WEBVTT - Invesco's ETF Playbook 0:00:02.480 --> 0:00:13.200 Bloomberg Audio Studios, Podcasts, radio News. 0:00:13.200 --> 0:00:18.480 I'm Juel Webber and I'm Eric Belchunas Eric. 0:00:18.480 --> 0:00:21.640 We have a special guest today from Investco, Brian Hartigan. 0:00:21.800 --> 0:00:26.479 He's the global head of ETFs and index Investments. Why 0:00:26.600 --> 0:00:28.160 is Invesco so interesting? 0:00:28.840 --> 0:00:31.800 Yeah, you know, they're in the terrordome with there in 0:00:31.880 --> 0:00:35.239 the upper echelon, but not in the big two, and 0:00:35.320 --> 0:00:37.880 so they're in that sort of like level with First 0:00:37.880 --> 0:00:41.200 Trust and Schwab and other sort of like i'd say 0:00:41.200 --> 0:00:43.559 big dogs but not quite Blank Vanguard and black Rock, 0:00:43.560 --> 0:00:46.200 And it's an interesting spot. If you look at their funds, 0:00:46.240 --> 0:00:47.440 they have a ton of hits, a lot of people 0:00:47.479 --> 0:00:50.120 like a lot of ones people love and know, and 0:00:50.760 --> 0:00:53.840 one big one, one big one, Yeah, one super stud 0:00:53.920 --> 0:00:57.000 The q's QQQ and QQQ and perhaps you've heard talk 0:00:57.000 --> 0:00:59.720 about Yeah, perhaps you've heard of it, and but it's 0:00:59.760 --> 0:01:03.080 interest company obviously used to be Power Shares purchased by Invesco. 0:01:03.680 --> 0:01:05.840 And we have had a couple episodes we talked to 0:01:05.880 --> 0:01:08.360 analysts and reporters, but this is sort of like, hey, 0:01:08.400 --> 0:01:10.959 let's wrap the euroup talking to somebody who's in the 0:01:11.040 --> 0:01:15.080 terror dome every day, fighting for every dollar. It is 0:01:15.120 --> 0:01:19.240 hard in this industry, and there's a lot of things 0:01:19.280 --> 0:01:21.600 going on in their products. They have a diversified product line, 0:01:21.640 --> 0:01:23.120 so we can touch on a bunch of different themes 0:01:23.120 --> 0:01:26.160 here and just sort of get the perspective from inside 0:01:26.240 --> 0:01:27.679 that competitive healthcape. 0:01:27.920 --> 0:01:32.399 Again joining us Brian Hartigan of Investco, this time on 0:01:32.440 --> 0:01:35.640 Trillions investcos etf playbook. 0:01:36.840 --> 0:01:39.840 Brian Wegan a trillions Warnow guys, great to bear. 0:01:40.280 --> 0:01:43.200 Just so that we have a disclaimer, Investco is a 0:01:43.200 --> 0:01:45.880 Bloomberg sponsor. Okay, so I want to talk to you 0:01:45.880 --> 0:01:50.120 about Invesco. What's the secret sauce at Invesco that strategically 0:01:50.160 --> 0:01:53.240 distinguishes you, guys from all those other players in Eric's 0:01:53.320 --> 0:01:54.480 thunderdome Terrordome. 0:01:55.040 --> 0:01:57.640 Sure, yeah, the Terroodome. I love it. It brings out 0:01:57.760 --> 0:02:00.280 some of the grittiness. But we've been in the game 0:02:00.280 --> 0:02:03.080 for quite some time, right, So we just recently hit 0:02:03.080 --> 0:02:07.160 a trillion dollars in assets shameless plug trillion, but it's 0:02:07.200 --> 0:02:08.359 through a see what you did there? 0:02:08.400 --> 0:02:11.079 Well, you know we always say the name we gave 0:02:11.120 --> 0:02:13.639 this podcast podcast aged really well. 0:02:13.600 --> 0:02:18.200 Yes, number go, so trillion, trillion, keep hitting the trillion flows. 0:02:18.960 --> 0:02:21.760 Investco has been in the ETF market for quite some 0:02:21.840 --> 0:02:26.320 time early days, pioneer through power shares, expansion into factors, 0:02:26.360 --> 0:02:29.960 fixed income, commodities, and global in terms of our overall reach, 0:02:30.080 --> 0:02:32.840 so we've been in the tero doome. We've been fighting, competing, 0:02:32.880 --> 0:02:37.000 We understand the landscape and it takes, you know, that 0:02:37.120 --> 0:02:40.919 level of focus really to compete and reach investors within 0:02:40.960 --> 0:02:44.360 the ETF landscape. So it's been a testament of a 0:02:44.400 --> 0:02:48.040 really understanding investors, understanding needs and evolving as we've gone. 0:02:48.720 --> 0:02:52.120 What about this year? What have you learned this year 0:02:52.360 --> 0:02:56.000 that you know is a timely insight for our listeners. Sure. 0:02:56.040 --> 0:02:59.240 Yeah, it's been a great year of returns. Many folks 0:02:59.400 --> 0:03:03.600 kind of forget that at first February March cell down, 0:03:03.680 --> 0:03:06.800 sell off, right, And what was interesting about the market 0:03:06.840 --> 0:03:09.920 correction is it it really opened the door for more diversification. 