Speaker 1: Wogan to trillions. I'm Joel Weber and I'm America. I'll
Speaker 1: shoot us Eric Bloomberg Intelligence. There's a lot of great
Speaker 1: research throughout the year. It also culminates at the end
Speaker 1: of the year with an outlook about and we're gonna
Speaker 1: spend some time today talking about that. We have some
Speaker 1: guests who will join us to talk about that, and
Speaker 1: you have some kind of macro level stuff that we're
Speaker 1: gonna also talk through to get started though, just high
Speaker 1: level what what are some things that you're you're thinking about? Yeah,
Speaker 1: so in in b I they make us or they
Speaker 1: we should do it. They do make us though right
Speaker 1: outlooks and uh, you know, we look you look forward.
Speaker 1: A lot of it is just repackaging the past into
Speaker 1: the future tents. I'll be honest. I mean that's what
Speaker 1: a lot of self side research does. We don't make
Speaker 1: calls like this will go up or down, but what
Speaker 1: we do is try to highlight the biggest themes that
Speaker 1: we think have a lot of legs or basically come
Speaker 1: against themes that may be overhyped and so are big
Speaker 1: theme for next year is simply that E t F
Speaker 1: s are transcending the passive label so that goes into
Speaker 1: how much there's been in flows into active discretionary active ETFs,
Speaker 1: E s G, smart beta, UM, all kinds of you know,
Speaker 1: I call them shiny objects, but even things like simplify,
Speaker 1: which uses derivative the sculpt outcomes. Um, most of the
Speaker 1: innovation is happening there so and and also bitcoin as
Speaker 1: so is the tent gets wider and wider, and people
Speaker 1: put more stuff into e t F that isn't just
Speaker 1: sort of cheap beta. That's good UM. And we think
Speaker 1: that gives the industry a lot of growth because it's
Speaker 1: so accepting and big tennis. And that's our general theme
Speaker 1: for next year. And the reason we went there is
Speaker 1: because basically almost every e t F took in money
Speaker 1: this year. I mean you almost had to try to
Speaker 1: not get flows. That's how much the fish were biting.
Speaker 1: It was like a lake that was just oct with
Speaker 1: a bunch of hungry trout. Um. And that's just the
Speaker 1: kind of year it was. And I've never seen anything
Speaker 1: like it, and I've been covering this for fifteen years.
Speaker 1: So within that optimism is a bunch of things that
Speaker 1: I think will break down the podcast, but that's our
Speaker 1: general take on it. Is we we really see this
Speaker 1: sort of growth continuing. Okay, So joining us in this
Speaker 1: big tent. Todd rosen Bluth, who's a senior director of
Speaker 1: et F and Mutual Fund Research at CFR, A a
Speaker 1: regular on the podcast, as well as Katie Greifeld, another
Speaker 1: regular in favorite on the podcast, who covers e t
Speaker 1: F for bloom Broke News and is also a regular
Speaker 1: Quick Tax, this time on Trillions. Todd, Katie, welcome back
Speaker 1: to Trillions. Great to be with you. Thanks, thanks for
Speaker 1: having me. Okay, so we're gonna walk through some of
Speaker 1: Eric's key research points, and I would also encourage you
Speaker 1: let's pick him apart as much as possible. So Eric,
Speaker 1: first of all, you want to talk about flows, right
Speaker 1: because this was a one was a huge year for
Speaker 1: flows into e t F. How just how big was
Speaker 1: it and and what do you think about? Yeah? So, uh,
Speaker 1: we're we're looking at about nine billion this year. That's
Speaker 1: I think we're it's going to end up. Um, you know,
Speaker 1: we're still two weeks away, but that's probably where will be. Now.
Speaker 1: That is what's the percentage more than the old record
Speaker 1: which was set last year with about that's a big deal.
Speaker 1: That's not just breaking the record, that's completely obliterating it.
Speaker 1: And you know, a couple of things account for this.
Speaker 1: You obviously there had other areas of the market that
Speaker 1: did well breadth, so you had value, small cap emerginga tips,
Speaker 1: A lot of things really woke up this year that
Speaker 1: weren't just say like you know, fang stocks and and
Speaker 1: and cheap data, although that takes the lion shares of
Speaker 1: the flows still, so you had the sort of ancillary
Speaker 1: areas of the market doing well. But you also just
Speaker 1: have more and more innovation happening. So many people are
Speaker 1: putting their best ideas to work in the t F
Speaker 1: world and and that will that route that pay. So
Speaker 1: next year, what do I think in flows? If you
Speaker 1: asked me to pick, I would say probably a little less.
