839 Speaker 2: There I'm very bullish on that. But for the developing world, 79 00:04:28,920 --> 00:04:33,120 Speaker 2: for the developed world, where we all have the ability 80 00:04:33,160 --> 00:04:37,080 Speaker 2: to roll out of bed in our underwear, still roll 81 00:04:37,120 --> 00:04:42,920 Speaker 2: over to Schwab, open up the Internet and hit by 82 00:04:43,440 --> 00:04:45,800 Speaker 2: and we can own almost anything under the sun in 83 00:04:45,839 --> 00:04:49,360 Speaker 2: one second for almost no fee. I just don't really 84 00:04:49,440 --> 00:04:51,600 Speaker 2: know how you're going to disrupt that. That's about is 85 00:04:52,560 --> 00:04:55,720 Speaker 2: clean and easy and low cost as you could possibly get, 86 00:04:56,080 --> 00:04:59,440 Speaker 2: and convenient so I think the tokenization story will be 87 00:04:59,440 --> 00:05:01,400 Speaker 2: one of a back office story. I think they'll use 88 00:05:01,400 --> 00:05:05,440 Speaker 2: the blockchain to maybe streamline some stuff in the back office, 89 00:05:05,440 --> 00:05:08,239 Speaker 2: but you, as the user, probably won't know that notice 90 00:05:08,240 --> 00:05:12,160 Speaker 2: the difference. But I could be wrong. So I'm bullish 91 00:05:13,200 --> 00:05:19,200 Speaker 2: tokenization as a back office a disintermediator, but I'm bearished 92 00:05:19,200 --> 00:05:23,320 Speaker 2: tokenization in terms of killing the ETF at least for now. 93 00:05:23,320 --> 00:05:26,200 Speaker 2: I'm evolving on this issue, but I just don't see 94 00:05:26,320 --> 00:05:30,400 Speaker 2: enough to disrupt what I just described in the rolling 95 00:05:30,400 --> 00:05:31,720 Speaker 2: out of bed visual. 96 00:05:32,400 --> 00:05:34,520 Speaker 4: I mean, I mostly aligned with Eric on this, like 97 00:05:35,040 --> 00:05:37,880 Speaker 4: the back end, Like do people really care about that 98 00:05:37,960 --> 00:05:40,320 Speaker 4: for the most part, Like it's for the you know, 99 00:05:40,360 --> 00:05:42,120 Speaker 4: it's pretty good already we already have you know, they're 100 00:05:42,120 --> 00:05:43,640 Speaker 4: already trying to move the T one settlement. 101 00:05:43,720 --> 00:05:45,080 Speaker 3: Anyways, I think. 102 00:05:44,920 --> 00:05:49,159 Speaker 4: The benefits are marginal, like okay, twenty four seven trading whatever, 103 00:05:49,200 --> 00:05:51,800 Speaker 4: So just it's not it's not enough benefits to be 104 00:05:51,839 --> 00:05:54,919 Speaker 4: a disruptor like the ETF was to the mutual fund. 105 00:05:55,520 --> 00:05:57,520 Speaker 4: You know, I might give you act some cool stuff, 106 00:05:57,560 --> 00:06:00,760 Speaker 4: but I'm still I'm with Eric on this one. 107 00:06:00,880 --> 00:06:04,000 Speaker 2: The other thing is, what is an etfis that would 108 00:06:04,000 --> 00:06:07,760 Speaker 2: be cool if it was tokenized. Okay, private equity maybe art, 109 00:06:08,000 --> 00:06:11,200 Speaker 2: you know, stuff like this, but a lot of that, 110 00:06:11,279 --> 00:06:14,240 Speaker 2: like private equity, let's take that. You can't really like 111 00:06:14,360 --> 00:06:18,560 Speaker 2: sidestep to the regulations and just have a token out 112 00:06:18,560 --> 00:06:21,560 Speaker 2: there for retail. I believe that the regulators won't really 113 00:06:21,600 --> 00:06:25,760 Speaker 2: appreciate that. So even if something seems like, oh it 114 00:06:25,800 --> 00:06:28,640 Speaker 2: hasn't been etfised, a token would fill in. I don't 115 00:06:28,640 --> 00:06:32,000 Speaker 2: know how cleanly you can get that done without dealing 116 00:06:32,000 --> 00:06:35,440 Speaker 2: with regulations. So the regulatory issue is a whole nother 117 00:06:35,760 --> 00:06:38,680 Speaker 2: problem here that will have to be surmounted. That said, 118 00:06:39,120 --> 00:06:42,280 Speaker 2: this particular sec somebody had commented to me when I 119 00:06:42,320 --> 00:06:45,320 Speaker 2: was basically saying, I don't I'm not really bullish on 120 00:06:45,400 --> 00:06:48,160 Speaker 2: robin Hood. And also, you see the guy from robin 121 00:06:48,160 --> 00:06:50,359 Speaker 2: Hood with it looks like Johnny Depp from the movie 122 00:06:50,360 --> 00:06:54,880 Speaker 2: Blow Yeah, and he's out there talking about tokenization and 123 00:06:55,440 --> 00:06:58,640 Speaker 2: in like in con Paris or whatever, and I mean 124 00:06:58,680 --> 00:07:00,719 Speaker 2: it was pretty showy. And I'm I'm not saying he's 125 00:07:00,760 --> 00:07:05,520 Speaker 2: not smart, But when I think about that company trying 126 00:07:05,520 --> 00:07:07,280 Speaker 2: to advertise is like, oh, we're going to give you 127 00:07:07,320 --> 00:07:09,800 Speaker 2: all this stuff for low cost, And then I think 128 00:07:09,800 --> 00:07:12,160 Speaker 2: of like Jack Bogel and Vanguard. I just don't know 129 00:07:12,320 --> 00:07:15,560 Speaker 2: if people are going to leave that boy Scout, trust 130 00:07:15,560 --> 00:07:18,280 Speaker 2: the Vanguard and black Rock and move over to Robinhood 131 00:07:19,040 --> 00:07:21,440 Speaker 2: at least the big giant blob of money. Maybe some 132 00:07:21,520 --> 00:07:25,560 Speaker 2: of the younger people. I don't really see that being 133 00:07:25,640 --> 00:07:29,080 Speaker 2: that attractive. And if something's free, if Robinhood's saying it free, 134 00:07:29,280 --> 00:07:32,320 Speaker 2: don't trust me. They are charging you somewhere else. It's 135 00:07:32,360 --> 00:07:35,360 Speaker 2: probably going to pay for orderflow. They're probably selling your 136 00:07:35,480 --> 00:07:38,080 Speaker 2: order flow to like Citadel, getting money there and you 137 00:07:38,120 --> 00:07:41,680 Speaker 2: don't know it. So be careful out there when it 138 00:07:41,720 --> 00:07:44,120 Speaker 2: comes to those kind of pitches, in my opinion, And 139 00:07:44,200 --> 00:07:47,800 Speaker 2: so I don't know. I'm just skeptical because the US 140 00:07:47,880 --> 00:07:51,000 Speaker 2: ETF market is the terroor dome. It is so hard. 141 00:07:51,000 --> 00:07:54,560 Speaker 2: I've seen so many legacy companies come here and get humbled. 142 00:07:55,040 --> 00:07:59,280 Speaker 2: It's hell for issuers but heaven for investors. And that 143 00:07:59,440 --> 00:08:02,560 Speaker 2: hell is something that I feel like Robin Hood's trying 144 00:08:02,600 --> 00:08:06,000 Speaker 2: to sidestep here. I just I have more faith in 145 00:08:06,040 --> 00:08:08,120 Speaker 2: a more bullish on companies that have come into the 146 00:08:08,120 --> 00:08:11,160 Speaker 2: ETF terrodome and figured out a way to survive and 147 00:08:11,240 --> 00:08:15,080 Speaker 2: thrive in an honest fashion. I'm just so I'm not 148 00:08:15,120 --> 00:08:17,320 Speaker 2: willing to like let go of all that and be like, oh, 149 00:08:17,360 --> 00:08:18,320 Speaker 2: token to the new thing. 