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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Let's talk more about this,

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Speaker 1: not ETF, with Kathy Woods. She is CEO and CIO

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Speaker 1: of ARC invest Kathy, great to have you with us.

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Speaker 1: We'll get into the ETF conversation, but let's start with

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Speaker 1: your holdings in your venture fund, because I'm taking a look,

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Speaker 1: it looks like your second biggest holding is SpaceX. Of course,

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Speaker 1: as we know, that is a private company, one of

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Speaker 1: Elon Musk's company right now in talks to potentially merge

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Speaker 1: with XAI and in talks potentially to IPO later this year.

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Speaker 1: I mean, as you digest these news events, how are

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Speaker 1: you feeling about your current slice in SpaceX, which I

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Speaker 1: believe is about seven and a half percent of this fund.

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Speaker 2: Yes, we're feeling great, especially the rumors are we have

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Speaker 2: no idea if it will go out at one point

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Speaker 2: five trillion again rumors, rumors, but SpaceX has big ideas

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Speaker 2: orbital data centers being the latest an EXSAI, which we

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Speaker 2: also own in ARKVX, is going to become a part

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Speaker 2: of this ecosystem. We do believe, and I think we're

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Speaker 2: getting more information now that this is becoming more and

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Speaker 2: more likely.

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Speaker 3: So when SpaceX does make its debut on the public

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Speaker 3: markets when it lists, when it IPOs, what does that

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Speaker 3: do to your fund? How do you respond to that?

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Speaker 2: Yes, the wonderful thing about ARKVX and Interval funds generally,

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Speaker 2: in terms of the way we've constructed this one, is

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Speaker 2: that it's twenty percent roughly twenty percent public eighty percent private.

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Speaker 2: And when SpaceX goes, we will obviously bump up the

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Speaker 2: public position, but we don't have to sell it now.

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Speaker 2: It would be unusual if all of these names, SpaceX

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Speaker 2: and thropic XAI, if they all were to go public. Yes,

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Speaker 2: we would want to diversify into more private names. We

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Speaker 2: don't have to sell right away now. The other things

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Speaker 2: that our companies really like is that they can see

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Speaker 2: we have thirty billion dollars of assets under management, and

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Speaker 2: most of those are in the public equity market. So

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Speaker 2: we will be feeding these names into our ETFs as

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Speaker 2: time goes on.

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Speaker 4: So, Kathy, let's talk about this conundrum.

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Speaker 1: Right.

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Speaker 4: This is one of the most fascinating topics to me

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Speaker 4: that I'm writing about. You've got all these stocks, you

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Speaker 4: have five hundred million. Meanwhile, there's been three tfs that

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Speaker 4: have sort of I don't know, we'll called bend the

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Speaker 4: rules or whatever. But they've added privates into their funds.

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Speaker 4: XOVR immediately one point five billion a crane shares ETF

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Speaker 4: has to privates and then ron B added twenty two

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Speaker 4: percent of SpaceX and immediately assets jump fifty percent in

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Speaker 4: a week. Clearly the demand is to get this in

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Speaker 4: the ETF format, but it's not the right format. How

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Speaker 4: is this going to play out?

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Speaker 2: It's going to be very interesting, Eric, Thank you for

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Speaker 2: doing the research on this, and this space is moving

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Speaker 2: very quickly. The reason we chose the interval fund format

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Speaker 2: was we could have more than fifteen percent of our

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Speaker 2: fund in ill liquid assets. Now it may be that

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Speaker 2: the definition of ill liquid is changing.

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Speaker 5: I know.

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Speaker 2: We actually have gone to some of our private companies,

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Speaker 2: the ones in the interval fund saying hey, we'd love

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Speaker 2: to add you into our ETFs because we think this

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Speaker 2: is such an important story. All we do is focus

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Speaker 2: on disrupt of innovation. You are one of the biggest disruptors,

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Speaker 2: let's just say SpaceX, and what we found over time

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Speaker 2: is that they have been reticent. So something is changing here, Eric,

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Speaker 2: and it would be very interesting to get to the

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Speaker 2: bottom of it. The SEC, of course, is deregulating, so

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Speaker 2: that could be part of it. Secondary markets are beginning

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Speaker 2: to grow, meaning private shairs on secondary markets, so there's

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Speaker 2: access there. So maybe this definition of ill liquid or

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Speaker 2: less liquid is changing here.

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Speaker 1: Yeah. Our understanding and Bloomberg Intelligences understanding, Kathy, is that

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Speaker 1: basically Barren classified their SpaceX holdings as less liquid rather

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Speaker 1: than e liquid. As we were talking about, we're learning

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Speaker 1: that that comes from the issuer rather than the SEC.

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Speaker 1: But you also make another interesting point when it comes

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Speaker 1: to the private companies themselves maybe being a little bit

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Speaker 1: reticent to be in a vehicle such as an ETF.

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Speaker 1: Of course, we talk about it from the issuer perspective

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Speaker 1: all the time, so interesting to hear it from the

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Speaker 1: perspective of the companies. But you mentioned that, you know,

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Speaker 1: when it comes to going ahead of that fifteen percent

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Speaker 1: cap in an ETF, that that's not something that you

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Speaker 1: necessarily want to do. But have you thought about adding

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Speaker 1: perhaps less than that, you know, in the realm of

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Speaker 1: five to ten percent into an ETF.