Speaker 1: I can't imagine the market returning again, So maybe we
Speaker 1: have a flat year or a tougher year, and I
Speaker 1: think the flows are good. Maybe maybe they're back to
Speaker 1: half a trillion something like that. That would be my
Speaker 1: my early guests into where the flows will be. But again,
Speaker 1: that's still a monster amount of growth, especially considering not
Speaker 1: many of the things are taking in cash. So should
Speaker 1: I jump in and uh? Put Eric Speed to the fire.
Speaker 1: So going back to half a trillion, that's still an
Speaker 1: enormous amount of money. It would still be an enormous
Speaker 1: reduction from what we're seeing this year. I mean, do
Speaker 1: you really chalk up the fact that we're going to
Speaker 1: get nine hundred billion dollars just to the fact that
Speaker 1: the SMP five hundred and was so strong. Yes, so
Speaker 1: ets taken I think two billion a day baseline. I
Speaker 1: think just the vehicle is so popular. I think, you know,
Speaker 1: one to two billion come in just because people are
Speaker 1: are experiencing a format change. Most new money now goes
Speaker 1: into e t f s. It used to go into
Speaker 1: mutual funds. So I think that's just the baseline. And
Speaker 1: then this year it took in four billion a year.
Speaker 1: So the other two billion I think a little more
Speaker 1: market dependent. The thing is, if the SNP were flat, right,
Speaker 1: something's going to be working. I remember, like it was
Speaker 1: two or three years ago where nothing was working except cash. Well,
Speaker 1: short duration bond ETFs took in a ton of money.
Speaker 1: I think people sometimes equate e t f s with
Speaker 1: the SNP or equities, but they cover everything, even stuff
Speaker 1: that goes up when the markets down. So I think
Speaker 1: we we will see those flows. I agree that if
Speaker 1: the stock market really is this sort of like the
Speaker 1: star player of the E t F worlds, like you know,
Speaker 1: lebron or Steph Curry of their team, and when equities
Speaker 1: are tough, that will minimize the flows a bit. But
Speaker 1: I still think those other reasons they'll be up there,
Speaker 1: you know, so maybe maybe the pace will come down
Speaker 1: a bit though, Todd, what do you think up or down? Well,
Speaker 1: I think it's gonna be up from the record we
Speaker 1: had last year. I think it's going to be between
Speaker 1: five hundred billion and a trillion hours. Where exactly that
Speaker 1: is is going to be dependent upon the stock market.
Speaker 1: Just to put some numbers behind what Eric was talking about,
Speaker 1: the three heavyweights within the space, I, vv v O
Speaker 1: and SPY are going to have taken in a hundred
Speaker 1: billion dollars. That's the first time they will have done
Speaker 1: that ever or anything close to that ever, and yet
Speaker 1: close to eight hundred billion dollars. It's going into things
Speaker 1: that are not directly tied to the SMP five hundred,
Speaker 1: either they're a slice of that or there fixed income.
Speaker 1: We saw tips explode this year, you know, given that
Speaker 1: investors have a chance to go wherever the puck is
Speaker 1: going using e t F. So I think we're gonna
Speaker 1: see it in an amazing year off of a very
Speaker 1: single digit level returns to the SNP five. Okay, so
Speaker 1: one thing that I thought was a curiosity a little
Speaker 1: bit was that, uh, that number for one actually excludes
Speaker 1: mutual fund to E t F conversions, which eric how
Speaker 1: big was that number? So if you count conversions that
Speaker 1: happened or announced, it's about fifty seven billion, and it's
Speaker 1: about two funds so far. But again, if we go
Speaker 1: back to this time last year, it was zero and zero.
Speaker 1: So I think that's superseded everybody's expectations. I noticed a
Speaker 1: lot of times when a conversion happens, there's this sort
Speaker 1: of like minimizing it, like, oh, well, it's just that
Speaker 1: one firm who has that one tax fund, and don't worry,
Speaker 1: this won't be a big deal. And then you see
Speaker 1: JP Morgan, and then you see Franklin, and then you
Speaker 1: see Motley Fool and then you see a cannabis fund.
Speaker 1: It's pretty widespread. We think there'll be a trillion dollars
Speaker 1: with a conversions in the next ten years. I think
Speaker 1: you could be even greater than that that said, it
Speaker 1: won't be everything. That would be ten of mutual funds converting.
Speaker 1: But that's where we're at now. And if we count
Speaker 1: the fifty seven billion, you do get it closer to
Speaker 1: a trillion. But most services I know todd might be different.
Speaker 1: Don't count conversions as flows as of now. They just
Speaker 1: show up as assets and ETFs not flows. So a
Speaker 1: trillion dollars in ten years, I mean, if you think
Speaker 1: of the realm of the mutual fund universe, isn't it
Speaker 1: about twenty one trillion dollars? It's huge? I mean, why
Speaker 1: would why only a trillion? Why stop there? What is
Speaker 1: preventing every single mutual fund from converting into an e
Speaker 1: t F given that's clearly where the direction of travel is. Yeah,
Speaker 1: a couple of reasons. One is, uh, the revenue over
Speaker 1: there is so good, and when you convert to an
Speaker 1: e t F they may just not They fear self cannibalization.