150 00:08:18,400 --> 00:08:20,840 Speaker 3: Can't do it now, I'm with you, okay. 151 00:08:21,000 --> 00:08:25,520 Speaker 1: Just on the topic of tokenization, Brian Tovar asks, from 152 00:08:25,600 --> 00:08:29,520 Speaker 1: a custody ownership perspective, what's the difference between owning a 153 00:08:29,560 --> 00:08:32,840 Speaker 1: tokenized stock versus an ETF stock? 154 00:08:35,320 --> 00:08:36,679 Speaker 4: I mean, that's kind of where I get hung up, 155 00:08:36,760 --> 00:08:40,080 Speaker 4: is I don't understand the difference. Like, if Microsoft is 156 00:08:40,160 --> 00:08:42,320 Speaker 4: Microsoft stock and you knowing that in a token form, 157 00:08:42,640 --> 00:08:45,640 Speaker 4: why not just own the ETF owned Microsoft stock unless 158 00:08:45,679 --> 00:08:49,920 Speaker 4: they're issuing tokens like Microsoft tokens. Why I don't Still 159 00:08:50,200 --> 00:08:53,839 Speaker 4: I'm struggling to wrap my head around. Besides the back 160 00:08:53,960 --> 00:08:56,439 Speaker 4: end benefits and maybe twenty four hour trading, those sort 161 00:08:56,480 --> 00:09:00,800 Speaker 4: of marginal benefits, what's the real meaningful difference between the two. 162 00:09:01,000 --> 00:09:02,720 Speaker 2: The other problem is, you know, you got all these 163 00:09:02,760 --> 00:09:05,400 Speaker 2: market makers and aps involved that people don't see. And 164 00:09:05,440 --> 00:09:08,720 Speaker 2: this is like heavy duty liquidity and financial institutions, and 165 00:09:08,720 --> 00:09:12,800 Speaker 2: they're smart. They arbitrage the price and the underlying all 166 00:09:12,840 --> 00:09:16,000 Speaker 2: the time. And I've asked people, what's gonna happen if 167 00:09:16,040 --> 00:09:19,559 Speaker 2: people start using tokens? Well, will the whole Wall Street 168 00:09:19,559 --> 00:09:23,920 Speaker 2: apparatus just move over? Because then what about exchanges too, 169 00:09:24,040 --> 00:09:26,439 Speaker 2: And there's some people say all that's gonna go away 170 00:09:26,840 --> 00:09:29,440 Speaker 2: and everything's gonna be on the blockchain. But a couple 171 00:09:29,480 --> 00:09:33,240 Speaker 2: of things. A. I think you're gonna find percent prems 172 00:09:33,240 --> 00:09:36,240 Speaker 2: and discounts. Some people say we can automate the market making. 173 00:09:36,520 --> 00:09:38,680 Speaker 2: I don't know, Like I think the system right now 174 00:09:38,800 --> 00:09:41,760 Speaker 2: is what we call antifragile. You can call somebody, people 175 00:09:41,840 --> 00:09:46,440 Speaker 2: have experience, there's many of them. The token world seems like, okay, 176 00:09:46,480 --> 00:09:49,400 Speaker 2: we could like save a little time on the settlement. 177 00:09:50,040 --> 00:09:52,480 Speaker 2: You can trade twenty four to seven. Costs are gonna 178 00:09:52,480 --> 00:09:53,800 Speaker 2: be the same. It's not like token to be cheap. 179 00:09:53,800 --> 00:09:56,600 Speaker 2: It can't be cheaper than ETFs. So again, it's marginal 180 00:09:56,640 --> 00:10:00,240 Speaker 2: benefit for a lot more fragility, it seems to me. 181 00:10:00,280 --> 00:10:04,160 Speaker 2: And as I've joked about with somebody on Twitter, centralization 182 00:10:04,400 --> 00:10:07,000 Speaker 2: has its benefits, which is meaning you can call somebody 183 00:10:07,640 --> 00:10:10,880 Speaker 2: if there's a real problem, you can take legal action. 184 00:10:11,120 --> 00:10:15,600 Speaker 2: There's prospectuses. This is where I think centralization has its 185 00:10:15,679 --> 00:10:19,120 Speaker 2: perkss you go full DeFi it's a little while west. 186 00:10:19,720 --> 00:10:23,319 Speaker 2: So I don't actually know how all these questions will 187 00:10:23,320 --> 00:10:27,079 Speaker 2: be answered again. The reason ETFs were such a big 188 00:10:27,160 --> 00:10:33,240 Speaker 2: hit is because mutual funds were slow, expensive, not that liquid, 189 00:10:33,440 --> 00:10:35,800 Speaker 2: and a lot of the costs were internalized. The taxes 190 00:10:35,800 --> 00:10:39,240 Speaker 2: weren't good. ETFs corrected like five things. I mean, it 191 00:10:39,280 --> 00:10:43,559 Speaker 2: was like five evolutionary steps. Tokenization seemed like one little baby, 192 00:10:44,200 --> 00:10:45,720 Speaker 2: like a little mouse step. 193 00:10:45,800 --> 00:10:49,000 Speaker 4: Yeah, I feel it doesn't change the experience, right, go 194 00:10:49,040 --> 00:10:51,400 Speaker 4: one to your schwabap whatever you buy Microsoft boom, and 195 00:10:51,440 --> 00:10:53,280 Speaker 4: I feel like when the market's open, I get a 196 00:10:53,280 --> 00:10:55,839 Speaker 4: fail fair price on Microsoft. I don't know what I'm 197 00:10:55,840 --> 00:10:58,480 Speaker 4: doing if I'm trading at like three am right like 198 00:10:58,559 --> 00:11:01,400 Speaker 4: on the blockchain, it just feels like I don't understand 199 00:11:01,440 --> 00:11:04,920 Speaker 4: how that really like improves the user experience. 200 00:11:06,440 --> 00:11:08,240 Speaker 1: Okay, there are a number of things in there to 201 00:11:08,320 --> 00:11:10,400 Speaker 1: follow up on, but I want to start with one 202 00:11:10,440 --> 00:11:15,760 Speaker 1: from an ex username discover Lightcoin, who asks how profitable 203 00:11:15,960 --> 00:11:20,880 Speaker 1: are ETFs really to the issuers and what variables determine 204 00:11:20,880 --> 00:11:23,880 Speaker 1: if a new ETF launches a success or failure. 205 00:11:24,840 --> 00:11:27,160 Speaker 2: ETFs are not that profitable for the assets they have. 206 00:11:27,280 --> 00:11:31,680 Speaker 2: So they have like eleven trillion in assets and they 207 00:11:31,720 --> 00:11:35,160 Speaker 2: bring in what like ten billion in revenue every year, right, 208 00:11:35,240 --> 00:11:38,280 Speaker 2: so maybe a little more, and then market makers make 209 00:11:38,520 --> 00:11:41,760 Speaker 2: about that too. So but to contrast, I believe mutual 210 00:11:41,800 --> 00:11:44,920 Speaker 2: funds pulling like one hundred and twenty five billion in revenue, 211 00:11:45,000 --> 00:11:50,160 Speaker 2: so it's just like and hedge funds pulling like triple ETFs, 212 00:11:50,160 --> 00:11:53,080 Speaker 2: and they have less assets, so every other structure makes 213 00:11:53,160 --> 00:11:54,679 Speaker 2: way more money. That's why when I go to these 214 00:11:54,679 --> 00:11:57,079 Speaker 2: crypto conferences and they think they're like the big disruptor, 215 00:11:57,120 --> 00:11:59,760 Speaker 2: and I'm like, dude, ETFs are way more punk rock 216 00:11:59,800 --> 00:12:01,760 Speaker 2: than you think. That's why all the money goes into 217 00:12:01,760 --> 00:12:05,199 Speaker 2: the bitcoin ETF is because it's so cheap