0:03:10.040 --> 0:03:12.440 From our view, there was a lot of US equity 0:03:12.760 --> 0:03:16.800 dominance and that was great for ourselves for our lineup, 0:03:17.080 --> 0:03:19.320 but I think you started to see investors look at 0:03:19.760 --> 0:03:25.760 more opportunities for diversification. Factors, international commodities came back into play. 0:03:25.880 --> 0:03:29.359 So it's a new world for investors to look at. 0:03:29.560 --> 0:03:31.600 How do they want to diversify through ETFs. 0:03:32.400 --> 0:03:34.040 One of the things that was interesting to me. So 0:03:34.120 --> 0:03:36.600 if I look at your ETFs by flows this year, 0:03:37.320 --> 0:03:40.680 the QQQM and qqq are at the top, So let's 0:03:40.680 --> 0:03:43.360 move those aside because I think everybody knows them. But 0:03:43.520 --> 0:03:45.960 number two is kind of a chakra or three rather 0:03:46.080 --> 0:03:48.800 is a chaker role SPMO. Most people probably don't know 0:03:48.800 --> 0:03:50.920 what that is. That's the investco S and P five 0:03:50.960 --> 0:03:54.280 hundred momentum ETF. You also have an international momentum in there. 0:03:55.880 --> 0:03:57.480 We call that smart beta. We used to have a 0:03:57.680 --> 0:04:01.640 bunch of episodes on beta kind of like went away 0:04:01.680 --> 0:04:04.080 because it's not like the hot topic anymore, but it 0:04:04.560 --> 0:04:07.400 took in I don't know, five hundred billion ish this year. 0:04:07.480 --> 0:04:09.760 So smart beta, obviously, for those who don't know, is 0:04:09.800 --> 0:04:12.240 basically when you take an index and you tweak it 0:04:12.240 --> 0:04:13.840 a little like some Instead of the S and P, 0:04:14.080 --> 0:04:16.680 you tweak it so it has a momentum tilt and 0:04:16.720 --> 0:04:18.960 so it's active but passive at the same time. And 0:04:19.000 --> 0:04:21.040 that sort of smart beta is like twenty five percent 0:04:21.040 --> 0:04:22.960 of the assets. People don't talk about it. It's still 0:04:22.960 --> 0:04:25.640 taking a bunch of cash. How would you do you? 0:04:25.760 --> 0:04:28.120 Obviously you're still talking about with clients. What are those 0:04:28.160 --> 0:04:31.080 conversations like and how did this one particular ETF get 0:04:31.080 --> 0:04:31.880 so high on the list? 0:04:32.400 --> 0:04:35.719 Sure? For us, smart beta is a it's a mechanism 0:04:35.760 --> 0:04:39.279 of factors, right, what is explaining market returns? And when 0:04:39.279 --> 0:04:42.400 you look at it this year, concentration mag seven, those 0:04:42.400 --> 0:04:47.400 are all momentum names. So momentum clearly is driving returns 0:04:47.400 --> 0:04:50.479 and it's driving flows. The beauty of smart beta is 0:04:50.520 --> 0:04:53.159 that it's emotionless, so you don't have to say, hey, 0:04:53.160 --> 0:04:55.679 are these getting too big? Are they becoming too large 0:04:56.080 --> 0:04:59.520 in my portfolio? So that creates that force discipline, and 0:04:59.560 --> 0:05:01.920 I think in vestors are showing that they want to 0:05:02.120 --> 0:05:04.440 know what the potential outcomes are going to be of 0:05:04.480 --> 0:05:05.400 the ETF. 0:05:05.839 --> 0:05:07.640 So let's talk a little bit more about smart beta 0:05:07.680 --> 0:05:10.600 and how smart beta works because it is unemotional, right, 0:05:11.040 --> 0:05:13.360 It's just detached from that, and it's got a little 0:05:13.360 --> 0:05:15.279 bot that basically tells it what to do, and it's 0:05:15.279 --> 