Speaker 1: They also with a four one case, it gets a
Speaker 1: little trickier with logistics, if not impossible. So for mutual
Speaker 1: funds that have deep four when K penetration, it's tough
Speaker 1: to just automatically have all those four when K plays
Speaker 1: have an e t F instead of a mutual fund.
Speaker 1: They're not bought similarly, So there's logistic but I think
Speaker 1: some of those logistical issues will be overcome and solved.
Speaker 1: But I you know, I thought a trillion was when
Speaker 1: you make predictions, it's good too if you, especially if
Speaker 1: you're contrarian, to go as low as you can while
Speaker 1: seeming bold. That way, you can easily overcome it. So
Speaker 1: like a trillion if you if you take the vibe
Speaker 1: out there. You know, back in July when I predicted
Speaker 1: it, it it was only like five billion new conversions. People
Speaker 1: were like, that's crazy, But it's more and more come in.
Speaker 1: It seems like I'm under selling it. So I agree
Speaker 1: with you. I think it could be way more, but
Speaker 1: might as well be right by a lot than like overshoot.
Speaker 1: Have you seen prices right when they bid like one
Speaker 1: dollar over? You gotta like have that mindset with these predictions.
Speaker 1: You know, you don't want to overdo it. Bitcoin people
Speaker 1: do that sometimes, you know, they're like, oh, it's going
Speaker 1: to a million dollars. You're also supposed to put your
Speaker 1: pinky into your lip and say one. Well, don't forget guys,
Speaker 1: that's the name of your of the podcast here. You
Speaker 1: guys called this because speaking each capation trillion just connected
Speaker 1: to this podcast that Wait, you mean the name that
Speaker 1: Joel gave the podcast like five years ago. Yes, and
Speaker 1: I remember being one of the early things to it
Speaker 1: about five years ago. Yeah, yeah, no, it was, it was.
Speaker 1: It was a good name. Then we try and think big. Um. Okay,
Speaker 1: I want to talk about another big thing, another theme
Speaker 1: in the Bloomberg Intelligence two outlook for e t s.
Speaker 1: E t f s have long been known for for
Speaker 1: a path with a passive context, and obviously there's been
Speaker 1: increasing amount of active, actively managed gtfs. Uh but Eric,
Speaker 1: you and you tease this already, but there's a whole
Speaker 1: new paradigm and organization that you're thinking about. What what
Speaker 1: is that? Yeah, I mean shiny objects some that I
Speaker 1: mean that's my turn for it or hot sauce um.
Speaker 1: You know, a professional institutional manager might call it funds
Speaker 1: with high tracking error. But it's just basically stuff that's
Speaker 1: completely different than you're boring beta e t F like
Speaker 1: v O O or v T I. And why is that? Well,
Speaker 1: most people own a very a very boring core, and
Speaker 1: but in order for that core to work, you've got
Speaker 1: to not touch it. So I think there's this market
Speaker 1: to enter too. To entertain yourself, take speculative bets that
Speaker 1: could have asymmetric returns that are pretty high, like a
Speaker 1: call option, and you decorate your boring vanilla with these
Speaker 1: sort of outlier hot sauce funds, either like an ARC
Speaker 1: or a theme et F or crypto. Crypto is a
Speaker 1: perfect example of hot sauce. Or you do call option
Speaker 1: trading on robin Hood and this is so you just
Speaker 1: distract yourself from the vanilla. So I called the Barbell era,
Speaker 1: and I think we're in it. And I think that's
Speaker 1: why you don't tend to see outflows from these crazy, wacky,
Speaker 1: high flying ets when they go down, um like people
Speaker 1: think they would see outflows. They tend to be pretty
Speaker 1: sticky thoughts. I'll do the I agree with Eric, and
Speaker 1: then I'll do with the I disagree with Eric. So
Speaker 1: I agree with Eric. I do think that that's how
Speaker 1: these products are are happening. So thematic ETF, you know,
Speaker 1: active as well as index space. Thematic ets were actually
Speaker 1: surprisingly popular h despite the fact that we saw so
Speaker 1: many of these themes underperform cannabis, blockchain, cloud computing. So
Speaker 1: many of these technology oriented themes underperformed, but money kept
Speaker 1: going into these products from global X among others, so
Speaker 1: in part because they round out a portfolio that's tied
Speaker 1: to the S and P five. But I do think
Speaker 1: that we're going to see active core. I think you
Speaker 1: know a key player that's coming is Capital Group. They're
Speaker 1: going to be launching their first suite of active equity
Speaker 1: e t s and they're gonna be not the mutual
Speaker 1: funds that we know of from American funds, but they're
Speaker 1: going to be similar enough to those, and those are
Speaker 1: core oriented strategies. They're just going to be actively managed
Speaker 1: by an experienced team. I think we're going to see
Speaker 1: that do well. Oh now this could be a bet. Okay,
Speaker 1: So we talked to Capital Group. I give them credit.