and easy 218 00:12:05,240 --> 00:12:09,720 Speaker 2: that the ETF has a lot of disruptive power because 219 00:12:09,720 --> 00:12:14,720 Speaker 2: the consumers know it's a good deal and they will 220 00:12:15,160 --> 00:12:17,760 Speaker 2: sell you out for an ETF that's like two basis 221 00:12:17,760 --> 00:12:21,280 Speaker 2: points cheaper. I mean, they are brutal consumers, but when 222 00:12:21,320 --> 00:12:22,880 Speaker 2: you service them, and like you said, if you can 223 00:12:22,880 --> 00:12:25,080 Speaker 2: make it there, you're going to do well. Now, there's 224 00:12:25,080 --> 00:12:28,679 Speaker 2: certainly room for some etf to be profitable. You know, 225 00:12:28,720 --> 00:12:31,040 Speaker 2: you can carve out a good living there. Black Rock 226 00:12:31,080 --> 00:12:35,600 Speaker 2: probably the best example. And then there's some hail mary's 227 00:12:35,600 --> 00:12:38,040 Speaker 2: that do well, like the two X Navidia that makes 228 00:12:38,080 --> 00:12:41,760 Speaker 2: six million a year. So there's been some like one 229 00:12:41,840 --> 00:12:43,840 Speaker 2: off Hail Mary ones that have really done well. But 230 00:12:43,880 --> 00:12:46,920 Speaker 2: for the most part, it's a hard business. It's tough. 231 00:12:47,000 --> 00:12:50,040 Speaker 2: Wall Street would rather ETFs have not been this successful. 232 00:12:50,080 --> 00:12:50,680 Speaker 2: I can tell you that. 233 00:12:51,240 --> 00:12:54,320 Speaker 1: Okay, follow up question from the same user, what will 234 00:12:54,360 --> 00:12:58,560 Speaker 1: happen to see a bitcoin or Ethereum etf sell off 235 00:12:58,600 --> 00:13:00,760 Speaker 1: their assets and shut down and say they're on the 236 00:13:00,760 --> 00:13:03,359 Speaker 1: bottom of the list for flows. Are they still profitable? 237 00:13:03,960 --> 00:13:07,400 Speaker 2: So at Bitcoin ETF, even the lowest one of the 238 00:13:07,440 --> 00:13:11,120 Speaker 2: spots is totally profitable. That's why this was such a 239 00:13:11,440 --> 00:13:13,920 Speaker 2: crazy launch, is that I think wisdom Tree might have 240 00:13:13,960 --> 00:13:17,160 Speaker 2: the least of the eleven or twelve out there, maybe hashtacks, 241 00:13:17,640 --> 00:13:20,520 Speaker 2: but they're all in profit mode already. That's rare. Now 242 00:13:20,559 --> 00:13:23,319 Speaker 2: on ether, I believe the couple towards the bottom are 243 00:13:23,880 --> 00:13:26,360 Speaker 2: maybe not profitable. I would say, if you're going to 244 00:13:26,440 --> 00:13:29,000 Speaker 2: charge twenty five thirty BIPs, which is what they most charge, 245 00:13:29,080 --> 00:13:32,800 Speaker 2: you would need like about eighty million right to be profitable, 246 00:13:33,240 --> 00:13:34,840 Speaker 2: and I don't know if all the ether have that. 247 00:13:35,000 --> 00:13:39,360 Speaker 2: So over the next five years, you know, the spot 248 00:13:39,440 --> 00:13:41,200 Speaker 2: ETFs look pretty good, but there's going to be some 249 00:13:41,320 --> 00:13:43,679 Speaker 2: like you know, option overlay. It's not going to try 250 00:13:43,679 --> 00:13:45,440 Speaker 2: all kinds of stuff. And there will be closures that 251 00:13:45,480 --> 00:13:48,280 Speaker 2: are in the crypto ETF space for sure. And if 252 00:13:48,280 --> 00:13:50,920 Speaker 2: a closure happens, if it's a company like Wisdom Tree 253 00:13:50,920 --> 00:13:53,880 Speaker 2: and they close a fund, there's the company's still profitable. 254 00:13:54,280 --> 00:13:56,600 Speaker 2: They just choosing to close that fund rather than sort 255 00:13:56,640 --> 00:13:58,600 Speaker 2: of like you know, put more money into to try 256 00:13:58,600 --> 00:14:00,880 Speaker 2: to sell it to make it profitable. It's really no 257 00:14:00,960 --> 00:14:02,080 Speaker 2: different than any other business. 258 00:14:02,160 --> 00:14:02,320 Speaker 3: You know. 259 00:14:02,520 --> 00:14:05,520 Speaker 2: You you attempt all these products, you hope some of 260 00:14:05,520 --> 00:14:09,360 Speaker 2: them hit. Usually have a couple of blockbuster hits, a 261 00:14:09,360 --> 00:14:12,120 Speaker 2: couple in the middle, and then maybe a couple duds, 262 00:14:12,600 --> 00:14:15,800 Speaker 2: and some issuers will keep those duds alive longer than others. 263 00:14:16,559 --> 00:14:19,480 Speaker 2: Some close quicker. But I'd imagine in the crypto space, 264 00:14:19,520 --> 00:14:23,320 Speaker 2: since it is so fledgling and new, you'll probably have 265 00:14:23,680 --> 00:14:26,200 Speaker 2: them hang in a little longer than if they were 266 00:14:26,200 --> 00:14:27,760 Speaker 2: trying some random theme ETF. 267 00:14:28,080 --> 00:14:30,280 Speaker 4: Oh okay, you now understand, Yeah, you're Right's probably punched 268 00:14:30,280 --> 00:14:32,600 Speaker 4: his way above its weight, like profitability wise and some 269 00:14:32,680 --> 00:14:35,640 Speaker 4: other categories. And I think Bloomberg News just covered this 270 00:14:35,800 --> 00:14:38,640 Speaker 4: right that black rocks ibit is like one of their 271 00:14:38,640 --> 00:14:42,360 Speaker 4: most profitable. I think third or second. It makes more 272 00:14:42,400 --> 00:14:45,920 Speaker 4: than their SMP product, So yeah, it definitely it speaks 273 00:14:45,920 --> 00:14:47,440 Speaker 4: to the demand there too, and the ability to be 274 00:14:47,480 --> 00:14:48,600 Speaker 4: able to charge a little bit more. 275 00:14:48,800 --> 00:14:48,960 Speaker 3: Yeah. 276 00:14:49,040 --> 00:14:52,760 Speaker 2: Joel Ethan actually helped News with this data. Ibit is 277 00:14:52,880 --> 00:14:56,720 Speaker 2: third in profitability out of twelve hundred ETFs that Blackrock has, Joel, 278 00:14:56,800 --> 00:14:59,880 Speaker 2: it's number three, and if it gets nine billion more 279 00:15:00,640 --> 00:15:02,880 Speaker 2: based on the fee, it will be the most profitable. 280 00:15:02,960 --> 00:15:06,000 Speaker 2: And nine billion is only a ten or eleven percent 281 00:15:06,280 --> 00:15:09,240 Speaker 2: increase in Bitcoin's price, so it doesn't even need any 282 00:15:09,280 --> 00:15:11,800 Speaker 2: new flows, just a nice little run in bitcoin. It 283 00:15:11,840 --> 00:15:14,040 Speaker 2: will be the number one most profitable et from black 284 00:15:14,120 --> 00:15:16,520 Speaker 2: Rock at a year and a half old. It's it's 285 00:15:16,600 --> 00:15:21,200 Speaker 2: absolutely bonkers. So that said, people are like, oh, Blackrock 286 00:15:21,280 --> 00:15:23,120 Speaker 2: is getting away with murder. He I'm like not really. 