1 00:00:05,880 --> 00:00:08,039 Speaker 1: Welcome to trillions. I'm Joel Webber and I'm Eric bel 2 00:00:08,080 --> 00:00:16,480 Speaker 1: Tunis Eric. A couple of days ago, something happened that 3 00:00:16,520 --> 00:00:18,479 Speaker 1: has never happened in the history of e t s. 4 00:00:18,640 --> 00:00:21,360 Speaker 1: What was it? It was the first ever e t 5 00:00:21,520 --> 00:00:24,320 Speaker 1: F to convert from a mutual fund into an e 6 00:00:24,440 --> 00:00:27,880 Speaker 1: t F. So if you're in this fund, you would 7 00:00:27,880 --> 00:00:30,560 Speaker 1: go to sleep h one night with mutual fund and 8 00:00:30,560 --> 00:00:33,199 Speaker 1: wake up with an e t F sequel. And this 9 00:00:33,320 --> 00:00:36,479 Speaker 1: was really monumental um and the first one to do 10 00:00:36,520 --> 00:00:39,680 Speaker 1: it was Guinness Atkinson. But there are a couple others 11 00:00:39,680 --> 00:00:41,919 Speaker 1: now lined up, including a massive one from d f 12 00:00:41,960 --> 00:00:44,280 Speaker 1: A that could be about twenty six billion dollars, and 13 00:00:44,320 --> 00:00:46,680 Speaker 1: it's got a lot of people buzzing. They there's a 14 00:00:46,720 --> 00:00:49,400 Speaker 1: lot of talk about how this could start to really 15 00:00:49,440 --> 00:00:53,239 Speaker 1: spread and really become the way as opposed to some 16 00:00:53,320 --> 00:00:56,800 Speaker 1: other ways that the traditional active mutual funds sort of 17 00:00:57,240 --> 00:00:59,600 Speaker 1: comes over and it takes advantage of the e t 18 00:00:59,760 --> 00:01:02,640 Speaker 1: F ructure and the benefits that are in it, while 19 00:01:02,680 --> 00:01:05,080 Speaker 1: being able to keep the track record and start with 20 00:01:05,120 --> 00:01:07,720 Speaker 1: some assets as opposed to try to, you know, make 21 00:01:07,720 --> 00:01:10,360 Speaker 1: it on their own in the terror dome as a newborn, 22 00:01:10,680 --> 00:01:14,559 Speaker 1: which is hard so this will be a fascinating conversation 23 00:01:14,760 --> 00:01:20,039 Speaker 1: and joining us from Guinness Atkinson Funds Jim Atkinson as 24 00:01:20,080 --> 00:01:24,399 Speaker 1: well as his lawyer Alex Albert stat They were the 25 00:01:24,440 --> 00:01:27,640 Speaker 1: two that helped bring these two e t f to market, 26 00:01:28,040 --> 00:01:30,880 Speaker 1: Smart E t F S Dividend Builder with the ticker 27 00:01:30,959 --> 00:01:33,920 Speaker 1: DIVS and the Smart E t F S Asia Pacific 28 00:01:33,920 --> 00:01:37,760 Speaker 1: Dividend Builder the ticker A d I V, as well 29 00:01:37,800 --> 00:01:41,080 Speaker 1: as at Bloomberg News Claire Valentine who wrote that story 30 00:01:41,440 --> 00:01:47,840 Speaker 1: in March, this time on Brilliance converting from a mutual 31 00:01:47,880 --> 00:01:54,120 Speaker 1: fund to an TF. Jim, Alex, Welcome to Trillians, Thanks 32 00:01:54,120 --> 00:01:58,040 Speaker 1: so much for joining us, Thank you for having so 33 00:01:58,240 --> 00:02:01,720 Speaker 1: this just happened in March. How long ago did you 34 00:02:01,760 --> 00:02:04,800 Speaker 1: start dreaming about leaving the mutual fund world for the 35 00:02:04,800 --> 00:02:10,760 Speaker 1: E t F world? Uh more than two years ago. Um, 36 00:02:10,840 --> 00:02:12,320 Speaker 1: maybe three or four or five years ago. But we 37 00:02:12,360 --> 00:02:15,400 Speaker 1: started in earnest on this project, I think about two 38 00:02:15,440 --> 00:02:21,480 Speaker 1: years ago. And what was the attraction? Well, we've been 39 00:02:21,480 --> 00:02:23,400 Speaker 1: in the mutual fund business for a long time. We 40 00:02:23,480 --> 00:02:26,320 Speaker 1: have some great funds, and we're noticing that the E 41 00:02:26,400 --> 00:02:29,160 Speaker 1: t f s are attracting all the assets. And you 42 00:02:29,200 --> 00:02:33,080 Speaker 1: look at the flows. You notice that UM mutual fund 43 00:02:33,080 --> 00:02:37,200 Speaker 1: flows have been persistently negative and E t F flows 44 00:02:37,200 --> 00:02:41,680 Speaker 1: have been persistently positive, and you look around and you say, well, 45 00:02:41,680 --> 00:02:43,280 Speaker 1: there's a reason for that, and that's because e t 46 00:02:43,440 --> 00:02:46,440 Speaker 1: s are a better mouse trap. And once you conclude that, 47 00:02:46,680 --> 00:02:49,200 Speaker 1: you start to say to yourself, I think we need 48 00:02:49,240 --> 00:02:50,919 Speaker 1: to be in the e t F space, not the 49 00:02:51,000 --> 00:02:54,600 Speaker 1: mutual fund space. But we've got some great funds. How 50 00:02:54,639 --> 00:02:58,440 Speaker 1: do we convert these into E t F s? Uh 51 00:02:58,480 --> 00:03:00,600 Speaker 1: and then And it was a little bit seuraging it first, 52 00:03:00,600 --> 00:03:02,400 Speaker 1: because I've never been done before and there were a 53 00:03:02,440 --> 00:03:05,600 Speaker 1: lot of obstacles, But I talked to Alex at length 54 00:03:05,600 --> 00:03:09,680 Speaker 1: about it, and uh, we just decided to go for it. 55 00:03:09,840 --> 00:03:11,520 Speaker 1: And we had a few phone calls with the SEC, 56 00:03:11,720 --> 00:03:14,639 Speaker 1: and we just pushed ahead, and we just kept pushing 57 00:03:14,639 --> 00:03:17,000 Speaker 1: that rock up the hill. I want to ask about 58 00:03:17,400 --> 00:03:19,160 Speaker 1: phone calls with the SEC, but I also want to 59 00:03:19,160 --> 00:03:22,239 Speaker 1: bring my colleague Claire in uh and and clear I 60 00:03:22,240 --> 00:03:24,919 Speaker 1: helped set the stage for us, like if they if 61 00:03:24,919 --> 00:03:27,799 Speaker 1: they were the first ones, how many more conversions are 62 00:03:27,800 --> 00:03:31,360 Speaker 1: we likely to see in the days slash week slash 63 00:03:31,440 --> 00:03:34,760 Speaker 1: months ahead. Well, the big one that we know is 64 00:03:34,800 --> 00:03:38,880 Speaker 1: coming up is Dimensional Fund Advisors UM. They're conferred converting 65 00:03:39,000 --> 00:03:42,480 Speaker 1: quite a few of their mutual funds. That's going to 66 00:03:42,600 --> 00:03:44,960 Speaker 1: make them, right out of the gate a really big 67 00:03:45,400 --> 00:03:47,480 Speaker 1: E t F issue where they've launched a couple of 68 00:03:47,520 --> 00:03:51,760 Speaker 1: their own E t F s separately, but with these conversions, 69 00:03:51,840 --> 00:03:55,040 Speaker 1: that's going to UM make them one of the largest 70 00:03:55,040 --> 00:03:59,000 Speaker 1: et F issue. Where's just from that and UM, outside 71 00:03:59,000 --> 00:04:02,200 Speaker 1: of just that, we've seen a couple of other smaller 72 00:04:02,240 --> 00:04:05,280 Speaker 1: players file to convert their funds. UM one is a 73 00:04:05,360 --> 00:04:08,880 Speaker 1: cannabis fund. So it's an interesting trend and I think 74 00:04:08,880 --> 00:04:12,320 Speaker 1: we're gonna see it more and more. And what stood 75 00:04:12,320 --> 00:04:16,240 Speaker 1: out to you about the Atkinson one, Like, what was 76 00:04:16,279 --> 00:04:20,640 Speaker 1: significant to you about it other than being first? Being first? Definitely, 77 00:04:20,760 --> 00:04:25,040 Speaker 1: And I remember last year hearing about this and just 78 00:04:25,120 --> 00:04:28,400 Speaker 1: in the middle of such a crazy pandemic year. I 79 00:04:28,480 --> 00:04:34,119 Speaker 1: just remember UM looking at this and having observed how 80 00:04:34,200 --> 00:04:36,920 Speaker 1: much money mutual funds have been losing and how much 81 00:04:36,960 --> 00:04:40,479 Speaker 1: money ETFs have been gaining. I remember my first thought 82 00:04:40,560 --> 00:04:43,760 Speaker 1: was like, WHOA is this possible? This is a game changer. 