Speaker 1: They're like, look, we're going for the core. We're going
Speaker 1: at Vanguard. We're trying dislodge them. We believe active has
Speaker 1: a place in the core, you know, God bless them.
Speaker 1: I think they'll fail dramatically. I think that nobody is
Speaker 1: going to sell a three basis point beta e t
Speaker 1: F for for that. I think those days are over.
Speaker 1: Even if they come in as low as they'll probably
Speaker 1: we have some success because they have clients that know
Speaker 1: them and like them. So maybe there's a little bit,
Speaker 1: but I don't see that as this is a good
Speaker 1: bet for us. How about over under after one year
Speaker 1: for Capital Group, I'll go with seven billion. I'll take
Speaker 1: you wouldn't take the over on that. That's that's the
Speaker 1: number you want to go with. You don't want to
Speaker 1: go lower if you're that pessimistic. The seven billions not
Speaker 1: that much these days, especially with inflation. Sure, I'll take
Speaker 1: the over. I was. I thought you'd go lower on it,
Speaker 1: you guys, I will I will take I guess where
Speaker 1: here this is happening first and live? This is it?
Speaker 1: This is so. We've got two reporters slash outitors in
Speaker 1: the room. They're gonna be writing this up. I'm sure
Speaker 1: for the for the record, Katie, I'll just buy you
Speaker 1: lunch regardless. But yeah, seven billion dollars twelve months after
Speaker 1: they launched the first projects not project. They're gonna watch
Speaker 1: at some point in the first quarter UM when the
Speaker 1: first Capital Group et F hits, we start the clock
Speaker 1: twelve months later, do they have seven billion total or not?
Speaker 1: I say under, I'll go with over There we go
Speaker 1: all right, there we go. That's a good vet. Katie.
Speaker 1: Let me ask you who would you take if you
Speaker 1: were like betting on the bet? Who would you go with?
Speaker 1: I don't know. Eric. I feel like you win these
Speaker 1: bets a lot. So just based on historical performance, I
Speaker 1: have to go past performance is not indicative of future results.
Speaker 1: Actually listen to those disclaimers. We we obviously build a
Speaker 1: research product related to it. Okay, Todd the full disclaimer.
Speaker 1: Have you actually ever won? Have I ever? One? Yes?
Speaker 1: Not on not on lunch. Uh. Todd is very good
Speaker 1: on bets that we don't make it steak much or
Speaker 1: steak dinner, those sort of little ones that we just
Speaker 1: do a friendly bet. He cleans up. So it's it's
Speaker 1: more even you think it's just when we make it
Speaker 1: steak dinner that he just doesn't work out. Yeah, I
Speaker 1: think so, I think so. Yeah. Okay, So we talked.
Speaker 1: We talked about the shiny stuff. Uh, Katie, I'm interested
Speaker 1: in you know. The other obsession of Eric's is the
Speaker 1: cheap set, which he touched on. There is there any
Speaker 1: any other new action in the cheap space that's that's
Speaker 1: caught your attention? Well, it feels like the lurch towards
Speaker 1: lower fees just continue. And it is interesting in talking
Speaker 1: about you know, these active funds, I mean, even those
Speaker 1: funds are so dirt cheap, but um, in this sort
Speaker 1: of race to the bottom, uh, if you look at
Speaker 1: the leaderboard, I mean, Todd already brought up the fact that,
Speaker 1: you know, the three big ones have already brought in
Speaker 1: like a hundred billion dollars this year, and all of
Speaker 1: this talk of shiny stuff which can be more expensive.
