WEBVTT - The 2022 ETF Outlook 0:00:05.640 --> 0:00:07.880 Wogan to trillions. I'm Joel Weber and I'm America. I'll 0:00:07.880 --> 0:00:16.040 shoot us Eric Bloomberg Intelligence. There's a lot of great 0:00:16.600 --> 0:00:20.079 research throughout the year. It also culminates at the end 0:00:20.120 --> 0:00:23.360 of the year with an outlook about and we're gonna 0:00:23.360 --> 0:00:26.200 spend some time today talking about that. We have some 0:00:26.239 --> 0:00:28.360 guests who will join us to talk about that, and 0:00:28.400 --> 0:00:31.280 you have some kind of macro level stuff that we're 0:00:31.280 --> 0:00:35.960 gonna also talk through to get started though, just high 0:00:36.000 --> 0:00:40.720 level what what are some things that you're you're thinking about? Yeah, 0:00:40.760 --> 0:00:43.000 so in in b I they make us or they 0:00:43.000 --> 0:00:45.879 we should do it. They do make us though right 0:00:46.159 --> 0:00:49.880 outlooks and uh, you know, we look you look forward. 0:00:49.920 --> 0:00:52.080 A lot of it is just repackaging the past into 0:00:52.120 --> 0:00:53.880 the future tents. I'll be honest. I mean that's what 0:00:53.920 --> 0:00:56.360 a lot of self side research does. We don't make 0:00:56.400 --> 0:00:58.120 calls like this will go up or down, but what 0:00:58.160 --> 0:01:00.520 we do is try to highlight the biggest themes that 0:01:00.600 --> 0:01:03.639 we think have a lot of legs or basically come 0:01:03.680 --> 0:01:07.160 against themes that may be overhyped and so are big 0:01:07.200 --> 0:01:10.520 theme for next year is simply that E t F 0:01:10.640 --> 0:01:14.640 s are transcending the passive label so that goes into 0:01:14.720 --> 0:01:19.240 how much there's been in flows into active discretionary active ETFs, 0:01:19.600 --> 0:01:23.679 E s G, smart beta, UM, all kinds of you know, 0:01:23.720 --> 0:01:27.280 I call them shiny objects, but even things like simplify, 0:01:27.360 --> 0:01:31.200 which uses derivative the sculpt outcomes. Um, most of the 0:01:31.240 --> 0:01:34.440 innovation is happening there so and and also bitcoin as 0:01:34.440 --> 0:01:37.959 so is the tent gets wider and wider, and people 0:01:37.959 --> 0:01:40.200 put more stuff into e t F that isn't just 0:01:40.280 --> 0:01:43.360 sort of cheap beta. That's good UM. And we think 0:01:43.440 --> 0:01:45.560 that gives the industry a lot of growth because it's 0:01:45.560 --> 0:01:48.480 so accepting and big tennis. And that's our general theme 0:01:48.480 --> 0:01:50.440 for next year. And the reason we went there is 0:01:50.480 --> 0:01:53.200 because basically almost every e t F took in money 0:01:53.240 --> 0:01:55.200 this year. I mean you almost had to try to 0:01:55.360 --> 0:01:57.440 not get flows. That's how much the fish were biting. 0:01:57.440 --> 0:02:00.320 It was like a lake that was just oct with 0:02:00.360 --> 0:02:03.240 a bunch of hungry trout. Um. And that's just the 0:02:03.280 --> 0:02:05.160 kind of year it was. And I've never seen anything 0:02:05.160 --> 0:02:07.240 like it, and I've been covering this for fifteen years. 0:02:07.280 --> 0:02:10.760 So within that optimism is a bunch of things that 0:02:10.800 --> 0:02:12.600 I think will break down the podcast, but that's our 0:02:12.639 --> 0:02:15.200 general take on it. Is we we really see this 0:02:15.240 --> 0:02:18.799 sort of growth continuing. Okay, So joining us in this 0:02:18.880 --> 0:02:23.320 big tent. Todd rosen Bluth, who's a senior director of 0:02:23.320 --> 0:02:25.960 et F and Mutual Fund Research at CFR, A a 0:02:26.080 --> 0:02:29.440 regular on the podcast, as well as Katie Greifeld, another 0:02:29.480 --> 0:02:31.959 regular in favorite on the podcast, who covers e t 0:02:32.120 --> 0:02:35.120 F for bloom Broke News and is also a regular 0:02:35.840 --> 0:02:44.720 Quick Tax, this time on Trillions. Todd, Katie, welcome back 0:02:44.760 --> 0:02:47.040 to Trillions. Great to be with you. Thanks, thanks for 0:02:47.080 --> 0:02:50.960 having