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Speaker 1: Wogan to trillions. I'm Joel Weber and I'm America. I'll

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Speaker 1: shoot us Eric Bloomberg Intelligence. There's a lot of great

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Speaker 1: research throughout the year. It also culminates at the end

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Speaker 1: of the year with an outlook about and we're gonna

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Speaker 1: spend some time today talking about that. We have some

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Speaker 1: guests who will join us to talk about that, and

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Speaker 1: you have some kind of macro level stuff that we're

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Speaker 1: gonna also talk through to get started though, just high

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Speaker 1: level what what are some things that you're you're thinking about? Yeah,

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Speaker 1: so in in b I they make us or they

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Speaker 1: we should do it. They do make us though right

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Speaker 1: outlooks and uh, you know, we look you look forward.

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Speaker 1: A lot of it is just repackaging the past into

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Speaker 1: the future tents. I'll be honest. I mean that's what

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Speaker 1: a lot of self side research does. We don't make

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Speaker 1: calls like this will go up or down, but what

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Speaker 1: we do is try to highlight the biggest themes that

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Speaker 1: we think have a lot of legs or basically come

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Speaker 1: against themes that may be overhyped and so are big

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Speaker 1: theme for next year is simply that E t F

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Speaker 1: s are transcending the passive label so that goes into

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Speaker 1: how much there's been in flows into active discretionary active ETFs,

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Speaker 1: E s G, smart beta, UM, all kinds of you know,

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Speaker 1: I call them shiny objects, but even things like simplify,

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Speaker 1: which uses derivative the sculpt outcomes. Um, most of the

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Speaker 1: innovation is happening there so and and also bitcoin as

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Speaker 1: so is the tent gets wider and wider, and people

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Speaker 1: put more stuff into e t F that isn't just

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Speaker 1: sort of cheap beta. That's good UM. And we think

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Speaker 1: that gives the industry a lot of growth because it's

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Speaker 1: so accepting and big tennis. And that's our general theme

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Speaker 1: for next year. And the reason we went there is

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Speaker 1: because basically almost every e t F took in money

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Speaker 1: this year. I mean you almost had to try to

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Speaker 1: not get flows. That's how much the fish were biting.

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Speaker 1: It was like a lake that was just oct with

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Speaker 1: a bunch of hungry trout. Um. And that's just the

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Speaker 1: kind of year it was. And I've never seen anything

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Speaker 1: like it, and I've been covering this for fifteen years.

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Speaker 1: So within that optimism is a bunch of things that

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Speaker 1: I think will break down the podcast, but that's our

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Speaker 1: general take on it. Is we we really see this

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Speaker 1: sort of growth continuing. Okay, So joining us in this

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Speaker 1: big tent. Todd rosen Bluth, who's a senior director of

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Speaker 1: et F and Mutual Fund Research at CFR, A a

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Speaker 1: regular on the podcast, as well as Katie Greifeld, another

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Speaker 1: regular in favorite on the podcast, who covers e t

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Speaker 1: F for bloom Broke News and is also a regular

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Speaker 1: Quick Tax, this time on Trillions. Todd, Katie, welcome back

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Speaker 1: to Trillions. Great to be with you. Thanks, thanks for

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Speaker 1: having me. Okay, so we're gonna walk through some of

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Speaker 1: Eric's key research points, and I would also encourage you

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Speaker 1: let's pick him apart as much as possible. So Eric,

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Speaker 1: first of all, you want to talk about flows, right

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Speaker 1: because this was a one was a huge year for

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Speaker 1: flows into e t F. How just how big was

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Speaker 1: it and and what do you think about? Yeah? So, uh,

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Speaker 1: we're we're looking at about nine billion this year. That's

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Speaker 1: I think we're it's going to end up. Um, you know,

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Speaker 1: we're still two weeks away, but that's probably where will be. Now.

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Speaker 1: That is what's the percentage more than the old record

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Speaker 1: which was set last year with about that's a big deal.

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Speaker 1: That's not just breaking the record, that's completely obliterating it.

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Speaker 1: And you know, a couple of things account for this.

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Speaker 1: You obviously there had other areas of the market that

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Speaker 1: did well breadth, so you had value, small cap emerginga tips,

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Speaker 1: A lot of things really woke up this year that

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Speaker 1: weren't just say like you know, fang stocks and and

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Speaker 1: and cheap data, although that takes the lion shares of

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Speaker 1: the flows still, so you had the sort of ancillary

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Speaker 1: areas of the market doing well. But you also just

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Speaker 1: have more and more innovation happening. So many people are

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Speaker 1: putting their best ideas to work in the t F

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Speaker 1: world and and that will that route that pay. So

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Speaker 1: next year, what do I think in flows? If you

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Speaker 1: asked me to pick, I would say probably a little less.

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Speaker 1: I can't imagine the market returning again, So maybe we

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Speaker 1: have a flat year or a tougher year, and I

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Speaker 1: think the flows are good. Maybe maybe they're back to

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Speaker 1: half a trillion something like that. That would be my

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Speaker 1: my early guests into where the flows will be. But again,

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Speaker 1: that's still a monster amount of growth, especially considering not

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Speaker 1: many of the things are taking in cash. So should

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Speaker 1: I jump in and uh? Put Eric Speed to the fire.

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Speaker 1: So going back to half a trillion, that's still an

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Speaker 1: enormous amount of money. It would still be an enormous

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Speaker 1: reduction from what we're seeing this year. I mean, do

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Speaker 1: you really chalk up the fact that we're going to

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Speaker 1: get nine hundred billion dollars just to the fact that

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Speaker 1: the SMP five hundred and was so strong. Yes, so

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Speaker 1: ets taken I think two billion a day baseline. I

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Speaker 1: think just the vehicle is so popular. I think, you know,

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Speaker 1: one to two billion come in just because people are

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Speaker 1: are experiencing a format change. Most new money now goes

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Speaker 1: into e t f s. It used to go into

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Speaker 1: mutual funds. So I think that's just the baseline. And

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Speaker 1: then this year it took in four billion a year.

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Speaker 1: So the other two billion I think a little more

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Speaker 1: market dependent. The thing is, if the SNP were flat, right,

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Speaker 1: something's going to be working. I remember, like it was

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Speaker 1: two or three years ago where nothing was working except cash. Well,

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Speaker 1: short duration bond ETFs took in a ton of money.

