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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is Masters in

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Speaker 1: Business with Barry Ritholtz on Bloomberg Radio.

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Speaker 2: This week on the podcast Another Banger. Steve Cohen is

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Speaker 2: BlackRock's Chief Product Officer and head of Product Solutions. Blackrock

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Speaker 2: runs three and a half trillion dollars of the world's

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Speaker 2: largest asset manager. Their I shares ETF division is over

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Speaker 2: five trillion dollars. There are a few people in the

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Speaker 2: world better situated to identify what is happening in the

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Speaker 2: world of asset and wealth management than Steve Cohen. Not

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Speaker 2: just fixed income, active index, bitcoin, digital assets. They're also

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Speaker 2: moving into private center alternatives, whether that's an ETF which

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Speaker 2: is part of that platform, is something else. Entirely thought

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Speaker 2: this conversation was fascinating, and I think you will also

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Speaker 2: with no further ado. BlackRock's Chief Product Officer and head

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Speaker 2: of Product Solutions, Steven Cohen.

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Speaker 3: It's great to be here.

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Speaker 2: We're going to talk a lot about what you do

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Speaker 2: at black Rock and how the company has been growing.

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Speaker 2: But I want to start with your background degree in

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Speaker 2: economics from Southampton College. Was the plan always to go

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Speaker 2: into investment strategy or what were you thinking back then.

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Speaker 3: I'm not sure I had a plan.

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Speaker 4: I studied economics at school and then at university, and

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Speaker 4: I was always I was always very interested in this

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Speaker 4: kind of concept of the markets. I didn't have any background,

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Speaker 4: no family background in markets or investing, but I always

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Speaker 4: found reading up about markets interesting. And what kind of

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Speaker 4: got me in it was a slight fluke. We were talking

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Speaker 4: about flukes before the show. One of my neighbors was

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Speaker 4: at telecoms engineer and he used to go round to

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Speaker 4: all the banks installing the dealer boards. And he one

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Speaker 4: day and I was talking to him, any one day,

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Speaker 4: it's like.

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Speaker 2: Various ATMs automatic tele machines we call them.

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Speaker 4: Here dealable the phone phone systems, the trading floors, you know,

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Speaker 4: with all the with all the.

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Speaker 2: Die balls, and I was missing.

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Speaker 3: Which maybe he installed those as well. I don't know.

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Speaker 2: Those were the big ATM manufactur.

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Speaker 4: And U and he said, so I got talking about it,

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Speaker 4: and I mentioned this interest, and he said, well, why

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Speaker 4: don't you do a day's work experience with me.

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Speaker 3: We'll go to a bank.

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Speaker 4: So we went to one of the banks, I can't

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Speaker 4: remember which one it was, and I walked onto this

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Speaker 4: trading floor and you know for someone who had no

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Speaker 4: experience or never experienced this before. It was amazing these

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Speaker 4: people shouting. There was screens and flashing numbers and stuff

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Speaker 4: like that, and I thought, you know what this this

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Speaker 4: looks pretty cool. This buzz was was the kind of

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Speaker 4: combination of an opportunity to work in something that that

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Speaker 4: took economics and markets and the world, and then this

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Speaker 4: kind of feeling of a buzzy environment that was the thing.

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Speaker 4: And so I applied to a number of banks and

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Speaker 4: at a university got an opportunity to go to UBS.

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Speaker 2: So that was your first gig right out of school.

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Speaker 2: You're working with convertibles and fixed income and something similar

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Speaker 2: at I G. Bearings. Tell us about your work at

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Speaker 2: UBS and ing what sort of job was it?

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Speaker 3: So I worked.

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Speaker 4: I originally started in fixed income and then and then

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Speaker 4: went into convertible bonds and a lot of what I

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Speaker 4: spent my time doing was kind of more market strategist

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Speaker 4: type of role, so talking to clients about what was

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Speaker 4: going on in the markets, what was going on in

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Speaker 4: the bomb markets, trade, developing trade ideas for clients, and

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Speaker 4: that's also how I got involved in spending quite a

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Speaker 4: lot of time on the Japanese markets, which I found

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Speaker 4: incredibly interesting and really got to understand the Japanese culture

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Speaker 4: and the way the way the country operated.

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Speaker 2: And is that what led you to no Mura or

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Speaker 2: did Nomura come first and then the Japanese.

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Speaker 3: Ev that kind of led? Yeah, it did.

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Speaker 4: So getting involved in Japan kind of lent me to

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Speaker 4: doing to do in combotible bonds, originally at Ing and

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Speaker 4: then with a group of US at Nomura, and and

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Speaker 4: that's where I spent a lot more time on the

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Speaker 4: Japanese markets. And I think it's all part of how

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Speaker 4: you I think back to those days. You know, Japan

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Speaker 4: was very different to what it is kind of now.

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Speaker 4: The market, definitely, the market at the time was about

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Speaker 4: nine The Nikko was about nine thousand nine to ten thousand, given.

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Speaker 2: World down from thirty.

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Speaker 4: Nine thousand and now we're back at forty six thousand,

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Speaker 4: so there was like a proper v shape of that market.

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Speaker 2: I took three and a half days.

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Speaker 4: And I took three and a half decades, and I

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Speaker 4: managed to do the middle bit, which was not necessarily

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Speaker 4: the most exciting bit. I've gotta be honest, but I think,

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Speaker 4: you know, again, it was what was interesting about it

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Speaker 4: is you learn about kind of an economy and therefore

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Speaker 4: a stock market that is in such a different place

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Speaker 4: as it was then to you know, look at the

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Speaker 4: US market or the European markets at the time.

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Speaker 2: So that raises a really interesting question. How do you think,

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Speaker 2: how do you think about the nineteen nineties, even the

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Speaker 2: two thousands, you're numuro till twenty eleven, How do you

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Speaker 2: think about those decades versus today? That world doesn't seem

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Speaker 2: like it's that long ago, but it really feels like

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Speaker 2: it was so different.

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Speaker 3: It feels incredibly different. I think for Japan it's completely different.

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Speaker 4: You know, if you go back to, as you say,

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Speaker 4: the late nineties, early two thousands, you know, the banking

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Speaker 4: crisis that was part of the bubble and the collapse

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Speaker 4: had still not been solved, and it was only really

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Speaker 4: in the early early to mid two thousands that they

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Speaker 4: finally got their arms around the banking system. And one

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Speaker 4: thing you read about history, and unless you can get

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Speaker 4: the banking system operating properly and lending, you really struggle

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Speaker 4: to get an economy going. The second thing that's really

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Speaker 4: interesting I think is so different is back then you

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Speaker 4: every six months every year that would be a government

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Speaker 4: led fiscal impulse, and you know, they used to call

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Speaker 4: it the building the roads to nowhere, paving the entire

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Speaker 4: country just got to kind of spend and spend and spend,

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Speaker 4: and the reaction of the market to that was this

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Speaker 4: is going to have no impact. The reaction now so

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Speaker 4: fiscal spending is actually, this is great. This is kind

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Speaker 4: of part of the economy the country of being back

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Speaker 4: on its feet. You're now talking about inflation being potentially

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Speaker 4: an issue in Japan, whereas there it was all about deflation.

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Speaker 4: So it's quite amazing how it has turned around, and

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Speaker 4: you're seeing that in the bomb market and just the yields.