Speaker 1: I don't know, it stood out to me that this
Speaker 1: year everything just seems to have gone to like plain,
Speaker 1: boring vanilla funds which are dirt cheap, even though I
Speaker 1: mean I've spent the better part of this past year
Speaker 1: talking about all the shiny stuff all the means meme
Speaker 1: stocks and crypto and everything else. But still it just
Speaker 1: feels like these like such cheap, boring products have this
Speaker 1: gravitational pull towards them. I think this also speaks to
Speaker 1: just the media apparatus. And I'm guilty as anybody. We
Speaker 1: tend to cover the stuff that moves and does, you know,
Speaker 1: move around up and down way more if you if
Speaker 1: you do an NT search on like v T I
Speaker 1: versus say ARC ARC will have like thirty times the
Speaker 1: coverage of v t I, even though v t I
Speaker 1: is thirty times bigger. And that's just the way it is. Um,
Speaker 1: that's just how it's not just financial, just the way
Speaker 1: the media operates. Um. You wouldn't have a media infrastructure
Speaker 1: if you said to everybody, well, let's just cover vt
Speaker 1: I all day long. Yeah, because I mean, what is
Speaker 1: there to say? You know what we did at the top. Okay,
Speaker 1: So let's talk about this idea of this new Active though,
Speaker 1: because we kind of got there with the Capital Group
Speaker 1: and that's another theme in the outlook Eric, So so
Speaker 1: what what does that mean to you? New Active is
Speaker 1: And here's where Todd and I will disagree, which is
Speaker 1: good for the podcast. New Active We consider if you
Speaker 1: take smart Beta, so it tracts an index, but let's
Speaker 1: say it tilt towards dividends or momentum stocks, we would
Speaker 1: consider that active, even though it's rules based, it's just
Speaker 1: rules based active. So if you look at New Active,
Speaker 1: a lot of active, a lot of way people like
Speaker 1: to consume active these days is through an index fund.
Speaker 1: So smart Beta e s G. The themes and so
Speaker 1: that would be new Active. And if you add up
Speaker 1: new active plus traditional active, you get a nice solid
Speaker 1: like of flow lane, which again is in two billion dollars.
Speaker 1: Considering how much ETFs are taking in and that that lane,
Speaker 1: that that is where all of the innovation is happening
Speaker 1: right now. Um, even though as Katie said, six billion
Speaker 1: are going to the boring vanilla stuff, nobody talks about.
Speaker 1: That lane of two three in a billion is pretty good.
Speaker 1: You can definitely carve out a living there if you
Speaker 1: have the right product. So since I got set up
Speaker 1: for it, I'll let me just state my case for it.
Speaker 1: We would consider the Eye Shares value factor e t
Speaker 1: F v l u E, which is extremely popular to
Speaker 1: be an index based product. Now it's being used actively
Speaker 1: by the investor to tactically rotate in or out based
Speaker 1: on moving into value and moving away from momentum or quality.
Speaker 1: But those have been extremely popular this year. We've seen
Speaker 1: advisors increasingly used factor et f s from Eye Shares,
Speaker 1: from invest Go among other single factor products and build
Speaker 1: a portfolio around those products. But those are index based products.
Speaker 1: Those are passive. They just are being handled by the
Speaker 1: investor in an active manner. In my view, No, no,
Speaker 1: but okay, But you could argue v O O is
Speaker 1: us being used act or spies being used actively, and
Speaker 1: that's passive. I get that our ument. What I'm saying
Speaker 1: is the e t F itself is active because it
Speaker 1: has these rules that say if the if the metrics
Speaker 1: say this, we're gonna buy these stocks. If it doesn't,
Speaker 1: we're gonna sell these That's the same thing a discretionary
Speaker 1: active manager would do. They might, they might, They'll have
Speaker 1: a system with their you know, rankings of stocks and whatnot.
Speaker 1: This is just formalizing it into an index. I think.
Speaker 1: I don't say. I just think the line between a
Speaker 1: person picking stocks because of how they feel and this
Speaker 1: is under the same tent of active. All right, I'll
Speaker 1: agree to disagree on it, but yes, the difference between
Speaker 1: a factor tilt to it that rebalances every six months.
Speaker 1: We know it's going to happen. We don't know exactly
Speaker 1: what's going in to it, but we know it's going
Speaker 1: to happen, whereas we don't know what's going into ARCS
Speaker 1: products tomorrow or what will go into the capital group
Speaker 1: of the fidelity of the tier price actively managed ones.
Speaker 1: Those managers have a discretion. But I agree with you
Speaker 1: the the outside of the pure beta products, the core
Speaker 1: is go going to grow factors, thematic oriented ETFs which
Speaker 1: we touched on, and those where that manager has discretion.
Speaker 1: We're going to see more more of those products in
Speaker 1: two and we're going to see them go on or
Speaker 1: even more of the assets than we saw. I agree
Speaker 1: with you on that, alright, we're in agreement. Um, it
Speaker 1: was a huge year for active in that you saw
Speaker 1: a lot of flows, you saw a lot of active launches.
Speaker 1: Even though I mean you would have done totally fine
Speaker 1: in the SMP five hundred, it wasn't a great environment
Speaker 1: for active managers because I mean, just being again in
Speaker 1: a boring old index, you would have gotten what twenty
Speaker 1: five percent gain, give or take. And I guess my question, uh,
Speaker 1: what do you make of that? I think there's a
Speaker 1: few things that are happening. One is the success of
Speaker 1: ARC in its performance and gathering assets in opened the
Speaker 1: door for more investors to be comfortable with actively managed
Speaker 1: gtfs and asset managers to try to launch a me
Speaker 1: kind of product to offer those strategies. Some of the
Speaker 1: actively managed products are semi transparent or I think would
Speaker 1: you guys refer to as non transparent or active non
Speaker 1: transparent ets where the asset managers are getting into it.