me. Okay, so we're gonna walk through some of 0:02:51.120 --> 0:02:54.720 Eric's key research points, and I would also encourage you 0:02:54.800 --> 0:02:58.880 let's pick him apart as much as possible. So Eric, 0:02:59.480 --> 0:03:02.399 first of all, you want to talk about flows, right 0:03:02.440 --> 0:03:05.520 because this was a one was a huge year for 0:03:05.639 --> 0:03:08.440 flows into e t F. How just how big was 0:03:08.480 --> 0:03:12.959 it and and what do you think about? Yeah? So, uh, 0:03:13.000 --> 0:03:15.840 we're we're looking at about nine billion this year. That's 0:03:15.880 --> 0:03:18.120 I think we're it's going to end up. Um, you know, 0:03:18.160 --> 0:03:21.079 we're still two weeks away, but that's probably where will be. Now. 0:03:21.240 --> 0:03:24.600 That is what's the percentage more than the old record 0:03:24.639 --> 0:03:28.160 which was set last year with about that's a big deal. 0:03:28.240 --> 0:03:31.360 That's not just breaking the record, that's completely obliterating it. 0:03:31.960 --> 0:03:34.360 And you know, a couple of things account for this. 0:03:34.400 --> 0:03:36.480 You obviously there had other areas of the market that 0:03:36.560 --> 0:03:40.040 did well breadth, so you had value, small cap emerginga tips, 0:03:40.320 --> 0:03:42.520 A lot of things really woke up this year that 0:03:42.560 --> 0:03:46.320 weren't just say like you know, fang stocks and and 0:03:46.320 --> 0:03:49.440 and cheap data, although that takes the lion shares of 0:03:49.440 --> 0:03:51.680 the flows still, so you had the sort of ancillary 0:03:51.720 --> 0:03:54.480 areas of the market doing well. But you also just 0:03:54.520 --> 0:03:57.400 have more and more innovation happening. So many people are 0:03:57.840 --> 0:04:00.280 putting their best ideas to work in the t F 0:04:00.400 --> 0:04:03.000 world and and that will that route that pay. So 0:04:03.320 --> 0:04:05.160 next year, what do I think in flows? If you 0:04:05.200 --> 0:04:07.760 asked me to pick, I would say probably a little less. 0:04:07.880 --> 0:04:11.400 I can't imagine the market returning again, So maybe we 0:04:11.440 --> 0:04:13.360 have a flat year or a tougher year, and I 0:04:13.400 --> 0:04:15.280 think the flows are good. Maybe maybe they're back to 0:04:15.360 --> 0:04:17.760 half a trillion something like that. That would be my 0:04:17.760 --> 0:04:21.080 my early guests into where the flows will be. But again, 0:04:21.160 --> 0:04:24.479 that's still a monster amount of growth, especially considering not 0:04:24.560 --> 0:04:27.040 many of the things are taking in cash. So should 0:04:27.040 --> 0:04:29.880 I jump in and uh? Put Eric Speed to the fire. 0:04:30.240 --> 0:04:33.200 So going back to half a trillion, that's still an 0:04:33.320 --> 0:04:35.839 enormous amount of money. It would still be an enormous 0:04:35.880 --> 0:04:38.400 reduction from what we're seeing this year. I mean, do 0:04:38.440 --> 0:04:41.160 you really chalk up the fact that we're going to 0:04:41.200 --> 0:04:43.600 get nine hundred billion dollars just to the fact that 0:04:44.040 --> 0:04:48.480 the SMP five hundred and was so strong. Yes, so 0:04:48.680 --> 0:04:52.240 ets taken I think two billion a day baseline. I 0:04:52.279 --> 0:04:55.560 think just the vehicle is so popular. I think, you know, 0:04:55.600 --> 0:04:57.599 one to two billion come in just because people are 0:04:57.960 --> 0:05:01.040 are experiencing a format change. Most new money now goes 0:05:01.080 --> 0:05:02.240 into e t f s. It used to go into 0:05:02.279 --> 0:05:05.080 mutual funds. So I think that's just the baseline. And 0:05:05.120 --> 0:05:07.360 then this year it took in four billion a year. 0:05:07.400 --> 0:05:08.920 So the other two billion I think a little more 0:05:08.960 --> 0:05:12.680 market dependent. The thing is, if the SNP were flat, right, 0:05:13.040 --> 0:05:14.840 something's going to be working. I remember, like it was 0:05:14.839 --> 0:05:19.400 two or three years ago where nothing was working except cash. Well, 0:05:19.520 --> 0:05:22.640 short duration bond ETFs took in a ton of money. 