83 00:04:44,560 --> 00:04:48,159 Speaker 1: So it's it's a really interesting trend, I think, And 84 00:04:48,240 --> 00:04:51,560 Speaker 1: just the fact that it's possible is is pretty notable. 85 00:04:53,600 --> 00:04:57,560 Speaker 1: So Jim, I I curious about this idea of how 86 00:04:57,600 --> 00:05:00,279 Speaker 1: to do it because when we first started talking about 87 00:05:00,279 --> 00:05:04,440 Speaker 1: conversions um I think it was the guy from um 88 00:05:04,800 --> 00:05:08,360 Speaker 1: UH Presidian who brought up conversions on our podcast about 89 00:05:08,360 --> 00:05:09,960 Speaker 1: a year and a half ago, and he said, some 90 00:05:10,040 --> 00:05:12,120 Speaker 1: lawyers are talking about it. I put this out on Twitter. 91 00:05:12,600 --> 00:05:14,840 Speaker 1: Some people replied, well, I don't know if this can 92 00:05:14,839 --> 00:05:18,320 Speaker 1: ever happen because people need brokerage accounts all of a sudden, 93 00:05:18,600 --> 00:05:20,000 Speaker 1: and it's tough to do that. What if it's in 94 00:05:20,040 --> 00:05:22,560 Speaker 1: a four one K plan? How did you work out 95 00:05:22,640 --> 00:05:28,840 Speaker 1: those kinks? Well, the biggest kink was the direct shareholders. 96 00:05:28,880 --> 00:05:32,120 Speaker 1: So most shareholders nowadays by their new tool funds through 97 00:05:32,120 --> 00:05:36,280 Speaker 1: a brokerage firm, but there's still some people and the 98 00:05:36,360 --> 00:05:40,760 Speaker 1: legacy shareholders that hold their shares direct. And you're correct, 99 00:05:41,320 --> 00:05:44,520 Speaker 1: the traditional transfer agent system doesn't permit the holding of 100 00:05:44,520 --> 00:05:47,960 Speaker 1: what what is essentially an equity security from an operational standpoint. 101 00:05:48,680 --> 00:05:50,880 Speaker 1: Uh and And we had to do a little research 102 00:05:50,960 --> 00:05:53,320 Speaker 1: to find the answer to this. But we we came 103 00:05:53,360 --> 00:05:56,520 Speaker 1: across a firm called American Stock Transfer and there are 104 00:05:56,520 --> 00:06:02,000 Speaker 1: a corporate transfer agency. So the way worked was as 105 00:06:02,000 --> 00:06:04,000 Speaker 1: we got close to the conversion, we reached out to 106 00:06:04,000 --> 00:06:06,080 Speaker 1: the shareholders who were direct and we said to them, 107 00:06:06,200 --> 00:06:09,000 Speaker 1: we'd like you to transfer your shares to a brokerage 108 00:06:09,000 --> 00:06:13,000 Speaker 1: firm UH or exchange into another one of our funds. 109 00:06:13,480 --> 00:06:16,680 Speaker 1: And our least preferred option was for them to redeem UH. 110 00:06:16,680 --> 00:06:18,880 Speaker 1: And most clients came back and said, we want to 111 00:06:19,880 --> 00:06:23,040 Speaker 1: transfer and and by the way, that is a whole 112 00:06:23,040 --> 00:06:25,200 Speaker 1: other process we can talk about later. But we knew 113 00:06:25,240 --> 00:06:27,040 Speaker 1: we weren't going to get a hundred percent of our 114 00:06:27,080 --> 00:06:31,880 Speaker 1: shareholders that were direct to transfer, so we arranged for 115 00:06:31,960 --> 00:06:34,280 Speaker 1: American Stock Transferred to step in and fill the gap. 116 00:06:34,720 --> 00:06:38,520 Speaker 1: So any shareholder that that was on our records as 117 00:06:38,520 --> 00:06:42,200 Speaker 1: a direct shareholder on the march in these two funds 118 00:06:42,200 --> 00:06:45,000 Speaker 1: got transferred over to American Stock Transfer and it's our 119 00:06:45,000 --> 00:06:47,400 Speaker 1: plan to get them to move off of there into 120 00:06:47,440 --> 00:06:50,920 Speaker 1: a brokerage account eventually. UM. That was sort of a 121 00:06:51,000 --> 00:06:53,000 Speaker 1: key breakthrough we had to come across, because that was 122 00:06:53,040 --> 00:06:57,239 Speaker 1: the operational snag that we kept bumping up against. Alex, 123 00:06:57,279 --> 00:06:59,520 Speaker 1: I want to bring you in here. Did did the 124 00:06:59,560 --> 00:07:03,719 Speaker 1: converse station between Jim and the sec Did that start 125 00:07:03,720 --> 00:07:07,000 Speaker 1: before you or or once you were part of the team. 126 00:07:07,360 --> 00:07:10,120 Speaker 1: Now that was. I mean, Jim and I planned this 127 00:07:10,200 --> 00:07:13,040 Speaker 1: structure out together. We've talked about it for a few years. 128 00:07:13,560 --> 00:07:16,480 Speaker 1: We've researched a lot of bits and pieces of different 129 00:07:16,480 --> 00:07:20,600 Speaker 1: transactions involving mutual funds, UM and closed down funds in 130 00:07:20,640 --> 00:07:23,120 Speaker 1: the past, and we sort of put all those elements 131 00:07:23,160 --> 00:07:26,120 Speaker 1: together and then we did what anybody can do, which 132 00:07:26,200 --> 00:07:29,320 Speaker 1: is you reach out to the SEC. You have a conversation, 133 00:07:29,800 --> 00:07:32,520 Speaker 1: You explain to them what your idea, your concept is. 134 00:07:33,000 --> 00:07:36,640 Speaker 1: You show them why it fits within the existing regulatory 135 00:07:36,720 --> 00:07:40,680 Speaker 1: scheme that they are comfortable with, and sometimes they have questions. 136 00:07:40,800 --> 00:07:43,160 Speaker 1: You respond to those questions, and eventually you get to 137 00:07:43,200 --> 00:07:47,120 Speaker 1: the point where you move forward with your disclosure filings, 138 00:07:47,440 --> 00:07:51,440 Speaker 1: which is what we did. So these aren't billable hours, um, 139 00:07:51,600 --> 00:07:57,680 Speaker 1: so I want to ask, um, you know now doubt now, 140 00:07:58,680 --> 00:08:02,680 Speaker 1: not exactly, but not not not a billable for me 141 00:08:02,800 --> 00:08:04,760 Speaker 1: right now at least. So so as long as I 142 00:08:04,800 --> 00:08:07,119 Speaker 1: have that advantage, I just want to ask, you know, what, 143 00:08:07,120 --> 00:08:09,800 Speaker 1: what did you find surprising in that conversation with the 144 00:08:09,880 --> 00:08:13,240 Speaker 1: SEC and throughout this process. Well, I mean the first 145 00:08:13,240 --> 00:08:16,800 Speaker 1: surprise was, um, we thought it was gonna be We 146 00:08:16,840 --> 00:08:18,360 Speaker 1: thought we were going to have to do a proxy 147 00:08:18,480 --> 00:08:22,240 Speaker 1: to get shareholder approval. UM. There's a special rule that 148 00:08:22,280 --> 00:08:25,880 Speaker 1: applies to mutual funds. When you're merging two mutual funds 149 00:08:25,880 --> 00:08:28,800 Speaker 1: that are managed by the same advisor, you don't always 150 00:08:28,840 --> 00:08:32,720 Speaker 1: need to have a proxy. Proxy is a very uh 151 00:08:32,880 --> 00:08:37,760 Speaker 1: time consuming and somewhat expensive process for mutual funds because 152 00:08:37,800 --> 00:08:41,240 Speaker 1: of the way funds are distributed. UM, it's extremely difficult 153 00:08:41,280 --> 00:08:44,959 Speaker 1: to get those proxy statements out and out to all 154 00:08:45,000 --> 00:08:47,920 Speaker 1: the shareholders and achieve your first shift to achieve acorum, 155 00:08:47,960 --> 00:08:49,760 Speaker 1: and then you have to get the approval vote. So 156 00:08:49,800 --> 00:08:52,600 Speaker 1: we were pleased to find out we didn't need a proxy. 