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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: I'm Juel Webber and I'm Eric Belchunas Eric.

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Speaker 3: We have a special guest today from Investco, Brian Hartigan.

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Speaker 3: He's the global head of ETFs and index Investments. Why

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Speaker 3: is Invesco so interesting?

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Speaker 2: Yeah, you know, they're in the terrordome with there in

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Speaker 2: the upper echelon, but not in the big two, and

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Speaker 2: so they're in that sort of like level with First

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Speaker 2: Trust and Schwab and other sort of like i'd say

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Speaker 2: big dogs but not quite Blank Vanguard and black Rock,

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Speaker 2: And it's an interesting spot. If you look at their funds,

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Speaker 2: they have a ton of hits, a lot of people

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Speaker 2: like a lot of ones people love and know, and

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Speaker 2: one big one, one big one, Yeah, one super stud

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Speaker 2: The q's QQQ and QQQ and perhaps you've heard talk

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Speaker 2: about Yeah, perhaps you've heard of it, and but it's

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Speaker 2: interest company obviously used to be Power Shares purchased by Invesco.

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Speaker 2: And we have had a couple episodes we talked to

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Speaker 2: analysts and reporters, but this is sort of like, hey,

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Speaker 2: let's wrap the euroup talking to somebody who's in the

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Speaker 2: terror dome every day, fighting for every dollar. It is

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Speaker 2: hard in this industry, and there's a lot of things

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Speaker 2: going on in their products. They have a diversified product line,

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Speaker 2: so we can touch on a bunch of different themes

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Speaker 2: here and just sort of get the perspective from inside

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Speaker 2: that competitive healthcape.

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Speaker 3: Again joining us Brian Hartigan of Investco, this time on

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Speaker 3: Trillions investcos etf playbook.

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Speaker 4: Brian Wegan a trillions Warnow guys, great to bear.

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Speaker 3: Just so that we have a disclaimer, Investco is a

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Speaker 3: Bloomberg sponsor. Okay, so I want to talk to you

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Speaker 3: about Invesco. What's the secret sauce at Invesco that strategically

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Speaker 3: distinguishes you, guys from all those other players in Eric's

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Speaker 3: thunderdome Terrordome.

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Speaker 4: Sure, yeah, the Terroodome. I love it. It brings out

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Speaker 4: some of the grittiness. But we've been in the game

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Speaker 4: for quite some time, right, So we just recently hit

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Speaker 4: a trillion dollars in assets shameless plug trillion, but it's

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Speaker 4: through a see what you did there?

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Speaker 2: Well, you know we always say the name we gave

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Speaker 2: this podcast podcast aged really well.

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Speaker 4: Yes, number go, so trillion, trillion, keep hitting the trillion flows.

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Speaker 4: Investco has been in the ETF market for quite some

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Speaker 4: time early days, pioneer through power shares, expansion into factors,

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Speaker 4: fixed income, commodities, and global in terms of our overall reach,

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Speaker 4: so we've been in the tero doome. We've been fighting, competing,

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Speaker 4: We understand the landscape and it takes, you know, that

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Speaker 4: level of focus really to compete and reach investors within

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Speaker 4: the ETF landscape. So it's been a testament of a

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Speaker 4: really understanding investors, understanding needs and evolving as we've gone.

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Speaker 3: What about this year? What have you learned this year

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Speaker 3: that you know is a timely insight for our listeners. Sure.

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Speaker 4: Yeah, it's been a great year of returns. Many folks

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Speaker 4: kind of forget that at first February March cell down,

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Speaker 4: sell off, right, And what was interesting about the market

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Speaker 4: correction is it it really opened the door for more diversification.

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Speaker 4: From our view, there was a lot of US equity

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Speaker 4: dominance and that was great for ourselves for our lineup,

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Speaker 4: but I think you started to see investors look at

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Speaker 4: more opportunities for diversification. Factors, international commodities came back into play.

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Speaker 4: So it's a new world for investors to look at.

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Speaker 4: How do they want to diversify through ETFs.

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Speaker 2: One of the things that was interesting to me. So

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Speaker 2: if I look at your ETFs by flows this year,

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Speaker 2: the QQQM and qqq are at the top, So let's

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Speaker 2: move those aside because I think everybody knows them. But

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Speaker 2: number two is kind of a chakra or three rather

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Speaker 2: is a chaker role SPMO. Most people probably don't know

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Speaker 2: what that is. That's the investco S and P five

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Speaker 2: hundred momentum ETF. You also have an international momentum in there.

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Speaker 2: We call that smart beta. We used to have a

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Speaker 2: bunch of episodes on beta kind of like went away

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Speaker 2: because it's not like the hot topic anymore, but it

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Speaker 2: took in I don't know, five hundred billion ish this year.

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Speaker 2: So smart beta, obviously, for those who don't know, is

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Speaker 2: basically when you take an index and you tweak it

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Speaker 2: a little like some Instead of the S and P,

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Speaker 2: you tweak it so it has a momentum tilt and

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Speaker 2: so it's active but passive at the same time. And

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Speaker 2: that sort of smart beta is like twenty five percent

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Speaker 2: of the assets. People don't talk about it. It's still

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Speaker 2: taking a bunch of cash. How would you do you?

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Speaker 2: Obviously you're still talking about with clients. What are those

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Speaker 2: conversations like and how did this one particular ETF get

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Speaker 2: so high on the list?

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Speaker 4: Sure? For us, smart beta is a it's a mechanism

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Speaker 4: of factors, right, what is explaining market returns? And when

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Speaker 4: you look at it this year, concentration mag seven, those

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Speaker 4: are all momentum names. So momentum clearly is driving returns

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Speaker 4: and it's driving flows. The beauty of smart beta is

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Speaker 4: that it's emotionless, so you don't have to say, hey,

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Speaker 4: are these getting too big? Are they becoming too large

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Speaker 4: in my portfolio? So that creates that force discipline, and

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Speaker 4: I think in vestors are showing that they want to

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Speaker 4: know what the potential outcomes are going to be of

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Speaker 4: the ETF.

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Speaker 3: So let's talk a little bit more about smart beta

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Speaker 3: and how smart beta works because it is unemotional, right,

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Speaker 3: It's just detached from that, and it's got a little

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Speaker 3: bot that basically tells it what to do, and it's

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Speaker 3: going to rebalance that set period of time. There's been

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Speaker 3: some pretty noteworthy ones that Eric and I have discussed before,

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Speaker 3: but I'm curious from your perspective, when was a moment

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Speaker 3: in time that you were like, Wow, that was exactly

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Speaker 3: what smart beta is supposed to do.

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Speaker 4: Sure. Yeah, as you said, it's an index, right, and

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Speaker 4: it's smart in that it is more than just buying

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Speaker 4: the entire market, so it has a pre programmed discipline

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Speaker 4: to it that gets you to an exact factor. So

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Speaker 4: for us, it's seeing some of the leadership change. So

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Speaker 4: when we looked at our flows as you do on

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Speaker 4: the show, last year, quality was one of our biggest

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Speaker 4: in terms of garnering attention investors not sure where the

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Speaker 4: market was going, and quality tends to take on kind

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Speaker 4: of a best of breed. It's not your biggest momentum,

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Speaker 4: it's not your cheapest, but it brings in fundamental and

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Speaker 4: we saw much of that last year. Then you saw

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Speaker 4: kind of the election change, sentiment change quite a bit

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Speaker 4: in the market, and momentum took off, right. That was

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Speaker 4: investors getting back into the market, and you saw leadership change.

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Speaker 4: And that's what we tend to look at, not only

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Speaker 4: on flows, but also on market returns through factors.

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Speaker 2: Yeah, and let me give you this SPMO is up

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Speaker 2: twenty seven percent. That's even better than the queues and

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Speaker 2: it's way better than the SMP which is eighteen percent. Oh,

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Speaker 2: that's a good year considering what you said about the

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Speaker 2: negativity earlier. One thing about spmo is and momentum is

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Speaker 2: what we found. We looked at active funds a lot

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Speaker 2: of active managers this year they did that thing where

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Speaker 2: they they are all full of the CFA, you know,

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Speaker 2: like fundamentals and I get it, and they shifted into

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Speaker 2: like non tech names. Momentum meanwhile, saw that tech names

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Speaker 2: were actually going better and tried to ride that and

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Speaker 2: it worked. So not having the mag seven is what

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Speaker 2: caused more active to underperform this year. They keep taking

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Speaker 2: the bait of biting on these like other fundament like

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Speaker 2: more fundamentally sound or low lower valuation sectors, and they're

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Speaker 2: like tech is just too expensive and ends up. Tech

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Speaker 2: just goes up again.