0:05:22.680 --> 0:05:24.840 I think people sometimes equate e t f s with 0:05:25.120 --> 0:05:28.719 the SNP or equities, but they cover everything, even stuff 0:05:28.760 --> 0:05:31.120 that goes up when the markets down. So I think 0:05:31.240 --> 0:05:34.040 we we will see those flows. I agree that if 0:05:34.080 --> 0:05:35.839 the stock market really is this sort of like the 0:05:35.839 --> 0:05:37.839 star player of the E t F worlds, like you know, 0:05:37.960 --> 0:05:40.839 lebron or Steph Curry of their team, and when equities 0:05:40.880 --> 0:05:43.120 are tough, that will minimize the flows a bit. But 0:05:43.240 --> 0:05:46.120 I still think those other reasons they'll be up there, 0:05:46.640 --> 0:05:49.159 you know, so maybe maybe the pace will come down 0:05:49.160 --> 0:05:52.800 a bit though, Todd, what do you think up or down? Well, 0:05:52.800 --> 0:05:54.680 I think it's gonna be up from the record we 0:05:54.720 --> 0:05:56.599 had last year. I think it's going to be between 0:05:57.160 --> 0:06:01.320 five hundred billion and a trillion hours. Where exactly that 0:06:01.440 --> 0:06:03.719 is is going to be dependent upon the stock market. 0:06:03.839 --> 0:06:06.320 Just to put some numbers behind what Eric was talking about, 0:06:06.320 --> 0:06:09.680 the three heavyweights within the space, I, vv v O 0:06:10.160 --> 0:06:12.880 and SPY are going to have taken in a hundred 0:06:12.920 --> 0:06:15.120 billion dollars. That's the first time they will have done 0:06:15.120 --> 0:06:18.640 that ever or anything close to that ever, and yet 0:06:19.120 --> 0:06:21.560 close to eight hundred billion dollars. It's going into things 0:06:21.560 --> 0:06:24.800 that are not directly tied to the SMP five hundred, 0:06:24.800 --> 0:06:28.800 either they're a slice of that or there fixed income. 0:06:28.960 --> 0:06:32.159 We saw tips explode this year, you know, given that 0:06:32.320 --> 0:06:34.640 investors have a chance to go wherever the puck is 0:06:34.640 --> 0:06:37.039 going using e t F. So I think we're gonna 0:06:37.080 --> 0:06:40.960 see it in an amazing year off of a very 0:06:41.000 --> 0:06:46.760 single digit level returns to the SNP five. Okay, so 0:06:47.200 --> 0:06:50.159 one thing that I thought was a curiosity a little 0:06:50.200 --> 0:06:54.800 bit was that, uh, that number for one actually excludes 0:06:55.480 --> 0:06:59.280 mutual fund to E t F conversions, which eric how 0:06:59.279 --> 0:07:03.120 big was that number? So if you count conversions that 0:07:03.200 --> 0:07:06.320 happened or announced, it's about fifty seven billion, and it's 0:07:06.320 --> 0:07:10.040 about two funds so far. But again, if we go 0:07:10.080 --> 0:07:12.040 back to this time last year, it was zero and zero. 0:07:12.160 --> 0:07:16.120 So I think that's superseded everybody's expectations. I noticed a 0:07:16.120 --> 0:07:18.840 lot of times when a conversion happens, there's this sort 0:07:18.880 --> 0:07:21.200 of like minimizing it, like, oh, well, it's just that 0:07:21.240 --> 0:07:24.120 one firm who has that one tax fund, and don't worry, 0:07:24.160 --> 0:07:25.920 this won't be a big deal. And then you see 0:07:25.960 --> 0:07:27.880 JP Morgan, and then you see Franklin, and then you 0:07:27.960 --> 0:07:30.480 see Motley Fool and then you see a cannabis fund. 0:07:30.680 --> 0:07:33.400 It's pretty widespread. We think there'll be a trillion dollars 0:07:33.440 --> 0:07:36.080 with a conversions in the next ten years. I think 0:07:36.080 --> 0:07:37.640 you could be even greater than that that said, it 0:07:37.640 --> 0:07:41.640 won't be everything. That would be ten of mutual funds converting. 0:07:41.960 --> 0:07:43.480 But that's where we're at now. And if we count 0:07:43.480 --> 0:07:45.440 the fifty seven billion, you do get it closer to 0:07:45.440 --> 0:07:48.400 a trillion. But most services I know todd might be different. 