0:05:17.960 going to rebalance that set period of time. There's been 0:05:18.000 --> 0:05:20.599 some pretty noteworthy ones that Eric and I have discussed before, 0:05:20.640 --> 0:05:23.440 but I'm curious from your perspective, when was a moment 0:05:23.440 --> 0:05:25.479 in time that you were like, Wow, that was exactly 0:05:25.480 --> 0:05:26.680 what smart beta is supposed to do. 0:05:26.920 --> 0:05:29.200 Sure. Yeah, as you said, it's an index, right, and 0:05:29.240 --> 0:05:32.200 it's smart in that it is more than just buying 0:05:32.200 --> 0:05:35.360 the entire market, so it has a pre programmed discipline 0:05:35.400 --> 0:05:38.479 to it that gets you to an exact factor. So 0:05:38.600 --> 0:05:41.400 for us, it's seeing some of the leadership change. So 0:05:41.440 --> 0:05:44.120 when we looked at our flows as you do on 0:05:44.200 --> 0:05:47.480 the show, last year, quality was one of our biggest 0:05:47.880 --> 0:05:51.360 in terms of garnering attention investors not sure where the 0:05:51.400 --> 0:05:54.880 market was going, and quality tends to take on kind 0:05:54.880 --> 0:05:57.320 of a best of breed. It's not your biggest momentum, 0:05:57.360 --> 0:06:00.600 it's not your cheapest, but it brings in fundamental and 0:06:00.640 --> 0:06:02.760 we saw much of that last year. Then you saw 0:06:02.960 --> 0:06:05.760 kind of the election change, sentiment change quite a bit 0:06:05.760 --> 0:06:08.279 in the market, and momentum took off, right. That was 0:06:08.360 --> 0:06:11.680 investors getting back into the market, and you saw leadership change. 0:06:11.680 --> 0:06:13.240 And that's what we tend to look at, not only 0:06:13.279 --> 0:06:16.240 on flows, but also on market returns through factors. 0:06:16.320 --> 0:06:18.479 Yeah, and let me give you this SPMO is up 0:06:18.520 --> 0:06:21.520 twenty seven percent. That's even better than the queues and 0:06:21.560 --> 0:06:23.760 it's way better than the SMP which is eighteen percent. Oh, 0:06:23.760 --> 0:06:25.840 that's a good year considering what you said about the 0:06:25.880 --> 0:06:30.479 negativity earlier. One thing about spmo is and momentum is 0:06:30.480 --> 0:06:32.920 what we found. We looked at active funds a lot 0:06:32.920 --> 0:06:35.800 of active managers this year they did that thing where 0:06:35.800 --> 0:06:38.760 they they are all full of the CFA, you know, 0:06:38.880 --> 0:06:42.040 like fundamentals and I get it, and they shifted into 0:06:42.120 --> 0:06:46.880 like non tech names. Momentum meanwhile, saw that tech names 0:06:46.880 --> 0:06:50.400 were actually going better and tried to ride that and 0:06:50.440 --> 0:06:53.120 it worked. So not having the mag seven is what 0:06:53.240 --> 0:06:56.480 caused more active to underperform this year. They keep taking 0:06:56.480 --> 0:07:00.320 the bait of biting on these like other fundament like 0:07:00.400 --> 0:07:04.160 more fundamentally sound or low lower valuation sectors, and they're 0:07:04.200 --> 0:07:07.080 like tech is just too expensive and ends up. Tech 0:07:07.160 --> 0:07:07.919 just goes up again. 0:07:08.040 --> 0:07:11.280 But this is kind of where smart beta is distinguished, 0:07:11.360 --> 0:07:12.840 right because it can just look at it from the 0:07:12.920 --> 0:07:15.200 numbers and just be like, absolutely. 0:07:14.720 --> 0:07:17.720 We know exactly what to do now except like a 0:07:17.840 --> 0:07:20.720 value ETF that they have probably didn't perform as well, 0:07:20.720 --> 0:07:23.240 but it's just doing what the robot says. But momentum 0:07:23.280 --> 0:07:25.720 obviously went into the tech names and the rest is 0:07:25.800 --> 0:07:27.400 you know, that's why it's number three on the list. 0:07:27.440 --> 0:07:32.440 So obviously those factors, there's regimes, right, yeah. 0:07:31.960 --> 0:07:34.160 Yeah, so the regimes and I think Eric you said 0:07:34.200 --> 0:07:36.880 it best, right, it creates a challenge in the market, 0:07:36.960 --> 0:07:39.520 not only for active but for managers. Right, where do 0:07:39.640 --> 0:07:44.040 I allocate because you have such a systematic bias towards 0:07:44.080 --> 0:07:49.080 towards price returns, momentum size and exposure. Right, So the 0:07:49.120 --> 0:07:52.560 momentum factor creates a bit of a decision for investors. 