287 00:15:23,360 --> 00:15:25,880 Speaker 2: Twenty five BIPs for that is pretty fair. Up until 288 00:15:25,880 --> 00:15:28,200 Speaker 2: Blackrock came out, you had to pay two percent or 289 00:15:28,200 --> 00:15:30,960 Speaker 2: one point five percent at best in Europe or in 290 00:15:31,000 --> 00:15:35,360 Speaker 2: hedge funds, so twenty five is dramatically cheaper. I think 291 00:15:35,400 --> 00:15:38,000 Speaker 2: this is a win win. You know, in capitalism, you 292 00:15:38,040 --> 00:15:40,320 Speaker 2: want to if somebody's first has a good idea, has 293 00:15:40,320 --> 00:15:43,360 Speaker 2: a good price, point, it's okay to make some money. 294 00:15:43,760 --> 00:15:45,880 Speaker 2: I just so, I think this is a case where 295 00:15:45,880 --> 00:15:46,760 Speaker 2: everybody won here. 296 00:15:47,240 --> 00:15:47,720 Speaker 3: Yeah, I agree. 297 00:15:47,760 --> 00:15:49,800 Speaker 4: I mean they're giving you IVV at three BIPs, right, 298 00:15:49,880 --> 00:15:53,360 Speaker 4: like everything can't be free. But yeah, overall, it's a 299 00:15:53,400 --> 00:15:56,120 Speaker 4: tough business. It's not even for these ascid managers. ETFs 300 00:15:56,160 --> 00:15:58,800 Speaker 4: are such a small part of their revenue. Like JP Morgan, 301 00:15:58,800 --> 00:16:01,840 Speaker 4: who's killing it, it's still like one percent of their 302 00:16:01,880 --> 00:16:02,680 Speaker 4: total revenue. 303 00:16:02,840 --> 00:16:06,480 Speaker 2: They're so lucky. Some jol some of these companies. I 304 00:16:06,480 --> 00:16:10,400 Speaker 2: always said, the Wall Street banks probably have the best position. 305 00:16:11,160 --> 00:16:13,640 Speaker 2: If you have other things that make you money, you 306 00:16:13,680 --> 00:16:16,600 Speaker 2: can afford to get guts when it comes to your 307 00:16:16,600 --> 00:16:18,880 Speaker 2: ETF business. And JP Morgan did. They had the guts 308 00:16:18,920 --> 00:16:21,720 Speaker 2: to get cheap. They sold active at vanguardian fees and 309 00:16:21,760 --> 00:16:24,520 Speaker 2: they're killing it. But it's harder for a company to 310 00:16:24,520 --> 00:16:27,200 Speaker 2: do that when that's your only thing, because then you're 311 00:16:27,400 --> 00:16:30,600 Speaker 2: instantly cannibalizing. But for JP Morgan, because they got so 312 00:16:30,680 --> 00:16:33,200 Speaker 2: much going on, it's a little easier to have that 313 00:16:34,280 --> 00:16:38,280 Speaker 2: intestinal fortitude. 314 00:16:40,920 --> 00:16:46,960 Speaker 1: Okay, next question from pick god on X looking forward, 315 00:16:47,800 --> 00:16:50,600 Speaker 1: is there ever going to be a product that catches 316 00:16:51,200 --> 00:16:54,760 Speaker 1: or matches VU, which is obviously vanguards just and P 317 00:16:54,840 --> 00:16:57,680 Speaker 1: five ETFs interesting. 318 00:16:59,080 --> 00:17:02,840 Speaker 2: I think VO will be king for I don't want 319 00:17:02,880 --> 00:17:06,119 Speaker 2: to say ever, but I'd say at least ten years. 320 00:17:06,600 --> 00:17:10,879 Speaker 2: So Michael Saylor, famous for micro Strategy CEO, replied to 321 00:17:10,960 --> 00:17:14,840 Speaker 2: one of my tweets colored weeks strategy. Sorry, yeah, it's 322 00:17:14,880 --> 00:17:21,600 Speaker 2: just hey, it's cleaner, that's okay. Anyway, strategy, he said, 323 00:17:22,280 --> 00:17:25,000 Speaker 2: mark my words, ibit will be the biggest ETF. So 324 00:17:25,240 --> 00:17:26,920 Speaker 2: I did the math on this, and I think he 325 00:17:27,000 --> 00:17:30,040 Speaker 2: said within ten years. I did the math, Joel. It 326 00:17:30,080 --> 00:17:35,040 Speaker 2: would have to like Quinn triple its flows. WU would 327 00:17:35,119 --> 00:17:37,919 Speaker 2: have to chill, and the S and P would have 328 00:17:37,960 --> 00:17:40,000 Speaker 2: to stop going up, and Bitcoin would have to rally. 329 00:17:40,359 --> 00:17:44,320 Speaker 2: So a lot would have to happen in that scenario. 330 00:17:44,400 --> 00:17:46,760 Speaker 2: I think you have a case where maybe the US 331 00:17:47,000 --> 00:17:50,280 Speaker 2: stock market has real issues and somehow Bitcoin is looked 332 00:17:50,280 --> 00:17:52,160 Speaker 2: at as the savior asset like and it just goes 333 00:17:52,240 --> 00:17:54,560 Speaker 2: up and up while the stock market goes down. That 334 00:17:54,680 --> 00:17:57,200 Speaker 2: scenario hasn't really happened. Bitcoin tends to have a little 335 00:17:57,200 --> 00:17:59,920 Speaker 2: more correlation to stocks, So as long as it's correlated, 336 00:18:00,359 --> 00:18:03,800 Speaker 2: I stn't see how that's possible, but I bits rise. 337 00:18:03,840 --> 00:18:06,120 Speaker 2: It's now the twenty third biggest ETF of all time 338 00:18:06,200 --> 00:18:08,879 Speaker 2: at one point four years old, which is insane to 339 00:18:08,880 --> 00:18:11,760 Speaker 2: be that high that quickly. I will never say never 340 00:18:11,800 --> 00:18:14,960 Speaker 2: with IBIT. I thought vt I would be bigger one 341 00:18:15,040 --> 00:18:17,200 Speaker 2: day because VOO and IVV be fighting over that same 342 00:18:17,240 --> 00:18:20,280 Speaker 2: assets and the total market. But it turns out people 343 00:18:20,359 --> 00:18:22,720 Speaker 2: want the S and P so bad, especially over any 344 00:18:22,720 --> 00:18:25,680 Speaker 2: other index or the total market that they just VU 345 00:18:25,800 --> 00:18:28,399 Speaker 2: and IVV can actually split some of that money and 346 00:18:28,480 --> 00:18:31,160 Speaker 2: VOU will still be the biggest. So I don't see 347 00:18:31,200 --> 00:18:33,240 Speaker 2: anything passing VU for at least a decade. 348 00:18:34,000 --> 00:18:36,280 Speaker 4: Yeah, it's too it's too big, and we can't live 349 00:18:36,280 --> 00:18:38,640 Speaker 4: in a world where ibit is the biggest ETF. VU 350 00:18:38,800 --> 00:18:41,520 Speaker 4: keeps us in check, right, It's like it is going 351 00:18:41,560 --> 00:18:41,920 Speaker 4: to quit. 352 00:18:42,119 --> 00:18:44,240 Speaker 2: He yeah, I will quit if I'm going to retire 353 00:18:44,359 --> 00:18:46,840 Speaker 2: if I BIT passes VU. It's like you know that 354 00:18:46,880 --> 00:18:49,800 Speaker 2: phrase no country for old analysts roll like this is 355 00:18:49,840 --> 00:18:52,080 Speaker 2: another one of the If I bid is the biggest ETF, 356 00:18:52,119 --> 00:18:55,240 Speaker 2: it's like a whole generation of people are just gonna 357 00:18:55,240 --> 00:18:56,280 Speaker 2: be like, I'm out. 358 00:18:57,040 --> 00:18:59,880 Speaker 3: Yeah, VU VO gives us some hope. 359 00:19:00,800 --> 00:19:02,880 Speaker 4: But all the point you said, though, they're spot on 360 00:19:02,920 --> 00:19:05,399 Speaker 4: that people you know, ibit's still always going to be 361 00:19:05,440 --> 00:19:08,120 Speaker 4: like a satellite position, so it's got to all come 362 00:19:08,160 --> 00:19:11,800 Speaker 4: from price, which vol you know, people can have sixty percent, 363 00:19:11,920 --> 00:19:13,600 Speaker 4: seventy percent allocations to VOO. 364 00:19:14,600 --> 00:19:18,040 Speaker 2: There's one black sheep here and that is a Fidelity 365 00:19:18,680 --> 00:19:21,880 Speaker 2: We're to do a conversion of its index SMP five 366 00:19:21,960 --> 00:19:25,400 Speaker 2: entered ETF. I believe right now that's already bigger than SPY, 367 00:19:25,560 --> 00:19:27,960 Speaker 2: So that would come in almost that where VU is. 368 00:19:28,640 --> 00:19:31,159 Speaker 2: And if Fidelity were to really you know, put in 369 00:19:31,200 --> 00:19:34,440 Speaker 2: its advisor network and Vanguard, you know, stumbled a little. 