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Speaker 1: I think people sometimes equate e t f s with

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Speaker 1: the SNP or equities, but they cover everything, even stuff

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Speaker 1: that goes up when the markets down. So I think

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Speaker 1: we we will see those flows. I agree that if

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Speaker 1: the stock market really is this sort of like the

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Speaker 1: star player of the E t F worlds, like you know,

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Speaker 1: lebron or Steph Curry of their team, and when equities

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Speaker 1: are tough, that will minimize the flows a bit. But

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Speaker 1: I still think those other reasons they'll be up there,

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Speaker 1: you know, so maybe maybe the pace will come down

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Speaker 1: a bit though, Todd, what do you think up or down? Well,

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Speaker 1: I think it's gonna be up from the record we

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Speaker 1: had last year. I think it's going to be between

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Speaker 1: five hundred billion and a trillion hours. Where exactly that

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Speaker 1: is is going to be dependent upon the stock market.

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Speaker 1: Just to put some numbers behind what Eric was talking about,

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Speaker 1: the three heavyweights within the space, I, vv v O

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Speaker 1: and SPY are going to have taken in a hundred

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Speaker 1: billion dollars. That's the first time they will have done

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Speaker 1: that ever or anything close to that ever, and yet

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Speaker 1: close to eight hundred billion dollars. It's going into things

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Speaker 1: that are not directly tied to the SMP five hundred,

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Speaker 1: either they're a slice of that or there fixed income.

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Speaker 1: We saw tips explode this year, you know, given that

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Speaker 1: investors have a chance to go wherever the puck is

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Speaker 1: going using e t F. So I think we're gonna

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Speaker 1: see it in an amazing year off of a very

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Speaker 1: single digit level returns to the SNP five. Okay, so

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Speaker 1: one thing that I thought was a curiosity a little

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Speaker 1: bit was that, uh, that number for one actually excludes

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Speaker 1: mutual fund to E t F conversions, which eric how

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Speaker 1: big was that number? So if you count conversions that

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Speaker 1: happened or announced, it's about fifty seven billion, and it's

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Speaker 1: about two funds so far. But again, if we go

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Speaker 1: back to this time last year, it was zero and zero.

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Speaker 1: So I think that's superseded everybody's expectations. I noticed a

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Speaker 1: lot of times when a conversion happens, there's this sort

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Speaker 1: of like minimizing it, like, oh, well, it's just that

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Speaker 1: one firm who has that one tax fund, and don't worry,

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Speaker 1: this won't be a big deal. And then you see

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Speaker 1: JP Morgan, and then you see Franklin, and then you

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Speaker 1: see Motley Fool and then you see a cannabis fund.

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Speaker 1: It's pretty widespread. We think there'll be a trillion dollars

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Speaker 1: with a conversions in the next ten years. I think

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Speaker 1: you could be even greater than that that said, it

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Speaker 1: won't be everything. That would be ten of mutual funds converting.

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Speaker 1: But that's where we're at now. And if we count

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Speaker 1: the fifty seven billion, you do get it closer to

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Speaker 1: a trillion. But most services I know todd might be different.

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Speaker 1: Don't count conversions as flows as of now. They just

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Speaker 1: show up as assets and ETFs not flows. So a

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Speaker 1: trillion dollars in ten years, I mean, if you think

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Speaker 1: of the realm of the mutual fund universe, isn't it

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Speaker 1: about twenty one trillion dollars? It's huge? I mean, why

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Speaker 1: would why only a trillion? Why stop there? What is

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Speaker 1: preventing every single mutual fund from converting into an e

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Speaker 1: t F given that's clearly where the direction of travel is. Yeah,

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Speaker 1: a couple of reasons. One is, uh, the revenue over

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Speaker 1: there is so good, and when you convert to an

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Speaker 1: e t F they may just not They fear self cannibalization.

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Speaker 1: They also with a four one case, it gets a

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Speaker 1: little trickier with logistics, if not impossible. So for mutual

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Speaker 1: funds that have deep four when K penetration, it's tough

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Speaker 1: to just automatically have all those four when K plays

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Speaker 1: have an e t F instead of a mutual fund.

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Speaker 1: They're not bought similarly, So there's logistic but I think

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Speaker 1: some of those logistical issues will be overcome and solved.

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Speaker 1: But I you know, I thought a trillion was when

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Speaker 1: you make predictions, it's good too if you, especially if

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Speaker 1: you're contrarian, to go as low as you can while

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Speaker 1: seeming bold. That way, you can easily overcome it. So

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Speaker 1: like a trillion if you if you take the vibe

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Speaker 1: out there. You know, back in July when I predicted

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Speaker 1: it, it it was only like five billion new conversions. People

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Speaker 1: were like, that's crazy, But it's more and more come in.

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Speaker 1: It seems like I'm under selling it. So I agree

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Speaker 1: with you. I think it could be way more, but

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Speaker 1: might as well be right by a lot than like overshoot.

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Speaker 1: Have you seen prices right when they bid like one

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Speaker 1: dollar over? You gotta like have that mindset with these predictions.

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Speaker 1: You know, you don't want to overdo it. Bitcoin people

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Speaker 1: do that sometimes, you know, they're like, oh, it's going

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Speaker 1: to a million dollars. You're also supposed to put your

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Speaker 1: pinky into your lip and say one. Well, don't forget guys,

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Speaker 1: that's the name of your of the podcast here. You

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Speaker 1: guys called this because speaking each capation trillion just connected

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Speaker 1: to this podcast that Wait, you mean the name that

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Speaker 1: Joel gave the podcast like five years ago. Yes, and

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Speaker 1: I remember being one of the early things to it

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Speaker 1: about five years ago. Yeah, yeah, no, it was, it was.

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Speaker 1: It was a good name. Then we try and think big. Um. Okay,

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Speaker 1: I want to talk about another big thing, another theme

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Speaker 1: in the Bloomberg Intelligence two outlook for e t s.