0:07:52.600 --> 0:07:54.280 Is it going to revert or do I want to 0:07:54.320 --> 0:07:57.120 continue to maintain the trend? And we're seeing people really 0:07:57.240 --> 0:07:59.840 use this as an allocation right to hedge some of 0:07:59.840 --> 0:08:01.040 those those decisions. 0:08:01.440 --> 0:08:04.880 So why does this base get talked about less now 0:08:04.920 --> 0:08:07.360 than say, ten years ago, when it was like it 0:08:07.400 --> 0:08:09.560 was a little spicier, I think. But yet, you know, 0:08:09.640 --> 0:08:11.680 active is sort of having a moment, So why isn't 0:08:11.840 --> 0:08:14.280 smart beta a little bit more part of the conversation. 0:08:14.560 --> 0:08:16.840 Yeah, I've lived through quite a bit of it, and 0:08:16.920 --> 0:08:20.680 you have written about it, you know, the active passive debate. Right, 0:08:20.720 --> 0:08:23.800 Smart beta was trying not to be just cheap and 0:08:24.560 --> 0:08:25.520 market exposure. 0:08:25.600 --> 0:08:25.720 Right. 0:08:25.760 --> 0:08:28.880 It was smarter, it was differentiated, and in every way 0:08:28.960 --> 0:08:31.920 it was active. We talk about our SMP equal weight 0:08:31.960 --> 0:08:35.920 fund RSP. It is one of the highest active shares 0:08:36.040 --> 0:08:37.800 that you can get compared to the S and P 0:08:37.920 --> 0:08:40.839 five hundred. Right, active means trying to be different than 0:08:40.840 --> 0:08:44.800 the index so that you generate differentiated returns. So there 0:08:44.880 --> 0:08:46.840 was it was kind of caught up in this What 0:08:46.960 --> 0:08:50.360 are ETF's passive active? And now active is having its 0:08:50.400 --> 0:08:53.920 new moment in its term. But the definition of active 0:08:54.040 --> 0:08:57.240 is really evolving. Right, It's not just stockpicking anymore. It's 0:08:57.600 --> 0:09:02.280 outcome based, it's active allocation, it's smart beta, it's factors, 0:09:02.360 --> 0:09:08.840 and it's investors saying I want active, I value the 0:09:08.920 --> 0:09:12.240 opportunities and active. But there are so many different ways 0:09:12.280 --> 0:09:15.719 by which I can outperform, be it manager or very 0:09:15.800 --> 0:09:19.319 pinpointed exposure that I can get through fixed income, equity 0:09:19.760 --> 0:09:22.600 and even asset classes. Right, themes and the. 0:09:22.679 --> 0:09:25.319 Like I would say RSP, they're equal weighted. One is 0:09:25.360 --> 0:09:26.839 the one I get asked a lot about, especially the 0:09:26.880 --> 0:09:28.200 Money Show. You know, I go to the Money show. 0:09:28.360 --> 0:09:30.559 That's like direct retail investors. They always ask me that 0:09:30.640 --> 0:09:32.880 equal weighting. People are fascinated about equal waiting. It almost 0:09:32.880 --> 0:09:35.160 seems like more fair, Like, yeah, I would like some 0:09:35.240 --> 0:09:37.560 of the stocks that are a little less loved. But 0:09:37.640 --> 0:09:41.160 it doesn't always work. But clearly as someone who has 0:09:41.160 --> 0:09:44.280 a product, if you do want that, like I want 0:09:44.320 --> 0:09:46.480 the market, but with a little less mag seven, this 0:09:46.520 --> 0:09:49.600 one seems to be the first thing people reach for 0:09:50.120 --> 0:09:53.560 when they want that, versus say going full value or 0:09:53.559 --> 0:09:55.120 some of these new products which are like hey, let 0:09:55.160 --> 0:09:57.079 me give you the SMP minus the top one hundred. 0:09:57.320 --> 0:10:00.240 They're getting really very specific. But I think equal wait 0:10:01.040 --> 0:10:04.120 it sort of like covers that feeling of like yeah, 0:10:04.160 --> 0:10:06.040 I want the market, but not with the mag seven, 0:10:06.120 --> 0:10:10.160 Like dominating seventy five billion dollars is the equal weight. 