Speaker 1: And then we also have these defined outcome oriented ETFs
Speaker 1: that continue to gain traction, and those I think Bloomberg
Speaker 1: also the way that we had cf A, we call
Speaker 1: it those actively managed ETFs. So I don't think when
Speaker 1: the year ends, we're going to see that these actively
Speaker 1: managed gts performed all that well. But investors are willing
Speaker 1: to to look for something better than just the benchmark.
Speaker 1: But yes, they would have been quite fine just owning
Speaker 1: I vv r v O for three basis points and
Speaker 1: been up more than for the year. Again, the cheap
Speaker 1: and shiny h if you look in the cheap bucket,
Speaker 1: there are there's active there. D f A is cheap adventists,
Speaker 1: which again I consider active is cheap, and they see flows.
Speaker 1: So the cheaper shiny to me has replaced the active
Speaker 1: or passive. As long as you're one of those two things,
Speaker 1: I think you can see flows. I think if you're passive,
Speaker 1: like there's index funds that track the SMP that charge
Speaker 1: forty basis points, nobody buys them. But if there's index
Speaker 1: like active funds that charge forty basis points, nobody's buying
Speaker 1: those either. But on the shiny object bucket, there's actually
Speaker 1: active funds in there too, Like block is active, ARC
Speaker 1: is obviously active. So to me, um, I think that
Speaker 1: that's replaced active or passive. If you can get very cheap,
Speaker 1: we're very shiny. Investors will overlook, I think sometimes whether
Speaker 1: your active passive. But I just don't think they want
Speaker 1: to pay fifty six bits for kind of active. All right,
Speaker 1: last theme, we're going to talk about outlook digital assets. Eric,
Speaker 1: you talked about how big this tent can get. It's
Speaker 1: long mint equities and bonds and commodities, but you think
Speaker 1: that there's a new horizon in the form of crypto
Speaker 1: and crypto futures, and that's obviously what happened this year
Speaker 1: with the first bitcoin futures product. But where else could
Speaker 1: that go? Oh my god, the potential is enormous. Um
Speaker 1: we predict again a trillion dollars probably in let's say
Speaker 1: ten years or even less. After the first spot bitcoin
Speaker 1: ETF is approved. Money is going to fly in quickly.
Speaker 1: But right now there's only a futures et F. I
Speaker 1: don't think Genzer will approve a spot for at least
Speaker 1: a year. So unfortunately we're have to weight to see
Speaker 1: this play out in full. But right now the rest
Speaker 1: of the world is launching spot ETF. They're doing well.
Speaker 1: The Bitcoin Futures et F has got a billion and
Speaker 1: a half. But until a Genser approved SPOT and then
Speaker 1: we start to see a few war breakout a crypto
Speaker 1: basket ETF that is going to really trigger some real money.
Speaker 1: And so we think that digital assets is sort of
Speaker 1: the next big phase in ETFs. Eric, are you referring
Speaker 1: to digital assets like not including the equity oriented ones
Speaker 1: that are digital assets related like Vanak has one including
Speaker 1: Are you including all those themes? Are you including what
Speaker 1: might be a bit wise related product? Hied to n
Speaker 1: f t S and know they launched an index. Sure
Speaker 1: if that's could somehow be e t F, I for sure,
Speaker 1: But I think I'm mostly just speaking about direct spot
Speaker 1: crypto investment. You think we're gonna see one before the
Speaker 1: ten years is over, I mean, I would hope. So
Speaker 1: I'm not that barrished. I mean Gainsler. Well, first of all,
Speaker 1: Gainsler should be gone in two or three years at
Speaker 1: the very least. I mean, because even Biden is not
Speaker 1: gonna I mean Biden is probably gonna be gone. So
Speaker 1: even if a Democrat takes over, they might replace him.
Speaker 1: But anyway, it doesn't matter. Will I think his mind
Speaker 1: will evolve over the next couple of years. Um, But yeah,
Speaker 1: I could be wrong. It could never happen. It's possible.
Speaker 1: But even if it doesn't happen, the rest of the
Speaker 1: world will offer stuff. Canada's got a bunch of going on,
Speaker 1: but let's just assume that at some point they approve one.
Speaker 1: I'm saying that's going to trigger a whole new massive
Speaker 1: asset class for e t F s to cover. Katie.
Speaker 1: How busy is that gonna make you? You're already pretty busy.