0:07:48.400 --> 0:07:51.280 Don't count conversions as flows as of now. They just 0:07:51.480 --> 0:07:54.760 show up as assets and ETFs not flows. So a 0:07:54.840 --> 0:07:57.120 trillion dollars in ten years, I mean, if you think 0:07:57.120 --> 0:07:59.880 of the realm of the mutual fund universe, isn't it 0:08:00.280 --> 0:08:03.880 about twenty one trillion dollars? It's huge? I mean, why 0:08:03.920 --> 0:08:06.560 would why only a trillion? Why stop there? What is 0:08:06.600 --> 0:08:10.760 preventing every single mutual fund from converting into an e 0:08:10.880 --> 0:08:15.000 t F given that's clearly where the direction of travel is. Yeah, 0:08:15.160 --> 0:08:18.320 a couple of reasons. One is, uh, the revenue over 0:08:18.360 --> 0:08:21.040 there is so good, and when you convert to an 0:08:21.040 --> 0:08:24.480 e t F they may just not They fear self cannibalization. 0:08:24.960 --> 0:08:26.680 They also with a four one case, it gets a 0:08:26.720 --> 0:08:30.160 little trickier with logistics, if not impossible. So for mutual 0:08:30.160 --> 0:08:32.439 funds that have deep four when K penetration, it's tough 0:08:32.480 --> 0:08:34.520 to just automatically have all those four when K plays 0:08:34.520 --> 0:08:35.960 have an e t F instead of a mutual fund. 0:08:36.200 --> 0:08:38.800 They're not bought similarly, So there's logistic but I think 0:08:38.800 --> 0:08:41.320 some of those logistical issues will be overcome and solved. 0:08:41.760 --> 0:08:45.280 But I you know, I thought a trillion was when 0:08:45.280 --> 0:08:48.080 you make predictions, it's good too if you, especially if 0:08:48.080 --> 0:08:51.280 you're contrarian, to go as low as you can while 0:08:51.360 --> 0:08:55.160 seeming bold. That way, you can easily overcome it. So 0:08:55.240 --> 0:08:58.000 like a trillion if you if you take the vibe 0:08:58.000 --> 0:09:00.360 out there. You know, back in July when I predicted 0:09:00.400 --> 0:09:03.280 it, it it was only like five billion new conversions. People 0:09:03.280 --> 0:09:05.640 were like, that's crazy, But it's more and more come in. 0:09:05.679 --> 0:09:07.800 It seems like I'm under selling it. So I agree 0:09:07.800 --> 0:09:09.839 with you. I think it could be way more, but 0:09:10.240 --> 0:09:13.839 might as well be right by a lot than like overshoot. 0:09:14.360 --> 0:09:16.600 Have you seen prices right when they bid like one 0:09:16.600 --> 0:09:19.920 dollar over? You gotta like have that mindset with these predictions. 0:09:19.960 --> 0:09:23.200 You know, you don't want to overdo it. Bitcoin people 0:09:23.240 --> 0:09:25.000 do that sometimes, you know, they're like, oh, it's going 0:09:25.040 --> 0:09:27.320 to a million dollars. You're also supposed to put your 0:09:27.320 --> 0:09:31.520 pinky into your lip and say one. Well, don't forget guys, 0:09:31.559 --> 0:09:33.960 that's the name of your of the podcast here. You 0:09:34.000 --> 0:09:39.840 guys called this because speaking each capation trillion just connected 0:09:39.880 --> 0:09:44.680 to this podcast that Wait, you mean the name that 0:09:44.960 --> 0:09:47.440 Joel gave the podcast like five years ago. Yes, and 0:09:47.760 --> 0:09:49.480 I remember being one of the early things to it 0:09:49.520 --> 0:09:52.360 about five years ago. Yeah, yeah, no, it was, it was. 0:09:52.440 --> 0:09:55.240 It was a good name. Then we try and think big. Um. Okay, 0:09:55.240 --> 0:09:57.480 I want to talk about another big thing, another theme 0:09:57.760 --> 0:10:01.880 in the Bloomberg Intelligence two outlook for e t s. 0:10:02.840 --> 0:10:05.440 E t f s have long been known for for 0:10:05.520 --> 0:10:08.880 a path with a passive context, and obviously there's been 0:10:09.280 --> 0:10:14.880 increasing amount of active, actively managed gtfs. Uh but Eric, 0:10:14.960 --> 0:10:17.800 you and you tease this already, but there's a whole 0:10:17.840 --> 0:10:20.480 new paradigm and organization that you're thinking about. What what 0:10:20.600 --> 0:10:23.880 is