0:10:10.640 --> 0:10:13.160 But can I ask you a story about this Goldman 0:10:13.520 --> 0:10:15.880 filed for an equal waiting wait at ETF back like 0:10:15.920 --> 0:10:20.080 ten years ago, and this one was forty forty BIPs, 0:10:20.720 --> 0:10:23.280 and before Goldman can even make it to market, they 0:10:23.280 --> 0:10:27.160 cut to twenty and just killed Goldman right there and 0:10:27.440 --> 0:10:31.480 ended up just taking all the money. And that said, 0:10:31.720 --> 0:10:34.080 that's why I called the Tarrodome roll. They looked at 0:10:34.120 --> 0:10:35.920 the Goldman come in, there's like, okay, we have to 0:10:36.040 --> 0:10:40.840 sever our own arm to survive, right, this is like castaway. Okay, 0:10:41.480 --> 0:10:44.280 they did it, and they they more than made up 0:10:44.280 --> 0:10:46.880 for it. In dollars since then. But I don't know 0:10:46.920 --> 0:10:48.280 if you were part of that decision, But can you 0:10:48.320 --> 0:10:50.800 go through that mentality, because if you're from the mutual 0:10:50.840 --> 0:10:54.320 fun world, that's never even nothing even close to that exists. 0:10:54.320 --> 0:10:55.800 If anything, you just start charging more. 0:10:56.120 --> 0:10:57.480 Brian, did you look at your arm and say I 0:10:57.480 --> 0:10:58.319 don't need that anymore? 0:10:58.480 --> 0:11:02.280 Welling on how much we broadcast on this one for 0:11:02.360 --> 0:11:05.320 the show it actually happened, I'll give you something of 0:11:05.320 --> 0:11:08.480 a nugget. You know, the price cut was actually just 0:11:08.520 --> 0:11:13.160 prior to the acquisition of Investco to Gougenheims, so certainly 0:11:13.200 --> 0:11:16.440 the numbers were were recognized in the final deal terms. 0:11:17.080 --> 0:11:20.199 So for us, you know, competitive pricing gave us an opportunity. 0:11:20.960 --> 0:11:24.320 But equal weight maybe i'll pivot to some comments on that, 0:11:25.360 --> 0:11:29.120 So equal weight for us, right, it's it's understandable. It's 0:11:29.240 --> 0:11:32.680 S and P five hundred equal weight. It's predictable. Investors 0:11:32.760 --> 0:11:36.160 know that when you know the mag seven is not performing, 0:11:36.280 --> 0:11:41.280 being underweight, those names are going to likely generate outperformance. 0:11:41.679 --> 0:11:44.920 So one of the downfalls or challenges that Active has 0:11:45.000 --> 0:11:48.800 is unpredictability. Investors don't want to be surprised by Active. 0:11:48.840 --> 0:11:51.080 They don't want to get a different return than what 0:11:51.120 --> 0:11:54.120 they expected. So last year, if you look at our flows, 0:11:54.200 --> 0:11:58.360 we had this diconomy of QQQ, which is concentrated large 0:11:58.440 --> 0:12:02.640 names being one of our leaders, but RSP also being 0:12:02.640 --> 0:12:04.680 one of the leaders in terms of flows. And that 0:12:04.840 --> 0:12:07.320 just told us that investors are trying to understand where 0:12:07.320 --> 0:12:09.720 the market's gonna pivot, and if it goes one way 0:12:09.840 --> 0:12:13.160 continues to run, QQQ will outperform, and if it goes 0:12:13.160 --> 0:12:16.600 another way, you know, and reverts, then something like RSP 0:12:17.080 --> 0:12:19.760 will have different bets. So that's the understanding and that 0:12:19.840 --> 0:12:22.920 the market is getting more sophisticated, that they want some 0:12:22.960 --> 0:12:24.680 predictability and where they allocate. 0:12:25.040 --> 0:12:28.040 Do you think the Terroodome has gotten more intimidating? 0:12:29.200 --> 0:12:32.079 The tarodome is pretty full with is it roller skaters 0:12:32.240 --> 0:12:33.840 or is that a different no. 0:12:33.960 --> 0:12:37.480 By the way, the metaphor people do throw in thunder Thunderdome. 0:12:37.559 --> 0:12:39.960 Now that's Mad Max Beyond Thunderdome. That was the third 0:12:40.000 --> 0:12:42.480 Mad Max movie, I believe where Tina turned to this 0:12:42.520 --> 0:12:45.040 theme song, whatever we don't need another hero, that's Thunderdome. 