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Speaker 3: But this is kind of where smart beta is distinguished,

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Speaker 3: right because it can just look at it from the

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Speaker 3: numbers and just be like, absolutely.

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Speaker 2: We know exactly what to do now except like a

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Speaker 2: value ETF that they have probably didn't perform as well,

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Speaker 2: but it's just doing what the robot says. But momentum

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Speaker 2: obviously went into the tech names and the rest is

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Speaker 2: you know, that's why it's number three on the list.

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Speaker 2: So obviously those factors, there's regimes, right, yeah.

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Speaker 4: Yeah, so the regimes and I think Eric you said

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Speaker 4: it best, right, it creates a challenge in the market,

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Speaker 4: not only for active but for managers. Right, where do

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Speaker 4: I allocate because you have such a systematic bias towards

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Speaker 4: towards price returns, momentum size and exposure. Right, So the

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Speaker 4: momentum factor creates a bit of a decision for investors.

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Speaker 4: Is it going to revert or do I want to

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Speaker 4: continue to maintain the trend? And we're seeing people really

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Speaker 4: use this as an allocation right to hedge some of

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Speaker 4: those those decisions.

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Speaker 3: So why does this base get talked about less now

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Speaker 3: than say, ten years ago, when it was like it

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Speaker 3: was a little spicier, I think. But yet, you know,

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Speaker 3: active is sort of having a moment, So why isn't

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Speaker 3: smart beta a little bit more part of the conversation.

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Speaker 4: Yeah, I've lived through quite a bit of it, and

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Speaker 4: you have written about it, you know, the active passive debate. Right,

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Speaker 4: Smart beta was trying not to be just cheap and

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Speaker 4: market exposure.

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Speaker 3: Right.

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Speaker 4: It was smarter, it was differentiated, and in every way

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Speaker 4: it was active. We talk about our SMP equal weight

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Speaker 4: fund RSP. It is one of the highest active shares

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Speaker 4: that you can get compared to the S and P

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Speaker 4: five hundred. Right, active means trying to be different than

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Speaker 4: the index so that you generate differentiated returns. So there

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Speaker 4: was it was kind of caught up in this What

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Speaker 4: are ETF's passive active? And now active is having its

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Speaker 4: new moment in its term. But the definition of active

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Speaker 4: is really evolving. Right, It's not just stockpicking anymore. It's

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Speaker 4: outcome based, it's active allocation, it's smart beta, it's factors,

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Speaker 4: and it's investors saying I want active, I value the

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Speaker 4: opportunities and active. But there are so many different ways

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Speaker 4: by which I can outperform, be it manager or very

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Speaker 4: pinpointed exposure that I can get through fixed income, equity

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Speaker 4: and even asset classes. Right, themes and the.

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Speaker 2: Like I would say RSP, they're equal weighted. One is

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Speaker 2: the one I get asked a lot about, especially the

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Speaker 2: Money Show. You know, I go to the Money show.

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Speaker 2: That's like direct retail investors. They always ask me that

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Speaker 2: equal weighting. People are fascinated about equal waiting. It almost

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Speaker 2: seems like more fair, Like, yeah, I would like some

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Speaker 2: of the stocks that are a little less loved. But

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Speaker 2: it doesn't always work. But clearly as someone who has

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Speaker 2: a product, if you do want that, like I want

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Speaker 2: the market, but with a little less mag seven, this

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Speaker 2: one seems to be the first thing people reach for

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Speaker 2: when they want that, versus say going full value or

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Speaker 2: some of these new products which are like hey, let

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Speaker 2: me give you the SMP minus the top one hundred.

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Speaker 2: They're getting really very specific. But I think equal wait

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Speaker 2: it sort of like covers that feeling of like yeah,

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Speaker 2: I want the market, but not with the mag seven,

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Speaker 2: Like dominating seventy five billion dollars is the equal weight.

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Speaker 2: But can I ask you a story about this Goldman

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Speaker 2: filed for an equal waiting wait at ETF back like

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Speaker 2: ten years ago, and this one was forty forty BIPs,

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Speaker 2: and before Goldman can even make it to market, they

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Speaker 2: cut to twenty and just killed Goldman right there and

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Speaker 2: ended up just taking all the money. And that said,

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Speaker 2: that's why I called the Tarrodome roll. They looked at

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Speaker 2: the Goldman come in, there's like, okay, we have to

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Speaker 2: sever our own arm to survive, right, this is like castaway. Okay,

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Speaker 2: they did it, and they they more than made up

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Speaker 2: for it. In dollars since then. But I don't know

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Speaker 2: if you were part of that decision, But can you

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Speaker 2: go through that mentality, because if you're from the mutual

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Speaker 2: fun world, that's never even nothing even close to that exists.

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Speaker 2: If anything, you just start charging more.

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Speaker 3: Brian, did you look at your arm and say I

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Speaker 3: don't need that anymore?

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Speaker 4: Welling on how much we broadcast on this one for

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Speaker 4: the show it actually happened, I'll give you something of

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Speaker 4: a nugget. You know, the price cut was actually just

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Speaker 4: prior to the acquisition of Investco to Gougenheims, so certainly

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Speaker 4: the numbers were were recognized in the final deal terms.

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Speaker 4: So for us, you know, competitive pricing gave us an opportunity.

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Speaker 4: But equal weight maybe i'll pivot to some comments on that,

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Speaker 4: So equal weight for us, right, it's it's understandable. It's

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Speaker 4: S and P five hundred equal weight. It's predictable. Investors

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Speaker 4: know that when you know the mag seven is not performing,

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Speaker 4: being underweight, those names are going to likely generate outperformance.

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Speaker 4: So one of the downfalls or challenges that Active has

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Speaker 4: is unpredictability. Investors don't want to be surprised by Active.

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Speaker 4: They don't want to get a different return than what

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Speaker 4: they expected. So last year, if you look at our flows,

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Speaker 4: we had this diconomy of QQQ, which is concentrated large

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Speaker 4: names being one of our leaders, but RSP also being

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Speaker 4: one of the leaders in terms of flows. And that

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Speaker 4: just told us that investors are trying to understand where

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Speaker 4: the market's gonna pivot, and if it goes one way

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Speaker 4: continues to run, QQQ will outperform, and if it goes

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Speaker 4: another way, you know, and reverts, then something like RSP

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Speaker 4: will have different bets. So that's the understanding and that

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Speaker 4: the market is getting more sophisticated, that they want some

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Speaker 4: predictability and where they allocate.

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Speaker 3: Do you think the Terroodome has gotten more intimidating?

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Speaker 4: The tarodome is pretty full with is it roller skaters

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Speaker 4: or is that a different no.

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Speaker 2: By the way, the metaphor people do throw in thunder Thunderdome.

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Speaker 2: Now that's Mad Max Beyond Thunderdome. That was the third

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Speaker 2: Mad Max movie, I believe where Tina turned to this

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Speaker 2: theme song, whatever we don't need another hero, that's Thunderdome.

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Speaker 2: It works. Terrordome is based on a Public Enemy song

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Speaker 2: called Welcome to the Tterodome a whole album. In fact,

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Speaker 2: listen to it. In my opinion, that sound and the

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Speaker 2: lyrics are what it would feel like if you launched

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Speaker 2: an ETF.

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Speaker 4: So I have my playlist on the way out, you

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Speaker 4: got to add that one. Yes, for sure, that's big

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Speaker 4: public enement.

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Speaker 2: They should play when you walk into the office at

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Speaker 2: every issue where it's like the frame of mind you

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Speaker 2: got to get into, you know, it's total survival.

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Speaker 3: Space, like today was a good day. It's like it's

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Speaker 3: stereo dumb okay.

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Speaker 4: But competition is certainly increasing right that active passive mutual

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Speaker 4: fund ETF. I will say ETFs are clearly becoming or

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Speaker 4: have become, the rapper of choice, and the competition is

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Speaker 4: trying to understand how how can they compete in that game,

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Speaker 4: and it makes it very difficult for new entrants, makes

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Speaker 4: it difficult for you know, legacy large providers trying to

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Speaker 4: pivot not only the rapper but their active content. And

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Speaker 4: there's a whole ecosystem from capital markets to product innovation

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Speaker 4: through index provider relationships and the like that really make

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Speaker 4: a strong ETF what it is. And that's that's through

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Speaker 4: that that knowledge of investors and opportunities that you can

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Speaker 4: create that outcome.