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Speaker 1: E t f s have long been known for for

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Speaker 1: a path with a passive context, and obviously there's been

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Speaker 1: increasing amount of active, actively managed gtfs. Uh but Eric,

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Speaker 1: you and you tease this already, but there's a whole

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Speaker 1: new paradigm and organization that you're thinking about. What what

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Speaker 1: is that? Yeah, I mean shiny objects some that I

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Speaker 1: mean that's my turn for it or hot sauce um.

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Speaker 1: You know, a professional institutional manager might call it funds

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Speaker 1: with high tracking error. But it's just basically stuff that's

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Speaker 1: completely different than you're boring beta e t F like

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Speaker 1: v O O or v T I. And why is that? Well,

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Speaker 1: most people own a very a very boring core, and

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Speaker 1: but in order for that core to work, you've got

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Speaker 1: to not touch it. So I think there's this market

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Speaker 1: to enter too. To entertain yourself, take speculative bets that

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Speaker 1: could have asymmetric returns that are pretty high, like a

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Speaker 1: call option, and you decorate your boring vanilla with these

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Speaker 1: sort of outlier hot sauce funds, either like an ARC

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Speaker 1: or a theme et F or crypto. Crypto is a

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Speaker 1: perfect example of hot sauce. Or you do call option

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Speaker 1: trading on robin Hood and this is so you just

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Speaker 1: distract yourself from the vanilla. So I called the Barbell era,

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Speaker 1: and I think we're in it. And I think that's

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Speaker 1: why you don't tend to see outflows from these crazy, wacky,

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Speaker 1: high flying ets when they go down, um like people

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Speaker 1: think they would see outflows. They tend to be pretty

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Speaker 1: sticky thoughts. I'll do the I agree with Eric, and

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Speaker 1: then I'll do with the I disagree with Eric. So

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Speaker 1: I agree with Eric. I do think that that's how

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Speaker 1: these products are are happening. So thematic ETF, you know,

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Speaker 1: active as well as index space. Thematic ets were actually

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Speaker 1: surprisingly popular h despite the fact that we saw so

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Speaker 1: many of these themes underperform cannabis, blockchain, cloud computing. So

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Speaker 1: many of these technology oriented themes underperformed, but money kept

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Speaker 1: going into these products from global X among others, so

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Speaker 1: in part because they round out a portfolio that's tied

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Speaker 1: to the S and P five. But I do think

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Speaker 1: that we're going to see active core. I think you

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Speaker 1: know a key player that's coming is Capital Group. They're

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Speaker 1: going to be launching their first suite of active equity

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Speaker 1: e t s and they're gonna be not the mutual

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Speaker 1: funds that we know of from American funds, but they're

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Speaker 1: going to be similar enough to those, and those are

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Speaker 1: core oriented strategies. They're just going to be actively managed

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Speaker 1: by an experienced team. I think we're going to see

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Speaker 1: that do well. Oh now this could be a bet. Okay,

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Speaker 1: So we talked to Capital Group. I give them credit.

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Speaker 1: They're like, look, we're going for the core. We're going

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Speaker 1: at Vanguard. We're trying dislodge them. We believe active has

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Speaker 1: a place in the core, you know, God bless them.

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Speaker 1: I think they'll fail dramatically. I think that nobody is

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Speaker 1: going to sell a three basis point beta e t

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Speaker 1: F for for that. I think those days are over.

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Speaker 1: Even if they come in as low as they'll probably

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Speaker 1: we have some success because they have clients that know

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Speaker 1: them and like them. So maybe there's a little bit,

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Speaker 1: but I don't see that as this is a good

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Speaker 1: bet for us. How about over under after one year

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Speaker 1: for Capital Group, I'll go with seven billion. I'll take

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Speaker 1: you wouldn't take the over on that. That's that's the

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Speaker 1: number you want to go with. You don't want to

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Speaker 1: go lower if you're that pessimistic. The seven billions not

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Speaker 1: that much these days, especially with inflation. Sure, I'll take

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Speaker 1: the over. I was. I thought you'd go lower on it,

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Speaker 1: you guys, I will I will take I guess where

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Speaker 1: here this is happening first and live? This is it?

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Speaker 1: This is so. We've got two reporters slash outitors in

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Speaker 1: the room. They're gonna be writing this up. I'm sure

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Speaker 1: for the for the record, Katie, I'll just buy you

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Speaker 1: lunch regardless. But yeah, seven billion dollars twelve months after

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Speaker 1: they launched the first projects not project. They're gonna watch

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Speaker 1: at some point in the first quarter UM when the

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Speaker 1: first Capital Group et F hits, we start the clock

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Speaker 1: twelve months later, do they have seven billion total or not?

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Speaker 1: I say under, I'll go with over There we go

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Speaker 1: all right, there we go. That's a good vet. Katie.

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Speaker 1: Let me ask you who would you take if you

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Speaker 1: were like betting on the bet? Who would you go with?

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Speaker 1: I don't know. Eric. I feel like you win these

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Speaker 1: bets a lot. So just based on historical performance, I

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Speaker 1: have to go past performance is not indicative of future results.

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Speaker 1: Actually listen to those disclaimers. We we obviously build a

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Speaker 1: research product related to it. Okay, Todd the full disclaimer.

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Speaker 1: Have you actually ever won? Have I ever? One? Yes?

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Speaker 1: Not on not on lunch. Uh. Todd is very good

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Speaker 1: on bets that we don't make it steak much or

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Speaker 1: steak dinner, those sort of little ones that we just

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Speaker 1: do a friendly bet. He cleans up. So it's it's

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Speaker 1: more even you think it's just when we make it

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Speaker 1: steak dinner that he just doesn't work out. Yeah, I

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Speaker 1: think so, I think so. Yeah. Okay, So we talked.

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Speaker 1: We talked about the shiny stuff. Uh, Katie, I'm interested

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Speaker 1: in you know. The other obsession of Eric's is the

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Speaker 1: cheap set, which he touched on. There is there any

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Speaker 1: any other new action in the cheap space that's that's

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Speaker 1: caught your attention? Well, it feels like the lurch towards

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Speaker 1: lower fees just continue. And it is interesting in talking

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Speaker 1: about you know, these active funds, I mean, even those

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Speaker 1: funds are so dirt cheap, but um, in this sort

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Speaker 1: of race to the bottom, uh, if you look at

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Speaker 1: the leaderboard, I mean, Todd already brought up the fact that,

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Speaker 1: you know, the three big ones have already brought in

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Speaker 1: like a hundred billion dollars this year, and all of

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Speaker 1: this talk of shiny stuff which can be more expensive.