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Speaker 2: One of the things I'm kind of fascinating about following

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Speaker 2: the Japan bubble parking in eighty nine and how long

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Speaker 2: it took to recover from that is the concept and

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Speaker 2: apologies in advance from my mispronunciation of Kiritsu, which is

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Speaker 2: the Japanese concept of these vertically integrated companies manufacturing, retail,

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Speaker 2: bank thinking like just every sector. If there's a banking problem,

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Speaker 2: the entire economy seems to run into trouble because that

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Speaker 2: whole vertical Sometimes it's Mitsubishi, sometimes it's whatever. Each of

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Speaker 2: these entities are giant, and if the bank has a problem, wow,

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Speaker 2: you're really doing some damage.

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Speaker 4: Yeah, because I think if you look back to the

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Speaker 4: history and again this is this is changing in the

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Speaker 4: different to the way we'd think about kind of Western

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Speaker 4: markets and companies. But Japan historically it was a bank

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Speaker 4: lending market, and you've got financing through bank lending all

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Speaker 4: the stock market and so banks were just so central

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Speaker 4: to the way the economy operated. And you see parallels

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Speaker 4: to that in Europe a little bit less here in

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Speaker 4: the US.

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Speaker 3: It's very different.

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Speaker 5: Now.

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Speaker 4: You know, there's there's the banking sector, which is obviously

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Speaker 4: very critical to the way companies are financing, but you

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Speaker 4: have this huge kind of private sector. You have private lending,

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Speaker 4: direct lending, things like that. So again it's good. I

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Speaker 4: think one things I've learned over my career and have

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Speaker 4: the opportunity to work in different markets, as you start

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Speaker 4: to see these the way these economies operated different, and

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Speaker 4: therefore the impact on the markets and therefore investors is

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Speaker 4: very very different.

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Speaker 2: So you stay at Nomura till twenty eleven, how did

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Speaker 2: you what brought you from the Mura to Blackrock?

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Speaker 4: So I had an opportunity, you know, having had a

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Speaker 4: lot of great experiences. Twenty eleven, Blackrock was probably eighteen

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Speaker 4: months into the integration of the I shares business or

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Speaker 4: the indexing business, and really focused on how do we

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Speaker 4: expand this business, particularly how do we expand icees, this

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Speaker 4: ETF business. And back in twenty eleven Europe, European ETFs

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Speaker 4: was still a very nascent industry. You know, now it's

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Speaker 4: like a two and a half trillion dollar industry. European

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Speaker 4: I shares is over a trillion dollars. Back then, it

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Speaker 4: was very much still the very early days, and you

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Speaker 4: could see what was happening in the States, and so

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Speaker 4: when I was speaking to black Rock, you could see

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Speaker 4: this really interesting opportunity to kind of take all of

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Speaker 4: what I'd done before in terms of the market's kind

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Speaker 4: of background and the breadth of experience, and then apply

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Speaker 4: it to this thing that was still pretty new. And

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Speaker 4: the kind of mission was, how do you educate people

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Speaker 4: about what an ETF is, how do you help people

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Speaker 4: start to think about how to use an ETF in

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Speaker 4: a portfolio? And by the way, also what are the

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Speaker 4: ETFs that don't exist yet that could exist? And again

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Speaker 4: you always have to. It's quite hard if you always

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Speaker 4: have to cast a barrier. You aways have to cast

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Speaker 4: your mind back to what it was then versus your

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Speaker 4: perspective of where you are today.

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Speaker 3: It was still fairly, you know, plain vanilla.

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Speaker 2: In terms of what go back to the nineteen nineties.

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Speaker 2: I'm pretty sure the cues were around then, and Spy

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Speaker 2: might have been around. This is before Really I Shares

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Speaker 2: were still part of Barclays. But no one really thought

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Speaker 2: that ETFs were a giant waiting to take place, or

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Speaker 2: I should say very few people like that. The ones

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Speaker 2: who did ended up being at the head of a

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Speaker 2: giant wave. What made you realize fifteen years ago that hey,

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Speaker 2: this I Shares thing is going to be big one day.

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Speaker 3: Honestly, it was talking to the people in I Shares.

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Speaker 4: It was having kind of been introduced to them and

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Speaker 4: having been approached to go and talk to them. It

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Speaker 4: was I learned a lot from just sitting down and

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Speaker 4: understanding this. I'd sat in banks, we traded ETFs. They were,

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Speaker 4: to be honest, a very very small component of what

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Speaker 4: we of what we did. It was only really when

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Speaker 4: I spoke to the people at I Shares and a

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Speaker 4: Black Crock and understood the history of how I Shares

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Speaker 4: had grown and where it was then, and that sense

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Speaker 4: of mission, that sense of kind of the purpose of

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Speaker 4: giving more access to investing two people, you know, and

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Speaker 4: creating more transparency that they had lived as they'd grow

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Speaker 4: in the US business and they were growing the European business,

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Speaker 4: and that kind of just captured you. And I think frankly,

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Speaker 4: in the last fifteen years I've seen that I've been

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Speaker 4: fortunately been part of kind of driving that, but it

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Speaker 4: was very clear that there was a big opportunity to

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Speaker 4: do something different in an industry, an asset, and from

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Speaker 4: an industry that hadn't really been shaken up. And I

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Speaker 4: think one thing that ETFs have done and I Shares

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Speaker 4: has lid this is really shaken up the industry on

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Speaker 4: behalf of end investors in a couple of ways.

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Speaker 2: At the very least, they're very low cost, and it's

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Speaker 2: raised questions about are do most not all, but do

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Speaker 2: most active managers actually justify their fees relative to their performance.

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Speaker 2: And then second, helping to move a lot of mom

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Speaker 2: and pop investors at least having a core as passive

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Speaker 2: indexing as opposed to an allocation that's nothing but active managers.

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Speaker 2: I mean I Shares has been the biggest driver of that.

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Speaker 2: When you started at Blackrock, what was the first job?

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Speaker 4: So I started in the I shares business and I

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Speaker 4: actually set up an investment strategy team and what we

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Speaker 4: did was go out and talk to clients about what

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Speaker 4: was going on in markets.

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Speaker 3: You know, we were part of Blackrock. Now my chairs

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Speaker 3: was part of Blackrock, and so.

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Speaker 4: There's a huge pedigree of investing and how do you

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Speaker 4: take that externally to our clients and educate them about

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Speaker 4: how ETFs could be used to implement these ideas build portfolios.

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Speaker 4: I have say in the early days, a lot of

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Speaker 4: it was just educating people on what is an ETF, like,

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Speaker 4: how does it actually work, what is a creation, what

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Speaker 4: is a redemption? And what do I need to understand

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Speaker 4: and know. Secondly, how do I then think about putting

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Speaker 4: them in a portfolio? And what's interesting I remember a

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Speaker 4: couple of years in probably probably eighteen months into my

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Speaker 4: time at Blackrock, did a big study on how do

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Speaker 4: you blend active and indexing? And we're very allergic to

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Speaker 4: the word passive. As you know, we used to go

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Speaker 4: out and say to people, which we still do. You know,

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Speaker 4: every decision you make is active, right, right?

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Speaker 2: If you be cap weighted, I mean it could. It's

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Speaker 2: a decision an equal cap totally.