that? Yeah, I mean shiny objects some that I 0:10:23.920 --> 0:10:26.640 mean that's my turn for it or hot sauce um. 0:10:26.679 --> 0:10:30.400 You know, a professional institutional manager might call it funds 0:10:30.400 --> 0:10:33.640 with high tracking error. But it's just basically stuff that's 0:10:33.679 --> 0:10:37.200 completely different than you're boring beta e t F like 0:10:37.280 --> 0:10:40.120 v O O or v T I. And why is that? Well, 0:10:40.840 --> 0:10:44.280 most people own a very a very boring core, and 0:10:44.360 --> 0:10:46.160 but in order for that core to work, you've got 0:10:46.160 --> 0:10:48.640 to not touch it. So I think there's this market 0:10:49.040 --> 0:10:52.719 to enter too. To entertain yourself, take speculative bets that 0:10:52.760 --> 0:10:54.880 could have asymmetric returns that are pretty high, like a 0:10:54.920 --> 0:10:58.400 call option, and you decorate your boring vanilla with these 0:10:58.440 --> 0:11:01.520 sort of outlier hot sauce funds, either like an ARC 0:11:01.600 --> 0:11:03.800 or a theme et F or crypto. Crypto is a 0:11:03.880 --> 0:11:07.280 perfect example of hot sauce. Or you do call option 0:11:07.360 --> 0:11:10.160 trading on robin Hood and this is so you just 0:11:10.800 --> 0:11:14.520 distract yourself from the vanilla. So I called the Barbell era, 0:11:14.679 --> 0:11:16.040 and I think we're in it. And I think that's 0:11:16.040 --> 0:11:19.239 why you don't tend to see outflows from these crazy, wacky, 0:11:19.360 --> 0:11:22.520 high flying ets when they go down, um like people 0:11:22.559 --> 0:11:24.920 think they would see outflows. They tend to be pretty 0:11:24.920 --> 0:11:28.640 sticky thoughts. I'll do the I agree with Eric, and 0:11:28.640 --> 0:11:30.440 then I'll do with the I disagree with Eric. So 0:11:30.480 --> 0:11:32.839 I agree with Eric. I do think that that's how 0:11:32.880 --> 0:11:36.280 these products are are happening. So thematic ETF, you know, 0:11:36.960 --> 0:11:40.199 active as well as index space. Thematic ets were actually 0:11:40.240 --> 0:11:45.320 surprisingly popular h despite the fact that we saw so 0:11:45.400 --> 0:11:50.439 many of these themes underperform cannabis, blockchain, cloud computing. So 0:11:50.480 --> 0:11:53.920 many of these technology oriented themes underperformed, but money kept 0:11:53.920 --> 0:11:57.120 going into these products from global X among others, so 0:11:57.400 --> 0:12:00.400 in part because they round out a portfolio that's tied 0:12:00.440 --> 0:12:03.840 to the S and P five. But I do think 0:12:03.840 --> 0:12:06.800 that we're going to see active core. I think you 0:12:06.840 --> 0:12:11.040 know a key player that's coming is Capital Group. They're 0:12:11.040 --> 0:12:14.800 going to be launching their first suite of active equity 0:12:14.840 --> 0:12:17.280 e t s and they're gonna be not the mutual 0:12:17.320 --> 0:12:19.400 funds that we know of from American funds, but they're 0:12:19.400 --> 0:12:22.360 going to be similar enough to those, and those are 0:12:22.440 --> 0:12:25.680 core oriented strategies. They're just going to be actively managed 0:12:25.679 --> 0:12:28.000 by an experienced team. I think we're going to see 0:12:28.000 --> 0:12:33.199 that do well. Oh now this could be a bet. Okay, 0:12:33.240 --> 0:12:36.120 So we talked to Capital Group. I give them credit. 0:12:36.280 --> 0:12:39.360 They're like, look, we're going for the core. We're going 0:12:39.400 --> 0:12:42.800 at Vanguard. We're trying dislodge them. We believe active has 0:12:42.800 --> 0:12:46.360 a place in the core, you know, God bless them. 0:12:46.400 --> 0:12:50.319 I think they'll fail dramatically. I think that nobody is 0:12:50.360 --> 0:12:53.439 going to sell a three basis point beta e t 0:12:53.679 --> 0:12:56.680 F for for that. I think those days are over. 0:12:57.160 --> 0:13:00.000 Even if they come in as low as they'll probably 0:13:00.040 --> 0:13:02.240 we have some success because they have clients that know 0:13:02.360 --> 