157 00:08:52,679 --> 00:08:55,600 Speaker 1: But the other thing that surprised me is some number 158 00:08:55,600 --> 00:08:58,520 Speaker 1: of years ago, there were other fun complexes that tried 159 00:08:58,520 --> 00:09:02,080 Speaker 1: to go down this path and there was actually a 160 00:09:02,080 --> 00:09:05,560 Speaker 1: denial letter out there. And I thought that from that 161 00:09:05,640 --> 00:09:07,800 Speaker 1: two thousand twelve denial letter we were going to have 162 00:09:07,880 --> 00:09:10,160 Speaker 1: a bigger problem, and we really didn't. I think that 163 00:09:10,640 --> 00:09:14,040 Speaker 1: the industry has evolved. E t F obviously have grown 164 00:09:14,080 --> 00:09:17,440 Speaker 1: significantly since that time frame. And then also we had 165 00:09:17,440 --> 00:09:20,839 Speaker 1: the benefit of the SEC taking a deeper look at 166 00:09:20,920 --> 00:09:24,520 Speaker 1: how E t F operate, and that came out of 167 00:09:24,559 --> 00:09:27,800 Speaker 1: the E t F rule. So that was obviously a 168 00:09:27,920 --> 00:09:31,120 Speaker 1: huge piece that. Um, you know, we've probably made them 169 00:09:31,120 --> 00:09:35,720 Speaker 1: more favorably inclined to this idea. I'm interested to just 170 00:09:36,120 --> 00:09:40,199 Speaker 1: in talking with your shareholders, was there any pushback? I mean, 171 00:09:40,240 --> 00:09:45,719 Speaker 1: did you get any concerns raised? How did that go? Um? No, 172 00:09:45,760 --> 00:09:48,920 Speaker 1: that's a great question. It well is the answer that question. 173 00:09:48,960 --> 00:09:51,120 Speaker 1: So a couple of things. First of all, when we 174 00:09:51,160 --> 00:09:54,680 Speaker 1: first started thinking about this, I reached out to some 175 00:09:54,800 --> 00:09:57,880 Speaker 1: of the advisors that have assets in these funds, and 176 00:09:59,240 --> 00:10:01,800 Speaker 1: of them weren't fa are this? And then I'd occasionally 177 00:10:01,800 --> 00:10:04,719 Speaker 1: get on the phone with a shareholder and I'd ask 178 00:10:04,800 --> 00:10:06,840 Speaker 1: them the same question, how do you feel about this? 179 00:10:06,920 --> 00:10:10,040 Speaker 1: What if we did this? Uh? And the answers were 180 00:10:10,120 --> 00:10:13,360 Speaker 1: again a hundred percent positive. And then, of course, as 181 00:10:13,360 --> 00:10:15,440 Speaker 1: we went through the process, I had the chance to 182 00:10:15,480 --> 00:10:20,160 Speaker 1: speak to several dozen of our shareholders. Not one person 183 00:10:20,720 --> 00:10:24,800 Speaker 1: expressed any reluctance to do this. That everybody thinks it's 184 00:10:24,800 --> 00:10:28,000 Speaker 1: a great idea. Now, are there some out there that 185 00:10:28,040 --> 00:10:32,000 Speaker 1: I didn't talk to? That's quite possible, But UM, let 186 00:10:32,000 --> 00:10:34,319 Speaker 1: me pretty do this differently. We've had a number of 187 00:10:34,320 --> 00:10:37,640 Speaker 1: advisors who are in our other funds and they're asking 188 00:10:37,679 --> 00:10:39,720 Speaker 1: me when are we going to get to these other 189 00:10:39,720 --> 00:10:42,040 Speaker 1: funds and convert them? This seems to be something that 190 00:10:42,120 --> 00:10:46,360 Speaker 1: everybody is interested in, and we've had zero pushback. Now, 191 00:10:46,360 --> 00:10:48,440 Speaker 1: there's been some operation elections we had to sort through, 192 00:10:48,800 --> 00:10:51,280 Speaker 1: you know, on a couple of account levels. Um, but 193 00:10:51,280 --> 00:10:56,680 Speaker 1: but those are those are all minor issues. Um, universal acceptance. 194 00:10:57,360 --> 00:10:59,839 Speaker 1: I guess it is the answer. You all have already 195 00:11:00,000 --> 00:11:03,480 Speaker 1: wild to convert a third fund. Are you going to 196 00:11:03,640 --> 00:11:06,240 Speaker 1: do all the mutual funds? How far are you going 197 00:11:06,320 --> 00:11:11,240 Speaker 1: with it? Uh, that's not fully determined, but I would say, 198 00:11:11,240 --> 00:11:13,040 Speaker 1: don't be surprised if a year from now we have 199 00:11:13,240 --> 00:11:16,920 Speaker 1: zero opening funds and were an entire e d F fan. Wow, yeah, 200 00:11:16,960 --> 00:11:20,439 Speaker 1: it's UM, this is kind of new information. I know 201 00:11:20,559 --> 00:11:22,960 Speaker 1: you did it, but to hear this sort of testimonial, 202 00:11:23,000 --> 00:11:27,480 Speaker 1: it's very interesting. Now. I was with a manager yesterday, UM, 203 00:11:27,520 --> 00:11:32,040 Speaker 1: and they're a mutual fund manager, and we were talking 204 00:11:32,080 --> 00:11:35,080 Speaker 1: and they were saying that part of their problem was 205 00:11:35,120 --> 00:11:37,320 Speaker 1: the four when K plans. Do you have any of 206 00:11:37,320 --> 00:11:40,400 Speaker 1: your shares in four when K plans? Or or no, 207 00:11:43,000 --> 00:11:45,520 Speaker 1: we do but not a lot. So you're right to 208 00:11:45,640 --> 00:11:48,199 Speaker 1: raise this issue. That was one of the first things 209 00:11:48,280 --> 00:11:50,120 Speaker 1: I looked at when we started thinking about this a 210 00:11:50,120 --> 00:11:54,120 Speaker 1: few years back. We don't have a lot of penetration 211 00:11:54,120 --> 00:11:55,640 Speaker 1: in the four oh one K market. We do have 212 00:11:55,760 --> 00:11:58,920 Speaker 1: some and in fact, I will tell you the Guinness 213 00:11:58,960 --> 00:12:02,600 Speaker 1: Atkinson four one K does invest in the dividend builder. 214 00:12:03,280 --> 00:12:06,320 Speaker 1: And I called our administrator and said, hey, what happens 215 00:12:06,320 --> 00:12:08,800 Speaker 1: if this becomes an e t F And their answer 216 00:12:08,960 --> 00:12:11,800 Speaker 1: was not a problem. We can handle it. So we 217 00:12:11,920 --> 00:12:15,680 Speaker 1: know that there are some retirement platforms that struggle with 218 00:12:15,760 --> 00:12:18,040 Speaker 1: e t s or can't handle them, but that's not 219 00:12:18,080 --> 00:12:20,719 Speaker 1: a universal problem. And there's nothing inherent about e t 220 00:12:20,920 --> 00:12:25,240 Speaker 1: f s that keeps them out of retirement plans. So 221 00:12:25,480 --> 00:12:28,200 Speaker 1: I guess if if somebody's out there listening and they're thinking, oh, 222 00:12:28,240 --> 00:12:30,320 Speaker 1: every mathful fun, well, I mean, do you think this 223 00:12:30,360 --> 00:12:34,440 Speaker 1: will be something that's targeted to to fun families that 224 00:12:34,640 --> 00:12:37,199 Speaker 1: might not have that big of a four one K presence, 225 00:12:37,840 --> 00:12:39,600 Speaker 1: or do you think it might spread and they'll just 226 00:12:39,640 --> 00:12:43,120 Speaker 1: figure out how to solve that too. They'll figure out 227 00:12:43,120 --> 00:12:46,560 Speaker 1: how to solve it. Yeah, there's there's um. There is 228 00:12:46,600 --> 00:12:50,160 Speaker 1: nothing to my knowledge, there's nothing inherent about the operations 229 00:12:50,240 --> 00:12:52,640 Speaker 