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Speaker 2: The big three in ETFs, which would be Vanguard, Black Rockets,

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Speaker 2: the Street, their market sharees are roading because there's so

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Speaker 2: many competitors. I think sixty new issuers this year, three

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Speaker 2: hundred total, six hundred brands. There's just too many people

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Speaker 2: nibbling at their market share for them to grow it. However,

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Speaker 2: in the mutual fund space, they're big three growing market

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Speaker 2: share by a lot because there's just no energy, there's

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Speaker 2: no hungry newcomers, and I think that's what makes the

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Speaker 2: ETF industry so dynamic and endlessly interesting for us obviously.

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Speaker 2: But one thing on this there's been a couple i'll

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Speaker 2: call them like chirping. Every year or so, somebody writes

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Speaker 2: something about how ETFs are ruining the market. Lately it

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Speaker 2: was how they're ruining capitalism, And I just want to say, like,

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Speaker 2: I find that ETFs are probably a shining example of

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Speaker 2: capitalism because it's so brutal, it's very competitive. In the end,

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Speaker 2: the customers are choosing, it's natural, there's no kickbacks, the

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Speaker 2: best products win. And would you argue that or is

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Speaker 2: there something we're missing about how there is potentially a

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Speaker 2: problem in terms of ETFs. I know part of that

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Speaker 2: argument isn't the industry itself, although it's about the number

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Speaker 2: of ETFs, although there's way more mutual funds still, but

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Speaker 2: it's also about fundamentals, and like, oh, if all this

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Speaker 2: money is going into passive fundamentals, don't matter anymore. I

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Speaker 2: don't know you have anything about all that, because they

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Speaker 2: once a year this stuff comes up. I call it

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Speaker 2: the some worry articles, and a few of them just

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Speaker 2: came up over the past week.

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Speaker 4: Sure, yeah, so I would agree there are pockets of

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Speaker 4: opportunity when you look at the ETF ecosystem. Right, So

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Speaker 4: capitalism as a whole, if there's an opportunity for gain,

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Speaker 4: if you can set up a system to generate profits

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Speaker 4: that will create that outcome for you. There's no excess

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Speaker 4: limits or there's no limitless there's no limitless capital in

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Speaker 4: the market. So I think what you've seen is a

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Speaker 4: bit of a shift of where some of that liquidity

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Speaker 4: has come from, and it's driving towards the ETF. The

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Speaker 4: ETF creates more liquidity. You've seen it in digital coin, right,

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Speaker 4: very simple wrapper, but it's creating liquidity, it's creating a

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Speaker 4: different way to access and otherwise liquid market. You see

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Speaker 4: it in options. The outcome of all of these buffer

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Speaker 4: and option income income advantage strategies are creating more liquid

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Speaker 4: liquidity in the underlying and fixed income.

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Speaker 3: Right.

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Speaker 4: Fixed income used to be a trade by appointment type

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Speaker 4: of market, and ETFs have created better liquidity in the underlying.

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Speaker 4: So it's not a guarantee, but I think through that

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Speaker 4: ecosystem of trading of market making, you're getting better pricing

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Speaker 4: and better liquidity within the rapper and within the markets.

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Speaker 3: Is there a version of the world that becomes too liquid?

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Speaker 3: That was some of the worry.

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Speaker 4: Sure, and I think there's you know, there's value in

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Speaker 4: private markets, private credits that you know, create solid you know,

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Speaker 4: access to issuers, differentiated return streams that that the market

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Speaker 4: is looking for. Will ETFs become the save all for

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Speaker 4: for private markets private equity? Not sure. I struggle with

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Speaker 4: the point we touched on of liquidity and transparency is

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Speaker 4: what an ETF thrives on. And I think you're trying

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Speaker 4: to create something different with private markets. So having that difference,

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Speaker 4: I think is important because you're going to get different

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Speaker 4: return profiles from those.

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Speaker 2: Two You mentioned digital coins, you have a bitcoin etf

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Speaker 2: BTCo I believe is the ticker. You were one of

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Speaker 2: the original ten who launched two years ago. Huge deal.

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Speaker 2: They got to one fifty billion in assets total. Since

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Speaker 2: this sell off, this has been the worst. There's been

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Speaker 2: a couple pullbacks, but this is the worst one. I

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Speaker 2: think at the peak it was forty percent down from

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Speaker 2: the peak. I mean, I think it's now it's thirty,

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Speaker 2: but it was pretty bad. Now only four percent of

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Speaker 2: the assets left. The flows are pretty solid. As the

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Speaker 2: crypto Twitter crowd calls anybody investigating to have as a boomer.

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Speaker 2: Apparently the boomers have stronger hands, I think than people thought.

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Speaker 2: But I want to talk about from your perspective, this

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Speaker 2: is a different asset class, it's new, it's we call

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Speaker 2: it hot sauce. How are these investors that you have

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Speaker 2: thinking about it? Are they talking about it? Have they

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Speaker 2: committed to like a four or five year holding period

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Speaker 2: and they don't care? What's going through their minds? And

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Speaker 2: what do you make behind them holding up stronger than

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Speaker 2: most people thought?

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Speaker 3: Sure?

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Speaker 4: Yeah, I think I touched on the evolution and how

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Speaker 4: ETFs can help create accessibility to new asset classes like

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Speaker 4: digital and others. For us, this is a long game.

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Speaker 4: This is how do I access it, how do I

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Speaker 4: model it, how do I own it in a portfolio?

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Speaker 4: And we're seeing that with clients too, from wealth channels

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Speaker 4: among advisors, right there's limitations on how are where they

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Speaker 4: can allocate, So I think the due diligence process has

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Speaker 4: taken some time to get that into a variety of

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Speaker 4: outlets for investors. So definitely a long game. I think

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Speaker 4: you're seeing some short term technicals which shows you that

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Speaker 4: it's it's behaving like an asset. There are investors that

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Speaker 4: might have gotten in late and are now sitting on

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Speaker 4: losses that they don't have elsewhere, whether it's equities or

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Speaker 4: other asset classes. So you have some short term selloffs

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Speaker 4: maybe tax loss that that investors are taking. But I

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Speaker 4: think having kind of this this evolution into what we

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Speaker 4: would all know in terms of kind of technical technical markets,

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Speaker 4: you're starting to see that within the asset class.

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Speaker 3: What do you think their appetite for a risk asset

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Speaker 3: like this is, because you know, down down thirty percent,

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Speaker 3: like it's asking a lot of a boomer specifically to

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Speaker 3: hang in there, right, Like how how you know, like,

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Speaker 3: what's what's the appetite the real appetite to take a

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Speaker 3: loss or write it.

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Speaker 4: Yeah, the key is education, Right, how much did you

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Speaker 4: allocate and why was it cocktail party discussion or was

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Speaker 4: it true fundamental asset allocation that you said, Look, this

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Speaker 4: is new, it's volatile, I should own it and a

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Speaker 4: certain percentage you know that is either market cap weighted

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Speaker 4: benchmark weighted. But if you're over allocated and you see

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Speaker 4: this volatility, people should understand what those risks are going

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Speaker 4: to lead to. Right.

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Speaker 2: We looked I just finished a book project on this.

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Speaker 2: We looked into this. If you held bitcoin for four

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Speaker 2: years at any time of its life, you made money

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Speaker 2: if you had a four year holding period, But once

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Speaker 2: you get below four years, it's up in the air.

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Speaker 2: You might have made a lot of money or lost

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Speaker 2: a lot of money. So it seems like a four

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Speaker 2: year holding period would be like, if you can't commit

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Speaker 2: to four years, don't buy it. That would be my advice.

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Speaker 2: The other thing is we have this thing called the

401
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Speaker 2: modern portfolio where we have found that a lot of

402
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Speaker 2: portfolios have gone to the core is you know, low

403
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Speaker 2: cost probably cheap beta or cheap smart beta, or even

404
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Speaker 2: cheap active. But it's like that's the vanilla stocks and

405
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Speaker 2: bonds usually now that's below twenty BIPs. But then that's boring, right,

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Speaker 2: you gotta wait thirty years for compounding, So people want

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Speaker 2: some fun in speculation, So we call it the hot

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Speaker 2: sauce bucket. It seems like if you put some of

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Speaker 2: this in your hot sauce bucket at two three percent,

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Speaker 2: then if it goes down, it's not the end of

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Speaker 2: the world because it's not really your nest egg, and

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Speaker 2: so there might be more intestinal fortitude you can get

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Speaker 2: because it's only a little tiny part and it's not

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Speaker 2: your nest egg. That's my thesis on how like this

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Speaker 2: ETF thing has lowered fees and made it very easy

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Speaker 2: and education is there that it's like, oh, I can

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Speaker 2: marry this low cost ETF like pebus, which is like

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Speaker 2: cheap beta, and I can just like wait thirty years

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Speaker 2: while it like compounds, and then I can do this

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Speaker 2: other stuff. And like the fact is like people can

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Speaker 2: get real committed to a portfolio now versus back in

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Speaker 2: the eighties when you had a five star manager. They

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Speaker 2: charged the lot, then they underperform it, like you had

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Speaker 2: to dump them and you just dump them at the bottom.