0:12:45.440 --> 0:12:48.719 It works. Terrordome is based on a Public Enemy song 0:12:48.800 --> 0:12:50.920 called Welcome to the Tterodome a whole album. In fact, 0:12:51.440 --> 0:12:55.000 listen to it. In my opinion, that sound and the 0:12:55.120 --> 0:12:57.800 lyrics are what it would feel like if you launched 0:12:57.800 --> 0:12:58.400 an ETF. 0:12:59.480 --> 0:13:02.120 So I have my playlist on the way out, you 0:13:02.200 --> 0:13:04.360 got to add that one. Yes, for sure, that's big 0:13:04.400 --> 0:13:05.439 public enement. 0:13:05.160 --> 0:13:07.120 They should play when you walk into the office at 0:13:07.120 --> 0:13:08.760 every issue where it's like the frame of mind you 0:13:08.760 --> 0:13:11.920 got to get into, you know, it's total survival. 0:13:11.520 --> 0:13:13.559 Space, like today was a good day. It's like it's 0:13:13.559 --> 0:13:14.400 stereo dumb okay. 0:13:14.640 --> 0:13:19.400 But competition is certainly increasing right that active passive mutual 0:13:19.400 --> 0:13:24.080 fund ETF. I will say ETFs are clearly becoming or 0:13:24.120 --> 0:13:28.280 have become, the rapper of choice, and the competition is 0:13:28.320 --> 0:13:31.160 trying to understand how how can they compete in that game, 0:13:31.480 --> 0:13:34.400 and it makes it very difficult for new entrants, makes 0:13:34.440 --> 0:13:38.040 it difficult for you know, legacy large providers trying to 0:13:38.080 --> 0:13:41.880 pivot not only the rapper but their active content. And 0:13:41.920 --> 0:13:45.480 there's a whole ecosystem from capital markets to product innovation 0:13:46.040 --> 0:13:49.560 through index provider relationships and the like that really make 0:13:49.640 --> 0:13:52.880 a strong ETF what it is. And that's that's through 0:13:52.920 --> 0:13:55.800 that that knowledge of investors and opportunities that you can 0:13:55.840 --> 0:13:56.600 create that outcome. 0:14:04.480 --> 0:14:07.760 The big three in ETFs, which would be Vanguard, Black Rockets, 0:14:07.840 --> 0:14:10.160 the Street, their market sharees are roading because there's so 0:14:10.240 --> 0:14:13.120 many competitors. I think sixty new issuers this year, three 0:14:13.200 --> 0:14:16.640 hundred total, six hundred brands. There's just too many people 0:14:16.720 --> 0:14:19.400 nibbling at their market share for them to grow it. However, 0:14:19.440 --> 0:14:22.760 in the mutual fund space, they're big three growing market 0:14:22.760 --> 0:14:26.200 share by a lot because there's just no energy, there's 0:14:26.240 --> 0:14:29.120 no hungry newcomers, and I think that's what makes the 0:14:29.120 --> 0:14:32.840 ETF industry so dynamic and endlessly interesting for us obviously. 0:14:33.200 --> 0:14:36.480 But one thing on this there's been a couple i'll 0:14:36.520 --> 0:14:39.880 call them like chirping. Every year or so, somebody writes 0:14:39.880 --> 0:14:42.360 something about how ETFs are ruining the market. Lately it 0:14:42.400 --> 0:14:45.040 was how they're ruining capitalism, And I just want to say, like, 0:14:46.080 --> 0:14:49.360 I find that ETFs are probably a shining example of 0:14:49.400 --> 0:14:55.560 capitalism because it's so brutal, it's very competitive. In the end, 0:14:55.640 --> 0:14:58.960 the customers are choosing, it's natural, there's no kickbacks, the 0:14:59.000 --> 0:15:03.680 best products win. And would you argue that or is 0:15:03.720 --> 0:15:07.000 there something we're missing about how there is potentially a 0:15:07.040 --> 0:15:10.040 problem in terms of ETFs. I know part of that 0:15:10.160 --> 0:15:13.480 argument isn't the industry itself, although it's about the number 0:15:13.480 --> 0:15:15.840 of ETFs, although there's way more mutual funds still, but 0:15:15.880 --> 0:15:18.160 it's also about fundamentals, and like, oh, if all this 0:15:18.240 --> 0:15:22.200 money is going into passive fundamentals, don't matter anymore. I 0:15:22.240 --> 0:15:24.720 don't know you have