Speaker 1: I mean from a job security standpoint, that's awesome. I
Speaker 1: I don't know. I want to dig into the it's
Speaker 1: going to take several years to get a spot bitcoin
Speaker 1: e t F. I feel like the winds shifted so
Speaker 1: quickly when it came to the futures product. Like in May,
Speaker 1: there was no hope at all. The tunnel was completely dark,
Speaker 1: we weren't going to get anything, and then all of
Speaker 1: a sudden in August. Uh, it felt like Gensler almost
Speaker 1: came out of nowhere and said, actually file it under
Speaker 1: this rule, make sure it's futures back blah blah blah,
Speaker 1: and then you know a few months later we had one.
Speaker 1: He's been quite clear, Gensler that he's not comfortable with
Speaker 1: a spot oriented product and he's concerned about fraud. And I, again,
Speaker 1: I don't know how you disprove that fraud is going
Speaker 1: to happen. And I think that's the challenge that that
Speaker 1: asset managers are going to struggle with. You know, Gray
Speaker 1: Scale has, you know, has probably the highest profile offering
Speaker 1: on on the docket. I don't think that that's going
Speaker 1: to make its way through. I don't know when it's
Speaker 1: going to be, but I definitely don't think it's gonna
Speaker 1: be or I don't believe it's gonna be two, but
Speaker 1: I'm not I'm not willing to put another bet in
Speaker 1: the line in two just because I got I I lost.
Speaker 1: This was the opportunity for you to crow, Eric, I
Speaker 1: lost a bitcoin. When would a bitcoin futures based product
Speaker 1: come to market? And I still owe you for that one,
Speaker 1: but I'll pay up. Yeah, And to Katie's point, I
Speaker 1: won't crow too much. Although three um, this was something
Speaker 1: that did develop quickly and you're right. Once we're always
Speaker 1: looking at Gainsler's words. If it changes a little, it's possible.
Speaker 1: Maybe Again, I think of that Obama on gay marriage.
Speaker 1: He said, I'm evolving, Remember that famous phrase he had.
Speaker 1: This to me is Ginzler? How fast is he evolving?
Speaker 1: And that's all that matters is Gensler's evolution on the
Speaker 1: crypto market and where that's at. I don't know, but
Speaker 1: it could come once he gets a little more evolved,
Speaker 1: it could come more quickly. To Katie's point, I will
Speaker 1: say I cover macro markets, I also cover E t F.
Speaker 1: So it feels like gensler watch has become almost to
Speaker 1: the same level of like fed Watch, like parsing his words,
Speaker 1: like putting them under the microscope, the same way you
Speaker 1: would with Jerome Pale. It's pretty crazy. Okay, So there's
Speaker 1: crypto digital assets space, the likelihood that et F becomes
Speaker 1: a rapper that can do things other than just uh
Speaker 1: equities and bonds and commodities. I'm curious, though, what what
Speaker 1: other risks could be associated with this space? Right? I
Speaker 1: think the big risk is just this is such an
Speaker 1: unusual asset class, and you know, we don't you know,
Speaker 1: it is a little wild West that which is what
Speaker 1: Ganser calls it. There are some unknowns. It's volatile, but
Speaker 1: again I think people who would own crypto would use
Speaker 1: it as an accessory on the portfolio and understand actually
Speaker 1: they want the volatility or understand it. But so I
Speaker 1: don't see too much. But I just think crypto in
Speaker 1: general is a pretty developing place, and I think that
Speaker 1: that would be the risk is what could something happen
Speaker 1: that we just don't see. I'm really interested to see
Speaker 1: what happens with UM, the futures et f s for
Speaker 1: Bitcoin that are on the market, because remember when they launched,
Speaker 1: we spend a lot of time talking about, you know,
Speaker 1: the fact that bit o pretty pretty quickly bumped up
Speaker 1: against its futures position limits. UM. Obviously the sort of
Speaker 1: just mad dash of assets into that fund has cooled down,
Speaker 1: but I mean that's something that I'll be watching. And
Speaker 1: then I mean the fact that their future space. I
Speaker 1: mean we've covered the roll costs to death, but also
Speaker 1: to get the level of exposure and the fund and
Speaker 1: I hope I don't butcher the mechanics of this, but
Speaker 1: just owning the amount of futures contracts that you need
Speaker 1: to get that exposure. I mean, even though it's not leveraged,
Speaker 1: it kind of is leveraged in some sense. So I mean,
Speaker 1: if there's a huge down swing in bitcoin, I mean,
Speaker 1: sentiment for the past few weeks has been pretty terrible.
Speaker 1: Just curious to see what they look on a big
Speaker 1: down swing, because we've seen them in a huge up
Speaker 1: swing so far. Yeah, I think bitcoin futures based products
Speaker 1: are going to be its own investment class kind of
Speaker 1: investment style, but I think it's gonna be relatively niche.
Speaker 1: And you know, there's just let's put it in perspective,
Speaker 1: there's just one point four billion dollars in assets, and
Speaker 1: as you mentioned, a lot of attention for it this year.