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Speaker 4: You know, investing in US equities is a decision as

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Speaker 4: an active decision, then deciding to use an ETF is

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Speaker 4: an active decision. So we would, you know, we would

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Speaker 4: talk to clients about and what does it mean to

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Speaker 4: use an ETF, how does it fit with with active management,

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Speaker 4: which again go back to I think it's pretty well

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Speaker 4: accepted now. I think Black Crockers and the ETF industry

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Speaker 4: has played a big, big role in this. But the

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Speaker 4: concept of blending indexing and active managers and alpha in

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Speaker 4: one portfolios's that's kind of very accepted. People kind of

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Speaker 4: get that. It's pretty standard. It wasn't back then ten

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Speaker 4: fourteen years ago, and in some respects it was slightly

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Speaker 4: religious in terms of indexing or like you're either passive

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Speaker 4: or you're active.

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Speaker 2: I recall the phrase that was used in the two

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Speaker 2: thousand's Core and Satellite COREN Satellite, and you don't hear

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Speaker 2: that all that much anymore. Now. It's you have a

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Speaker 2: passive core and you're you're decorating it with active choices

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Speaker 2: around it.

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Speaker 4: Yeah, it's kind of how do you get the best

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Speaker 4: out of out of everything? How do you say, you

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Speaker 4: know what, Actually, here's an area where I think that

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Speaker 4: we can deliver alpha, which is really what you're when

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Speaker 4: you say active, what you're really saying is like alpha,

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Speaker 4: something beyond the index. And I come back to a

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Speaker 4: point you made earlier bout it about how the industry shifted.

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Speaker 4: I think what ETFs did is they shone a light

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Speaker 4: on what is what is performance? And you know, if

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Speaker 4: you can get the index through an ETF, it's very efficient,

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Speaker 4: then as an active manager, you've got to deliver something more,

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Speaker 4: and many, many active managers a black rock do deliver more.

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Speaker 4: But I think that that element of the more became

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Speaker 4: a very important component of the industry and component of

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Speaker 4: how for many investors they could then blend these these

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Speaker 4: different tools together to create better portfolios. And I think

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Speaker 4: that's the journey to me in the last kind of

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Speaker 4: twelve fourteen years has been so exciting.

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Speaker 2: You said when you began, you went out and spoke

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Speaker 2: to a variety of black rock clients. Were these mom

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Speaker 2: and pop investors, were these institutional clients. Were they brokers

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Speaker 2: and rias that are investing in ETFs on beha for

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Speaker 2: their clients, who were the folks that you first reached

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Speaker 2: out to.

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Speaker 4: It was pretty broad actually, it tended to be wealth managers,

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Speaker 4: and it tended to be institutional investors, which would be

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Speaker 4: you know, primarily compension funds. But what's interesting is how

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Speaker 4: that has, how that's expanded over the last again, in

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Speaker 4: the last kind of decade. You know, if I look

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Speaker 4: at if I look at the breadth of users now,

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Speaker 4: is anything from central banks through to you know, entrytail

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Speaker 4: investors in four oh one K plans or the equivalent

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Speaker 4: in Europe. And I think that's been one of the

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Speaker 4: secrets to why ETFs have grown so quickly is that

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Speaker 4: they actually are very much a product or a tool

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Speaker 4: for anybody and everybody. So it started very much with

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Speaker 4: I would say, kind of wealth manager and PNCH funds,

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Speaker 4: but it grew out and out and out, and frankly,

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Speaker 4: in Europe we learned a lot from the way the

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Speaker 4: US industry had grown. We talk all the time about

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Speaker 4: how the European ETF industry is probably about ten years

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Speaker 4: behind the US, and so there's a bit of a

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Speaker 4: roadmap there and I think we're seeing that happen in

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Speaker 4: Real Time.

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Speaker 2: Coming up, we continue our conversation with Steve Cohen, black

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Speaker 2: Rock's Chief Product Officer and head of Global Product Solutions,

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Speaker 2: discussing the idea of private market assets in an etf rapper.

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Speaker 2: I'm Barry Rittaults. You're listening to Masters in Business.

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Speaker 3: On Bloomberg Radio.

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Speaker 2: I'm Barry Ridults. You're listening to Masters in Business on

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Speaker 2: Bloomberg Radio. My extra special guest this week is Steve Cohen.

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Speaker 2: He's black Rocks Chief Product Officer and head of Global

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Speaker 2: Product Solutions. He also sits on black Rocks Global Executive Committee.

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Speaker 2: When I look over at Europe and especially the UK,

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Speaker 2: it seems like index adoption has been very slow. People

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Speaker 2: haven't quite bought into the concept of hey, before you

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Speaker 2: go after alpha, at least start with beta. That hasn't

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Speaker 2: really found a lot of traction there yet or are

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Speaker 2: you seeing that start to change in Europe.

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Speaker 3: We've seen that change.

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Speaker 4: It's definitely behind the US, but it is definitely happening,

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Speaker 4: and I think the same forces and drivers that we've

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Speaker 4: seen in the US are very much applicable to Europe

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Speaker 4: and ultimately will be to Asia as well, which I

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Speaker 4: think will go on that kind of same journey. So

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Speaker 4: I think it's just more of a matter of time

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Speaker 4: or timing as to where we are now.

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Speaker 3: Versus the US.

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Speaker 4: And there are different country dynamics that everywhere in the

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Speaker 4: world play into why different parts of the industry move

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Speaker 4: quicker or slower.

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Speaker 3: But I think the direction is definitely the same.

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Speaker 2: Different regulatory regimes, tax treatment, technology. Is the technology really

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Speaker 2: all that different? You would think that adoption maybe some

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Speaker 2: countries not a lag, but not ten years.

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Speaker 4: Yeah, I think it's just so I think the last

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Speaker 4: ten years in the US, if we are today in

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Speaker 4: somewhere like Europe in the ETF industry where the US

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Speaker 4: was ten years ago, I think the next ten years

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Speaker 4: in Europe will be faster than the last ten years

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Speaker 4: in the US. Makes sense, Yeah, it's because I think

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Speaker 4: that partly because there is a roadmap that the US

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Speaker 4: has created. It's different because of regulation, all the things

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Speaker 4: that you mentioned. But I think that everything is happening

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Speaker 4: so much faster now, and you've seen that in ETFs,

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Speaker 4: You've seen that in other parts of the industry as well.

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Speaker 2: So let's talk a little bit about what you've been

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Speaker 2: doing at black Rock for almost the past fifteen years.

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Speaker 2: You begin in twenty eleven. The growth must have been explosive.

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Speaker 2: What was that like watching this rocket ship take off?

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Speaker 3: It's been fantastic. It's been an amazing experience.

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Speaker 4: You know, the firm has grown so quickly in the

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Speaker 4: last ten to fifteen years, and not just grown in

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Speaker 4: terms of assets, which is obviously one way to measure growth,

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Speaker 4: but also just the breadth of what Blackrock does for

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Speaker 4: our clients and the breadth of the number of clients

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Speaker 4: that we talk to. What's I think so for someone

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Speaker 4: like me, what's been so great is the ability to

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Speaker 4: be involved in lots of different parts of the firm,

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Speaker 4: and you know, whether that was again growing the European

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Speaker 4: I shares business, whether that was running fixed income I shares,

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Speaker 4: which was a fantastic opportunity and time or moment in time,

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Speaker 4: I should say, in terms of really not just growing

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Speaker 4: fixing commtfs, but changing the bomb market and the impact

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Speaker 4: we've had there to now where again the breadth of

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Speaker 4: the company with private markets and things like that. So

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Speaker 4: it has been a great journey to be on personally,

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Speaker 4: but also to see it from the inside.

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Speaker 2: Can you explain what a chief product officer does at

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Speaker 2: a large asset manager. It's sort of an unusual title

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Speaker 2: in the world of investing.