0:13:04.480 them and like them. So maybe there's a little bit, 0:13:04.480 --> 0:13:06.439 but I don't see that as this is a good 0:13:06.440 --> 0:13:10.840 bet for us. How about over under after one year 0:13:10.920 --> 0:13:15.280 for Capital Group, I'll go with seven billion. I'll take 0:13:15.400 --> 0:13:18.160 you wouldn't take the over on that. That's that's the 0:13:18.240 --> 0:13:20.120 number you want to go with. You don't want to 0:13:20.120 --> 0:13:24.360 go lower if you're that pessimistic. The seven billions not 0:13:24.440 --> 0:13:28.120 that much these days, especially with inflation. Sure, I'll take 0:13:28.160 --> 0:13:29.880 the over. I was. I thought you'd go lower on it, 0:13:29.920 --> 0:13:31.680 you guys, I will I will take I guess where 0:13:31.679 --> 0:13:34.320 here this is happening first and live? This is it? 0:13:34.880 --> 0:13:38.640 This is so. We've got two reporters slash outitors in 0:13:38.640 --> 0:13:40.880 the room. They're gonna be writing this up. I'm sure 0:13:40.960 --> 0:13:43.199 for the for the record, Katie, I'll just buy you 0:13:43.320 --> 0:13:48.000 lunch regardless. But yeah, seven billion dollars twelve months after 0:13:48.080 --> 0:13:52.440 they launched the first projects not project. They're gonna watch 0:13:52.480 --> 0:13:55.080 at some point in the first quarter UM when the 0:13:55.120 --> 0:13:57.560 first Capital Group et F hits, we start the clock 0:13:57.640 --> 0:13:59.880 twelve months later, do they have seven billion total or not? 0:14:00.320 --> 0:14:03.040 I say under, I'll go with over There we go 0:14:03.080 --> 0:14:06.600 all right, there we go. That's a good vet. Katie. 0:14:06.720 --> 0:14:08.679 Let me ask you who would you take if you 0:14:08.720 --> 0:14:12.000 were like betting on the bet? Who would you go with? 0:14:12.920 --> 0:14:14.600 I don't know. Eric. I feel like you win these 0:14:14.640 --> 0:14:18.280 bets a lot. So just based on historical performance, I 0:14:18.320 --> 0:14:22.120 have to go past performance is not indicative of future results. 0:14:23.240 --> 0:14:30.080 Actually listen to those disclaimers. We we obviously build a 0:14:30.200 --> 0:14:35.520 research product related to it. Okay, Todd the full disclaimer. 0:14:35.560 --> 0:14:38.760 Have you actually ever won? Have I ever? One? Yes? 0:14:39.160 --> 0:14:43.360 Not on not on lunch. Uh. Todd is very good 0:14:43.400 --> 0:14:45.880 on bets that we don't make it steak much or 0:14:45.960 --> 0:14:48.840 steak dinner, those sort of little ones that we just 0:14:48.880 --> 0:14:51.480 do a friendly bet. He cleans up. So it's it's 0:14:51.520 --> 0:14:53.160 more even you think it's just when we make it 0:14:53.240 --> 0:14:57.640 steak dinner that he just doesn't work out. Yeah, I 0:14:57.680 --> 0:15:08.160 think so, I think so. Yeah. Okay, So we talked. 0:15:08.200 --> 0:15:11.840 We talked about the shiny stuff. Uh, Katie, I'm interested 0:15:11.840 --> 0:15:13.720 in you know. The other obsession of Eric's is the 0:15:14.000 --> 0:15:16.920 cheap set, which he touched on. There is there any 0:15:16.960 --> 0:15:19.520 any other new action in the cheap space that's that's 0:15:19.600 --> 0:15:23.440 caught your attention? Well, it feels like the lurch towards 0:15:23.480 --> 0:15:26.600 lower fees just continue. And it is interesting in talking 0:15:26.640 --> 0:15:29.360 about you know, these active funds, I mean, even those 0:15:29.360 --> 0:15:34.360 funds are so dirt cheap, but um, in this sort 0:15:34.360 --> 0:15:36.840 of race to the bottom, uh, if you look at 0:15:36.840 --> 0:15:39.640 the leaderboard, I mean, Todd already brought up the fact that, 0:15:40.160 --> 0:15:42.640 you know, the three big ones have already brought in 0:15:42.720 --> 0:15:45.440 like a hundred billion dollars this year, and all of 0:15:45.480 --> 0:15:48.600 this talk of shiny stuff which can be more expensive. 