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Speaker 2: Then you've got the next one after they had already

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Speaker 2: had their good run. So people were constantly buying high

427
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Speaker 2: and selling low. I feel as though ETFs and low

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Speaker 2: cost investing in particular have in a way solved behavior

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Speaker 2: and allowed not only for holding long term vanilla, but

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Speaker 2: even having more stomach for the hot sauce because it's

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Speaker 2: only a tiny part of the whole meal. Does that

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Speaker 2: make sense? Am I onto something there? Or just am

433
00:22:26,200 --> 00:22:27,199
Speaker 2: I losing it? No?

434
00:22:27,359 --> 00:22:30,480
Speaker 4: I'm I'm right with you. I think I would shake

435
00:22:30,560 --> 00:22:34,520
Speaker 4: that into kind of this this evolution of creating active

436
00:22:34,720 --> 00:22:39,520
Speaker 4: or putting active decisions further down the advice chain. Right,

437
00:22:39,560 --> 00:22:43,040
Speaker 4: it's not just the manager, it's the advisor, it's the investor,

438
00:22:43,119 --> 00:22:47,120
Speaker 4: and the ETF is creating more liquid, more accessible tools

439
00:22:47,160 --> 00:22:50,440
Speaker 4: for you to express those active bets, whether it's new

440
00:22:50,480 --> 00:22:54,520
Speaker 4: emerging asset classes or even fixed income. Right, fixed income,

441
00:22:55,160 --> 00:22:57,600
Speaker 4: you have pretty good success on the active side of

442
00:22:57,640 --> 00:23:02,960
Speaker 4: active managers, somewhere above fifty percent on a near term basis.

443
00:23:03,520 --> 00:23:07,719
Speaker 4: But investors now have the ability to overweight or underweight duration.

444
00:23:07,880 --> 00:23:10,760
Speaker 4: They could overweight or underweight credit. They can take a

445
00:23:10,840 --> 00:23:14,439
Speaker 4: core like an ad aggregate, you know type strategy, and

446
00:23:14,480 --> 00:23:16,879
Speaker 4: they can play around the edges, and that's what the

447
00:23:16,920 --> 00:23:20,400
Speaker 4: ETF does, and through the underlying gives you better execution,

448
00:23:20,920 --> 00:23:25,280
Speaker 4: better liquidity, better pricing to sourcing those those exposures.

449
00:23:25,400 --> 00:23:27,479
Speaker 3: But how do you feel about Eric's hot sauce metaphor.

450
00:23:28,040 --> 00:23:30,400
Speaker 4: I've always loved the hot sauce and we always want

451
00:23:30,440 --> 00:23:33,400
Speaker 4: to get more more tickers in the hot sauce category.

452
00:23:33,720 --> 00:23:35,520
Speaker 2: That's why I roll with it. I've gotten pretty good

453
00:23:35,520 --> 00:23:39,240
Speaker 2: feedback on it. Like I also think you can't mess

454
00:23:39,240 --> 00:23:42,359
Speaker 2: with it. Like everybody knows what hot sauce is. Everybody

455
00:23:42,400 --> 00:23:45,359
Speaker 2: knows using small doses. Not everybody loves it. It just

456
00:23:45,480 --> 00:23:48,320
Speaker 2: like it's really it's a it's solid ol.

457
00:23:49,280 --> 00:23:52,399
Speaker 3: Sorry, as you just said, though I love more tickers

458
00:23:52,400 --> 00:23:54,760
Speaker 3: in the hot sauce category. Is that where the white

459
00:23:54,760 --> 00:23:57,760
Speaker 3: space is? And how do you distinguish yourself in that

460
00:23:57,800 --> 00:23:58,800
Speaker 3: hot sauce category?

461
00:23:58,840 --> 00:24:01,600
Speaker 4: Sure, I let er stick with the hot sauce, but

462
00:24:01,640 --> 00:24:03,840
Speaker 4: for us, it's emerging trends, right, so.

463
00:24:03,920 --> 00:24:04,680
Speaker 2: They have hot sauce.

464
00:24:04,760 --> 00:24:05,720
Speaker 4: We level on a minute.

465
00:24:06,040 --> 00:24:08,639
Speaker 2: Ten is hot sauce. I'm sorry, it's like twenty solar stocks.

466
00:24:08,640 --> 00:24:12,760
Speaker 2: I'm sorry, that's gonna be like two three XCSMP. Thematic

467
00:24:12,840 --> 00:24:15,800
Speaker 2: is hot sauce. It's mild hot sauce. It's not like

468
00:24:15,800 --> 00:24:18,320
Speaker 2: ghost pepper, but it's still hot sauce.

469
00:24:18,960 --> 00:24:22,639
Speaker 4: So totally agree. Hot sauce had been thematic right first

470
00:24:22,640 --> 00:24:28,520
Speaker 4: to market new ideas AI for us, you know, blockchain technology.

471
00:24:28,760 --> 00:24:31,959
Speaker 4: Even banks recently have been called it hot sauce or

472
00:24:32,040 --> 00:24:36,359
Speaker 4: emerging trends. And we've seen that again investors not looking

473
00:24:36,400 --> 00:24:39,840
Speaker 4: at thematic to get in and run returns, but starting

474
00:24:39,840 --> 00:24:44,840
Speaker 4: to allocate and using thematic as ways to differentiate their portfolios,

475
00:24:45,119 --> 00:24:48,359
Speaker 4: ways to generate active returns because you've got some of

476
00:24:48,400 --> 00:24:52,640
Speaker 4: that differentiated profile. So thematic, which used to be hey,

477
00:24:52,720 --> 00:24:55,960
Speaker 4: let's be first to market, let's raise the biggest etf

478
00:24:56,040 --> 00:24:59,680
Speaker 4: has started to compete to again a more mature market

479
00:24:59,760 --> 00:25:03,480
Speaker 4: where investors are using it for for hot sauce eric

480
00:25:03,720 --> 00:25:05,800
Speaker 4: or for for outsized returns.

481
00:25:05,840 --> 00:25:08,119
Speaker 2: By the way, can I fun fact here? I believe

482
00:25:08,160 --> 00:25:11,840
Speaker 2: power shares started the first thematic etf ever. Can you

483
00:25:11,920 --> 00:25:15,720
Speaker 2: name it? Can you name it? You might not know.

484
00:25:16,000 --> 00:25:19,080
Speaker 2: This is going way back before you investment even acquired them.

485
00:25:19,280 --> 00:25:21,520
Speaker 4: If I grab a drink of water, would I be around?

486
00:25:21,640 --> 00:25:23,120
Speaker 3: Yes? Wow? Water.

487
00:25:24,080 --> 00:25:25,840
Speaker 2: It came out in like two thousand and five or so,

488
00:25:26,920 --> 00:25:29,720
Speaker 2: get this, it's p h O. But they should have

489
00:25:30,320 --> 00:25:34,199
Speaker 2: the Vietnam ETF should trade you. You should be just

490
00:25:34,520 --> 00:25:37,679
Speaker 2: h O or something and give foe to them. Anyway,

491
00:25:37,720 --> 00:25:39,040
Speaker 2: that's just something that I always though.

492
00:25:39,520 --> 00:25:42,240
Speaker 4: We evolved to numbers H two oh at some point, yeah,

493
00:25:42,280 --> 00:25:42,600
Speaker 4: that's it.

494
00:25:42,600 --> 00:25:45,399
Speaker 2: That would be perfect. But the water ETF, get this

495
00:25:45,440 --> 00:25:50,520
Speaker 2: has two billion dollars. You know why because at some point, Joel,

496
00:25:50,800 --> 00:25:53,000
Speaker 2: water is going to be a big deal. Hopefully it's

497
00:25:53,040 --> 00:25:55,600
Speaker 2: after we're gone. They're going to be fighting wars over water.

498
00:25:55,640 --> 00:25:57,800
Speaker 2: This thing could go to the moon. But it's just

499
00:25:57,840 --> 00:25:58,520
Speaker 2: that when.