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Speaker 1: I don't know, it stood out to me that this

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Speaker 1: year everything just seems to have gone to like plain,

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Speaker 1: boring vanilla funds which are dirt cheap, even though I

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Speaker 1: mean I've spent the better part of this past year

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Speaker 1: talking about all the shiny stuff all the means meme

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Speaker 1: stocks and crypto and everything else. But still it just

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Speaker 1: feels like these like such cheap, boring products have this

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Speaker 1: gravitational pull towards them. I think this also speaks to

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Speaker 1: just the media apparatus. And I'm guilty as anybody. We

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Speaker 1: tend to cover the stuff that moves and does, you know,

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Speaker 1: move around up and down way more if you if

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Speaker 1: you do an NT search on like v T I

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Speaker 1: versus say ARC ARC will have like thirty times the

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Speaker 1: coverage of v t I, even though v t I

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Speaker 1: is thirty times bigger. And that's just the way it is. Um,

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Speaker 1: that's just how it's not just financial, just the way

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Speaker 1: the media operates. Um. You wouldn't have a media infrastructure

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Speaker 1: if you said to everybody, well, let's just cover vt

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Speaker 1: I all day long. Yeah, because I mean, what is

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Speaker 1: there to say? You know what we did at the top. Okay,

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Speaker 1: So let's talk about this idea of this new Active though,

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Speaker 1: because we kind of got there with the Capital Group

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Speaker 1: and that's another theme in the outlook Eric, So so

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Speaker 1: what what does that mean to you? New Active is

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Speaker 1: And here's where Todd and I will disagree, which is

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Speaker 1: good for the podcast. New Active We consider if you

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Speaker 1: take smart Beta, so it tracts an index, but let's

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Speaker 1: say it tilt towards dividends or momentum stocks, we would

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Speaker 1: consider that active, even though it's rules based, it's just

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Speaker 1: rules based active. So if you look at New Active,

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Speaker 1: a lot of active, a lot of way people like

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Speaker 1: to consume active these days is through an index fund.

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Speaker 1: So smart Beta e s G. The themes and so

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Speaker 1: that would be new Active. And if you add up

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Speaker 1: new active plus traditional active, you get a nice solid

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Speaker 1: like of flow lane, which again is in two billion dollars.

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Speaker 1: Considering how much ETFs are taking in and that that lane,

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Speaker 1: that that is where all of the innovation is happening

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Speaker 1: right now. Um, even though as Katie said, six billion

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Speaker 1: are going to the boring vanilla stuff, nobody talks about.

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Speaker 1: That lane of two three in a billion is pretty good.

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Speaker 1: You can definitely carve out a living there if you

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Speaker 1: have the right product. So since I got set up

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Speaker 1: for it, I'll let me just state my case for it.

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Speaker 1: We would consider the Eye Shares value factor e t

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Speaker 1: F v l u E, which is extremely popular to

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Speaker 1: be an index based product. Now it's being used actively

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Speaker 1: by the investor to tactically rotate in or out based

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Speaker 1: on moving into value and moving away from momentum or quality.

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Speaker 1: But those have been extremely popular this year. We've seen

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Speaker 1: advisors increasingly used factor et f s from Eye Shares,

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Speaker 1: from invest Go among other single factor products and build

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Speaker 1: a portfolio around those products. But those are index based products.

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Speaker 1: Those are passive. They just are being handled by the

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Speaker 1: investor in an active manner. In my view, No, no,

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Speaker 1: but okay, But you could argue v O O is

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Speaker 1: us being used act or spies being used actively, and

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Speaker 1: that's passive. I get that our ument. What I'm saying

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Speaker 1: is the e t F itself is active because it

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Speaker 1: has these rules that say if the if the metrics

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Speaker 1: say this, we're gonna buy these stocks. If it doesn't,

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Speaker 1: we're gonna sell these That's the same thing a discretionary

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Speaker 1: active manager would do. They might, they might, They'll have

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Speaker 1: a system with their you know, rankings of stocks and whatnot.

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Speaker 1: This is just formalizing it into an index. I think.

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Speaker 1: I don't say. I just think the line between a

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Speaker 1: person picking stocks because of how they feel and this

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Speaker 1: is under the same tent of active. All right, I'll

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Speaker 1: agree to disagree on it, but yes, the difference between

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Speaker 1: a factor tilt to it that rebalances every six months.

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Speaker 1: We know it's going to happen. We don't know exactly

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Speaker 1: what's going in to it, but we know it's going

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Speaker 1: to happen, whereas we don't know what's going into ARCS

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Speaker 1: products tomorrow or what will go into the capital group

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Speaker 1: of the fidelity of the tier price actively managed ones.

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Speaker 1: Those managers have a discretion. But I agree with you

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Speaker 1: the the outside of the pure beta products, the core

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Speaker 1: is go going to grow factors, thematic oriented ETFs which

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Speaker 1: we touched on, and those where that manager has discretion.

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Speaker 1: We're going to see more more of those products in

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Speaker 1: two and we're going to see them go on or

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Speaker 1: even more of the assets than we saw. I agree

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Speaker 1: with you on that, alright, we're in agreement. Um, it

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Speaker 1: was a huge year for active in that you saw

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Speaker 1: a lot of flows, you saw a lot of active launches.

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Speaker 1: Even though I mean you would have done totally fine

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Speaker 1: in the SMP five hundred, it wasn't a great environment

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Speaker 1: for active managers because I mean, just being again in

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Speaker 1: a boring old index, you would have gotten what twenty

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Speaker 1: five percent gain, give or take. And I guess my question, uh,

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Speaker 1: what do you make of that? I think there's a

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Speaker 1: few things that are happening. One is the success of

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Speaker 1: ARC in its performance and gathering assets in opened the

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Speaker 1: door for more investors to be comfortable with actively managed

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Speaker 1: gtfs and asset managers to try to launch a me

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Speaker 1: kind of product to offer those strategies. Some of the

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Speaker 1: actively managed products are semi transparent or I think would

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Speaker 1: you guys refer to as non transparent or active non

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Speaker 1: transparent ets where the asset managers are getting into it.