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Speaker 4: Yeah, So there are a number of things that I

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Speaker 4: look at and my team look at. One is, how

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Speaker 4: do we continue to make sure that our product range

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Speaker 4: is at the forefront of innovation in terms of where

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Speaker 4: the industry is going. How do we make sure that

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Speaker 4: what our clients are looking for with delivering in whatever

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Speaker 4: format they're looking at. And I think one of the

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Speaker 4: biggest shifts that we've seen in the industry we talk

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Speaker 4: before about kind of how you blend active at indexing

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Speaker 4: kind of together, how that's become more commonplace and kind

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Speaker 4: of more more accepted. I think the other thing that

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Speaker 4: is happening is that the way all of our clients

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Speaker 4: are consuming investments or accessing markets is also shifting. So

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Speaker 4: this concept that you know, pretty much for the whole

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Speaker 4: time that we were growing the I shares business, when

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Speaker 4: we talked about growing ETFs, we were really talking about

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Speaker 4: were also talking about growing indexing.

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Speaker 3: That was very synonymous.

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Speaker 4: Right when you talk about growing ETFs, now you're not

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Speaker 4: just talking about growing indexing, You're talking about lots of

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Speaker 4: different things, active, ETFs, digital assets. And so I think

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Speaker 4: this concept of how we ensure that as we look

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Speaker 4: across all of the investment capabilities we have as a

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Speaker 4: firm that we want to bring to our clients, that

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Speaker 4: we're delivering them in a way that works for our clients,

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Speaker 4: that requires us to think a little bit differently to

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Speaker 4: the way we've had too in the past, and the

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Speaker 4: way I think the way the industry has And so

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Speaker 4: that's we've brought all this together into my role and

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Speaker 4: my group, and that includes driving the I shares business

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Speaker 4: and the growth of ETFs, making ETFs more central to

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Speaker 4: what we do in the firm, but also looking across

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Speaker 4: all of our liquid active business, our private markets businesses,

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Speaker 4: with our investment teams and those business leads to ensure

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Speaker 4: that our product range works for our clients, and then

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Speaker 4: helping them, helping our clients actually get the best out

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Speaker 4: of what we have.

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Speaker 3: I started an investment strategy.

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Speaker 4: We spent a lot of time talking to clients about

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Speaker 4: what's going on in markets, how to build better portfolios,

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Speaker 4: how to get the best out of the tools that

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Speaker 4: they have that we need to build, and then what's next,

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Speaker 4: what's the next trend or theme that's on people's minds.

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Speaker 2: So I'm hearing two approaches. One is a top down here,

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Speaker 2: what's going on in the world, what's out there that's

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Speaker 2: interesting that perhaps we're not addressing, and a bottoms up

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Speaker 2: what our clients askoking for? What do they think they want?

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Speaker 2: What do we think they need? What? What's the key

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Speaker 2: driver of new offerings. We could talk a little bit

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Speaker 2: about ibit, which is a unicorn, the the Bitcoin ETF

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Speaker 2: approaching one hundred billion dollars in assets. I think it

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Speaker 2: could be the fastest ETF to one hundred billion dollars.

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Speaker 2: I don't even know what's close. Maybe GLD, but that

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Speaker 2: that was a long time ago. How do you think

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Speaker 2: about coming up with new products? How much of it

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Speaker 2: is driven by client demand and how much of it

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Speaker 2: is driven by just looking from the top down and saying,

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Speaker 2: here's a hole that we really should fill.

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Speaker 4: It's a real mixture, it is. You know, we'll have

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Speaker 4: a lot of ideas. We'll have a lot of ideas

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Speaker 4: that are driven by investment views we have as a firm,

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Speaker 4: by our investment teams, by working with other people in

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Speaker 4: the industry, and we will combine that with what we're

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Speaker 4: hearing from clients and where clients are. You know, we're

439
00:24:09,960 --> 00:24:12,480
Speaker 4: engaging with clients all the time around you know their

440
00:24:12,520 --> 00:24:16,320
Speaker 4: portfolios and seeing where are their kind of gaps in

441
00:24:16,359 --> 00:24:20,560
Speaker 4: a portfolio or where are there sometimes it's sometimes there

442
00:24:20,560 --> 00:24:24,800
Speaker 4: are investment opportunities, but there isn't a way to get

443
00:24:24,840 --> 00:24:27,800
Speaker 4: to it. Again, come back to what ETFs have done,

444
00:24:27,840 --> 00:24:30,160
Speaker 4: like how do you give that access to to something

445
00:24:30,200 --> 00:24:32,679
Speaker 4: that was new? If you think about ibit, you know,

446
00:24:32,840 --> 00:24:36,280
Speaker 4: bitcoin obviously had grown already to a pretty sizable kind

447
00:24:36,280 --> 00:24:37,080
Speaker 4: of industry.

448
00:24:37,280 --> 00:24:40,800
Speaker 2: I think when ibit launched, bitcoin was a little over

449
00:24:40,840 --> 00:24:42,200
Speaker 2: a trillion dollar or something.

450
00:24:42,000 --> 00:24:42,560
Speaker 3: Like roughly that.

451
00:24:42,800 --> 00:24:47,200
Speaker 4: Yeah, and so there was a sizeable kind of industry

452
00:24:47,240 --> 00:24:51,040
Speaker 4: already out there. But for many clients or many potential investors,

453
00:24:52,480 --> 00:24:57,080
Speaker 4: the ease, the comfort, the knowledge understanding of an ETF

454
00:24:57,320 --> 00:24:59,200
Speaker 4: rapper was a great.

455
00:24:59,000 --> 00:25:01,240
Speaker 3: Way of allowing them.

456
00:25:01,080 --> 00:25:06,760
Speaker 4: To buy into crypto bitcoin in this case, and make

457
00:25:06,840 --> 00:25:10,119
Speaker 4: it potentially a bigger part of the portfolio. What's interesting

458
00:25:10,200 --> 00:25:13,639
Speaker 4: is the number of you know, in that explosive growth

459
00:25:13,640 --> 00:25:20,000
Speaker 4: that ibit has had, the number of buyers investors of

460
00:25:20,200 --> 00:25:24,360
Speaker 4: ibit who are already holders of bitcoin in other forms

461
00:25:24,760 --> 00:25:27,600
Speaker 4: was quite notable, and so I think it kind of

462
00:25:27,800 --> 00:25:31,560
Speaker 4: tests to this idea of actually, how do you access

463
00:25:31,560 --> 00:25:34,560
Speaker 4: different markets, sometimes in quite traditional ways, and how do

464
00:25:34,600 --> 00:25:36,960
Speaker 4: you bridge between this kind of traditional world and this

465
00:25:37,240 --> 00:25:40,280
Speaker 4: decentralized world. And you're seeing the same thing with Ether

466
00:25:40,440 --> 00:25:41,760
Speaker 4: as well with our Ether fund.

467
00:25:42,160 --> 00:25:46,000
Speaker 2: So you know, the classic bitcoin issue is, wait, I

468
00:25:46,040 --> 00:25:48,680
Speaker 2: have to make sure that this drive doesn't get damaged.

469
00:25:48,720 --> 00:25:51,640
Speaker 2: I have to keep in the safe. What's my password? Hey,

470
00:25:51,680 --> 00:25:53,600
Speaker 2: this is a lot of money and it's a bigger

471
00:25:53,640 --> 00:25:56,440
Speaker 2: pain in the neck to keep track of than the

472
00:25:56,480 --> 00:26:00,800
Speaker 2: rest of my assets. I can own this in ETF

473
00:26:00,960 --> 00:26:04,119
Speaker 2: Why do I ever want to own bitcoins directly? He

474
00:26:04,359 --> 00:26:06,679
Speaker 2: seems to be what a lot of people are saying.