1: or legal structure of four one case that's keeping them 230 00:12:52,679 --> 00:12:55,439 Speaker 1: out of retirement plans. So there was some questions in 231 00:12:55,520 --> 00:12:57,480 Speaker 1: forward k plans and the reason E t s aren't 232 00:12:57,679 --> 00:12:59,960 Speaker 1: tend to be in the four one care well, besides 233 00:13:00,000 --> 00:13:02,120 Speaker 1: the fact that you can get the institutional classes cheap, 234 00:13:02,360 --> 00:13:04,240 Speaker 1: you don't need to interdate trade your four one k 235 00:13:04,520 --> 00:13:06,680 Speaker 1: ets lose a lot of their superpowers when they go 236 00:13:06,760 --> 00:13:09,160 Speaker 1: into the four one k that they have outside of it. 237 00:13:09,480 --> 00:13:12,959 Speaker 1: That said, one of the reasons I, you know, would 238 00:13:13,040 --> 00:13:14,880 Speaker 1: assume is that if you have an e t F 239 00:13:14,880 --> 00:13:18,200 Speaker 1: in there and your drip drip drip buying, you're constantly 240 00:13:18,200 --> 00:13:20,559 Speaker 1: paying a spread where you wouldn't pay that with the 241 00:13:20,640 --> 00:13:25,079 Speaker 1: mutual fund. Yeah, well, I think I don't know that 242 00:13:25,080 --> 00:13:27,079 Speaker 1: that's really that big of an issue there. There's I 243 00:13:27,160 --> 00:13:29,760 Speaker 1: refer to those as carriage costs. So when you buy 244 00:13:29,760 --> 00:13:33,400 Speaker 1: a mutual fund, the carriage costs go to the entire fund. 245 00:13:33,480 --> 00:13:35,480 Speaker 1: That is to say, the bid ESTs you put money 246 00:13:35,480 --> 00:13:37,680 Speaker 1: to the neutral fund, the mutual fund has to deployed that. 247 00:13:38,320 --> 00:13:41,760 Speaker 1: They're paying commissions, they're paying custody charges, they're paying the 248 00:13:41,760 --> 00:13:45,360 Speaker 1: bidst spread and everything they're buying. Those carriage costs, which 249 00:13:45,640 --> 00:13:48,679 Speaker 1: rightfully belong to the person coming in and being shared 250 00:13:48,720 --> 00:13:50,760 Speaker 1: by everybody in the fund. There's one of the benefits 251 00:13:50,800 --> 00:13:53,600 Speaker 1: of ets. So the fact that the carriage cost is 252 00:13:53,640 --> 00:13:55,720 Speaker 1: more visible in E t F doesn't mean it's being 253 00:13:55,760 --> 00:13:58,440 Speaker 1: a something the mutual fund. To your point about the 254 00:13:58,520 --> 00:14:02,640 Speaker 1: drip one the sort of psychological problems about e t 255 00:14:02,800 --> 00:14:06,200 Speaker 1: s versus mutual funds. Mutual funds are bought in dollars 256 00:14:06,320 --> 00:14:08,840 Speaker 1: and e t s are bought in shares. But that's 257 00:14:08,840 --> 00:14:11,440 Speaker 1: not an impediment that can't be overcome. Yes, so I, 258 00:14:11,440 --> 00:14:16,120 Speaker 1: if I can summarize you, mutual funds are internalizing those costs. 259 00:14:16,120 --> 00:14:18,040 Speaker 1: The e t F it's externalized, but you're paying it 260 00:14:18,120 --> 00:14:21,640 Speaker 1: either way. Okay, understood, So that's interesting. Um, that really 261 00:14:22,800 --> 00:14:25,720 Speaker 1: makes the world much bigger that could do this because 262 00:14:25,760 --> 00:14:29,000 Speaker 1: we had said, well, it's probably gonna be targeted. But 263 00:14:29,000 --> 00:14:31,760 Speaker 1: but then again we people were pretty barossed that anybody 264 00:14:31,760 --> 00:14:33,440 Speaker 1: would do it, And now you've got five or six 265 00:14:33,480 --> 00:14:43,800 Speaker 1: lined up. Um. Anyway, interesting, So, Jim, if if there 266 00:14:43,800 --> 00:14:48,520 Speaker 1: are one mutual funds out there, arbitrary picking a number, 267 00:14:49,200 --> 00:14:54,720 Speaker 1: how many of those could you see doing what you've did? Um, well, 268 00:14:54,760 --> 00:14:56,960 Speaker 1: if there are, you a hundred. But let's let's talk 269 00:14:57,000 --> 00:14:59,280 Speaker 1: about what are some of the impediments for other people 270 00:14:59,280 --> 00:15:02,400 Speaker 1: doing it. So first of all, I should say that 271 00:15:02,400 --> 00:15:04,800 Speaker 1: the project that we just went through was the biggest 272 00:15:04,800 --> 00:15:07,800 Speaker 1: project of my career, and that's because the level of 273 00:15:07,840 --> 00:15:11,480 Speaker 1: detail that has to be dealt with when with this 274 00:15:11,520 --> 00:15:14,640 Speaker 1: conversion isn't just affecting part of the business. It affects 275 00:15:14,680 --> 00:15:20,280 Speaker 1: our entire business, from asset management, portfolio construction, trading compliance, 276 00:15:20,320 --> 00:15:25,640 Speaker 1: shareholder communications. Every every single one of our service providers 277 00:15:25,640 --> 00:15:27,320 Speaker 1: for mutual fund was involved. The broker do you know 278 00:15:27,360 --> 00:15:30,720 Speaker 1: can news and the level of detail was enormous. We 279 00:15:30,840 --> 00:15:34,400 Speaker 1: did two funds. Now, imagine if you're a mutual fund 280 00:15:34,400 --> 00:15:37,000 Speaker 1: company with a hundred and fifty funds and seven share 281 00:15:37,040 --> 00:15:42,000 Speaker 1: classes each. That is an enormous project. And when you 282 00:15:42,040 --> 00:15:44,320 Speaker 1: start talking about all of these share classes, and many 283 00:15:44,360 --> 00:15:47,280 Speaker 1: of the share classes are four different types of retirement plans, 284 00:15:47,760 --> 00:15:50,040 Speaker 1: they might decide just to leave them as they are 285 00:15:50,120 --> 00:15:55,040 Speaker 1: because it does work. But for everybody else, I think 286 00:15:55,080 --> 00:15:56,760 Speaker 1: you're gonna decide that the e t F is a 287 00:15:56,760 --> 00:16:00,840 Speaker 1: better mouse trap. And yes, it's a big object, but 288 00:16:00,920 --> 00:16:02,960 Speaker 1: it's a project worth doing both for your business and 289 00:16:02,960 --> 00:16:06,280 Speaker 1: fear shareholders. So could it be a hundred yes, might 290 00:16:06,280 --> 00:16:09,760 Speaker 1: it be eight? Could be eight. There's some other issues 291 00:16:09,800 --> 00:16:12,040 Speaker 1: to some funds don't really work well as an e 292 00:16:12,080 --> 00:16:14,480 Speaker 1: t F. You can need to have a liquid pool 293 00:16:14,520 --> 00:16:18,840 Speaker 1: of investments otherwise the arbitrage mechanism doesn't work UM, and 294 00:16:18,880 --> 00:16:23,240 Speaker 1: the create process actually can I but it isna that 295 00:16:23,400 --> 00:16:25,800 Speaker 1: all mutual funds become e t s and that might 296 00:16:25,840 --> 00:16:28,400 Speaker 1: take a decade. So in the small cap area, you're 297 00:16:28,400 --> 00:16:30,560 Speaker 1: saying it wouldn't be if you have a decent sized 298 00:16:30,600 --> 00:16:33,400 Speaker 1: small cap converting that to an e t F, then 299 00:16:33,440 --> 00:16:35,440 Speaker 1: you get into this whole debate they're having with Cathy 300 00:16:35,440 --> 00:16:38,160 Speaker 1: Wood right now and ARC, which is you're too big 301 00:16:38,280 --> 00:16:40,040 Speaker 1: to own these small stocks. You're going to push them 302 00:16:40,040 --> 00:16:42,520 Speaker 1: around and the arbitrage band would widen and it just 303 00:16:42,560 --> 00:16:45,480 Speaker 1: wouldn't really make sense. Whereas in a mutual fund