500
00:25:58,400 --> 00:26:00,320
Speaker 3: It's like the graduate, I've got one more for you,

501
00:26:00,840 --> 00:26:01,720
Speaker 3: only it's not plastic.

502
00:26:01,800 --> 00:26:05,440
Speaker 2: It's it's water. Well that's what they call it. Blue gold. Yeah,

503
00:26:05,640 --> 00:26:07,920
Speaker 2: I've I did a lot of research on water. I thought,

504
00:26:07,920 --> 00:26:09,040
Speaker 2: oh my god, this is the big thing. I wrote

505
00:26:09,040 --> 00:26:11,480
Speaker 2: all these articles and it's like you could get that.

506
00:26:11,600 --> 00:26:13,040
Speaker 2: This is one of those calls you can get right,

507
00:26:13,080 --> 00:26:16,040
Speaker 2: but be like fifty years early. Remember you know the

508
00:26:16,080 --> 00:26:19,240
Speaker 2: movie water World. That's what that was kind of all about. Anyway,

509
00:26:19,280 --> 00:26:22,240
Speaker 2: we could have water could be the best performing ETF

510
00:26:22,359 --> 00:26:25,480
Speaker 2: in history at some point in the future. We just

511
00:26:25,480 --> 00:26:27,160
Speaker 2: don't know when I.

512
00:26:27,080 --> 00:26:29,080
Speaker 3: Could say that about a few other things, probably, but

513
00:26:29,320 --> 00:26:39,719
Speaker 3: I like it. I like your enthusiasm. Yeah, okay. So

514
00:26:40,119 --> 00:26:42,479
Speaker 3: one thing that we've touched on but we haven't actually

515
00:26:42,720 --> 00:26:45,600
Speaker 3: really spent some time talking about it yet. It is

516
00:26:46,920 --> 00:26:49,240
Speaker 3: an ETF that probably needs no introduction, but the cues

517
00:26:50,480 --> 00:26:53,040
Speaker 3: Eric calls it the eighth wonder of the world. Yes,

518
00:26:53,680 --> 00:26:55,119
Speaker 3: it has it gone up at all? Can it be

519
00:26:55,160 --> 00:26:57,040
Speaker 3: like seven through six? Yeh? Or does it have to

520
00:26:57,040 --> 00:26:57,520
Speaker 3: be eight? Still?

521
00:26:57,640 --> 00:26:59,680
Speaker 2: Well there's seven one? Yeah? You yeah, come on, you

522
00:27:00,200 --> 00:27:03,639
Speaker 2: definitely know that. Okay. The reason we call it that

523
00:27:04,280 --> 00:27:06,920
Speaker 2: is also because it's like an unusual specimen like the

524
00:27:07,400 --> 00:27:10,600
Speaker 2: you know, typically you have an index since market cap waited,

525
00:27:10,720 --> 00:27:13,400
Speaker 2: and it's like, okay, that's beta. Beta does really well.

526
00:27:13,720 --> 00:27:16,280
Speaker 2: Then you have like the tech sector. Okay, great, tech

527
00:27:16,400 --> 00:27:18,760
Speaker 2: is good. Ques is neither one of those. It just

528
00:27:18,760 --> 00:27:21,560
Speaker 2: stocks the list on NASDAK. So it's like, what's so

529
00:27:21,640 --> 00:27:26,160
Speaker 2: great about that? Well? I thought I pondered this more

530
00:27:26,200 --> 00:27:29,320
Speaker 2: than most, like more than an rural person should. My

531
00:27:29,480 --> 00:27:31,679
Speaker 2: thesis on the why que job? Actually yeah, it is

532
00:27:31,720 --> 00:27:35,879
Speaker 2: my job, but this is I went real deep my

533
00:27:36,000 --> 00:27:39,639
Speaker 2: thesis on why the ques kick so much butt and

534
00:27:39,680 --> 00:27:41,760
Speaker 2: it's not tech and it's not beta and it's just

535
00:27:41,800 --> 00:27:44,439
Speaker 2: these stocks that listens on NASAK. Is the Steve Jobs effect.

536
00:27:45,119 --> 00:27:48,879
Speaker 2: When Steve Jobs in nineteen eighty called you guys, I

537
00:27:48,880 --> 00:27:51,280
Speaker 2: asked your PR person, Stephanie, if I could even find

538
00:27:51,320 --> 00:27:54,160
Speaker 2: the person who took this call, but they said they're

539
00:27:54,160 --> 00:27:57,159
Speaker 2: probably retired at this point, like or even worse. But

540
00:27:57,800 --> 00:27:59,960
Speaker 2: in nineteen eighty somebody took a call from Steve Jobs.

541
00:28:00,440 --> 00:28:03,200
Speaker 2: He said, I want to listen to NASDAK and they

542
00:28:03,200 --> 00:28:05,760
Speaker 2: were like, sure and appen. Nobody who appened. Steve Jabs

543
00:28:05,800 --> 00:28:07,560
Speaker 2: is twenty seven years old and he wanted to list

544
00:28:07,600 --> 00:28:10,960
Speaker 2: there because all the dorks from IBM were unicy, so

545
00:28:10,960 --> 00:28:13,320
Speaker 2: he wanted to go to NASDAC, just like Michael Jordan

546
00:28:13,640 --> 00:28:16,520
Speaker 2: went to Nike instead of Converse and Adidas. This was

547
00:28:16,560 --> 00:28:21,280
Speaker 2: the Jordan Nike moment of this market. Once Steve Jobs

548
00:28:21,280 --> 00:28:23,960
Speaker 2: went there, people were like, ooh, that must be the

549
00:28:23,960 --> 00:28:26,080
Speaker 2: place to be. So of course Bill Gates, who worshiped

550
00:28:26,080 --> 00:28:29,440
Speaker 2: Steve Jobs, he went there when Microsoft went public in

551
00:28:29,520 --> 00:28:32,080
Speaker 2: ninety three. Then he got those two guys there. It's

552
00:28:32,119 --> 00:28:34,679
Speaker 2: over since then, especially when Steve Jobs came back for

553
00:28:34,720 --> 00:28:37,000
Speaker 2: his third act, that has been the place to be.

554
00:28:37,800 --> 00:28:42,200
Speaker 2: Amazon Tesla. If you are a visionary founder, CEO who

555
00:28:42,240 --> 00:28:45,480
Speaker 2: works seven days a week, that's where you go. Steve

556
00:28:45,560 --> 00:28:49,200
Speaker 2: Jobs set that he was the mold of this tech

557
00:28:49,240 --> 00:28:52,920
Speaker 2: revolution and to me, that's why the cues kicked so much.

558
00:28:52,920 --> 00:28:58,240
Speaker 2: But it's the Steve Jobs follow effect thoughts.

559
00:28:59,360 --> 00:29:02,880
Speaker 4: Fully green the NASZAQ one hundred, as we've talked about

560
00:29:02,880 --> 00:29:05,520
Speaker 4: smart Beta, it is an index, but for us, we

561
00:29:05,600 --> 00:29:09,040
Speaker 4: track it based on innovation and innovation as a factor

562
00:29:09,640 --> 00:29:12,360
Speaker 4: that we track is on R and D research and development.

563
00:29:12,600 --> 00:29:15,120
Speaker 4: And if you looked at those hundred names, each of

564
00:29:15,160 --> 00:29:18,800
Speaker 4: those companies commit more to research and development than any

565
00:29:18,800 --> 00:29:21,719
Speaker 4: other peer group. So it's founded in innovation, it's founded

566
00:29:21,720 --> 00:29:25,080
Speaker 4: in differentiation, and I think going back to original days

567
00:29:25,120 --> 00:29:28,000
Speaker 4: of Apple to Microsoft to what we see today, it's

568
00:29:28,040 --> 00:29:32,480
Speaker 4: truly evolved with the modernizing economy, right, so going from

569
00:29:32,920 --> 00:29:39,040
Speaker 4: PCs to servers, to telecom bandwidth to having a PC

570
00:29:39,320 --> 00:29:42,720
Speaker 4: in your hand that's mobile and getting into AI that

571
00:29:42,800 --> 00:29:45,080
Speaker 4: you speak to on your phone for twenty five years,

572
00:29:45,120 --> 00:29:49,560
Speaker 4: it's evolved with not only personal consumption, but the evolution

573
00:29:49,720 --> 00:29:53,719
Speaker 4: of our modern economy, and the leaders that are driving

574
00:29:53,760 --> 00:29:56,000
Speaker 4: that tend to be listed on nasdek.