0:15:49.560 --> 0:15:51.280 I don't know, it stood out to me that this 0:15:51.360 --> 0:15:55.240 year everything just seems to have gone to like plain, 0:15:55.400 --> 0:15:58.880 boring vanilla funds which are dirt cheap, even though I 0:15:58.880 --> 0:16:00.800 mean I've spent the better part of this past year 0:16:00.880 --> 0:16:04.040 talking about all the shiny stuff all the means meme 0:16:04.080 --> 0:16:06.920 stocks and crypto and everything else. But still it just 0:16:06.960 --> 0:16:10.920 feels like these like such cheap, boring products have this 0:16:11.000 --> 0:16:14.440 gravitational pull towards them. I think this also speaks to 0:16:14.640 --> 0:16:20.120 just the media apparatus. And I'm guilty as anybody. We 0:16:20.160 --> 0:16:24.160 tend to cover the stuff that moves and does, you know, 0:16:24.920 --> 0:16:27.960 move around up and down way more if you if 0:16:28.000 --> 0:16:30.280 you do an NT search on like v T I 0:16:30.880 --> 0:16:34.160 versus say ARC ARC will have like thirty times the 0:16:34.200 --> 0:16:36.520 coverage of v t I, even though v t I 0:16:36.600 --> 0:16:40.000 is thirty times bigger. And that's just the way it is. Um, 0:16:40.040 --> 0:16:42.200 that's just how it's not just financial, just the way 0:16:42.240 --> 0:16:46.920 the media operates. Um. You wouldn't have a media infrastructure 0:16:47.400 --> 0:16:49.880 if you said to everybody, well, let's just cover vt 0:16:50.000 --> 0:16:53.120 I all day long. Yeah, because I mean, what is 0:16:53.160 --> 0:16:59.600 there to say? You know what we did at the top. Okay, 0:16:59.600 --> 0:17:02.520 So let's talk about this idea of this new Active though, 0:17:02.560 --> 0:17:04.560 because we kind of got there with the Capital Group 0:17:05.040 --> 0:17:09.560 and that's another theme in the outlook Eric, So so 0:17:09.600 --> 0:17:12.159 what what does that mean to you? New Active is 0:17:12.280 --> 0:17:14.280 And here's where Todd and I will disagree, which is 0:17:14.320 --> 0:17:18.000 good for the podcast. New Active We consider if you 0:17:18.040 --> 0:17:20.720 take smart Beta, so it tracts an index, but let's 0:17:20.720 --> 0:17:24.080 say it tilt towards dividends or momentum stocks, we would 0:17:24.080 --> 0:17:27.159 consider that active, even though it's rules based, it's just 0:17:27.240 --> 0:17:30.359 rules based active. So if you look at New Active, 0:17:30.440 --> 0:17:32.439 a lot of active, a lot of way people like 0:17:32.480 --> 0:17:35.000 to consume active these days is through an index fund. 0:17:35.680 --> 0:17:39.880 So smart Beta e s G. The themes and so 0:17:39.960 --> 0:17:41.879 that would be new Active. And if you add up 0:17:41.920 --> 0:17:44.840 new active plus traditional active, you get a nice solid 0:17:44.920 --> 0:17:49.639 like of flow lane, which again is in two billion dollars. 0:17:49.680 --> 0:17:53.240 Considering how much ETFs are taking in and that that lane, 0:17:53.240 --> 0:17:55.600 that that is where all of the innovation is happening 0:17:55.680 --> 0:17:59.880 right now. Um, even though as Katie said, six billion 0:18:00.000 --> 0:18:02.960 are going to the boring vanilla stuff, nobody talks about. 0:18:03.600 --> 0:18:05.880 That lane of two three in a billion is pretty good. 0:18:05.920 --> 0:18:07.720 You can definitely carve out a living there if you 0:18:07.760 --> 0:18:10.919 have the right product. So since I got set up 0:18:10.960 --> 0:18:13.439 for it, I'll let me just state my case for it. 0:18:13.920 --> 0:18:16.879 We would consider the Eye Shares value factor e t 0:18:17.040 --> 0:18:20.960 F v l u E, which is extremely popular to 0:18:21.119 --> 0:18:24.040 be an index based product. Now it's being used actively 0:18:24.160 --> 0:18:28.520 by the investor to tactically rotate in or out based 0:18:28.560 --> 0:18:32.760 on moving into value and moving away from momentum or quality. 0:18:33.280 --> 0:18:35.920 But those have been extremely popular this year. We've seen 0:18:35.960 --> 0:18:39.840 advisors increasingly used factor et f s from Eye Shares, 0:18:40.200 --> 0:18:43.760 from invest Go among other single factor products and build 0:18:43.760 --> 0:18:47.879 a portfolio around those products. But those are index based products. 