you 304 00:16:45,480 --> 00:16:48,160 Speaker 1: can close to close it if you need it. If 305 00:16:48,160 --> 00:16:50,400 Speaker 1: you're a small cap fund, you get too big and 306 00:16:50,440 --> 00:16:55,240 Speaker 1: you have capacity issues, you can just close the fund. Yeah, okay, Gus. 307 00:16:55,320 --> 00:16:58,840 Speaker 1: My question too, is now that this has happened, UM, 308 00:16:58,920 --> 00:17:02,080 Speaker 1: does this sort of pave the way for more or 309 00:17:02,120 --> 00:17:04,040 Speaker 1: as more people do it, does it get easier for 310 00:17:04,080 --> 00:17:06,440 Speaker 1: the next person to do it? Or is it more 311 00:17:06,720 --> 00:17:12,399 Speaker 1: just a very individualized kind of process. Um. Yeah, it 312 00:17:12,480 --> 00:17:15,399 Speaker 1: definitely is gonna pay. It's paving the way for people 313 00:17:15,440 --> 00:17:19,800 Speaker 1: to follow and Geinness Atkinson's paths here for sure. UM, 314 00:17:19,840 --> 00:17:22,560 Speaker 1: we know a lot of advisors who are obviously there 315 00:17:22,560 --> 00:17:24,879 Speaker 1: are a number of advisors who have already filed documents 316 00:17:24,920 --> 00:17:27,600 Speaker 1: indicating that they're going to pursue this. There are a 317 00:17:27,640 --> 00:17:30,040 Speaker 1: number of other advisors who are talking about it, thinking 318 00:17:30,080 --> 00:17:33,439 Speaker 1: about it UM and looking into it. And there are 319 00:17:33,480 --> 00:17:37,120 Speaker 1: also people who are thinking about converting other types of 320 00:17:37,600 --> 00:17:42,520 Speaker 1: either pooled vehicles or assets, types of institutional accounts into 321 00:17:42,560 --> 00:17:45,639 Speaker 1: e t s and I think that's probably coming. And 322 00:17:45,680 --> 00:17:47,480 Speaker 1: then I think there's a group of people who are 323 00:17:47,520 --> 00:17:52,439 Speaker 1: looking at converting into non transparent or semi transparent e 324 00:17:52,520 --> 00:17:55,040 Speaker 1: t s and I think that's probably you know, on 325 00:17:55,119 --> 00:17:58,080 Speaker 1: the horizon, and I haven't seen any filings on those yet, 326 00:17:58,160 --> 00:18:03,320 Speaker 1: but it's possible. It's interesting because the non transparent has 327 00:18:03,359 --> 00:18:05,960 Speaker 1: been one route to go um A d f A 328 00:18:06,119 --> 00:18:10,120 Speaker 1: did transparent active UM and this is sort of doing 329 00:18:10,119 --> 00:18:12,679 Speaker 1: it where you bring it everything over. Jim, was was 330 00:18:12,720 --> 00:18:16,840 Speaker 1: it attractive to you because you could launch e t 331 00:18:17,040 --> 00:18:18,960 Speaker 1: f s that are cloni sho off your strategies and 332 00:18:19,000 --> 00:18:21,600 Speaker 1: still have the tax benefits. But then you've got to 333 00:18:21,640 --> 00:18:24,800 Speaker 1: start from scratch. Was it attractive to you the fact 334 00:18:24,840 --> 00:18:27,479 Speaker 1: that you could bring over the assets as well as 335 00:18:27,520 --> 00:18:31,320 Speaker 1: the track record and the shareholders. I mean, if if 336 00:18:31,359 --> 00:18:33,840 Speaker 1: we had launched the clone for a shareholder to take 337 00:18:33,880 --> 00:18:36,119 Speaker 1: advantage of the e t F, they'd have had to 338 00:18:36,160 --> 00:18:39,639 Speaker 1: realize a taxable gain. So, but yes, we wanted to 339 00:18:39,640 --> 00:18:42,720 Speaker 1: bring There were two bedrock principles from the very beginning. 340 00:18:42,840 --> 00:18:44,920 Speaker 1: We wanted to be able to bring the track record over. 341 00:18:45,680 --> 00:18:47,560 Speaker 1: We wanted it to be a non taxable event for 342 00:18:47,600 --> 00:18:51,239 Speaker 1: our investors. Uh. And those were critical. Um. And then 343 00:18:51,400 --> 00:18:53,359 Speaker 1: just from a business standpoint, I don't really want to 344 00:18:53,359 --> 00:18:58,440 Speaker 1: be having, you know, two different structures and two different overheads. 345 00:18:58,440 --> 00:19:01,920 Speaker 1: So so Jim, I have to ask, um, this being 346 00:19:02,000 --> 00:19:06,840 Speaker 1: such a seminal event in in your career, uh, and 347 00:19:06,960 --> 00:19:09,520 Speaker 1: you know it taking a what sounds to be like 348 00:19:09,600 --> 00:19:12,760 Speaker 1: just a considerable amount of work. What was the point 349 00:19:12,760 --> 00:19:14,840 Speaker 1: in the process that you were like, what have I 350 00:19:15,000 --> 00:19:19,359 Speaker 1: gotten myself into? I'm like bashing my head against the wall. 351 00:19:19,440 --> 00:19:22,480 Speaker 1: What what were what were those things that made you 352 00:19:22,520 --> 00:19:26,639 Speaker 1: bash your head against the wall. Well, the thing that 353 00:19:26,680 --> 00:19:29,520 Speaker 1: worried me throughout the process even even before we started 354 00:19:29,600 --> 00:19:32,280 Speaker 1: was what am I going to learn? That I wished 355 00:19:32,320 --> 00:19:35,199 Speaker 1: I knew now? And I was always worried about the 356 00:19:35,320 --> 00:19:39,919 Speaker 1: unknowable unknown um. And in fact, we didn't really stumble 357 00:19:39,960 --> 00:19:42,280 Speaker 1: across anything major. But I will tell you where I 358 00:19:42,320 --> 00:19:45,240 Speaker 1: had my sort of moment of panic. We've been having 359 00:19:45,240 --> 00:19:47,600 Speaker 1: phone calls with everybody in the operations. These are fall 360 00:19:47,880 --> 00:19:50,879 Speaker 1: like thirty different people from from five or six different firms. 361 00:19:51,440 --> 00:19:53,639 Speaker 1: These phone calls have been going on once a week 362 00:19:54,240 --> 00:19:57,119 Speaker 1: and then later more than that, going back to like August. 363 00:19:58,119 --> 00:20:01,800 Speaker 1: Just a tremendous amount of effort, all these details, and 364 00:20:01,880 --> 00:20:04,760 Speaker 1: everything just kept looking like it was going fine. The 365 00:20:04,800 --> 00:20:08,359 Speaker 1: workload kept going up. But we got about ten days 366 00:20:08,400 --> 00:20:12,879 Speaker 1: out and I said to myself, what happens if something 367 00:20:12,920 --> 00:20:17,320 Speaker 1: goes haywire here? What if this thing just completely fails? Um? 368 00:20:17,359 --> 00:20:19,080 Speaker 1: And I knew it wasn't going to but that was 369 00:20:19,119 --> 00:20:21,120 Speaker 1: sort of like my moment of panic. And I woke 370 00:20:21,200 --> 00:20:23,520 Speaker 1: up the next day and we were about nine days out, 371 00:20:23,560 --> 00:20:24,960 Speaker 1: and I said, you know what, this is going to 372 00:20:25,000 --> 00:20:29,639 Speaker 1: go fine. And as it turned out, UM so. So 373 00:20:29,680 --> 00:20:32,720 Speaker 1: the conversion happened on a Friday, last days a mutual 374 00:20:32,720 --> 00:20:34,879 Speaker 1: phone was Friday first days in ETF was a Monday, 375 00:20:35,000 --> 00:20:37,879 Speaker 1: so we had that weekend and I was thinking, my 376 00:20:37,880 --> 00:20:40,440 Speaker 1: phone's gonna ring up the hook, I'll have problems all weekend. 377 00:20:41,200 --> 00:20:43,640 Speaker 1: I got nothing. I had no phone calls over the weekend. 