anything about all that, because they 0:15:24.720 --> 0:15:26.440 once a year this stuff comes up. I call it 0:15:26.520 --> 0:15:28.760 the some worry articles, and a few of them just 0:15:28.800 --> 0:15:29.920 came up over the past week. 0:15:30.200 --> 0:15:33.880 Sure, yeah, so I would agree there are pockets of 0:15:35.160 --> 0:15:38.400 opportunity when you look at the ETF ecosystem. Right, So 0:15:38.840 --> 0:15:42.200 capitalism as a whole, if there's an opportunity for gain, 0:15:42.720 --> 0:15:45.840 if you can set up a system to generate profits 0:15:45.880 --> 0:15:50.800 that will create that outcome for you. There's no excess 0:15:50.840 --> 0:15:56.800 limits or there's no limitless there's no limitless capital in 0:15:56.840 --> 0:15:59.680 the market. So I think what you've seen is a 0:15:59.680 --> 0:16:02.320 bit of a shift of where some of that liquidity 0:16:02.360 --> 0:16:05.640 has come from, and it's driving towards the ETF. The 0:16:05.680 --> 0:16:10.800 ETF creates more liquidity. You've seen it in digital coin, right, 0:16:11.480 --> 0:16:14.920 very simple wrapper, but it's creating liquidity, it's creating a 0:16:14.960 --> 0:16:18.280 different way to access and otherwise liquid market. You see 0:16:18.320 --> 0:16:22.760 it in options. The outcome of all of these buffer 0:16:22.840 --> 0:16:26.760 and option income income advantage strategies are creating more liquid 0:16:27.000 --> 0:16:29.520 liquidity in the underlying and fixed income. 0:16:29.600 --> 0:16:29.760 Right. 0:16:29.760 --> 0:16:32.520 Fixed income used to be a trade by appointment type 0:16:32.560 --> 0:16:37.960 of market, and ETFs have created better liquidity in the underlying. 0:16:38.080 --> 0:16:40.680 So it's not a guarantee, but I think through that 0:16:40.800 --> 0:16:46.480 ecosystem of trading of market making, you're getting better pricing 0:16:46.520 --> 0:16:50.000 and better liquidity within the rapper and within the markets. 0:16:50.520 --> 0:16:53.040 Is there a version of the world that becomes too liquid? 0:16:53.120 --> 0:16:54.440 That was some of the worry. 0:16:56.920 --> 0:16:59.720 Sure, and I think there's you know, there's value in 0:16:59.720 --> 0:17:04.879 private markets, private credits that you know, create solid you know, 0:17:04.960 --> 0:17:10.399 access to issuers, differentiated return streams that that the market 0:17:10.440 --> 0:17:14.280 is looking for. Will ETFs become the save all for 0:17:14.280 --> 0:17:18.040 for private markets private equity? Not sure. I struggle with 0:17:18.560 --> 0:17:21.840 the point we touched on of liquidity and transparency is 0:17:21.880 --> 0:17:24.800 what an ETF thrives on. And I think you're trying 0:17:24.840 --> 0:17:28.720 to create something different with private markets. So having that difference, 0:17:29.320 --> 0:17:32.000 I think is important because you're going to get different 0:17:32.200 --> 0:17:33.520 return profiles from those. 0:17:33.400 --> 0:17:36.080 Two You mentioned digital coins, you have a bitcoin etf 0:17:36.160 --> 0:17:39.600 BTCo I believe is the ticker. You were one of 0:17:39.640 --> 0:17:43.359 the original ten who launched two years ago. Huge deal. 0:17:43.760 --> 0:17:46.840 They got to one fifty billion in assets total. Since 0:17:46.840 --> 0:17:48.320 this sell off, this has been the worst. There's been 0:17:48.359 --> 0:17:50.439 a couple pullbacks, but this is the worst one. I 0:17:50.440 --> 0:17:53.400 think at the peak it was forty percent down from 0:17:53.400 --> 0:17:55.679 the peak. I mean, I think it's now it's thirty, 0:17:55.680 --> 0:18:00.480 but it was pretty bad. Now only four percent of 0:18:00.560 --> 0:18:03.639 the assets left. The flows are pretty solid. As the 0:18:03.640 --> 0:18:06.520 crypto Twitter crowd calls anybody investigating to have as a boomer. 0:18:06.520 --> 0:18:10.880 Apparently the boomers have stronger hands, I think than people thought. 