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Speaker 1: And then we also have these defined outcome oriented ETFs

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Speaker 1: that continue to gain traction, and those I think Bloomberg

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Speaker 1: also the way that we had cf A, we call

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Speaker 1: it those actively managed ETFs. So I don't think when

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Speaker 1: the year ends, we're going to see that these actively

404
00:21:28,760 --> 00:21:33,520
Speaker 1: managed gts performed all that well. But investors are willing

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Speaker 1: to to look for something better than just the benchmark.

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Speaker 1: But yes, they would have been quite fine just owning

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Speaker 1: I vv r v O for three basis points and

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00:21:42,280 --> 00:21:45,359
Speaker 1: been up more than for the year. Again, the cheap

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Speaker 1: and shiny h if you look in the cheap bucket,

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Speaker 1: there are there's active there. D f A is cheap adventists,

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Speaker 1: which again I consider active is cheap, and they see flows.

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Speaker 1: So the cheaper shiny to me has replaced the active

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Speaker 1: or passive. As long as you're one of those two things,

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Speaker 1: I think you can see flows. I think if you're passive,

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Speaker 1: like there's index funds that track the SMP that charge

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Speaker 1: forty basis points, nobody buys them. But if there's index

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Speaker 1: like active funds that charge forty basis points, nobody's buying

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Speaker 1: those either. But on the shiny object bucket, there's actually

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Speaker 1: active funds in there too, Like block is active, ARC

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Speaker 1: is obviously active. So to me, um, I think that

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Speaker 1: that's replaced active or passive. If you can get very cheap,

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Speaker 1: we're very shiny. Investors will overlook, I think sometimes whether

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Speaker 1: your active passive. But I just don't think they want

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Speaker 1: to pay fifty six bits for kind of active. All right,

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Speaker 1: last theme, we're going to talk about outlook digital assets. Eric,

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Speaker 1: you talked about how big this tent can get. It's

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Speaker 1: long mint equities and bonds and commodities, but you think

428
00:22:50,480 --> 00:22:53,240
Speaker 1: that there's a new horizon in the form of crypto

429
00:22:53,280 --> 00:22:55,440
Speaker 1: and crypto futures, and that's obviously what happened this year

430
00:22:55,480 --> 00:22:58,520
Speaker 1: with the first bitcoin futures product. But where else could

431
00:22:58,520 --> 00:23:02,640
Speaker 1: that go? Oh my god, the potential is enormous. Um

432
00:23:02,800 --> 00:23:06,879
Speaker 1: we predict again a trillion dollars probably in let's say

433
00:23:06,920 --> 00:23:09,800
Speaker 1: ten years or even less. After the first spot bitcoin

434
00:23:09,880 --> 00:23:12,400
Speaker 1: ETF is approved. Money is going to fly in quickly.

435
00:23:12,440 --> 00:23:14,440
Speaker 1: But right now there's only a futures et F. I

436
00:23:14,480 --> 00:23:17,560
Speaker 1: don't think Genzer will approve a spot for at least

437
00:23:17,600 --> 00:23:19,760
Speaker 1: a year. So unfortunately we're have to weight to see

438
00:23:19,760 --> 00:23:22,240
Speaker 1: this play out in full. But right now the rest

439
00:23:22,280 --> 00:23:24,600
Speaker 1: of the world is launching spot ETF. They're doing well.

440
00:23:24,760 --> 00:23:27,359
Speaker 1: The Bitcoin Futures et F has got a billion and

441
00:23:27,359 --> 00:23:30,600
Speaker 1: a half. But until a Genser approved SPOT and then

442
00:23:30,640 --> 00:23:33,600
Speaker 1: we start to see a few war breakout a crypto

443
00:23:33,680 --> 00:23:37,600
Speaker 1: basket ETF that is going to really trigger some real money.

444
00:23:37,680 --> 00:23:39,679
Speaker 1: And so we think that digital assets is sort of

445
00:23:39,720 --> 00:23:44,240
Speaker 1: the next big phase in ETFs. Eric, are you referring

446
00:23:44,280 --> 00:23:47,960
Speaker 1: to digital assets like not including the equity oriented ones

447
00:23:48,040 --> 00:23:51,720
Speaker 1: that are digital assets related like Vanak has one including

448
00:23:53,040 --> 00:23:55,359
Speaker 1: Are you including all those themes? Are you including what

449
00:23:55,560 --> 00:23:58,960
Speaker 1: might be a bit wise related product? Hied to n

450
00:23:59,040 --> 00:24:02,600
Speaker 1: f t S and know they launched an index. Sure

451
00:24:02,720 --> 00:24:05,320
Speaker 1: if that's could somehow be e t F, I for sure,

452
00:24:05,640 --> 00:24:08,600
Speaker 1: But I think I'm mostly just speaking about direct spot

453
00:24:08,680 --> 00:24:12,399
Speaker 1: crypto investment. You think we're gonna see one before the

454
00:24:12,640 --> 00:24:16,760
Speaker 1: ten years is over, I mean, I would hope. So

455
00:24:17,040 --> 00:24:19,239
Speaker 1: I'm not that barrished. I mean Gainsler. Well, first of all,

456
00:24:19,280 --> 00:24:22,439
Speaker 1: Gainsler should be gone in two or three years at

457
00:24:22,480 --> 00:24:25,040
Speaker 1: the very least. I mean, because even Biden is not

458
00:24:25,080 --> 00:24:27,560
Speaker 1: gonna I mean Biden is probably gonna be gone. So

459
00:24:27,640 --> 00:24:29,560
Speaker 1: even if a Democrat takes over, they might replace him.

460
00:24:29,560 --> 00:24:32,280
Speaker 1: But anyway, it doesn't matter. Will I think his mind

461
00:24:32,320 --> 00:24:35,360
Speaker 1: will evolve over the next couple of years. Um, But yeah,

462
00:24:35,400 --> 00:24:38,120
Speaker 1: I could be wrong. It could never happen. It's possible.