378 00:20:44,240 --> 00:20:46,480 Speaker 1: We had a seven am call on Monday morning. At 379 00:20:46,560 --> 00:20:48,640 Speaker 1: nine am call on Monday morning, just to check in 380 00:20:49,800 --> 00:20:51,720 Speaker 1: all of this build up and all of this work. 381 00:20:52,160 --> 00:20:54,639 Speaker 1: It was like the whole thing was a whimper at 382 00:20:54,640 --> 00:20:57,720 Speaker 1: the very end. It must be like you're you're describing 383 00:20:57,760 --> 00:21:01,199 Speaker 1: like what I would imagine carnation sounds like No, what 384 00:21:01,240 --> 00:21:04,879 Speaker 1: are you's describing? Is y t K? Remember that was 385 00:21:04,920 --> 00:21:07,440 Speaker 1: the whole faith? That's what There you go, Thank you, 386 00:21:07,640 --> 00:21:10,720 Speaker 1: My work is done here, I'm going to happen. You're 387 00:21:10,760 --> 00:21:14,879 Speaker 1: You're welcome. Yeah y t K. Comparison way better than reincarnation, 388 00:21:14,960 --> 00:21:19,000 Speaker 1: but less weird too, less weird. I went to super 389 00:21:19,040 --> 00:21:21,760 Speaker 1: Meta and you kept it real. So thank you for that. 390 00:21:22,080 --> 00:21:24,840 Speaker 1: Um so so Jim. I have to ask, since since 391 00:21:24,880 --> 00:21:30,040 Speaker 1: this happened, how many phone calls of of former peers 392 00:21:30,920 --> 00:21:33,600 Speaker 1: UM in the Mutual Fun world have you been getting? 393 00:21:34,560 --> 00:21:42,440 Speaker 1: It doesn't UM emails, UM phone calls. Uh yeah, it's 394 00:21:42,480 --> 00:21:44,440 Speaker 1: surprising because you know you're sort of just working away, 395 00:21:44,440 --> 00:21:46,360 Speaker 1: working away, and that you don't realize that so many 396 00:21:46,400 --> 00:21:48,680 Speaker 1: people are watching. But a lot of people were in 397 00:21:48,720 --> 00:21:51,080 Speaker 1: a lot of people have noticed. So I've been in 398 00:21:51,119 --> 00:21:52,560 Speaker 1: touch with people I hadn't been in touch with for 399 00:21:52,600 --> 00:21:54,520 Speaker 1: five or tenure. And and Alex, how about for you 400 00:21:54,600 --> 00:22:00,000 Speaker 1: since you are the trailblazing lawyer that got this done. Yeah, 401 00:22:00,040 --> 00:22:03,159 Speaker 1: I've heard from a lot of people. Um, you know, 402 00:22:03,200 --> 00:22:05,840 Speaker 1: I think lawyers, you know, need to fun lawyers. We 403 00:22:05,920 --> 00:22:09,119 Speaker 1: usually connect every year two we all go to a 404 00:22:09,160 --> 00:22:13,400 Speaker 1: big conference together. So that conference did happened. I don't 405 00:22:13,440 --> 00:22:16,480 Speaker 1: think it even happened last year. It happened virtually this year. 406 00:22:16,560 --> 00:22:19,040 Speaker 1: I think, you know, I have a lot of drink 407 00:22:19,080 --> 00:22:21,240 Speaker 1: tickets coming my way next year. By the way, just 408 00:22:21,280 --> 00:22:24,119 Speaker 1: speaking of mutual fund lawyers, UM, I think of the 409 00:22:24,160 --> 00:22:26,199 Speaker 1: word compliance when I think of you guys, and I 410 00:22:26,240 --> 00:22:29,080 Speaker 1: think of someone who's just constantly saying no. And it 411 00:22:29,200 --> 00:22:31,840 Speaker 1: just seems like, I don't know, but you seem pretty cool, 412 00:22:31,920 --> 00:22:35,240 Speaker 1: Like you seem like you're a little more optimistic. Can 413 00:22:35,280 --> 00:22:38,520 Speaker 1: you talk about the sort of trying to work in 414 00:22:38,560 --> 00:22:42,880 Speaker 1: between the need to market and the rules. Well, I mean, 415 00:22:43,200 --> 00:22:46,040 Speaker 1: first of all, thank you, Um, there are plenty of 416 00:22:46,119 --> 00:22:48,320 Speaker 1: times where I have said no to to Jim and 417 00:22:48,400 --> 00:22:52,640 Speaker 1: he'll vouch for that, UM there you know. Look, it's 418 00:22:52,680 --> 00:22:59,119 Speaker 1: always attention. Mutual funds are extremely regulated. This Investment companies 419 00:22:59,200 --> 00:23:02,480 Speaker 1: are highly regulated when you look into the scheme of 420 00:23:02,520 --> 00:23:06,120 Speaker 1: how things operate in the US, right and there are 421 00:23:06,640 --> 00:23:12,200 Speaker 1: very significant and very specific rules around mutual fund marketing. 422 00:23:12,680 --> 00:23:18,240 Speaker 1: And that is accommodation of statutory UM, elements of the 423 00:23:18,280 --> 00:23:22,760 Speaker 1: statute itself, regulations that were adapted UM under the Investment 424 00:23:22,760 --> 00:23:27,680 Speaker 1: Company Act UM, and pieces of the Investment Advisor's Act. 425 00:23:28,119 --> 00:23:30,720 Speaker 1: And then there's this whole body of law which is 426 00:23:30,760 --> 00:23:34,840 Speaker 1: in no action letters and other sec pronouncements, and they 427 00:23:34,840 --> 00:23:37,680 Speaker 1: are very precise about what you can and cannot say 428 00:23:38,240 --> 00:23:41,800 Speaker 1: UM with respect to mutual funds and performance and compliance 429 00:23:42,160 --> 00:23:45,800 Speaker 1: with those requirements is obviously a big piece of this picture. Now. 430 00:23:45,840 --> 00:23:47,480 Speaker 1: The e t F rule came out a couple of 431 00:23:47,520 --> 00:23:51,040 Speaker 1: years ago. It also has a series of very specific 432 00:23:51,119 --> 00:23:56,600 Speaker 1: compliance obligations. UM. The fund manager requires very precise information 433 00:23:56,640 --> 00:23:58,840 Speaker 1: to be put up on the website every day if 434 00:23:58,840 --> 00:24:01,280 Speaker 1: you're operating for sea to a rule, which these funds 435 00:24:01,280 --> 00:24:05,840 Speaker 1: are are under that rule. That's rule six C eleven UM. 436 00:24:05,920 --> 00:24:09,680 Speaker 1: And you know, you have to compliances. As Jim said, 437 00:24:09,760 --> 00:24:12,639 Speaker 1: this is touching every piece of the advisory business and 438 00:24:12,680 --> 00:24:14,959 Speaker 1: compliance as part of that, and compliance is all as 439 00:24:15,000 --> 00:24:17,800 Speaker 1: part of a mutual fund business too, So it's really 440 00:24:18,440 --> 00:24:20,880 Speaker 1: UM trying to just make sure you don't have conflicts. 441 00:24:20,960 --> 00:24:24,360 Speaker 1: The two sets of schemes harmonized, they're not exactly at all. 442 00:24:24,440 --> 00:24:27,359 Speaker 1: Fours And we are in the middle of this suit 443 00:24:27,440 --> 00:24:31,160 Speaker 1: because there's a new rule that applies to investment advisor 444 00:24:31,359 --> 00:24:34,360 Speaker 1: marketing that has just been adopted by the SEC. It's 445 00:24:34,400 --> 00:24:37,359 Speaker 1: gonna be going into applying shortly, so we're sort of 446 00:24:37,359 --> 00:24:41,399 Speaker 1: retooling this all. But you know, the standardized information that 447 00:24:41,440 --> 00:24:43,399 Speaker 1: you see, whether it's about a mutual fund or an 448 00:24:43,400 --> 00:24:46,720 Speaker 1: exchange traded fund UM, what you're seeing out there is 449 00:24:47,440 --> 00:24:50,520 Speaker 1: put together in accordance with a very specific set of 450 00:24:50,560 --> 00:24:54,000 Speaker 1: accounting and financial reporting rules UM. And that's what you 451 00:24:54,040 --> 00:24:56,080 Speaker 1: had with the mutual fund perspectives, and now you have 452 00:24:56,200 --> 00:24:58,240 Speaker 1: that with the e t F. In the case of 453 00:24:58,280 --> 00:25:02,159 Speaker 1: these conversions to eat, TF is the accounting and performance 454 00:25:02,160 --> 00:25:05,719 Speaker 1: survivor in these merger transactions, so they adapt the performance 455 00:25:05,800 --> 00:25:10,120 Speaker 1: of the predecessor mutual funds. So I had to UM 456 00:25:10,160 --> 00:25:13,360 Speaker 1: I have to ask if there are as many mutual 457 00:25:13,440 --> 00:25:16,600 Speaker 1: funds going to make this jump as as Jim sort 458 00:25:16,600 --> 00:25:19,679 Speaker 1: of indicated, you know, he thinks, my, how many mutual 459 00:25:19,680 --> 00:25:23,080 Speaker 1: fund lawyers are gonna jump over to become E t 460 00:25:23,240 --> 00:25:26,000 Speaker 1: F lawyers. Well, I mean there are a lot of 461 00:25:26,080 --> 00:25:28,560 Speaker 1: mutual fund lawyers who are also E t F lawyers. 