475
00:26:06,560 --> 00:26:08,399
Speaker 4: That, and that's what we heard over and over again,

476
00:26:09,240 --> 00:26:12,760
Speaker 4: both again from people who had held or hold bitcoin

477
00:26:12,800 --> 00:26:15,960
Speaker 4: in digital wallets and felt that this was kind of

478
00:26:15,960 --> 00:26:18,000
Speaker 4: an easier, better way to hold.

479
00:26:17,760 --> 00:26:22,280
Speaker 2: It, especially when you read the numbers. Twenty five percent

480
00:26:22,359 --> 00:26:24,639
Speaker 2: of all coins. Ever, mind it might even be thirty

481
00:26:24,680 --> 00:26:28,159
Speaker 2: percent have been lost either the price were damaged or

482
00:26:28,200 --> 00:26:29,679
Speaker 2: the passwords were lost.

483
00:26:29,480 --> 00:26:31,280
Speaker 3: Which is there's some great stories out there.

484
00:26:31,320 --> 00:26:33,960
Speaker 2: Crazy guy who went out and bought a landfill because.

485
00:26:33,720 --> 00:26:36,240
Speaker 3: He's because he was trying to find the two.

486
00:26:36,119 --> 00:26:38,480
Speaker 2: Hundred million dollars worth of bitcoin on the drive, that

487
00:26:38,560 --> 00:26:40,240
Speaker 2: was accidentally thrown away.

488
00:26:40,240 --> 00:26:42,439
Speaker 4: I mean, so you know, putting in a nice are

489
00:26:42,480 --> 00:26:46,840
Speaker 4: probably would have been at least an easier way of

490
00:26:48,320 --> 00:26:49,080
Speaker 4: owning a landfill.

491
00:26:49,520 --> 00:26:54,119
Speaker 2: It's but it's kind of amazing. But it raises a

492
00:26:54,240 --> 00:26:59,440
Speaker 2: question that I've been thinking about for a while. Alternatives

493
00:26:59,440 --> 00:27:03,880
Speaker 2: and private whether it's private equity, private debt, private infrastructure,

494
00:27:03,920 --> 00:27:08,040
Speaker 2: and real assets are probably the fastest growing segment of

495
00:27:08,080 --> 00:27:11,080
Speaker 2: the market. Are we ever going to see something like

496
00:27:11,119 --> 00:27:16,600
Speaker 2: that in an ETF wrapper and illiquid art in an ETF.

497
00:27:17,560 --> 00:27:18,040
Speaker 3: Possibly.

498
00:27:19,080 --> 00:27:21,639
Speaker 4: Look, it's definitely something that a lot of people are

499
00:27:21,680 --> 00:27:24,240
Speaker 4: looking at, including ourselves, But there are a lot of

500
00:27:24,280 --> 00:27:26,240
Speaker 4: ways to I think the biggest story, I think people

501
00:27:26,320 --> 00:27:29,000
Speaker 4: jump towards the kind of private markets in ETFs, and

502
00:27:29,040 --> 00:27:32,160
Speaker 4: the real story is how do you open up access

503
00:27:32,320 --> 00:27:36,000
Speaker 4: appropriately for more people to access private markets as part

504
00:27:36,000 --> 00:27:38,080
Speaker 4: of the portfolio. So, if we think about a world

505
00:27:38,119 --> 00:27:40,080
Speaker 4: which we believe in which you're kind of moving from

506
00:27:40,080 --> 00:27:43,240
Speaker 4: called it sixty forty, you know, the traditional portfolio to

507
00:27:43,320 --> 00:27:45,639
Speaker 4: more of a fifty to thirty twenty where twenty is

508
00:27:45,680 --> 00:27:49,199
Speaker 4: private markets. And that's applicable to somebody who owns a

509
00:27:49,200 --> 00:27:52,399
Speaker 4: defined benefit scheme. In fact, they've got that already probably

510
00:27:52,400 --> 00:27:55,399
Speaker 4: more through the way the scheme's managed. But actually if

511
00:27:55,440 --> 00:27:58,639
Speaker 4: you then apply that to, say to other pension types

512
00:27:58,680 --> 00:28:02,320
Speaker 4: like a defined contribution SCI or a wealth investor, that

513
00:28:02,480 --> 00:28:05,760
Speaker 4: kind of journey towards incorporating more private markets into a

514
00:28:05,760 --> 00:28:09,760
Speaker 4: portfolio for all of the diversification reasons that we've talked

515
00:28:09,760 --> 00:28:16,879
Speaker 4: about a lot that how that happens is the real work,

516
00:28:17,480 --> 00:28:21,000
Speaker 4: and that may end up requiring an ETF, but I

517
00:28:21,000 --> 00:28:23,440
Speaker 4: think there are a lot of other ways that could

518
00:28:23,480 --> 00:28:26,879
Speaker 4: open up the door to private markets being a bigger part,

519
00:28:27,160 --> 00:28:29,880
Speaker 4: either either a completely new part or a bigger part

520
00:28:29,920 --> 00:28:34,119
Speaker 4: of a portfolio for you know, an individual retiree or

521
00:28:34,119 --> 00:28:36,840
Speaker 4: an individual investor. Again comes back to what we were

522
00:28:36,840 --> 00:28:41,800
Speaker 4: saying earlier on about rather than thinking about different product

523
00:28:41,800 --> 00:28:44,600
Speaker 4: types an ETF or a mutual fund being associated with

524
00:28:44,760 --> 00:28:47,400
Speaker 4: one type of strategy, it's actually saying.

525
00:28:48,640 --> 00:28:52,320
Speaker 3: What are the strategies that we believe would help a

526
00:28:52,400 --> 00:28:55,440
Speaker 3: client an investor have a better portfolio for whatever their

527
00:28:55,480 --> 00:28:58,719
Speaker 3: goals are, and then how do you best put that together?

528
00:28:58,880 --> 00:29:01,720
Speaker 2: So it's it's less about the product, more about the

529
00:29:01,760 --> 00:29:02,880
Speaker 2: solution to those To.

530
00:29:02,800 --> 00:29:05,400
Speaker 3: Me, it's about the portfolio. Yeah, what's the solution exactly?

531
00:29:05,440 --> 00:29:07,200
Speaker 4: What are you trying to achieve, you know, and if

532
00:29:07,240 --> 00:29:10,400
Speaker 4: it's long term retirement or retirement income, whatever it is,

533
00:29:11,240 --> 00:29:13,040
Speaker 4: And then what does the portfolio need to look like

534
00:29:13,240 --> 00:29:15,280
Speaker 4: or should look like, and how does it evolve over time?

535
00:29:15,600 --> 00:29:17,240
Speaker 3: And then how do you do it right?

536
00:29:17,840 --> 00:29:19,680
Speaker 4: And what are the kind of mixture of tools that

537
00:29:19,840 --> 00:29:22,680
Speaker 4: are most appropriate to get you there?

538
00:29:22,800 --> 00:29:25,360
Speaker 2: So that's the shift in thinking. So let's dive into

539
00:29:25,400 --> 00:29:29,560
Speaker 2: that a little bit. You know, the advantage of stocks, bonds, convertibles.