463
00:24:38,640 --> 00:24:40,920
Speaker 1: But even if it doesn't happen, the rest of the

464
00:24:41,000 --> 00:24:43,520
Speaker 1: world will offer stuff. Canada's got a bunch of going on,

465
00:24:43,960 --> 00:24:46,119
Speaker 1: but let's just assume that at some point they approve one.

466
00:24:46,560 --> 00:24:49,880
Speaker 1: I'm saying that's going to trigger a whole new massive

467
00:24:49,960 --> 00:24:54,119
Speaker 1: asset class for e t F s to cover. Katie.

468
00:24:54,160 --> 00:24:56,560
Speaker 1: How busy is that gonna make you? You're already pretty busy.

469
00:24:57,400 --> 00:25:00,680
Speaker 1: I mean from a job security standpoint, that's awesome. I

470
00:25:01,480 --> 00:25:05,120
Speaker 1: I don't know. I want to dig into the it's

471
00:25:05,119 --> 00:25:07,640
Speaker 1: going to take several years to get a spot bitcoin

472
00:25:08,240 --> 00:25:11,480
Speaker 1: e t F. I feel like the winds shifted so

473
00:25:11,800 --> 00:25:14,320
Speaker 1: quickly when it came to the futures product. Like in May,

474
00:25:14,440 --> 00:25:18,560
Speaker 1: there was no hope at all. The tunnel was completely dark,

475
00:25:18,640 --> 00:25:20,119
Speaker 1: we weren't going to get anything, and then all of

476
00:25:20,160 --> 00:25:23,240
Speaker 1: a sudden in August. Uh, it felt like Gensler almost

477
00:25:23,280 --> 00:25:25,920
Speaker 1: came out of nowhere and said, actually file it under

478
00:25:26,000 --> 00:25:28,200
Speaker 1: this rule, make sure it's futures back blah blah blah,

479
00:25:28,200 --> 00:25:30,320
Speaker 1: and then you know a few months later we had one.

480
00:25:31,600 --> 00:25:34,760
Speaker 1: He's been quite clear, Gensler that he's not comfortable with

481
00:25:35,080 --> 00:25:39,160
Speaker 1: a spot oriented product and he's concerned about fraud. And I, again,

482
00:25:39,280 --> 00:25:41,640
Speaker 1: I don't know how you disprove that fraud is going

483
00:25:41,720 --> 00:25:44,440
Speaker 1: to happen. And I think that's the challenge that that

484
00:25:44,520 --> 00:25:47,480
Speaker 1: asset managers are going to struggle with. You know, Gray

485
00:25:47,520 --> 00:25:52,040
Speaker 1: Scale has, you know, has probably the highest profile offering

486
00:25:52,320 --> 00:25:55,320
Speaker 1: on on the docket. I don't think that that's going

487
00:25:55,359 --> 00:25:57,200
Speaker 1: to make its way through. I don't know when it's

488
00:25:57,240 --> 00:25:59,520
Speaker 1: going to be, but I definitely don't think it's gonna

489
00:25:59,560 --> 00:26:02,480
Speaker 1: be or I don't believe it's gonna be two, but

490
00:26:02,520 --> 00:26:04,560
Speaker 1: I'm not I'm not willing to put another bet in

491
00:26:04,640 --> 00:26:07,840
Speaker 1: the line in two just because I got I I lost.

492
00:26:07,960 --> 00:26:10,359
Speaker 1: This was the opportunity for you to crow, Eric, I

493
00:26:10,520 --> 00:26:13,840
Speaker 1: lost a bitcoin. When would a bitcoin futures based product

494
00:26:13,920 --> 00:26:15,960
Speaker 1: come to market? And I still owe you for that one,

495
00:26:16,000 --> 00:26:19,240
Speaker 1: but I'll pay up. Yeah, And to Katie's point, I

496
00:26:19,320 --> 00:26:23,520
Speaker 1: won't crow too much. Although three um, this was something

497
00:26:23,600 --> 00:26:27,840
Speaker 1: that did develop quickly and you're right. Once we're always

498
00:26:27,880 --> 00:26:31,000
Speaker 1: looking at Gainsler's words. If it changes a little, it's possible.

499
00:26:31,080 --> 00:26:34,879
Speaker 1: Maybe Again, I think of that Obama on gay marriage.

500
00:26:34,920 --> 00:26:38,160
Speaker 1: He said, I'm evolving, Remember that famous phrase he had.

501
00:26:39,160 --> 00:26:42,040
Speaker 1: This to me is Ginzler? How fast is he evolving?

502
00:26:42,160 --> 00:26:46,320
Speaker 1: And that's all that matters is Gensler's evolution on the

503
00:26:46,400 --> 00:26:49,399
Speaker 1: crypto market and where that's at. I don't know, but

504
00:26:49,480 --> 00:26:52,119
Speaker 1: it could come once he gets a little more evolved,

505
00:26:52,119 --> 00:26:54,680
Speaker 1: it could come more quickly. To Katie's point, I will

506
00:26:54,760 --> 00:26:57,879
Speaker 1: say I cover macro markets, I also cover E t F.

507
00:26:57,960 --> 00:27:01,840
Speaker 1: So it feels like gensler watch has become almost to

508
00:27:01,960 --> 00:27:05,200
Speaker 1: the same level of like fed Watch, like parsing his words,

509
00:27:05,359 --> 00:27:07,840
Speaker 1: like putting them under the microscope, the same way you

510
00:27:07,920 --> 00:27:20,640
Speaker 1: would with Jerome Pale. It's pretty crazy. Okay, So there's

511
00:27:20,680 --> 00:27:24,960
Speaker 1: crypto digital assets space, the likelihood that et F becomes

512
00:27:25,000 --> 00:27:28,760
Speaker 1: a rapper that can do things other than just uh

513
00:27:29,359 --> 00:27:33,119
Speaker 1: equities and bonds and commodities. I'm curious, though, what what

514
00:27:33,240 --> 00:27:36,680
Speaker 1: other risks could be associated with this space? Right? I

515
00:27:36,760 --> 00:27:39,400
Speaker 1: think the big risk is just this is such an

516
00:27:39,520 --> 00:27:42,000
Speaker 1: unusual asset class, and you know, we don't you know,