0:18:47.920 --> 0:18:50.520 Those are passive. They just are being handled by the 0:18:50.560 --> 0:18:52.960 investor in an active manner. In my view, No, no, 0:18:53.000 --> 0:18:55.800 but okay, But you could argue v O O is 0:18:55.880 --> 0:18:58.800 us being used act or spies being used actively, and 0:18:58.800 --> 0:19:01.160 that's passive. I get that our ument. What I'm saying 0:19:01.200 --> 0:19:02.919 is the e t F itself is active because it 0:19:02.960 --> 0:19:06.240 has these rules that say if the if the metrics 0:19:06.240 --> 0:19:08.119 say this, we're gonna buy these stocks. If it doesn't, 0:19:08.119 --> 0:19:10.760 we're gonna sell these That's the same thing a discretionary 0:19:10.800 --> 0:19:13.520 active manager would do. They might, they might, They'll have 0:19:13.560 --> 0:19:16.680 a system with their you know, rankings of stocks and whatnot. 0:19:17.080 --> 0:19:20.080 This is just formalizing it into an index. I think. 0:19:20.359 --> 0:19:22.840 I don't say. I just think the line between a 0:19:22.880 --> 0:19:26.960 person picking stocks because of how they feel and this 0:19:27.520 --> 0:19:30.600 is under the same tent of active. All right, I'll 0:19:30.640 --> 0:19:33.480 agree to disagree on it, but yes, the difference between 0:19:34.000 --> 0:19:37.760 a factor tilt to it that rebalances every six months. 0:19:37.760 --> 0:19:39.880 We know it's going to happen. We don't know exactly 0:19:39.960 --> 0:19:42.199 what's going in to it, but we know it's going 0:19:42.240 --> 0:19:45.720 to happen, whereas we don't know what's going into ARCS 0:19:46.160 --> 0:19:49.360 products tomorrow or what will go into the capital group 0:19:49.400 --> 0:19:52.400 of the fidelity of the tier price actively managed ones. 0:19:52.440 --> 0:19:55.120 Those managers have a discretion. But I agree with you 0:19:55.160 --> 0:19:59.240 the the outside of the pure beta products, the core 0:19:59.680 --> 0:20:04.960 is go going to grow factors, thematic oriented ETFs which 0:20:04.960 --> 0:20:08.359 we touched on, and those where that manager has discretion. 0:20:08.480 --> 0:20:10.440 We're going to see more more of those products in 0:20:10.520 --> 0:20:12.760 two and we're going to see them go on or 0:20:12.760 --> 0:20:16.359 even more of the assets than we saw. I agree 0:20:16.359 --> 0:20:19.760 with you on that, alright, we're in agreement. Um, it 0:20:19.880 --> 0:20:23.080 was a huge year for active in that you saw 0:20:23.160 --> 0:20:25.320 a lot of flows, you saw a lot of active launches. 0:20:25.920 --> 0:20:28.520 Even though I mean you would have done totally fine 0:20:28.640 --> 0:20:31.760 in the SMP five hundred, it wasn't a great environment 0:20:31.880 --> 0:20:35.639 for active managers because I mean, just being again in 0:20:35.680 --> 0:20:38.679 a boring old index, you would have gotten what twenty 0:20:38.760 --> 0:20:43.320 five percent gain, give or take. And I guess my question, uh, 0:20:43.480 --> 0:20:45.520 what do you make of that? I think there's a 0:20:45.560 --> 0:20:47.879 few things that are happening. One is the success of 0:20:48.160 --> 0:20:52.439 ARC in its performance and gathering assets in opened the 0:20:52.440 --> 0:20:55.960 door for more investors to be comfortable with actively managed 0:20:55.960 --> 0:21:00.359 gtfs and asset managers to try to launch a me 0:21:00.720 --> 0:21:04.840 kind of product to offer those strategies. Some of the 0:21:04.880 --> 0:21:08.160 actively managed products are semi transparent or I think would 0:21:08.160 --> 0:21:11.280 you guys refer to as non transparent or active non 0:21:11.280 --> 0:21:14.239 transparent ets where the asset managers are getting into it. 0:21:14.480 --> 0:21:18.080 And then we also have these defined outcome oriented ETFs 0:21:18.119 --> 0:21:21.840 that continue to gain traction, and those I think Bloomberg 0:21:21.880 --> 0:21:23.760