462 00:25:28,560 --> 00:25:32,000 Speaker 1: It doesn't necessarily we don't sort of separate ourselves into 463 00:25:32,040 --> 00:25:34,399 Speaker 1: those buckets. Um, I think you know, there are a 464 00:25:34,440 --> 00:25:38,000 Speaker 1: lot of fund lawyers who are representing or advising UM 465 00:25:38,040 --> 00:25:42,040 Speaker 1: fund complexes or words of directors of funds who are 466 00:25:42,080 --> 00:25:45,760 Speaker 1: already focused on these transactions and looking into them. So, um, 467 00:25:45,800 --> 00:25:47,879 Speaker 1: I think that you know, there's As I said, I 468 00:25:47,960 --> 00:25:50,919 Speaker 1: think there's a lot of opportunity here. The concept of 469 00:25:50,960 --> 00:25:53,800 Speaker 1: converting and existing pool of assets into the E t 470 00:25:53,960 --> 00:25:57,560 Speaker 1: F is appealing because it's much harder, It feels much 471 00:25:57,600 --> 00:26:00,560 Speaker 1: harder for the advisor to start from zero out. When 472 00:26:00,560 --> 00:26:03,600 Speaker 1: you're converting an existing pool or an existing account, you 473 00:26:03,680 --> 00:26:06,639 Speaker 1: already have a performance history, you know your strategy works. 474 00:26:07,119 --> 00:26:09,119 Speaker 1: Question is this the E t F rapp or the 475 00:26:09,240 --> 00:26:14,359 Speaker 1: right distribution? One thing that I'm wondering just about the 476 00:26:14,520 --> 00:26:18,800 Speaker 1: conversion environment in general is from questions that I've gotten 477 00:26:19,000 --> 00:26:22,480 Speaker 1: on Twitter or that kind of thing. People who maybe 478 00:26:22,480 --> 00:26:27,040 Speaker 1: are mutual fund shareholders and they're wondering like, oh, is 479 00:26:27,080 --> 00:26:29,240 Speaker 1: my mutual fund going to become an e t F 480 00:26:29,840 --> 00:26:32,280 Speaker 1: or just the idea that that could could sneak up 481 00:26:32,280 --> 00:26:36,080 Speaker 1: on you. Um, But there is a lot of disclosure 482 00:26:36,080 --> 00:26:38,560 Speaker 1: involved in it, right. I mean, people listening shouldn't be 483 00:26:38,680 --> 00:26:42,719 Speaker 1: like either worried or you know, freaked that suddenly something's 484 00:26:42,720 --> 00:26:48,640 Speaker 1: going to happen without them knowing. They'll definitely notice, Yeah, 485 00:26:48,680 --> 00:26:52,280 Speaker 1: they're gonna get a you're gonna get an adage in 486 00:26:52,320 --> 00:26:56,320 Speaker 1: the mail, and then they'll get less capital gains distributions. 487 00:26:56,359 --> 00:26:59,920 Speaker 1: They'll notice that that's exactly right. And I think if 488 00:27:00,000 --> 00:27:01,879 Speaker 1: if a shareholder is worried about that, they should be 489 00:27:01,920 --> 00:27:03,600 Speaker 1: thinking this is a good thing for them, not a 490 00:27:03,600 --> 00:27:07,560 Speaker 1: bad thing. Uh. They'll they'll have an et F one 491 00:27:07,560 --> 00:27:10,399 Speaker 1: morning where they previously had a mutual fund and it 492 00:27:10,440 --> 00:27:14,160 Speaker 1: will be on their statement. Um. They'll most of these 493 00:27:14,160 --> 00:27:17,240 Speaker 1: investors have their their funds currently through a broker dealer, 494 00:27:17,320 --> 00:27:19,960 Speaker 1: so they'll place there there you only want to redeem. 495 00:27:19,960 --> 00:27:21,359 Speaker 1: They'll do what they normally do. They'll just call the 496 00:27:21,440 --> 00:27:25,480 Speaker 1: broker to get their exit. Okay, let me just like 497 00:27:25,560 --> 00:27:28,040 Speaker 1: we'll put the thing out there that any investor would 498 00:27:28,080 --> 00:27:31,440 Speaker 1: want to know here, which is what downside if any 499 00:27:31,600 --> 00:27:40,000 Speaker 1: do you see here? Um well, I don't really um, 500 00:27:40,240 --> 00:27:43,240 Speaker 1: particularly an era of zero commissions. Now if you have, 501 00:27:43,440 --> 00:27:45,320 Speaker 1: if you're if you're a client at a broker's from 502 00:27:45,359 --> 00:27:49,880 Speaker 1: the still charges commissions, that's a bit of a negative. Um. 503 00:27:49,920 --> 00:27:51,679 Speaker 1: You know you do have to deal with you know, 504 00:27:51,720 --> 00:27:54,000 Speaker 1: figuring out what kind of order you're gonna put in 505 00:27:54,240 --> 00:27:56,200 Speaker 1: so they can put in a limit order, a market order, 506 00:27:56,240 --> 00:28:00,040 Speaker 1: and I would advise a limit order. Um, but be 507 00:28:00,080 --> 00:28:03,240 Speaker 1: on that. I mean, you should be realizing cost savings, 508 00:28:03,280 --> 00:28:07,320 Speaker 1: you should be gaining tax efficiency, you should be gaining transparency, 509 00:28:08,440 --> 00:28:11,160 Speaker 1: and you should be gaining the ability to have intra 510 00:28:11,240 --> 00:28:22,000 Speaker 1: day liquidity. Let me just um, I put a question 511 00:28:22,040 --> 00:28:24,280 Speaker 1: in the in the chat to the guys on my 512 00:28:24,280 --> 00:28:28,360 Speaker 1: team to see if they had any questions. Um. It's 513 00:28:28,359 --> 00:28:34,880 Speaker 1: a good question. Actually, this would be from Athanacios in London. Hey, Ethanacios, 514 00:28:34,880 --> 00:28:38,520 Speaker 1: thanks for listening. I feel like radio show. Um. He 515 00:28:38,560 --> 00:28:41,120 Speaker 1: asks you as a question for Jim, how do you 516 00:28:41,200 --> 00:28:45,400 Speaker 1: feel though about having to be transparent now? Because that's 517 00:28:45,400 --> 00:28:49,160 Speaker 1: a good question. Yeah, right. Our our shop tends to 518 00:28:49,160 --> 00:28:53,880 Speaker 1: be transparent um by the way, that's our sort of style. 