370 00:19:34,480 --> 00:19:37,800 Speaker 2: There's an outside chance that could be something is the 371 00:19:37,800 --> 00:19:41,240 Speaker 2: Fidelity conversion of an index mutual fund to an ETF, 372 00:19:41,240 --> 00:19:42,159 Speaker 2: But that's a little out. 373 00:19:42,000 --> 00:19:45,560 Speaker 1: There, okay. Next question comes from Liz Simmy who asked, 374 00:19:45,840 --> 00:19:48,840 Speaker 1: since active is the coolest thing in ETFs, can you 375 00:19:49,160 --> 00:19:53,200 Speaker 1: break down the difference between flows to traditional active strategies 376 00:19:53,240 --> 00:19:56,960 Speaker 1: in ETFs versus thematic in ets and how the flows 377 00:19:57,000 --> 00:19:57,840 Speaker 1: have changed over time. 378 00:19:58,400 --> 00:20:01,240 Speaker 4: Yeah, Active is a pretty fluid turn and ETFs, and 379 00:20:01,560 --> 00:20:05,440 Speaker 4: it's not traditional stock picking like, so flows to that 380 00:20:05,520 --> 00:20:09,920 Speaker 4: type of stuff is pretty pretty low. When we say active, 381 00:20:10,080 --> 00:20:15,520 Speaker 4: it's more things like single stock ETFs option overlays buffers, 382 00:20:15,720 --> 00:20:18,439 Speaker 4: which technically get classified as active. I get it that 383 00:20:18,480 --> 00:20:22,320 Speaker 4: it's not the traditional like stock picking, but I feel 384 00:20:22,359 --> 00:20:25,879 Speaker 4: like with all these ETF options single stocks, people are 385 00:20:25,880 --> 00:20:28,280 Speaker 4: their own active managers now, right, So instead of like 386 00:20:28,320 --> 00:20:31,920 Speaker 4: going to Kathy Wood to buy these like stocks, there's 387 00:20:31,960 --> 00:20:33,960 Speaker 4: like single stock versions of all these so they're just 388 00:20:34,119 --> 00:20:37,520 Speaker 4: ended up doing on themselves. So the breakdown if you 389 00:20:37,720 --> 00:20:40,680 Speaker 4: if you really look at it closely, it's not going 390 00:20:40,720 --> 00:20:43,640 Speaker 4: to like the how we think active traditionally. It's sort 391 00:20:43,640 --> 00:20:47,560 Speaker 4: of like this new generation of active, like mostly derivatives 392 00:20:47,640 --> 00:20:48,720 Speaker 4: usage and things like that. 393 00:20:49,280 --> 00:20:52,720 Speaker 2: Yeah, I think active is taking in forty percent of 394 00:20:52,760 --> 00:20:54,560 Speaker 2: all the flows, and that sounds like, oh my god, 395 00:20:55,119 --> 00:20:57,480 Speaker 2: active is back. It's a I could see a reporter 396 00:20:57,520 --> 00:21:00,200 Speaker 2: a tempted to write that headline, But as Ethan's said, 397 00:21:00,240 --> 00:21:02,159 Speaker 2: most of it is buffers and sort of you know, 398 00:21:02,280 --> 00:21:06,600 Speaker 2: derivative using stuff that is more solution oriented. That said, 399 00:21:06,760 --> 00:21:12,760 Speaker 2: there is some traction with traditional grandpa stockpicking active. You've 400 00:21:12,800 --> 00:21:16,520 Speaker 2: got Capital Group DFA, JP Morgan JP Morgan in particular, 401 00:21:17,240 --> 00:21:20,119 Speaker 2: and one of the reasons it's finally working is they 402 00:21:20,160 --> 00:21:22,520 Speaker 2: got cheap. Most of the products that take in money 403 00:21:22,560 --> 00:21:25,760 Speaker 2: from the grandfather active are now got their fun under 404 00:21:25,760 --> 00:21:28,320 Speaker 2: forty basis points. So I think there's a definitely a 405 00:21:28,359 --> 00:21:31,399 Speaker 2: group of advisors out there that still believes in Active, 406 00:21:31,440 --> 00:21:33,879 Speaker 2: but they want it served up a little cheaper. I 407 00:21:33,880 --> 00:21:36,040 Speaker 2: just want to pay for the active, not all the 408 00:21:36,080 --> 00:21:38,520 Speaker 2: beta which you can get for free and a Vanguard fund. 409 00:21:38,600 --> 00:21:41,479 Speaker 2: So I think Active is going through this repricing of 410 00:21:41,520 --> 00:21:44,200 Speaker 2: how much it's actually worth, and as it goes through 411 00:21:44,240 --> 00:21:45,960 Speaker 2: that it gets a little cheaper. I think it will 412 00:21:45,960 --> 00:21:50,360 Speaker 2: see actual real flows, But there's all the new fangled 413 00:21:50,359 --> 00:21:54,080 Speaker 2: stuff that kind of makes the active rebound story a 414 00:21:54,080 --> 00:21:56,639 Speaker 2: little more complex and just on thematic ETFs. I just 415 00:21:56,640 --> 00:21:58,720 Speaker 2: looked today. Actually they've taken in two billion this year 416 00:21:59,080 --> 00:22:01,399 Speaker 2: out of five hundred sixty billion to flows, so not 417 00:22:01,520 --> 00:22:03,880 Speaker 2: a lot when you look at themes. If you look 418 00:22:03,960 --> 00:22:07,880 Speaker 2: like some themes are on fire, like defense, everyone's taking 419 00:22:07,880 --> 00:22:10,320 Speaker 2: you money. It's a feeding frenzy. But then like ARC 420 00:22:10,480 --> 00:22:15,119 Speaker 2: and UH, the US infrastructure and the natural resources have 421 00:22:15,200 --> 00:22:19,000 Speaker 2: seen outflows, and so you tend to have like whatever's 422 00:22:19,040 --> 00:22:21,200 Speaker 2: going on in the market, there's always some theme ETF 423 00:22:21,280 --> 00:22:23,919 Speaker 2: like killing it, and there's always some that's suffering. So 424 00:22:24,000 --> 00:22:26,720 Speaker 2: them ETFs have a lot going on underneath and they're 425 00:22:26,760 --> 00:22:28,800 Speaker 2: they're they're viable to me. I think they'll be around 426 00:22:28,800 --> 00:22:30,919 Speaker 2: for a while, but I don't know if they're going 427 00:22:30,960 --> 00:22:33,200 Speaker 2: to like grow to any more than say, two to 428 00:22:33,240 --> 00:22:35,000 Speaker 2: three percent of all ETF assets. 429 00:22:35,520 --> 00:22:38,439 Speaker 1: Okay, next question comes from a next user named market Wizard. 430 00:22:38,760 --> 00:22:41,840 Speaker 1: What do you think of multi asset ETFs? 431 00:22:42,440 --> 00:22:44,960 Speaker 2: Oh, this is a good question. This is when you 432 00:22:45,040 --> 00:22:47,520 Speaker 2: combine like stock bond like it would be like a 433 00:22:47,560 --> 00:22:50,600 Speaker 2: target day fund essentially. I share just trying it. Everybody's 434 00:22:50,640 --> 00:22:54,320 Speaker 2: tried it, it it here's you know, eighth and alluditude early. 