517
00:27:42,400 --> 00:27:43,840
Speaker 1: it is a little wild West that which is what

518
00:27:43,920 --> 00:27:47,240
Speaker 1: Ganser calls it. There are some unknowns. It's volatile, but

519
00:27:47,440 --> 00:27:49,439
Speaker 1: again I think people who would own crypto would use

520
00:27:49,480 --> 00:27:52,879
Speaker 1: it as an accessory on the portfolio and understand actually

521
00:27:53,080 --> 00:27:56,240
Speaker 1: they want the volatility or understand it. But so I

522
00:27:56,280 --> 00:27:58,480
Speaker 1: don't see too much. But I just think crypto in

523
00:27:58,600 --> 00:28:02,200
Speaker 1: general is a pretty developing place, and I think that

524
00:28:02,440 --> 00:28:04,880
Speaker 1: that would be the risk is what could something happen

525
00:28:05,119 --> 00:28:07,760
Speaker 1: that we just don't see. I'm really interested to see

526
00:28:07,800 --> 00:28:11,040
Speaker 1: what happens with UM, the futures et f s for

527
00:28:11,119 --> 00:28:14,479
Speaker 1: Bitcoin that are on the market, because remember when they launched,

528
00:28:14,600 --> 00:28:17,040
Speaker 1: we spend a lot of time talking about, you know,

529
00:28:17,160 --> 00:28:20,199
Speaker 1: the fact that bit o pretty pretty quickly bumped up

530
00:28:20,240 --> 00:28:24,960
Speaker 1: against its futures position limits. UM. Obviously the sort of

531
00:28:25,160 --> 00:28:28,360
Speaker 1: just mad dash of assets into that fund has cooled down,

532
00:28:28,480 --> 00:28:31,359
Speaker 1: but I mean that's something that I'll be watching. And

533
00:28:31,440 --> 00:28:33,840
Speaker 1: then I mean the fact that their future space. I

534
00:28:33,880 --> 00:28:35,880
Speaker 1: mean we've covered the roll costs to death, but also

535
00:28:36,400 --> 00:28:39,680
Speaker 1: to get the level of exposure and the fund and

536
00:28:39,720 --> 00:28:41,880
Speaker 1: I hope I don't butcher the mechanics of this, but

537
00:28:42,440 --> 00:28:47,000
Speaker 1: just owning the amount of futures contracts that you need

538
00:28:47,080 --> 00:28:50,360
Speaker 1: to get that exposure. I mean, even though it's not leveraged,

539
00:28:50,440 --> 00:28:54,280
Speaker 1: it kind of is leveraged in some sense. So I mean,

540
00:28:54,320 --> 00:28:57,520
Speaker 1: if there's a huge down swing in bitcoin, I mean,

541
00:28:57,640 --> 00:29:00,479
Speaker 1: sentiment for the past few weeks has been pretty terrible.

542
00:29:01,080 --> 00:29:03,640
Speaker 1: Just curious to see what they look on a big

543
00:29:03,760 --> 00:29:05,560
Speaker 1: down swing, because we've seen them in a huge up

544
00:29:05,600 --> 00:29:10,280
Speaker 1: swing so far. Yeah, I think bitcoin futures based products

545
00:29:10,320 --> 00:29:13,400
Speaker 1: are going to be its own investment class kind of

546
00:29:13,440 --> 00:29:15,960
Speaker 1: investment style, but I think it's gonna be relatively niche.

547
00:29:16,120 --> 00:29:19,360
Speaker 1: And you know, there's just let's put it in perspective,

548
00:29:19,400 --> 00:29:22,440
Speaker 1: there's just one point four billion dollars in assets, and

549
00:29:22,600 --> 00:29:25,520
Speaker 1: as you mentioned, a lot of attention for it this year.

550
00:29:25,680 --> 00:29:27,920
Speaker 1: It was perhaps the story of the year. But just

551
00:29:28,040 --> 00:29:31,360
Speaker 1: one point four billion dollars is not that big a

552
00:29:31,480 --> 00:29:34,040
Speaker 1: deal in terms of what we got so far of

553
00:29:34,120 --> 00:29:39,800
Speaker 1: what eight you know, almost nine billion dollars. Okay, as

554
00:29:39,840 --> 00:29:42,920
Speaker 1: we wrap up here, Eric, is there any other themes

555
00:29:43,040 --> 00:29:46,680
Speaker 1: or two outlook ideas that we haven't hit on that

556
00:29:46,720 --> 00:29:49,240
Speaker 1: you wanted to make sure that we touch. Yeah. I

557
00:29:49,280 --> 00:29:51,760
Speaker 1: think the big one is inflation. This is not going away.

558
00:29:51,840 --> 00:29:54,440
Speaker 1: This this word is here to stay for a long time.

559
00:29:54,480 --> 00:29:57,440
Speaker 1: I think and it's gonna be interesting to see. The

560
00:29:57,520 --> 00:30:01,520
Speaker 1: et F industry is so a on it about exploiting

561
00:30:02,160 --> 00:30:05,080
Speaker 1: the news flow. And so we've seen that every and

562
00:30:05,160 --> 00:30:06,880
Speaker 1: kadie cover this. Every e t F with the word

563
00:30:06,880 --> 00:30:09,600
Speaker 1: inflation is seen flows this year. I don't think I've

564
00:30:09,600 --> 00:30:11,600
Speaker 1: ever seen that. Usually there's one or two without flows

565
00:30:11,680 --> 00:30:14,200
Speaker 1: or nothing. So how many e t s are going

566
00:30:14,240 --> 00:30:16,680
Speaker 1: to try to figure out how you can actually get

567
00:30:16,680 --> 00:30:20,320
Speaker 1: ahead of inflation beat inflation? Uh, we might see a

568
00:30:20,480 --> 00:30:24,160
Speaker 1: leveraged inflation benefactors ETFs Like there could be some crazy

569
00:30:24,240 --> 00:30:26,360
Speaker 1: stuff that's gonna be a whole wing of the E

570
00:30:26,480 --> 00:30:28,680
Speaker 1: t F world. I think, uh, in a similar way

571
00:30:28,720 --> 00:30:31,280
Speaker 1: that currency hedging was back in the day. Even beyond tips,

572
00:30:31,360 --> 00:30:35,480
Speaker 1: they'll they'll work inflation into commodities, into equities. There could

573
00:30:35,480 --> 00:30:37,440
Speaker 1: be some that go across a bunch of different areas.