575
00:29:56,440 --> 00:29:58,880
Speaker 2: Can you pull some strings and get us this person

576
00:29:58,880 --> 00:30:02,320
Speaker 2: who took the call in nineteen. If we can get them,

577
00:30:02,920 --> 00:30:05,680
Speaker 2: Joel said, he will do a whole podcast Ken Burns

578
00:30:05,680 --> 00:30:08,680
Speaker 2: type documentary on this. But we need that person. Can

579
00:30:08,680 --> 00:30:10,560
Speaker 2: you pull some strings for me, some digging? Yeah, I

580
00:30:10,600 --> 00:30:13,360
Speaker 2: mean yeah, or reach out? If you're like, did they

581
00:30:13,440 --> 00:30:15,160
Speaker 2: know the importance of that call?

582
00:30:15,680 --> 00:30:18,160
Speaker 3: No, I'm guessing not. You know, like I think it's

583
00:30:18,160 --> 00:30:20,200
Speaker 3: just another phone call where you're like, yeah, sure, whatever,

584
00:30:20,240 --> 00:30:22,240
Speaker 3: and then everything else that follows you're like, oh, I

585
00:30:22,360 --> 00:30:25,400
Speaker 3: love you that stuff. Though, we'd love to find and

586
00:30:25,800 --> 00:30:28,400
Speaker 3: interview that person. As long as we're talking about QUES,

587
00:30:28,720 --> 00:30:31,560
Speaker 3: probably can't talk about that without talking about the Unit

588
00:30:31,600 --> 00:30:34,480
Speaker 3: Investment Trust, the u I T, which is basically the

589
00:30:34,480 --> 00:30:38,160
Speaker 3: framework that QQQ is built on, and not that many

590
00:30:38,200 --> 00:30:41,960
Speaker 3: others like one. That's right, Uh, if you could have

591
00:30:42,000 --> 00:30:44,480
Speaker 3: a redo, is there anything more in your life that

592
00:30:44,520 --> 00:30:46,520
Speaker 3: you would rather have a redo on than Q being

593
00:30:46,520 --> 00:30:47,040
Speaker 3: a u I T.

594
00:30:47,560 --> 00:30:50,080
Speaker 4: Sure? Well, of course you want the ETF market to

595
00:30:50,080 --> 00:30:52,760
Speaker 4: be started, right, So thank you for the pioneers in

596
00:30:52,800 --> 00:30:57,240
Speaker 4: that regard. But like many things, markets evolve, structures evolve,

597
00:30:57,360 --> 00:31:01,080
Speaker 4: regulations evolve, and we've seen that through route the last

598
00:31:01,120 --> 00:31:03,440
Speaker 4: twenty five years in the ETF market to get to

599
00:31:03,440 --> 00:31:06,760
Speaker 4: some level of standards standardization. There was a time at

600
00:31:06,760 --> 00:31:09,640
Speaker 4: which some had exemptive relief and some didn't. So early

601
00:31:09,800 --> 00:31:13,200
Speaker 4: entrants that had that relief were able to launch ETFs,

602
00:31:13,200 --> 00:31:17,160
Speaker 4: others were not. So evolution is is great, and you

603
00:31:17,200 --> 00:31:20,040
Speaker 4: know that's that's an opportunity for some of these unit

604
00:31:20,120 --> 00:31:25,160
Speaker 4: investment trusts to modernize their structure and and and you know,

605
00:31:25,320 --> 00:31:30,800
Speaker 4: bring bring the structure and the ETF ecosysm ecosystem into

606
00:31:30,840 --> 00:31:31,680
Speaker 4: that investor base.

607
00:31:32,040 --> 00:31:35,680
Speaker 2: So our outlook, which we published this month, basically is

608
00:31:36,240 --> 00:31:41,080
Speaker 2: ETFs are living the dream, but reality checks await. So

609
00:31:41,240 --> 00:31:43,760
Speaker 2: we don't think this big movement is going to be

610
00:31:44,480 --> 00:31:47,360
Speaker 2: dampered much. Market going down a little, maybe it's like

611
00:31:47,600 --> 00:31:51,200
Speaker 2: a little less record breaking. But there's a couple of

612
00:31:51,240 --> 00:31:54,920
Speaker 2: things out there, like, for example, some stocks are real

613
00:31:55,520 --> 00:31:57,880
Speaker 2: volatile and they get two XD and one of those

614
00:31:57,880 --> 00:32:00,080
Speaker 2: probably will blow up. There could be something there the

615
00:32:00,120 --> 00:32:03,280
Speaker 2: mutual fund share classes that are adding ETF share classes.

616
00:32:03,720 --> 00:32:06,840
Speaker 2: There could be some tax contagion there where the ETF

617
00:32:06,880 --> 00:32:09,640
Speaker 2: gets capital gains because of the mutual fund. There's a

618
00:32:09,640 --> 00:32:12,520
Speaker 2: couple of things that I think are maybe possible stories

619
00:32:12,560 --> 00:32:17,080
Speaker 2: Also just the paradox of choice, so many products that

620
00:32:17,160 --> 00:32:17,960
Speaker 2: it's just hard to pick.

621
00:32:18,040 --> 00:32:20,000
Speaker 3: I call it the breadee, the bread ale. What what

622
00:32:20,040 --> 00:32:22,040
Speaker 3: am I going to do? Which which type of bread

623
00:32:22,120 --> 00:32:23,160
Speaker 3: is am I going to use?

624
00:32:23,160 --> 00:32:26,320
Speaker 2: So those are some of the things we're looking at

625
00:32:26,360 --> 00:32:28,920
Speaker 2: as like what could be some hiccups. We don't see

626
00:32:28,920 --> 00:32:30,959
Speaker 2: anything derailing it. But what do you make of that?

627
00:32:31,000 --> 00:32:32,800
Speaker 2: Like what keeps you up at night? What are you

628
00:32:32,840 --> 00:32:34,760
Speaker 2: looking at, whether it's your own firm or the industry

629
00:32:34,760 --> 00:32:35,200
Speaker 2: as a whole.

630
00:32:35,680 --> 00:32:37,960
Speaker 4: Sure, I think ETF share class is a is a

631
00:32:37,960 --> 00:32:42,040
Speaker 4: great opportunity to uh to integrate, you know, structures and

632
00:32:42,560 --> 00:32:46,560
Speaker 4: bring some of the advantages that ETFs offer into mutual funds.

633
00:32:46,960 --> 00:32:49,360
Speaker 4: But I've I've been out there saying that there's pure

634
00:32:49,480 --> 00:32:51,880
Speaker 4: and less pure. Right, So an ETF that only has

635
00:32:51,920 --> 00:32:54,720
Speaker 4: its own not share class, but trades as an ETF

636
00:32:55,040 --> 00:33:00,000
Speaker 4: will take advantages of all the tax ability, all the liquidity,

637
00:33:00,000 --> 00:33:03,560
Speaker 4: the track record and the like. Pivoting into the share

638
00:33:03,560 --> 00:33:07,480
Speaker 4: class is complex, and that's why you've seen some of

639
00:33:06,960 --> 00:33:11,280
Speaker 4: the reviews. The industry come together to identify what the

640
00:33:11,280 --> 00:33:15,640
Speaker 4: solution is and what would look like a preferred outcome

641
00:33:15,680 --> 00:33:19,120
Speaker 4: for investors. And there's still quite a bit of uncertainty

642
00:33:19,120 --> 00:33:23,120
Speaker 4: there from not only wealth channels, but issuers as well.

643
00:33:23,200 --> 00:33:25,960
Speaker 4: Because you have to be transparent. Some managers don't want

644
00:33:25,960 --> 00:33:28,560
Speaker 4: to be transparent. We've seen that. We've tried that, and

645
00:33:28,640 --> 00:33:32,239
Speaker 4: non transparent the market didn't really respond to it. You

646
00:33:32,280 --> 00:33:34,560
Speaker 4: have to have the right pricing. You don't have to

647
00:33:34,560 --> 00:33:37,320
Speaker 4: be the lowest cost, but there could be price impacts,

648
00:33:37,320 --> 00:33:40,320
Speaker 4: so you need to look at economics and the impact

649
00:33:40,320 --> 00:33:43,400
Speaker 4: of that overall, and you still need to provide returns.

650
00:33:43,640 --> 00:33:47,120
Speaker 4: Just moving it into an ETF doesn't guarantee success, so

651
00:33:47,480 --> 00:33:52,480
Speaker 4: differentiated active strong managers quality investment performance is still going

652
00:33:52,560 --> 00:33:53,200
Speaker 4: to drive the day.