540
00:29:30,880 --> 00:29:33,440
Speaker 2: They all come with AQSIP number. It's pretty standard in

541
00:29:33,560 --> 00:29:39,040
Speaker 2: terms of the custodian ship where it's held. What sort

542
00:29:39,040 --> 00:29:42,560
Speaker 2: of public information is about available, the due diligence you

543
00:29:42,600 --> 00:29:45,200
Speaker 2: can do about it, how to get liquid when you

544
00:29:45,240 --> 00:29:49,200
Speaker 2: want to get liquid? All those stocks, bonds and put

545
00:29:49,240 --> 00:29:53,720
Speaker 2: convertibles as sort of a hybrid. Everybody knows how to

546
00:29:53,920 --> 00:29:57,480
Speaker 2: operate around that. It seems like when we look at privates,

547
00:29:58,040 --> 00:30:02,120
Speaker 2: they're all one offs. The custodianship are all a single thing.

548
00:30:02,720 --> 00:30:06,400
Speaker 2: Doing the due diligence is time consuming and expensive. The

549
00:30:07,320 --> 00:30:11,440
Speaker 2: hope is they're they're not correlated and you're giving up

550
00:30:11,640 --> 00:30:16,640
Speaker 2: liquidly in exchange for the liquidity premium. Can that ever

551
00:30:16,800 --> 00:30:22,920
Speaker 2: be standardized? Enough that as a wealth manager, I could say, Hey, Steven,

552
00:30:23,000 --> 00:30:26,040
Speaker 2: I want to move ten twenty percent of these clients'

553
00:30:26,040 --> 00:30:31,200
Speaker 2: assets to a diversified set of equity, debt, and real assets,

554
00:30:32,000 --> 00:30:36,280
Speaker 2: and I want some liquidly Like is this a pipe dream? Oh?

555
00:30:36,320 --> 00:30:38,360
Speaker 2: And I don't want any k ones because they're a

556
00:30:38,400 --> 00:30:43,440
Speaker 2: disaster to deal with. Like, if that were something that

557
00:30:43,560 --> 00:30:48,160
Speaker 2: was turnkeen available, I would think that every wealth manager

558
00:30:48,160 --> 00:30:51,760
Speaker 2: in America would rush in that direction. How long might

559
00:30:51,800 --> 00:30:59,240
Speaker 2: it be before privates look something like public markets, or

560
00:30:59,280 --> 00:31:04,520
Speaker 2: at least the pain points are are reduced to something tolerable.

561
00:31:04,760 --> 00:31:07,480
Speaker 4: I think we're we're on a journey, and I think

562
00:31:07,480 --> 00:31:12,120
Speaker 4: that that is about, first of all, developing investment strategies

563
00:31:12,160 --> 00:31:15,200
Speaker 4: and therefore and being able to put them in products

564
00:31:15,240 --> 00:31:18,640
Speaker 4: that work for a wealth manager. Secondly, there's a big

565
00:31:18,640 --> 00:31:22,080
Speaker 4: you know, the operational lift, right the technology development that

566
00:31:22,160 --> 00:31:22,840
Speaker 4: is happening, and.

567
00:31:22,760 --> 00:31:24,560
Speaker 3: We're working We're working with a number of.

568
00:31:26,400 --> 00:31:28,880
Speaker 4: Firms around how can we make sure that, for example,

569
00:31:28,880 --> 00:31:32,000
Speaker 4: model portfolios can incorporate private markets in a more efficient

570
00:31:32,120 --> 00:31:36,040
Speaker 4: kind of easier to use way. It's going to be

571
00:31:36,040 --> 00:31:38,400
Speaker 4: different to public markets. It should be different to public

572
00:31:38,440 --> 00:31:41,800
Speaker 4: markets because I think the role of an infrastructure, for example,

573
00:31:41,840 --> 00:31:44,400
Speaker 4: in a in a in a portfolio is different to

574
00:31:44,440 --> 00:31:46,920
Speaker 4: the role of owning stocks or owning bonds, and I

575
00:31:46,960 --> 00:31:50,560
Speaker 4: think that part of you know, part of the way

576
00:31:50,600 --> 00:31:52,440
Speaker 4: we've always thought about the role of stocks and bonds

577
00:31:52,480 --> 00:31:54,440
Speaker 4: has been different as well. You know, bonds is a

578
00:31:54,440 --> 00:31:56,800
Speaker 4: ballast to a portfolio stocks as a growth driver.

579
00:31:56,920 --> 00:31:58,960
Speaker 3: For example. I think you think.

580
00:31:58,800 --> 00:32:02,600
Speaker 2: About when barns we generated attractive.

581
00:32:02,160 --> 00:32:05,720
Speaker 4: Yields, Maybe that'll come back, you know, we might need

582
00:32:05,720 --> 00:32:08,760
Speaker 4: a bit of inflation, but yeah, one day, one day,

583
00:32:09,520 --> 00:32:12,280
Speaker 4: so we be back on the podcast to cover that off.

584
00:32:12,400 --> 00:32:14,760
Speaker 4: But I think that different role is very important. But

585
00:32:14,800 --> 00:32:18,640
Speaker 4: there's a lot of development that is happening to be

586
00:32:18,680 --> 00:32:22,680
Speaker 4: able to make that more efficient than it has been historically.

587
00:32:23,520 --> 00:32:26,080
Speaker 4: And I think that's I think we will see a

588
00:32:26,120 --> 00:32:27,440
Speaker 4: lot of change in the next couple of years.

589
00:32:27,720 --> 00:32:31,160
Speaker 2: You mentioned technology. Let's let's dive a little deeper into that.

590
00:32:31,720 --> 00:32:36,280
Speaker 2: Black Rock acquired Prequin and acquired e front and I'm

591
00:32:36,600 --> 00:32:41,440
Speaker 2: read about some integration into your Aladdin platform. How significant

592
00:32:41,480 --> 00:32:46,680
Speaker 2: are those tools when it comes to offering private market

593
00:32:46,760 --> 00:32:48,640
Speaker 2: investments to the public.

594
00:32:49,600 --> 00:32:50,640
Speaker 3: Incredibly important.

595
00:32:50,800 --> 00:32:54,560
Speaker 4: I think that you know, for anybody who is for

596
00:32:54,600 --> 00:32:57,880
Speaker 4: a wealth manager who is running a portfolio for a client.

597
00:32:59,600 --> 00:33:01,440
Speaker 4: The it's not just as you know, it's not just

598
00:33:01,480 --> 00:33:04,320
Speaker 4: about buying the different products or doing the asset allocation.

599
00:33:04,400 --> 00:33:06,640
Speaker 4: It's also about the risk management of what does that

600
00:33:06,680 --> 00:33:11,040
Speaker 4: portfolio look like. And that's really what a laddin is about.