574
00:30:38,040 --> 00:30:40,400
Speaker 1: That's gonna be interesting to me to watch UM and

575
00:30:40,600 --> 00:30:42,640
Speaker 1: I foresee that as being like a sort of mini

576
00:30:43,040 --> 00:30:47,360
Speaker 1: subplot next year. Well, Horizon Kinetics Inflation Beneficiary e t

577
00:30:47,520 --> 00:30:51,120
Speaker 1: F I NFL, which as we're recording this is about

578
00:30:51,240 --> 00:30:54,480
Speaker 1: nine million in assets. It launched earlier this year, was

579
00:30:54,520 --> 00:30:57,120
Speaker 1: among the best timed e t s you know, we've

580
00:30:57,200 --> 00:31:00,480
Speaker 1: we've talked about hack and how they were early just

581
00:31:00,560 --> 00:31:04,760
Speaker 1: ahead of the cybersecurity, the fact that inflation is so prominent.

582
00:31:04,880 --> 00:31:09,000
Speaker 1: This is an equity e t F that owns energy materials, companies,

583
00:31:09,440 --> 00:31:13,080
Speaker 1: exchanges that are benefiting because they're asset light or because

584
00:31:13,120 --> 00:31:15,200
Speaker 1: they benefit from it. The fact that we only have

585
00:31:15,320 --> 00:31:17,440
Speaker 1: one of these products really in the marketplace, or one

586
00:31:17,480 --> 00:31:19,960
Speaker 1: or two of these products. I agree with you. The

587
00:31:20,000 --> 00:31:24,200
Speaker 1: asset management industry knows how to launch products that benefit

588
00:31:24,320 --> 00:31:26,800
Speaker 1: from the same themes that somebody had success with in

589
00:31:26,880 --> 00:31:28,920
Speaker 1: a prior year. We're going to see more of these products.

590
00:31:29,800 --> 00:31:31,600
Speaker 1: I feel like the fact that we already have a

591
00:31:31,720 --> 00:31:34,440
Speaker 1: meme E t F is pretty good proof that um

592
00:31:34,880 --> 00:31:37,480
Speaker 1: issuers are just really good at launching funds. Yeah. I

593
00:31:37,560 --> 00:31:39,840
Speaker 1: was talking to Dave Natick who was saying, how you know,

594
00:31:39,960 --> 00:31:41,880
Speaker 1: the the year started with meme stocks and then it

595
00:31:41,920 --> 00:31:43,920
Speaker 1: sort of went here and there, and because it can,

596
00:31:44,080 --> 00:31:47,640
Speaker 1: ended with a meme t F actually six months, I

597
00:31:47,680 --> 00:31:49,640
Speaker 1: would say, I'm surprised it didn't come out even faster.

598
00:31:49,680 --> 00:31:51,360
Speaker 1: Remember there was like a five month period where people

599
00:31:51,360 --> 00:31:52,600
Speaker 1: are like, why isn't there a me met F? And

600
00:31:52,600 --> 00:31:56,080
Speaker 1: then I think Roundhill finally filed. But yeah, Roundhill, by

601
00:31:56,120 --> 00:31:58,520
Speaker 1: the way put the metaverse et f out. That was

602
00:31:58,560 --> 00:32:02,280
Speaker 1: another cybersecurity per perfect timing. I think we will continue

603
00:32:02,280 --> 00:32:04,160
Speaker 1: to see e t s to come out that you're like,

604
00:32:04,320 --> 00:32:05,920
Speaker 1: what in the hell does this even mean? We have

605
00:32:06,000 --> 00:32:09,160
Speaker 1: to google the topic because people realize that you sort

606
00:32:09,200 --> 00:32:12,720
Speaker 1: of have to be before that news moment, that catalyst,

607
00:32:12,800 --> 00:32:16,000
Speaker 1: that Zuck moment where oh now we care about this.

608
00:32:16,480 --> 00:32:18,120
Speaker 1: You can't if you do it after, you miss a

609
00:32:18,160 --> 00:32:21,120
Speaker 1: good amount of flow action. So again, I think we'll

610
00:32:21,160 --> 00:32:24,960
Speaker 1: see so much experimentation, and because there's such a hunger

611
00:32:25,080 --> 00:32:27,920
Speaker 1: for things that are hot saucy, and between that and

612
00:32:27,920 --> 00:32:29,760
Speaker 1: they getting ahead of stuff, there's gonna be e t

613
00:32:29,960 --> 00:32:31,560
Speaker 1: s again where you won't even know what it is.

614
00:32:31,640 --> 00:32:33,920
Speaker 1: You have to google the term hot saucy, and that's

615
00:32:33,960 --> 00:32:36,680
Speaker 1: what you should name this episode, guys, hot saucy, and

616
00:32:37,000 --> 00:32:41,040
Speaker 1: Eric just invented another word. All right. On that note,

617
00:32:41,120 --> 00:32:43,800
Speaker 1: Todd Katie thinks so much for joining us, and thank you,

618
00:32:44,120 --> 00:32:51,480
Speaker 1: thank you, happy here, thanks for listening to trillions until

619
00:32:51,560 --> 00:32:53,400
Speaker 1: next time. You can find us on the Bloomberg terminal,

620
00:32:53,680 --> 00:32:57,720
Speaker 1: Bloomberg dot com, Apple podcast, Spotify, and where else you'd

621
00:32:57,720 --> 00:33:00,440
Speaker 1: like to listen. We'd love to hear from you on Twitter.

622
00:33:00,800 --> 00:33:04,760
Speaker 1: I'm at Joel lever Show. He's at Eric Faltunus. This

623
00:33:04,920 --> 00:33:08,640
Speaker 1: episode of Trillions was produced by Magnus Hendrickson. Francesco Leady

624
00:33:08,840 --> 00:33:17,080
Speaker 1: is the head of Bloomberg Podcast. Bye, m m m

625
00:33:19,480 --> 00:33:19,520
Speaker 1: m