519 00:28:53,960 --> 00:28:57,080 Speaker 1: That's a different question from our portfolio being fully transparent 520 00:28:57,160 --> 00:29:00,000 Speaker 1: every day. We are a low turnover shop. That's part 521 00:29:00,080 --> 00:29:04,160 Speaker 1: of how we manage money, and we don't mind people 522 00:29:04,200 --> 00:29:06,160 Speaker 1: seeing our holdings. So that sort of raises a question 523 00:29:06,200 --> 00:29:08,960 Speaker 1: of okay, what about front running. The way we've set 524 00:29:09,000 --> 00:29:12,080 Speaker 1: it up, when we make a change in the portfolio, 525 00:29:12,320 --> 00:29:14,400 Speaker 1: it will be completed before the end of the day 526 00:29:14,480 --> 00:29:18,000 Speaker 1: and before people realize what has happened. So we have 527 00:29:18,120 --> 00:29:21,880 Speaker 1: to report our holdings um every day, put them on 528 00:29:21,920 --> 00:29:24,360 Speaker 1: our website every day after the market closes, and we 529 00:29:24,400 --> 00:29:26,920 Speaker 1: distribute the basket through the n SEC system to the 530 00:29:26,920 --> 00:29:29,960 Speaker 1: market participants. But by the time they see that it's 531 00:29:29,960 --> 00:29:33,640 Speaker 1: different from the day day before. We're done. So we're 532 00:29:33,640 --> 00:29:36,880 Speaker 1: not worried about people front running. We we touched on this, 533 00:29:36,920 --> 00:29:39,360 Speaker 1: but we're looking at, say, by the way, I mean, 534 00:29:39,480 --> 00:29:41,480 Speaker 1: the fact that you're getting all these calls and emails 535 00:29:41,480 --> 00:29:44,040 Speaker 1: speaks volumes about what we're probably going to see. But 536 00:29:44,960 --> 00:29:48,440 Speaker 1: the mutual fund industry is I want to say, of 537 00:29:48,480 --> 00:29:51,760 Speaker 1: the equity and fixed income sides together, is I think 538 00:29:51,800 --> 00:29:56,240 Speaker 1: ballpark twelve trillion somewhere in there, twelve thirteen trillion. What 539 00:29:56,440 --> 00:30:04,760 Speaker 1: percentage of that do you think is convertible? I don't 540 00:30:04,760 --> 00:30:08,840 Speaker 1: know the answer that question. UM. Part of that would 541 00:30:08,880 --> 00:30:11,160 Speaker 1: would relate to how much is in fixed income and 542 00:30:11,200 --> 00:30:14,480 Speaker 1: how many of those fixed income funds would be convertible. UM. 543 00:30:14,480 --> 00:30:16,640 Speaker 1: It's not quite as easy for some of the fixed 544 00:30:16,680 --> 00:30:19,320 Speaker 1: income vehicles to become ets. That's such that they couldn't be. 545 00:30:19,360 --> 00:30:21,280 Speaker 1: But there's some things to be thought through, and then 546 00:30:21,320 --> 00:30:23,600 Speaker 1: there's some derivative based strategies that may not work as 547 00:30:23,600 --> 00:30:28,400 Speaker 1: e T F s. UM. If this happens, which is 548 00:30:28,440 --> 00:30:30,440 Speaker 1: to say, if there's a long term trend to convert 549 00:30:30,480 --> 00:30:31,960 Speaker 1: mutual funds of e t s, which is what I 550 00:30:31,960 --> 00:30:33,920 Speaker 1: think will happen, it is not going to happen quickly. 551 00:30:33,960 --> 00:30:37,360 Speaker 1: It's gonna be a potentially a decade long process because 552 00:30:37,360 --> 00:30:39,440 Speaker 1: some of the ones that are more difficult are going 553 00:30:39,520 --> 00:30:43,040 Speaker 1: to have to take longer to figure out. I don't 554 00:30:43,040 --> 00:30:45,520 Speaker 1: know if that answers your question, and you're asking me 555 00:30:46,000 --> 00:30:49,120 Speaker 1: the future of it, UM. I can't really speak for 556 00:30:49,120 --> 00:30:50,640 Speaker 1: the rest of the industry, but I just sort of 557 00:30:50,680 --> 00:30:53,800 Speaker 1: look at this from my perspective and from a shareholder perspective, 558 00:30:54,320 --> 00:30:56,000 Speaker 1: the E t F is just a better mouse trap, 559 00:30:56,280 --> 00:30:58,360 Speaker 1: and if we can deliver a better product, we should 560 00:30:58,360 --> 00:31:01,160 Speaker 1: all be thinking about doing that. Now. Might it be 561 00:31:01,200 --> 00:31:04,360 Speaker 1: difficult in some cases? Yes, and and increasingly difficult for 562 00:31:04,360 --> 00:31:06,800 Speaker 1: certain firms, and some strategies might not make it, might 563 00:31:06,880 --> 00:31:12,040 Speaker 1: might pass the test, alright, So Jim, what about for uh, 564 00:31:12,240 --> 00:31:16,000 Speaker 1: like a big mutual fund player, like a Fidelity how 565 00:31:16,040 --> 00:31:17,680 Speaker 1: much how much of this conversation is going to go 566 00:31:17,720 --> 00:31:23,880 Speaker 1: down there? Well, well, I don't have any information about 567 00:31:23,920 --> 00:31:26,400 Speaker 1: what's going on inside of Fidelity UM, but I have 568 00:31:26,600 --> 00:31:32,160 Speaker 1: heard that UM new to fund executives at other large 569 00:31:32,240 --> 00:31:36,080 Speaker 1: firms are watching this very closely. And again it's it's 570 00:31:36,080 --> 00:31:38,920 Speaker 1: almost a case by case basis. Uh, there's a lot 571 00:31:38,920 --> 00:31:42,280 Speaker 1: of business complexity at a larger firm. Uh, the more 572 00:31:42,320 --> 00:31:46,160 Speaker 1: products you have, the more esoteric the products are, the 573 00:31:46,240 --> 00:31:48,440 Speaker 1: less liquid they are. I mean, there's just there's a 574 00:31:48,480 --> 00:31:50,000 Speaker 1: whole lot of things to think about, not to make 575 00:31:50,040 --> 00:31:53,520 Speaker 1: some multiple share classes, distribution channels, etcetera. So it's it's 576 00:31:53,560 --> 00:31:56,440 Speaker 1: it's impossible for me to say what might be happening 577 00:31:56,440 --> 00:31:59,240 Speaker 1: in a particular firm. All I can tell you is 578 00:31:59,280 --> 00:32:04,360 Speaker 1: I know from multiple sources that that the senior executives 579 00:32:04,560 --> 00:32:08,880 Speaker 1: of very large asset management firms are looking at what 580 00:32:08,920 --> 00:32:15,640 Speaker 1: we're doing and you're the guinea pig. Well listen, Joel 581 00:32:15,640 --> 00:32:18,720 Speaker 1: I I tweeted out the other day Dives. I was like, 582 00:32:18,840 --> 00:32:22,920 Speaker 1: this little guy made history. Um, it's you know, gonna 583 00:32:22,960 --> 00:32:25,760 Speaker 1: be the first one over. There's been all kinds of conversions. 584 00:32:26,240 --> 00:32:28,440 Speaker 1: Canada has done this. In the U S. There's been 585 00:32:28,480 --> 00:32:30,320 Speaker 1: I think closed and fun to E t F but 586 00:32:30,400 --> 00:32:33,920 Speaker 1: there has never been this, and so Dives definitely has 587 00:32:34,000 --> 00:32:37,840 Speaker 1: broken ground. It's probably gonna make the history book. So 588 00:32:37,960 --> 00:32:41,200 Speaker 1: congratulations Jim and Alex. I think you've earned a couple 589 00:32:41,200 --> 00:32:46,400 Speaker 1: of drink tickets Alex plus Guinness. By the way, Jim, 590 00:32:46,400 --> 00:32:49,760 Speaker 1: do you get free Guinness? Well that's just that's just 591 00:32:49,800 --> 00:32:53,680 Speaker 1: a perk, so you don't need drink tickets if you 592 00:32:53,680 --> 00:32:57,520 Speaker 1: hang out with Jim. Uh, Jim, Alex, thank you so 593 00:32:57,600 --> 00:32:59,640 Speaker 1: much for joining us. Some Tralians thank you. Yeah, this 594 00:32:59,800 --> 00:33:07,120 Speaker 1: was Thanks so much, guys. Thanks for listening to trillions 595 00:33:07,440 --> 00:33:10,000 Speaker 1: until next time. You can find us on the Bloomberg terminal, 596 00:33:10,200 --> 00:33:14,280 Speaker 1: Bloomberg dot com, Apple Podcasts, Spotify, and where else you'd 597 00:33:14,280 --> 00:33:16,360 Speaker 1: like to listen. We'd love to hear from you. We're 598 00:33:16,360 --> 00:33:19,400 Speaker 1: on Twitter, I'm at Joel Webber Show, He's at Eric 599 00:33:19,440 --> 00:33:23,520 Speaker 1: Ball Tuness and you can find Claire at CFB Underscore 600 00:33:23,560 --> 00:33:27,040 Speaker 1: eight teen. For more on Guinness Atkinson Funds, check out 601 00:33:27,080 --> 00:33:31,640 Speaker 1: smart Ets. This episode of Trillions was produced by Magnus Hendrickson. 602 00:33:31,880 --> 00:33:35,240 Speaker 1: Francesco Levi is the head of Bloomberg Podcast. Bye.