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Speaker 2: Yes, we certainly have thought about it, so much so

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Speaker 2: that we've gone to the companies and as I said,

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Speaker 2: there at least when we went to these companies, there

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Speaker 2: was some reticence because they're in the worst case, let's

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Speaker 2: just say black Swan, the public markets go down dramatically.

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Speaker 2: These private positions are not marked to market every day,

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Speaker 2: they could end up easily above fifteen percent, and then

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Speaker 2: what would a fun be faced doing trying to find

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Speaker 2: a secondary market. Now, maybe the secondary markets are becoming

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Speaker 2: more liquid themselves. They're much more liquid today than they

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Speaker 2: were when they first started, maybe five, six, seven years ago.

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Speaker 2: So we've been, i would say, from a compliance point

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Speaker 2: of view, very careful. And then you know, our market

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Speaker 2: makers are also trying to figure out what to do

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Speaker 2: with this. How do they price in real time when

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Speaker 2: at any minute something crazy could happen coming from one

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Speaker 2: of these private companies. So there are some ecosystem challenges here.

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Speaker 3: Some ecosystem challenges, and it's something that we will be

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Speaker 3: watching for certainly. It's an involving story. Kathy, I do

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Speaker 3: want to get your take on what a lot of

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Speaker 3: people are calling the debasement trade, the effort to diversify

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Speaker 3: beyond the US dollar and US dollar assets, moving to

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Speaker 3: other assets like precious metal, specifically as a hedge against

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Speaker 3: the dollar. What's different this time around from what we

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Speaker 3: saw last year is the crypto is not part of this.

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Speaker 3: It's not getting the bid from folks who are looking

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Speaker 3: to diversify, who believe in this debasement idea.

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Speaker 2: How do you think about that? A couple of thoughts.

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Speaker 2: I've been writing a lot about it recently. I think

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Speaker 2: if you look over time, if you look for the

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Speaker 2: last five years and you do a correlation between gold

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Speaker 2: and bitcoin, you'll find very little correlation at all. What

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Speaker 2: you will see if you look back a little further,

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Speaker 2: the last two major cycles for bitcoin were preceded by

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Speaker 2: the gold price increasing first. Now, I think, what's going

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Speaker 2: on This so called debasement trade, if I can just

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Speaker 2: back up a little bit, I think is misplaced, And

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Speaker 2: especially when we think about the dollar, if you put

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Speaker 2: the dollar into perspective, you will see that over the

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Speaker 2: years and in recent years, it's toward the higher end

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Speaker 2: of its range against other currencies. And we think that

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Speaker 2: the combination of deregulation here in the United States, big

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Speaker 2: tax changes, especially for corporations, and very business and capital

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Speaker 2: friendly policies here in the United States. We think because

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Speaker 2: of those, the returns on invested capital in the United

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Speaker 2: States are going to go up relative to those elsewhere

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Speaker 2: in the world. And this we think is because trump Eanomics,

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Speaker 2: if you want to call it, that is like Reaganomics

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Speaker 2: on steroids. If you look at what happened to the

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Speaker 2: dollar under Reagan, it doubled, it nearly doubled, so much

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Speaker 2: so and so quickly that we ended up in the

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Speaker 2: Plaza and Louver Accords to try and get it down.

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Speaker 2: So I think it's a little misplaced.

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Speaker 3: Kathy. We had Todd soone, thank you for explaining that.

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Speaker 3: By the way, we had Todstone of Strutigis on with

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Speaker 3: us last week and he was talking about the key

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Speaker 3: man risk idea for funds that are tightly tied to

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Speaker 3: their star managers. And you're nothing of not a star manager.

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Speaker 3: Take a listen to what Todd said.

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Speaker 5: Think of arc. Kathy would is the arc. She's the

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Speaker 5: face of that company. What happens when Kathy says, you know,

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Speaker 5: I'm moving on or whatever it might be. This is

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Speaker 5: gonna be really interesting over the next thirty years of

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Speaker 5: all these established players coming into the ETF market and

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Speaker 5: you're gonna lose these key man key woman risk up there.

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Speaker 3: Key woman risk, I'm just curious about the state of

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Speaker 3: your succession planning over at ARC invest. If one day

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Speaker 3: you want to move on to do something.

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Speaker 2: Else, oh my goodness, I can't imagine that day. Let's

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Speaker 2: just say that to start, But we have a very

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Speaker 2: firm succession plan here the way we've set up the

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Speaker 2: firm with directors of research, chief futurists, analyst research associates,

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Speaker 2: and really the equivalent of investment committees for each of

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Speaker 2: our funds. I think any due diligence effort would look

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Speaker 2: at what we've done here at ARC and be pretty

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Speaker 2: reassured by it.

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Speaker 1: All right, Kathy, that's a good place to leave it.

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Speaker 1: Really appreciate you taking the time for us on our

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Speaker 1: relaunch day. That is Kathy Wood of ARC Invest. And

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Speaker 1: you can read all about this drill down plus the

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