601
00:33:11,480 --> 00:33:16,680
Speaker 4: And as more and more investors, whether that is a

602
00:33:16,720 --> 00:33:19,400
Speaker 4: retail investor or wealth wealth investor, or whether it's a

603
00:33:19,440 --> 00:33:23,960
Speaker 4: big pension fund, incorporate private markets into portfolios and blend

604
00:33:24,880 --> 00:33:26,960
Speaker 4: private and public. And I think again, if you go

605
00:33:27,040 --> 00:33:29,840
Speaker 4: back over that ten to fifteen year journey, we started

606
00:33:29,880 --> 00:33:34,040
Speaker 4: with indexing on one side of the floor and active

607
00:33:34,080 --> 00:33:36,280
Speaker 4: on the other side, and we gradually brought those together

608
00:33:36,320 --> 00:33:38,320
Speaker 4: and that became commonplace to blend. And I think we're

609
00:33:38,360 --> 00:33:41,640
Speaker 4: now in that world of starting to blend public markets

610
00:33:41,640 --> 00:33:45,320
Speaker 4: and private markets, which historically were completely distinct, and were

611
00:33:45,360 --> 00:33:49,200
Speaker 4: starting to kind of blend those because the industries are

612
00:33:49,280 --> 00:33:52,000
Speaker 4: crossing over, more companies are staying private for longer, et cetera,

613
00:33:52,040 --> 00:33:56,000
Speaker 4: et cetera. So as we bring those together, the need

614
00:33:56,160 --> 00:34:00,000
Speaker 4: to be able to risk manage and understand those portfolios,

615
00:34:00,000 --> 00:34:03,880
Speaker 4: those in different scenarios is incredibly important. That's what a

616
00:34:03,920 --> 00:34:04,680
Speaker 4: laddin is about.

617
00:34:05,320 --> 00:34:05,920
Speaker 3: With prequel.

618
00:34:06,000 --> 00:34:09,240
Speaker 4: What is so exciting is that I think over time

619
00:34:10,200 --> 00:34:13,160
Speaker 4: the private markets will become more transparent, there will be

620
00:34:13,200 --> 00:34:16,680
Speaker 4: more data available and around, and very similar to what

621
00:34:17,560 --> 00:34:20,760
Speaker 4: a Laddin and Blackrock did with public markets will happen

622
00:34:20,840 --> 00:34:22,759
Speaker 4: in the private markets as well, and that I think

623
00:34:22,800 --> 00:34:26,360
Speaker 4: will help more and more investors access private markets in

624
00:34:26,400 --> 00:34:28,879
Speaker 4: the way and understand what it is that they have.

625
00:34:29,719 --> 00:34:32,920
Speaker 4: Partly of which is again understanding the different liquidity and

626
00:34:33,400 --> 00:34:36,719
Speaker 4: being comfortable that they're different for a reason. And you're

627
00:34:36,760 --> 00:34:38,799
Speaker 4: not trying to create a one size fit fit's all.

628
00:34:38,840 --> 00:34:43,560
Speaker 4: You're trying to create a portfolio that delivers the right outcomes. Aladdin,

629
00:34:43,600 --> 00:34:44,919
Speaker 4: I think is going to be critical for that.

630
00:34:45,040 --> 00:34:48,840
Speaker 2: So let's talk a little bit about product development just

631
00:34:48,920 --> 00:34:52,560
Speaker 2: in the ETF space. This year, over a thousand new

632
00:34:52,560 --> 00:34:55,600
Speaker 2: ETFs have come out, or at least we're on pace

633
00:34:55,680 --> 00:34:58,799
Speaker 2: to do that by the end of this year. This

634
00:34:58,920 --> 00:35:03,120
Speaker 2: sort of hybrid development of ETF, so everything we've talked

635
00:35:03,120 --> 00:35:06,840
Speaker 2: about seems to be very thoughtful and very measured with

636
00:35:07,160 --> 00:35:11,239
Speaker 2: a really specific approach. Kind of feels like the rest

637
00:35:11,239 --> 00:35:13,319
Speaker 2: of the industry is just throwing stuff up against the

638
00:35:13,360 --> 00:35:16,080
Speaker 2: wall to see what sticks. How do you look at.

639
00:35:16,080 --> 00:35:20,000
Speaker 3: This we can only focus on what we do, so.

640
00:35:20,800 --> 00:35:22,400
Speaker 2: But you have to be aware of what. But you

641
00:35:22,440 --> 00:35:26,640
Speaker 2: are all aware of what's going on three x inverse bitcoin,

642
00:35:26,920 --> 00:35:29,560
Speaker 2: like what and why do I want that? Or why

643
00:35:29,560 --> 00:35:30,480
Speaker 2: does anyone want that?

644
00:35:31,320 --> 00:35:32,480
Speaker 3: Yeah, you'll have to ask them.

645
00:35:33,000 --> 00:35:35,720
Speaker 2: I mean, I guess it's they want to give people

646
00:35:35,719 --> 00:35:39,479
Speaker 2: an opportunity to make any type of trade and every

647
00:35:39,520 --> 00:35:42,160
Speaker 2: type of trade. I'm assuming that's not your approach.

648
00:35:43,000 --> 00:35:45,120
Speaker 4: I think there is a lot out there of throwing

649
00:35:45,160 --> 00:35:49,400
Speaker 4: things outlet sticks. Our approach is very much where do

650
00:35:49,520 --> 00:35:55,719
Speaker 4: we believe that we can develop products, strategies, exposures that

651
00:35:55,760 --> 00:35:59,279
Speaker 4: are going to help create better portfolios. Right, And if

652
00:35:59,320 --> 00:36:01,440
Speaker 4: you look at the solution of the ETF industry and

653
00:36:01,480 --> 00:36:05,520
Speaker 4: what's happened, is it started, you know, go back thirty

654
00:36:05,719 --> 00:36:08,440
Speaker 4: thirty plus years ago. It started very much with how

655
00:36:08,440 --> 00:36:10,240
Speaker 4: do you give access to kind of broad in disease,

656
00:36:11,040 --> 00:36:13,080
Speaker 4: And then it was how do you inequities? Then how

657
00:36:13,120 --> 00:36:16,840
Speaker 4: do you give access to more granular exposure like sectors

658
00:36:16,880 --> 00:36:19,440
Speaker 4: or different countries. Then it was how do you move

659
00:36:19,440 --> 00:36:22,080
Speaker 4: into different asset classes like fixed income for example, And

660
00:36:22,120 --> 00:36:24,280
Speaker 4: then more recently it's been something like kind of digital

661
00:36:24,280 --> 00:36:29,600
Speaker 4: assets with ibit and that's really been the journey of IAS, right,

662
00:36:29,640 --> 00:36:32,080
Speaker 4: and I think that's been therefore the journey of the

663
00:36:32,120 --> 00:36:37,120
Speaker 4: industry as as we've led it that it remains very

664
00:36:37,160 --> 00:36:40,560
Speaker 4: much of you how we think about continuing to expand

665
00:36:40,719 --> 00:36:44,480
Speaker 4: the ICES platform, and that includes now using the ETF

666
00:36:44,560 --> 00:36:47,880
Speaker 4: technology we've built to take things like active funds and

667
00:36:47,920 --> 00:36:50,360
Speaker 4: wrap them into an ETF, because the ETF is a

668
00:36:50,360 --> 00:36:55,040
Speaker 4: more efficient way for many investors to actually own those

669
00:36:55,080 --> 00:36:56,359
Speaker 4: different strategies.

670
00:36:56,680 --> 00:36:59,840
Speaker 3: But again, it starts with the strategy, and I think.