Speaker 1: It was perhaps the story of the year. But just
Speaker 1: one point four billion dollars is not that big a
Speaker 1: deal in terms of what we got so far of
Speaker 1: what eight you know, almost nine billion dollars. Okay, as
Speaker 1: we wrap up here, Eric, is there any other themes
Speaker 1: or two outlook ideas that we haven't hit on that
Speaker 1: you wanted to make sure that we touch. Yeah. I
Speaker 1: think the big one is inflation. This is not going away.
Speaker 1: This this word is here to stay for a long time.
Speaker 1: I think and it's gonna be interesting to see. The
Speaker 1: et F industry is so a on it about exploiting
Speaker 1: the news flow. And so we've seen that every and
Speaker 1: kadie cover this. Every e t F with the word
Speaker 1: inflation is seen flows this year. I don't think I've
Speaker 1: ever seen that. Usually there's one or two without flows
Speaker 1: or nothing. So how many e t s are going
Speaker 1: to try to figure out how you can actually get
Speaker 1: ahead of inflation beat inflation? Uh, we might see a
Speaker 1: leveraged inflation benefactors ETFs Like there could be some crazy
Speaker 1: stuff that's gonna be a whole wing of the E
Speaker 1: t F world. I think, uh, in a similar way
Speaker 1: that currency hedging was back in the day. Even beyond tips,
Speaker 1: they'll they'll work inflation into commodities, into equities. There could
Speaker 1: be some that go across a bunch of different areas.
Speaker 1: That's gonna be interesting to me to watch UM and
Speaker 1: I foresee that as being like a sort of mini
Speaker 1: subplot next year. Well, Horizon Kinetics Inflation Beneficiary e t
Speaker 1: F I NFL, which as we're recording this is about
Speaker 1: nine million in assets. It launched earlier this year, was
Speaker 1: among the best timed e t s you know, we've
Speaker 1: we've talked about hack and how they were early just
Speaker 1: ahead of the cybersecurity, the fact that inflation is so prominent.
Speaker 1: This is an equity e t F that owns energy materials, companies,
Speaker 1: exchanges that are benefiting because they're asset light or because
Speaker 1: they benefit from it. The fact that we only have
Speaker 1: one of these products really in the marketplace, or one
Speaker 1: or two of these products. I agree with you. The
Speaker 1: asset management industry knows how to launch products that benefit
Speaker 1: from the same themes that somebody had success with in
Speaker 1: a prior year. We're going to see more of these products.
Speaker 1: I feel like the fact that we already have a
Speaker 1: meme E t F is pretty good proof that um
Speaker 1: issuers are just really good at launching funds. Yeah. I
Speaker 1: was talking to Dave Natick who was saying, how you know,
Speaker 1: the the year started with meme stocks and then it
Speaker 1: sort of went here and there, and because it can,
Speaker 1: ended with a meme t F actually six months, I
Speaker 1: would say, I'm surprised it didn't come out even faster.
Speaker 1: Remember there was like a five month period where people
Speaker 1: are like, why isn't there a me met F? And
Speaker 1: then I think Roundhill finally filed. But yeah, Roundhill, by
Speaker 1: the way put the metaverse et f out. That was
Speaker 1: another cybersecurity per perfect timing. I think we will continue
Speaker 1: to see e t s to come out that you're like,
Speaker 1: what in the hell does this even mean? We have
Speaker 1: to google the topic because people realize that you sort
Speaker 1: of have to be before that news moment, that catalyst,
Speaker 1: that Zuck moment where oh now we care about this.
Speaker 1: You can't if you do it after, you miss a
Speaker 1: good amount of flow action. So again, I think we'll
Speaker 1: see so much experimentation, and because there's such a hunger
Speaker 1: for things that are hot saucy, and between that and
Speaker 1: they getting ahead of stuff, there's gonna be e t
Speaker 1: s again where you won't even know what it is.
Speaker 1: You have to google the term hot saucy, and that's
Speaker 1: what you should name this episode, guys, hot saucy, and
Speaker 1: Eric just invented another word. All right. On that note,
Speaker 1: Todd Katie thinks so much for joining us, and thank you,
Speaker 1: thank you, happy here, thanks for listening to trillions until
Speaker 1: next time. You can find us on the Bloomberg terminal,
Speaker 1: Bloomberg dot com, Apple podcast, Spotify, and where else you'd
Speaker 1: like to listen. We'd love to hear from you on Twitter.
Speaker 1: I'm at Joel lever Show. He's at Eric Faltunus. This
Speaker 1: episode of Trillions was produced by Magnus Hendrickson. Francesco Leady
Speaker 1: is the head of Bloomberg Podcast. Bye, m m m
Speaker 1: m