435 00:22:54,440 --> 00:22:58,520 Speaker 2: I think for the most part, when people invest in ETFs, 436 00:22:58,560 --> 00:23:02,400 Speaker 2: they want to be the decider. To quote w remember 437 00:23:02,480 --> 00:23:07,680 Speaker 2: in that movie W He's like, Dick, I'm the decider anyway, 438 00:23:08,000 --> 00:23:10,240 Speaker 2: great movie, underrated movie about George the b Bush. But 439 00:23:11,000 --> 00:23:13,399 Speaker 2: that word the decider always stuck with me, and I 440 00:23:13,440 --> 00:23:16,399 Speaker 2: think that the advisor wants to be the decider how 441 00:23:16,480 --> 00:23:19,280 Speaker 2: much goes in equity bonds. You can't be an advisor 442 00:23:19,320 --> 00:23:23,080 Speaker 2: and have one ticker and client portfolio because the client's 443 00:23:23,119 --> 00:23:24,960 Speaker 2: going to be like, why do I need you? I 444 00:23:24,960 --> 00:23:26,679 Speaker 2: think for four to one k is they're great, but 445 00:23:26,760 --> 00:23:30,000 Speaker 2: ETFs have don't really have an easy time penetrating four 446 00:23:30,040 --> 00:23:31,960 Speaker 2: one k, so outside of the form one k market, 447 00:23:32,200 --> 00:23:34,320 Speaker 2: I just think most people want to assemble the pieces, 448 00:23:34,800 --> 00:23:38,040 Speaker 2: and therefore a multi acid ETFs will always be relegated 449 00:23:38,080 --> 00:23:39,040 Speaker 2: to the fringe. Yeah. 450 00:23:39,080 --> 00:23:40,760 Speaker 4: I agree, And I think people are just in general 451 00:23:40,840 --> 00:23:44,280 Speaker 4: questioning that sixty forty model with bonds and they like, well, 452 00:23:44,359 --> 00:23:45,920 Speaker 4: they don't want to own bonds as much. They want 453 00:23:45,920 --> 00:23:49,280 Speaker 4: to own alternatives like crypto or whatever, and I think 454 00:23:49,440 --> 00:23:51,520 Speaker 4: those haven't caught up yet. Like if you're buying one 455 00:23:51,560 --> 00:23:54,359 Speaker 4: of these funds, it's just a pretty traditional model. So 456 00:23:54,520 --> 00:23:57,600 Speaker 4: maybe if they start getting a little bit, you know, 457 00:23:57,840 --> 00:24:00,600 Speaker 4: more innovative in the allocations, but overall, Eric, I think 458 00:24:00,600 --> 00:24:03,680 Speaker 4: it's just the category that's never really taken off. 459 00:24:05,440 --> 00:24:09,159 Speaker 1: The next question from Carrie Presley, who asks there are 460 00:24:09,200 --> 00:24:13,640 Speaker 1: a few clear explanations for the kind of redemption and 461 00:24:13,680 --> 00:24:17,600 Speaker 1: the tax efficiency of ETFs. Eric, a clear metaphor example 462 00:24:17,680 --> 00:24:18,800 Speaker 1: would be swell. 463 00:24:19,880 --> 00:24:23,840 Speaker 2: Okay, I've I've spent years on this. I used to 464 00:24:23,840 --> 00:24:25,600 Speaker 2: teach the new higher class and I go over crash 465 00:24:25,640 --> 00:24:28,479 Speaker 2: redemption and their eyes would glaze over. And in my survey, 466 00:24:28,520 --> 00:24:31,040 Speaker 2: that's when they'd say that part sucked. Everything else is interesting. 467 00:24:32,320 --> 00:24:35,400 Speaker 2: So I actually reframed it and I told the story 468 00:24:35,480 --> 00:24:38,800 Speaker 2: of how the ETF was designed. And I start with, like, 469 00:24:38,880 --> 00:24:40,960 Speaker 2: you know, the American Stock Exchange was in third place. 470 00:24:40,960 --> 00:24:43,679 Speaker 2: They were looking for a winner. And Nate most was 471 00:24:43,880 --> 00:24:46,600 Speaker 2: I don't know, in his sixties or seventies at the MX, 472 00:24:46,640 --> 00:24:50,080 Speaker 2: and he had worked at the commodity's warehouse and when 473 00:24:50,119 --> 00:24:52,280 Speaker 2: he was thinking about how to design the ETF and 474 00:24:52,359 --> 00:24:55,840 Speaker 2: make it so that costs of trading wouldn't infiltrate the 475 00:24:55,880 --> 00:24:59,520 Speaker 2: actual costs of the ETF, which would affect all the shareholders, 476 00:24:59,560 --> 00:25:01,119 Speaker 2: Like how do you say break trading costs from like 477 00:25:01,280 --> 00:25:05,399 Speaker 2: the shareholders? And he thought about commodity warehouse that he 478 00:25:05,480 --> 00:25:09,000 Speaker 2: worked at, and he thought, well, in that warehouse, you 479 00:25:09,000 --> 00:25:11,520 Speaker 2: have a bunch of soybean oil and you bring it 480 00:25:11,560 --> 00:25:13,879 Speaker 2: to the warehouse. They give you a receipt for your 481 00:25:13,920 --> 00:25:15,679 Speaker 2: soybean oil and they store it for you in a locker. 482 00:25:16,160 --> 00:25:18,840 Speaker 2: Then you can trade your receipts with other commodity traders 483 00:25:18,880 --> 00:25:20,960 Speaker 2: without having to move all the merchandise around. Right, it 484 00:25:21,000 --> 00:25:24,240 Speaker 2: makes sense. And let's you get a bunch of receipts 485 00:25:24,240 --> 00:25:27,440 Speaker 2: and you want actual soybean oil back. Then you take 486 00:25:27,480 --> 00:25:30,160 Speaker 2: your receipts and they give the exact proportion to soybean oil, 487 00:25:30,240 --> 00:25:33,240 Speaker 2: and then you have your goods. So all he did 488 00:25:33,400 --> 00:25:36,960 Speaker 2: was take that structure, that paradigm and say, instead of 489 00:25:37,200 --> 00:25:38,800 Speaker 2: soybean oil, what if I had the S and P 490 00:25:38,880 --> 00:25:41,359 Speaker 2: five hundred stocks. I could then take it to this 491 00:25:41,880 --> 00:25:44,760 Speaker 2: warehouse which is State Street and the custodian, and I 492 00:25:44,760 --> 00:25:49,560 Speaker 2: get a receipt for spy and that receipt is worth 493 00:25:49,600 --> 00:25:53,439 Speaker 2: fifty is fifty thousand shares worth of receipts, then I 494 00:25:53,480 --> 00:25:55,320 Speaker 2: can sell those in the open market. People can just 495 00:25:55,359 --> 00:25:58,240 Speaker 2: trade these receipts all day long, and then if there's 496 00:25:58,280 --> 00:26:00,520 Speaker 2: a surplus of receipts and we need to do a 497 00:26:00,560 --> 00:26:03,399 Speaker 2: creation or redemption, will go back to the warehouse. So 498 00:26:03,960 --> 00:26:06,960 Speaker 2: all it is is a commodity warehouse paradigm applied to 499 00:26:06,960 --> 00:26:10,800 Speaker 2: stocks and bonds. And the reason that's cool is because again, 500 00:26:10,840 --> 00:26:14,240 Speaker 2: when the receipts are trading, it's basically all everybody trading, 501 00:26:14,440 --> 00:26:17,240 Speaker 2: all the tax implifications and everything is on them. And 502 00:26:17,240 --> 00:26:19,840 Speaker 2: when a creation redemption happens, when you bring the stocks 503 00:26:19,880 --> 00:26:23,000 Speaker 2: get in exchange for the receipts or shares, there's no 504 00:26:23,160 --> 00:26:26,720 Speaker 2: money changing hands. And so when there's no money changing hands, 505 00:26:26,760 --> 00:26:30,800 Speaker 2: there's no taxation, and so there's no tax consequence in 506 00:26:30,800 --> 00:26:33,880 Speaker 2: the creation redemption process, which is the magic of why 507 00:26:33,920 --> 00:26:37,240 Speaker 2: ETFs don't kick out capital distributions capital gains distribution. So 508 00:26:38,080 --> 00:26:41,560 Speaker 2: that is I love stories like that because a lot 509 00:26:41,600 --> 00:26:44,200 Speaker 2: of times, you know, Steve Jobs always said like nothing 510 00:26:44,280 --> 00:26:47,400 Speaker 2: is wasted like that. You know the font he made, 511 00:26:47,400 --> 00:26:49,879 Speaker 2: the calligraphy and the early apple he got because he 512 00:26:49,960 --> 00:26:51,760 Speaker 2: just used to like skip class and go to the 513 00:26:52,560 --> 00:26:57,399 Speaker 2: this writing class. Things that happen in your old life 514 00:26:57,880 --> 00:27:01,000 Speaker 2: can come in really valuable or something you see overseas 515 00:27:01,040 --> 00:27:03,600 Speaker 2: you apply it to your country you're in. And that's 516 00:27:03,600 --> 00:27:05,480 Speaker 2: what happened here, and it was ingenius and that's the 517 00:27:05,480 --> 00:27:08,200 Speaker 2: secret sauce right there. Joel Eighthan, did your eyes glaze over? 518 00:27:08,560 --> 00:27:10,199 Speaker 3: Yeah? I fell asleep a little bit too. 519 00:27:10,240 --> 00:27:12,000 Speaker 4: That No, that was actually a really good explanation for 520 00:27:12,040 --> 00:27:16,000 Speaker 4: a topic that is kind of operational and dubba. And 521 00:27:16,080 --> 00:27:17,960 Speaker 4: this is why we talk about the share classes. Why 522 00:27:18,000 --> 00:27:19,679 Speaker 4: all met funds want to go towards that because they 523 00:27:19,760 --> 00:27:22,520 Speaker 4: get this benefit now, so which is why there's that 524 00:27:22,560 --> 00:27:24,240 Speaker 4: big push towards the ETF. 525 00:27:32,280 --> 00:27:37,280 Speaker 1: Okay, next question from Crypto Roy, how much notice is 526 00:27:37,400 --> 00:27:40,560 Speaker 1: usually required to close an ETF or move to a 527 00:27:40,600 --> 00:27:45,119 Speaker 1: different ETF. Are there usually fees involved with closing an ETF. Also, 528 00:27:45,160 --> 00:27:47,080 Speaker 1: if you move from one ETF to another, is this 529 00:27:47,119 --> 00:27:47,920 Speaker 1: a taxable event? 530 00:27:49,200 --> 00:27:51,480 Speaker 4: Oh, those are some good questions. I don't know about 531 00:27:51,480 --> 00:27:53,840 Speaker 4: the lead time from when they closed. There's definitely an 532 00:27:53,840 --> 00:27:55,800 Speaker 4: announcement they let you know, so you. 533 00:27:55,800 --> 00:27:58,240 Speaker 2: Have like sixty days maybe something like that. 534 00:27:58,320 --> 00:27:59,640 Speaker 3: Yeah, so they have a chance to get out. 535 00:27:59,720 --> 00:28:01,400 Speaker 4: Yeah, so give me a chance to wap you into 536 00:28:01,400 --> 00:28:03,320 Speaker 4: some so like etn's do this all the time. If 537 00:28:03,359 --> 00:28:05,880 Speaker 4: the ETN is sort of coming to a maturity date, 538 00:28:05,920 --> 00:28:08,040 Speaker 4: they will offer you to switch you into another one. 539 00:28:08,600 --> 00:28:11,080 Speaker 4: So you definitely are getting notices. If you own the fund, 540 00:28:12,080 --> 00:28:15,240 Speaker 4: you know the cost. Obviously there's some unwinding, paying some 541 00:28:15,240 --> 00:28:17,960 Speaker 4: some of the fun administration costs, but you're pretty much 542 00:28:17,960 --> 00:28:18,640 Speaker 4: gonna get what. 543 00:28:18,640 --> 00:28:20,000 Speaker 3: Nav is at that day. 544 00:28:20,760 --> 00:28:22,359 Speaker 2: Yeah, but you get the tax then the tax, so 545 00:28:22,400 --> 00:28:24,240 Speaker 2: you're kind of Yeah, so when you if you want 546 00:28:24,240 --> 00:28:27,639 Speaker 2: to switch, like let's say the Wisdom Tree such and 547 00:28:27,680 --> 00:28:29,680 Speaker 2: such ETF clothes not to pick on them this whole show, 548 00:28:29,720 --> 00:28:34,879 Speaker 2: but anyway, you whether you sell or they send you 549 00:28:34,960 --> 00:28:38,560 Speaker 2: a check because they redeemed the funds, you got a 550 00:28:39,040 --> 00:28:41,560 Speaker 2: capital gains distribution if the fund went up as you 551 00:28:41,560 --> 00:28:45,200 Speaker 2: bought it. So that's why closure risk is like real, 552 00:28:45,800 --> 00:28:49,280 Speaker 2: but it's not huge. It's not like loss of principal risk. 553 00:28:49,320 --> 00:28:51,680 Speaker 2: You can never lose your principle in an ETF, but 554 00:28:52,000 --> 00:28:54,960 Speaker 2: the closure risk is just like annoying and nobody wants 555 00:28:55,000 --> 00:28:57,400 Speaker 2: to deal with that. Again, people hate taxes, so that's 556 00:28:57,440 --> 00:29:00,640 Speaker 2: the problem. So yeah, that's why you don't like to 557 00:29:00,680 --> 00:29:03,040 Speaker 2: see ETF's liquidate, but usually don't liquid if there's a 558 00:29:03,040 --> 00:29:06,080 Speaker 2: hardlybody in there. So like there's very few casualties to 559 00:29:06,440 --> 00:29:10,760 Speaker 2: ETF liquidations in general, but definitely, and this is part 560 00:29:10,760 --> 00:29:13,240 Speaker 2: of why it's hard in ETFs because a lot of 561 00:29:13,320 --> 00:29:15,360 Speaker 2: advisors in particular won't use you unless you've got like 562 00:29:15,360 --> 00:29:18,240 Speaker 2: five hundred million a billion dollars. But how do you 563 00:29:18,280 --> 00:29:20,560 Speaker 2: get that if you can't sell to anybody because people 564 00:29:20,560 --> 00:29:22,160 Speaker 2: don't want to be in there just in case you close. 565 00:29:22,760 --> 00:29:25,680 Speaker 2: It's a chicken and egg conundrum. 566 00:29:25,880 --> 00:29:29,640 Speaker 1: Final question comes from Kyle four Kid, who asks on 567 00:29:29,640 --> 00:29:32,000 Speaker 1: a macro level, Eric, how do you and your team 568 00:29:32,040 --> 00:29:35,280 Speaker 1: see the ETF landscape evolving over the next ten to 569 00:29:35,320 --> 00:29:39,080 Speaker 1: fifteen years? Any improvements to the ETF structure itself if needed, 570 00:29:39,440 --> 00:29:41,720 Speaker 1: or we see a zero fee ETF like we have 571 00:29:41,840 --> 00:29:43,800 Speaker 1: with zero fee index mutual funds. 