0:18:10.920 --> 0:18:13.600 But I want to talk about from your perspective, this 0:18:13.640 --> 0:18:16.320 is a different asset class, it's new, it's we call 0:18:16.359 --> 0:18:20.240 it hot sauce. How are these investors that you have 0:18:21.680 --> 0:18:24.200 thinking about it? Are they talking about it? Have they 0:18:24.200 --> 0:18:26.200 committed to like a four or five year holding period 0:18:26.240 --> 0:18:28.959 and they don't care? What's going through their minds? And 0:18:29.160 --> 0:18:32.280 what do you make behind them holding up stronger than 0:18:32.280 --> 0:18:32.920 most people thought? 0:18:33.920 --> 0:18:34.200 Sure? 0:18:34.280 --> 0:18:37.040 Yeah, I think I touched on the evolution and how 0:18:37.040 --> 0:18:42.000 ETFs can help create accessibility to new asset classes like 0:18:42.240 --> 0:18:46.320 digital and others. For us, this is a long game. 0:18:46.400 --> 0:18:49.280 This is how do I access it, how do I 0:18:49.320 --> 0:18:51.639 model it, how do I own it in a portfolio? 0:18:52.040 --> 0:18:54.760 And we're seeing that with clients too, from wealth channels 0:18:54.760 --> 0:18:58.560 among advisors, right there's limitations on how are where they 0:18:58.560 --> 0:19:01.320 can allocate, So I think the due diligence process has 0:19:01.359 --> 0:19:04.480 taken some time to get that into a variety of 0:19:04.920 --> 0:19:08.000 outlets for investors. So definitely a long game. I think 0:19:08.000 --> 0:19:11.080 you're seeing some short term technicals which shows you that 0:19:11.119 --> 0:19:13.919 it's it's behaving like an asset. There are investors that 0:19:14.400 --> 0:19:16.600 might have gotten in late and are now sitting on 0:19:16.680 --> 0:19:20.080 losses that they don't have elsewhere, whether it's equities or 0:19:20.119 --> 0:19:23.000 other asset classes. So you have some short term selloffs 0:19:23.080 --> 0:19:26.960 maybe tax loss that that investors are taking. But I 0:19:27.000 --> 0:19:30.560 think having kind of this this evolution into what we 0:19:30.600 --> 0:19:35.440 would all know in terms of kind of technical technical markets, 0:19:35.720 --> 0:19:37.640 you're starting to see that within the asset class. 0:19:39.200 --> 0:19:43.400 What do you think their appetite for a risk asset 0:19:43.440 --> 0:19:48.040 like this is, because you know, down down thirty percent, 0:19:48.280 --> 0:19:53.000 like it's asking a lot of a boomer specifically to 0:19:53.359 --> 0:19:56.679 hang in there, right, Like how how you know, like, 0:19:56.720 --> 0:19:59.639 what's what's the appetite the real appetite to take a 0:19:59.640 --> 0:20:01.959 loss or write it. 0:20:02.640 --> 0:20:05.240 Yeah, the key is education, Right, how much did you 0:20:05.440 --> 0:20:09.119 allocate and why was it cocktail party discussion or was 0:20:09.160 --> 0:20:12.520 it true fundamental asset allocation that you said, Look, this 0:20:12.560 --> 0:20:15.280 is new, it's volatile, I should own it and a 0:20:15.320 --> 0:20:18.439 certain percentage you know that is either market cap weighted 0:20:18.560 --> 0:20:22.840 benchmark weighted. But if you're over allocated and you see 0:20:22.840 --> 0:20:26.159 this volatility, people should understand what those risks are going 0:20:26.240 --> 0:20:27.560 to lead to. Right. 0:20:27.760 --> 0:20:30.359 We looked I just finished a book project on this. 0:20:30.400 --> 0:20:33.640 We looked into this. If you held bitcoin for four 0:20:33.720 --> 0:20:36.919 years at any time of its life, you made money 0:20:37.280 --> 0:20:39.120 if you had a four year holding period, But once 0:20:39.119 --> 0:20:41.280 you get below four years, it's up in the air. 0:20:41.400 --> 0:20:42.960 You might have made a lot of money or lost 0:20:42.960 --> 0:20:45.280 a lot of money. So it seems like a four 0:20:45.359 --> 0:20:48.679 year holding period would be like, if you can't commit 0:20:48.720 --> 0:20:50.680 to four years, don't buy it. That would be my advice. 0:20:51.080 --> 0:20:53.040 The other thing is we have this thing called the 0:20:53.040 --> 0:20:55.000