653
00:33:54,000 --> 00:33:55,920
Speaker 2: Yeah, you got it tough enough. I always say you

654
00:33:55,960 --> 00:33:58,120
Speaker 2: have to come to the ETF industry on it's terms,

655
00:33:58,160 --> 00:34:01,440
Speaker 2: not yours, and not everybody wants to do that. Said,

656
00:34:01,800 --> 00:34:03,760
Speaker 2: we could be. We did the math. There's about three

657
00:34:03,800 --> 00:34:08,359
Speaker 2: thousand mutual funds that currently don't have any ETF where

658
00:34:08,360 --> 00:34:11,280
Speaker 2: the issuer has no ETFs at all that have filed

659
00:34:11,600 --> 00:34:14,560
Speaker 2: for the share class. So there's potentially three thousand new

660
00:34:14,600 --> 00:34:16,800
Speaker 2: ETFs that could just be bolted onto a mutual fund.

661
00:34:16,920 --> 00:34:21,280
Speaker 2: Probably won't be that many. That's a big deal, Joel,

662
00:34:21,320 --> 00:34:23,000
Speaker 2: I mean it just might take a couple of years

663
00:34:23,000 --> 00:34:23,400
Speaker 2: to play out.

664
00:34:23,440 --> 00:34:25,680
Speaker 3: Though how much of twenty twenty six are we going

665
00:34:25,719 --> 00:34:26,520
Speaker 3: to be talking about.

666
00:34:26,320 --> 00:34:28,880
Speaker 2: This a lot? I think DFA is going to be

667
00:34:28,880 --> 00:34:31,440
Speaker 2: the guinea pig. They're really pushing it. It fits their

668
00:34:31,480 --> 00:34:35,439
Speaker 2: whole business and plumbing perfectly this particular thing. But if

669
00:34:35,440 --> 00:34:41,000
Speaker 2: they see success, look out especially you know, it's tricky.

670
00:34:41,000 --> 00:34:43,000
Speaker 2: There's one caveats all this. And I'm not sure if

671
00:34:43,000 --> 00:34:45,239
Speaker 2: you thought about this, but Capitol Group, they were on

672
00:34:45,280 --> 00:34:48,200
Speaker 2: ETFIQ they said, we're not doing anything. We don't believe

673
00:34:48,200 --> 00:34:51,680
Speaker 2: in this, and they're the biggest active manager on Earth.

674
00:34:51,880 --> 00:34:55,320
Speaker 2: I mean, they're the number one, So what they say matters.

675
00:34:55,480 --> 00:34:56,800
Speaker 2: And if they look at this and said we're just

676
00:34:56,840 --> 00:34:59,440
Speaker 2: going to put ETFs out there separate from the mutual fund,

677
00:35:00,360 --> 00:35:02,960
Speaker 2: that's also Capital Groups of why non transparent active I

678
00:35:02,960 --> 00:35:04,960
Speaker 2: think didn't take off because when they finally came in,

679
00:35:05,280 --> 00:35:09,759
Speaker 2: they went transparent, and so that's also interesting. So I

680
00:35:09,880 --> 00:35:11,680
Speaker 2: don't know, but all I know is if cope you

681
00:35:11,719 --> 00:35:14,400
Speaker 2: will find success, the rest will rush in. But that

682
00:35:14,520 --> 00:35:16,560
Speaker 2: the first part is we don't totally know.

683
00:35:16,520 --> 00:35:17,920
Speaker 3: What does success look like, Brian.

684
00:35:18,800 --> 00:35:22,800
Speaker 4: So I think success is bringing more quality investment capabilities

685
00:35:22,880 --> 00:35:26,600
Speaker 4: to investors through the optimal wrapper, and that's what we're

686
00:35:26,600 --> 00:35:31,319
Speaker 4: looking at. We're on a very focused pace in our

687
00:35:31,360 --> 00:35:34,040
Speaker 4: own path of share class, and that's looking at it

688
00:35:34,160 --> 00:35:38,360
Speaker 4: very opportunistically, not ETF share class for all type of approach,

689
00:35:38,719 --> 00:35:41,160
Speaker 4: but bringing you know, where it makes sense, where we

690
00:35:41,160 --> 00:35:43,520
Speaker 4: think we can have the liquidity and where the managers

691
00:35:43,520 --> 00:35:47,399
Speaker 4: can operate within the structure. So I think you're going

692
00:35:47,480 --> 00:35:50,799
Speaker 4: to see and each each manager has a different strategy, right,

693
00:35:50,840 --> 00:35:53,040
Speaker 4: they have a different path and they've come down a

694
00:35:53,040 --> 00:35:56,120
Speaker 4: different road. Some have large active and they might say, hey,

695
00:35:56,160 --> 00:35:58,680
Speaker 4: we're just going to cannibalize ourselves. We're going to try

696
00:35:58,719 --> 00:36:02,600
Speaker 4: to get pivots into to somewhat similar but differentiated strategies,

697
00:36:02,640 --> 00:36:06,520
Speaker 4: not cloned, and that's our best path forward to avoid

698
00:36:06,680 --> 00:36:09,560
Speaker 4: maybe a difficult decision. Others just want to get into

699
00:36:09,560 --> 00:36:12,600
Speaker 4: the ETF space, right, so they want to launch and

700
00:36:12,680 --> 00:36:14,960
Speaker 4: find a way to get into that market. But not

701
00:36:15,080 --> 00:36:18,200
Speaker 4: all will succeed because there are again i'll speak to

702
00:36:18,239 --> 00:36:24,080
Speaker 4: the ecosystem, they're trading implications, cost implications, liquidity implications that

703
00:36:24,520 --> 00:36:26,920
Speaker 4: managers need to weigh trod them.

704
00:36:27,040 --> 00:36:30,200
Speaker 2: And another thing is the transparency thing is a big

705
00:36:30,239 --> 00:36:33,760
Speaker 2: deal for some because they spend their whole life picking

706
00:36:33,800 --> 00:36:36,239
Speaker 2: these stocks and they feel like it's their ip. But

707
00:36:36,560 --> 00:36:38,960
Speaker 2: I have found that I don't think anybody cares. I mean,

708
00:36:40,600 --> 00:36:43,360
Speaker 2: I give ARC a lot of credit. They came out transparent.

709
00:36:43,520 --> 00:36:45,239
Speaker 2: She even shows you what the trades were that day.

710
00:36:45,280 --> 00:36:48,040
Speaker 2: I mean, it's full transparency, and I just think that's

711
00:36:48,080 --> 00:36:50,000
Speaker 2: sort of what people demand in their ETFs. It's sort

712
00:36:50,000 --> 00:36:51,880
Speaker 2: of like an attribute of an ETF. They're used to,

713
00:36:52,080 --> 00:36:54,319
Speaker 2: so they don't want it to be different. But some

714
00:36:54,360 --> 00:36:57,960
Speaker 2: managers just I think it's hard for them to get

715
00:36:58,000 --> 00:37:01,480
Speaker 2: over that, but I think they should. Nobody cares. Nobody

716
00:37:01,480 --> 00:37:03,680
Speaker 2: cares if you have Amazon at three percent and the

717
00:37:03,719 --> 00:37:05,640
Speaker 2: market has like the S and P's at like six percent,

718
00:37:05,719 --> 00:37:07,960
Speaker 2: like nobody cares. It's like they're just gonna look at

719
00:37:08,000 --> 00:37:11,760
Speaker 2: the returns. So I just think it doesn't matter anymore.

720
00:37:11,760 --> 00:37:15,000
Speaker 2: There's so many portfolios. Back in the day, it was

721
00:37:15,040 --> 00:37:17,279
Speaker 2: like Jeff Finnick managed the Filly Magellan and it was

722
00:37:17,320 --> 00:37:19,440
Speaker 2: like that was like so big and if he if

723
00:37:19,480 --> 00:37:21,080
Speaker 2: he showed his holdings, you could get ahead of it.

724
00:37:21,120 --> 00:37:24,359
Speaker 2: Like there was some legit issues. I don't really see

725
00:37:24,400 --> 00:37:27,400
Speaker 2: that those days are over, so I think they should

726
00:37:27,440 --> 00:37:31,000
Speaker 2: just come in try it. This is the technology. Everybody

727
00:37:31,040 --> 00:37:34,520
Speaker 2: wants to use it. It's the equivalent of Spotify. It'd

728
00:37:34,520 --> 00:37:36,279
Speaker 2: be like being in a band and like refusing to

729
00:37:36,280 --> 00:37:38,600
Speaker 2: take your music from compact disc and putting it on Spotify,

730
00:37:38,600 --> 00:37:39,360
Speaker 2: Like why would you do that?