572 00:29:45,120 --> 00:29:46,920 Speaker 2: Well yeah, I mean Bank Bank in New York alread 573 00:29:46,920 --> 00:29:49,640 Speaker 2: has zero that's hard that already exists. Here's the thing 574 00:29:49,640 --> 00:29:53,360 Speaker 2: about zero fee, they've if you talk to people, brand 575 00:29:53,440 --> 00:29:57,400 Speaker 2: is huge, and so unless Blackrock or Vanguard or State 576 00:29:57,480 --> 00:29:59,880 Speaker 2: Street did zero fee, it won't matter that much. People 577 00:29:59,840 --> 00:30:02,280 Speaker 2: are going to go with that brand and three BIPs. 578 00:30:02,680 --> 00:30:04,560 Speaker 2: In fact, I think some people like paying a little 579 00:30:04,800 --> 00:30:07,520 Speaker 2: because it feels less like you're gonna get like ripped 580 00:30:07,560 --> 00:30:11,320 Speaker 2: off somewhere else. So I think three BIPs, five BIPs. 581 00:30:12,000 --> 00:30:15,800 Speaker 2: You know, people are gonna want to build portfolios with 582 00:30:15,920 --> 00:30:18,760 Speaker 2: ETFs under ten basis points for the next ten to 583 00:30:18,760 --> 00:30:22,920 Speaker 2: twenty years. The only again, the tokenization is certainly one thing. 584 00:30:23,760 --> 00:30:26,360 Speaker 2: Perhaps tokenization can improve some of the back office stuff, 585 00:30:26,360 --> 00:30:29,440 Speaker 2: but again that wouldn't totally affect anybody. If anything, that 586 00:30:29,480 --> 00:30:32,480 Speaker 2: would just help the issuers more maybe save a little money. 587 00:30:33,920 --> 00:30:37,320 Speaker 2: But I you know, look, I think what's going to 588 00:30:37,360 --> 00:30:40,520 Speaker 2: be tested is that they're gonna put stuff in ETFs 589 00:30:40,520 --> 00:30:43,160 Speaker 2: that's just not liquid, and that's I think where we're 590 00:30:43,160 --> 00:30:47,640 Speaker 2: going to find some experimentation where I guess private equity, 591 00:30:47,680 --> 00:30:52,080 Speaker 2: private credit. Maybe they'll try to put something like I 592 00:30:52,120 --> 00:30:54,800 Speaker 2: don't know, farmland and Nebraska, you know, something that's just 593 00:30:55,440 --> 00:30:57,920 Speaker 2: like like that an endowment would invest in. We'd call 594 00:30:57,960 --> 00:31:01,120 Speaker 2: those real assets. I would be fine with that. I think, 595 00:31:01,160 --> 00:31:03,680 Speaker 2: you know, it's okay to break an egg once in 596 00:31:03,720 --> 00:31:06,640 Speaker 2: a while to get the omelet. So I'm okay with 597 00:31:07,400 --> 00:31:10,520 Speaker 2: experimenting with ets But it could get very interesting in 598 00:31:10,600 --> 00:31:13,520 Speaker 2: terms of testing the durability of the ETF. But the 599 00:31:13,600 --> 00:31:16,280 Speaker 2: other thing is you got to look overseas. That's where 600 00:31:16,280 --> 00:31:18,520 Speaker 2: a lot of a growth opportunity is. They're just waking 601 00:31:18,600 --> 00:31:21,760 Speaker 2: up to like what fees are and like how to 602 00:31:21,880 --> 00:31:24,440 Speaker 2: make money long term. And so to me, the ETF 603 00:31:24,480 --> 00:31:26,720 Speaker 2: story is like maybe fifth sixth inning in the US, 604 00:31:26,760 --> 00:31:30,240 Speaker 2: but it's like second third overseas. So that's what I 605 00:31:30,280 --> 00:31:33,600 Speaker 2: would look for. But I do think we're gonna see 606 00:31:34,040 --> 00:31:38,840 Speaker 2: a lot of crazy because the vanilla is so hard 607 00:31:38,880 --> 00:31:41,240 Speaker 2: to compete in that you will see more people launching 608 00:31:41,680 --> 00:31:44,480 Speaker 2: stuff that's pretty out there and it will get a 609 00:31:44,520 --> 00:31:49,160 Speaker 2: lot of copy because it's interesting. But just relax, almost 610 00:31:49,160 --> 00:31:51,000 Speaker 2: all the money is going to go to the VU 611 00:31:51,240 --> 00:31:54,040 Speaker 2: type stuff, and that's probably for the best. But some 612 00:31:54,080 --> 00:31:58,040 Speaker 2: of that experimentation will be interesting and there'll be some 613 00:31:58,560 --> 00:32:01,200 Speaker 2: evolutions there that will probably be pretty good in my opinion. 614 00:32:01,240 --> 00:32:04,640 Speaker 2: But I'm generally optimistic. I have some colleagues that worry 615 00:32:04,640 --> 00:32:05,160 Speaker 2: more than I do. 616 00:32:06,640 --> 00:32:08,360 Speaker 3: Nathan, are you one of those colleagues. 617 00:32:08,440 --> 00:32:11,120 Speaker 1: Yeah, I think see what do you see evolving in 618 00:32:11,160 --> 00:32:12,000 Speaker 1: the YouTube landscape. 619 00:32:12,040 --> 00:32:14,120 Speaker 4: I think sometimes someone will push it too far at 620 00:32:14,120 --> 00:32:18,360 Speaker 4: one point, but overall, these are fringe products, right, it's 621 00:32:18,360 --> 00:32:20,880 Speaker 4: not gonna I don't think it's gonna dislodge industry at all. 622 00:32:21,200 --> 00:32:24,160 Speaker 4: It's like absolutely on fire. But I think we'll see 623 00:32:24,520 --> 00:32:27,400 Speaker 4: every type of combination you can possibly think of. We 624 00:32:27,480 --> 00:32:30,600 Speaker 4: did max seven single stocks. Now there's like stocks pinned 625 00:32:30,600 --> 00:32:33,640 Speaker 4: against each other. Then there might be like five portfolio stocks. 626 00:32:33,640 --> 00:32:36,560 Speaker 4: So I just think it's gonna be any possible combination 627 00:32:36,600 --> 00:32:38,720 Speaker 4: of things you can think of. We'll be etf e's 628 00:32:39,040 --> 00:32:41,080 Speaker 4: and then it's on to the next frontier, whether it's 629 00:32:41,120 --> 00:32:45,120 Speaker 4: private equity, all coins, whatever. So I think that's just 630 00:32:45,120 --> 00:32:48,640 Speaker 4: how it's gonna gonna evolve, which is gonna you know, 631 00:32:48,760 --> 00:32:51,440 Speaker 4: products are gonna keep coming at a really rapid pace. 632 00:32:51,800 --> 00:32:53,479 Speaker 3: Yeah, we probably might see a product blow up at 633 00:32:53,480 --> 00:32:54,000 Speaker 3: some point, but I. 634 00:32:54,000 --> 00:32:55,800 Speaker 4: Don't think it's gonna be a big deal like one 635 00:32:55,840 --> 00:32:58,800 Speaker 4: of these single stock ones quantum stocks or something like that. 636 00:32:58,920 --> 00:33:02,720 Speaker 4: But I don't think it's gonna be up a bruise 637 00:33:02,760 --> 00:33:03,760 Speaker 4: on the industry at all. 638 00:33:04,920 --> 00:33:07,280 Speaker 1: Pathan, As always, thank you for joining us on Trillions, 639 00:33:07,640 --> 00:33:16,160 Speaker 1: Thanks for having me on, Thanks for listening to Trillions. 640 00:33:16,280 --> 00:33:18,440 Speaker 1: Until next time. You can find us on the Bloomberg terminal, 641 00:33:18,520 --> 00:33:22,920 Speaker 1: Bloomberg dot com, Apple Podcasts, Spotify, or wherever else you'd 642 00:33:22,960 --> 00:33:24,800 Speaker 1: like to listen. We'd love to hear from you. Hit 643 00:33:24,880 --> 00:33:27,520 Speaker 1: us up on social I'm at Joel Weber Show, He's 644 00:33:27,560 --> 00:33:31,560 Speaker 1: at Eric Balchina's. Trillions is produced by Magnus Hendrickson. Brendan 645 00:33:31,640 --> 00:33:34,760 Speaker 1: Newman is our executive producer. Sage Bauman is the head 646 00:33:34,760 --> 00:33:35,760 Speaker 1: of Bloomberg Podcasts.