731
00:37:40,600 --> 00:37:41,960
Speaker 3: Still some people to do it.

732
00:37:42,040 --> 00:37:44,200
Speaker 2: I know, well no, Like Neil Young is like, listen

733
00:37:44,239 --> 00:37:47,000
Speaker 2: to my music on analog. It's like, okay, fine, Harvest

734
00:37:47,080 --> 00:37:51,080
Speaker 2: Moon sounds two percent better on analog, but like, I'm.

735
00:37:50,920 --> 00:37:53,279
Speaker 3: Sorry more than two percent, but I hear you.

736
00:37:53,960 --> 00:37:56,439
Speaker 2: By the way, Harvest Harvest is the better album. That's

737
00:37:56,440 --> 00:38:00,120
Speaker 2: the one from nineteen seventy three with Old Man. That's

738
00:38:00,160 --> 00:38:02,560
Speaker 2: a good album and it does sound good on vinyl, all.

739
00:38:02,600 --> 00:38:09,600
Speaker 3: Right, Brian, Final question, favorite ticker other than any of Invesco's.

740
00:38:09,800 --> 00:38:11,879
Speaker 2: Wow, I take your time?

741
00:38:11,960 --> 00:38:13,200
Speaker 4: I need a ten second count?

742
00:38:13,600 --> 00:38:14,600
Speaker 2: No, where did it take your time?

743
00:38:16,280 --> 00:38:19,319
Speaker 3: I'll motion with my hand to just like pretend that

744
00:38:19,400 --> 00:38:22,279
Speaker 3: it's a shot clock. Well, you like the ref and

745
00:38:22,320 --> 00:38:25,200
Speaker 3: the it's like five seconds.

746
00:38:25,280 --> 00:38:27,240
Speaker 4: You know, I'm going to bring it back to Invesco.

747
00:38:27,320 --> 00:38:31,880
Speaker 4: But it's your favorite too. What so most creative ticker?

748
00:38:32,040 --> 00:38:35,239
Speaker 4: I can't give too much credit outside of our own

749
00:38:35,560 --> 00:38:37,400
Speaker 4: our own home cooking PBJ.

750
00:38:38,400 --> 00:38:40,480
Speaker 2: Wait a second, that's your ticker.

751
00:38:40,560 --> 00:38:42,279
Speaker 3: Right, oh, favorite other than yours?

752
00:38:42,560 --> 00:38:43,280
Speaker 4: I know I pivoted.

753
00:38:43,520 --> 00:38:45,240
Speaker 3: Yeah, he can't do it, so PBJ.

754
00:38:45,760 --> 00:38:48,640
Speaker 2: Matt Kaufman, who's from Wheaton, which is where the Power

755
00:38:48,640 --> 00:38:52,560
Speaker 2: Shares people grew up. He picked PBJ, which I thought

756
00:38:52,560 --> 00:38:53,080
Speaker 2: it was a good one.

757
00:38:53,120 --> 00:38:55,600
Speaker 3: But I'll give it to you if you can answer.

758
00:38:56,440 --> 00:38:58,759
Speaker 3: Do you prefer the crunchy or the creamy version of

759
00:38:58,840 --> 00:38:59,399
Speaker 3: peanut butter?

760
00:39:00,120 --> 00:39:03,719
Speaker 4: You always gotta go creamy. Yeah, that's how crunchy is interesting.

761
00:39:03,800 --> 00:39:07,480
Speaker 4: The real question is strawberry or great and then jelly

762
00:39:07,560 --> 00:39:10,680
Speaker 4: or jam? So many decisions. Maybe there's an analyst.

763
00:39:10,840 --> 00:39:11,480
Speaker 3: Yeah, PVJ.

764
00:39:11,960 --> 00:39:14,200
Speaker 2: Just wrap it up in it or that that stuff

765
00:39:14,200 --> 00:39:16,440
Speaker 2: that comes where you you suppress it and both come

766
00:39:16,480 --> 00:39:17,160
Speaker 2: out at the same time.

767
00:39:17,360 --> 00:39:17,840
Speaker 3: Its gross.

768
00:39:18,480 --> 00:39:21,560
Speaker 2: Not for me. I'm fine with that. Well, you have

769
00:39:21,640 --> 00:39:24,439
Speaker 2: another thing. When you get the jelly and the peanut butter,

770
00:39:24,560 --> 00:39:26,279
Speaker 2: do you use two different knives or do you like

771
00:39:26,320 --> 00:39:28,040
Speaker 2: how do you deal with that peanut butter?

772
00:39:28,080 --> 00:39:30,120
Speaker 3: First, take the peanut butter all the way off on

773
00:39:30,239 --> 00:39:31,719
Speaker 3: the bread, and then you do the jam.

774
00:39:31,760 --> 00:39:33,839
Speaker 2: You cannot possibly get all the peanut butter off without

775
00:39:33,880 --> 00:39:34,760
Speaker 2: breaking the bread.

776
00:39:34,520 --> 00:39:37,040
Speaker 3: And you can watch me, okay, give you a tutorial.

777
00:39:37,160 --> 00:39:39,799
Speaker 2: That's That's what that thing solves, is having to use

778
00:39:39,840 --> 00:39:40,800
Speaker 2: two knives. It's annoying.

779
00:39:40,800 --> 00:39:42,319
Speaker 3: But because I do.

780
00:39:42,360 --> 00:39:44,839
Speaker 2: Peanut butter and jelly like probably once a week, and

781
00:39:45,160 --> 00:39:48,839
Speaker 2: I watched the whole knife off and I'm like, they

782
00:39:49,360 --> 00:39:51,160
Speaker 2: that's where the guy who came up with that one

783
00:39:51,200 --> 00:39:52,840
Speaker 2: you pour both together, That's what he was.

784
00:39:52,960 --> 00:39:56,160
Speaker 3: There's a paper towel that you can also do. But

785
00:39:56,600 --> 00:39:58,880
Speaker 3: by the way, this is the cutting room floor for

786
00:39:58,920 --> 00:40:00,000
Speaker 3: this episode is going to be well.

787
00:40:00,000 --> 00:40:02,879
Speaker 2: But there is a metaphor there which sometimes ETFs make

788
00:40:03,239 --> 00:40:06,400
Speaker 2: something like the two x ETFs. They make something just

789
00:40:06,440 --> 00:40:09,960
Speaker 2: a little bit easier, and that's sort of similar, like

790
00:40:10,239 --> 00:40:12,240
Speaker 2: because we always tell people like why is this so popular,

791
00:40:12,280 --> 00:40:14,480
Speaker 2: I'm like, honestly, dude, people are lazy. If you can

792
00:40:14,520 --> 00:40:17,080
Speaker 2: make something just a touch easier, like, you're gonna get

793
00:40:17,080 --> 00:40:20,920
Speaker 2: some buyers. You know who said that? And Dorsey, right,

794
00:40:21,719 --> 00:40:24,840
Speaker 2: Tom Dorsey, he was like he was talking.

795
00:40:24,560 --> 00:40:26,959
Speaker 3: About how what are you bringing back to smart Beta?

796
00:40:27,239 --> 00:40:30,160
Speaker 2: Yeah, Tom Dorsey from my book, he was like, he

797
00:40:30,360 --> 00:40:35,240
Speaker 2: really highlighted the convenience aspect of ETFs big time. He's great,

798
00:40:35,480 --> 00:40:38,520
Speaker 2: He's got a hope. Following Yeah, he's part of their stable.

799
00:40:38,640 --> 00:40:46,800
Speaker 3: Yeah, Brian, thanks for joining us some Trucks, Thanks, Guess,

800
00:40:48,120 --> 00:40:50,640
Speaker 3: Thanks for listening to trucks. Until next time. You can

801
00:40:50,640 --> 00:40:54,920
Speaker 3: find us on the Bloomberg Terminal, Bloomberg dot com, Apple Podcasts, Spotify,

802
00:40:55,239 --> 00:40:57,440
Speaker 3: or wherever else do you like to listen. We'd love

803
00:40:57,480 --> 00:41:00,800
Speaker 3: to hear from you. Hit us up on Social. Trillions

804
00:41:00,840 --> 00:41:04,480
Speaker 3: is produced by Magnus Hendrickson and Ryan Kessler. Amy Keene

805
00:41:04,760 --> 00:41:07,719
Speaker 3: is our executive producer. Sage Bauman is the head of

806
00:41:07,760 --> 00:41:09,600
Speaker 3: Bloomberg Podcast. Bye b