671
00:36:59,680 --> 00:37:03,880
Speaker 4: That for us, it's about how do you what is

672
00:37:03,920 --> 00:37:06,120
Speaker 4: it that you're developing in terms of an exposure or

673
00:37:06,160 --> 00:37:09,600
Speaker 4: a strategy, why how does it fit with the world

674
00:37:09,600 --> 00:37:11,480
Speaker 4: that we see today in terms of where we think

675
00:37:11,520 --> 00:37:13,719
Speaker 4: the world is going from a market standpoint and a

676
00:37:13,719 --> 00:37:16,319
Speaker 4: macro standpoint, How does it fit in terms of kind

677
00:37:16,320 --> 00:37:19,920
Speaker 4: of a portfolio construction standpoint. You're going to have waves

678
00:37:19,920 --> 00:37:21,960
Speaker 4: of innovation right now, we're having a huge wave of

679
00:37:22,840 --> 00:37:25,760
Speaker 4: ETF launches, and in particular the last two three years,

680
00:37:25,800 --> 00:37:28,200
Speaker 4: you know, the ETF is it's it's gone from being

681
00:37:28,280 --> 00:37:29,760
Speaker 4: kind of very much on the side of the industry

682
00:37:29,800 --> 00:37:32,319
Speaker 4: to being very central. We're excited about that, you know,

683
00:37:32,320 --> 00:37:34,439
Speaker 4: that's what we were, what's what we've built at black

684
00:37:34,480 --> 00:37:38,000
Speaker 4: Rock and I Shares. But it's also meant that ETFs

685
00:37:38,000 --> 00:37:40,440
Speaker 4: are very much kind of being used more broadly, and

686
00:37:40,719 --> 00:37:42,319
Speaker 4: you know that's going to be I think, part of

687
00:37:42,360 --> 00:37:45,800
Speaker 4: how the industry evolves and then it kind of matures.

688
00:37:45,880 --> 00:37:48,560
Speaker 2: Especially on the active side, where you get all the

689
00:37:48,600 --> 00:37:55,920
Speaker 2: benefits of mutual ownership without the capital gains penalty that

690
00:37:55,960 --> 00:37:59,120
Speaker 2: you get in mutual funds. So it makes sense that

691
00:37:59,320 --> 00:38:03,160
Speaker 2: a lot of act of ETFs would develop where they

692
00:38:03,280 --> 00:38:05,080
Speaker 2: might have been active mutual funds.

693
00:38:05,160 --> 00:38:05,279
Speaker 3: YEA.

694
00:38:06,000 --> 00:38:09,880
Speaker 2: What else do you see as changing or in the

695
00:38:09,880 --> 00:38:14,040
Speaker 2: midst of transforming? Is it by asset class, is it

696
00:38:14,080 --> 00:38:18,040
Speaker 2: by you mentioned geography or a sector? What is really

697
00:38:18,040 --> 00:38:19,280
Speaker 2: in flux these days?

698
00:38:19,640 --> 00:38:20,640
Speaker 3: So I think that.

699
00:38:22,200 --> 00:38:23,759
Speaker 4: You know, when you look at I'll give you a

700
00:38:23,800 --> 00:38:28,920
Speaker 4: couple of good examples. So digital assets, I think it's

701
00:38:29,000 --> 00:38:32,640
Speaker 4: kind of fairly early days. Ibit is incredibly fast growing.

702
00:38:33,040 --> 00:38:35,040
Speaker 4: It was the fastest to twenty to thirty, to forty

703
00:38:35,080 --> 00:38:37,640
Speaker 4: to fifty and now hopefully to one hundred billion as

704
00:38:37,680 --> 00:38:40,720
Speaker 4: an ETF, and we you know, we have an ethereum METF.

705
00:38:40,880 --> 00:38:42,800
Speaker 4: I think there will be more product development in something

706
00:38:42,880 --> 00:38:45,680
Speaker 4: like that and again for us, that's about bridging this

707
00:38:45,760 --> 00:38:50,320
Speaker 4: kind of defile world with the traditional kind of finance world.

708
00:38:50,520 --> 00:38:54,400
Speaker 4: That's one area. The second area is take something like

709
00:38:54,440 --> 00:38:58,040
Speaker 4: fixed income. You know, we've been building out fixed INCOMEMTF

710
00:38:58,120 --> 00:39:02,759
Speaker 4: industry for twenty years. The industry is now two and

711
00:39:02,760 --> 00:39:05,680
Speaker 4: a half ish trillion dollars. We think it's going to

712
00:39:05,719 --> 00:39:08,520
Speaker 4: be six trillion by kind of twenty thirty. The growth

713
00:39:08,920 --> 00:39:12,560
Speaker 4: is huge. Less than two percent of bombs in the

714
00:39:12,560 --> 00:39:13,920
Speaker 4: world are in an ETF.

715
00:39:14,040 --> 00:39:14,400
Speaker 2: Wow.

716
00:39:14,480 --> 00:39:17,520
Speaker 4: So it feels and having been I can tell you,

717
00:39:17,560 --> 00:39:20,040
Speaker 4: having been on the journey and been out there, you know,

718
00:39:20,200 --> 00:39:22,439
Speaker 4: kind of pounding the streets on the value of fixed

719
00:39:22,480 --> 00:39:26,040
Speaker 4: income ETFs over the years, it feels like this has

720
00:39:26,080 --> 00:39:28,799
Speaker 4: become really really big, and it has. And yet when

721
00:39:28,800 --> 00:39:30,880
Speaker 4: you think it in the context of the one hundred

722
00:39:30,880 --> 00:39:34,279
Speaker 4: and forty trillion dollars of fixed income out there, you know,

723
00:39:34,320 --> 00:39:37,480
Speaker 4: ETFs are still a pretty tiny part of the market

724
00:39:37,520 --> 00:39:40,120
Speaker 4: in terms of how people own bonds.

725
00:39:39,920 --> 00:39:43,440
Speaker 2: It's relatively large compared to it was, but an absolute term.

726
00:39:43,320 --> 00:39:45,320
Speaker 4: And in absolute terms, I still you know, we're still

727
00:39:45,600 --> 00:39:49,000
Speaker 4: to using out the sports terminology of've given it to

728
00:39:49,000 --> 00:39:52,040
Speaker 4: the World Series, you know, the first inning maybe the

729
00:39:52,080 --> 00:39:55,120
Speaker 4: second inning. And then even if you look at what's

730
00:39:55,160 --> 00:39:58,640
Speaker 4: really fascinating is you if you look at and we

731
00:39:58,680 --> 00:40:01,880
Speaker 4: talked about active activity, and again that's still very early stagment.

732
00:40:02,000 --> 00:40:05,279
Speaker 2: I'm fixed income. They actually seem to do very like

733
00:40:05,360 --> 00:40:10,440
Speaker 2: the broad the Bloomberg ag includes everything good, bed and different.

734
00:40:10,960 --> 00:40:15,160
Speaker 2: It seems like it's relatively easy to capture a little

735
00:40:15,160 --> 00:40:18,719
Speaker 2: bit of fixed income alpha with a handful of screens.

736
00:40:18,760 --> 00:40:22,840
Speaker 2: You're taking out the lowest credit quality, or you're taking

737
00:40:22,880 --> 00:40:26,239
Speaker 2: out the riskiest credit that you're not getting compensated for.

738
00:40:26,960 --> 00:40:31,359
Speaker 2: Why does fixed income active seem like it's a better

739
00:40:31,440 --> 00:40:36,000
Speaker 2: bet or a higher probability bet than active equity.

740
00:40:37,200 --> 00:40:39,400
Speaker 4: I think the historically fixed income, and I go back

741
00:40:39,400 --> 00:40:43,400
Speaker 4: to when I started, was very much a world of

742
00:40:44,280 --> 00:40:48,520
Speaker 4: limited transparency and kind of understanding. Frankly, I think the

743
00:40:48,600 --> 00:40:51,680
Speaker 4: understanding for most investors of fixed income relative to I

744
00:40:51,680 --> 00:40:53,640
Speaker 4: don't mean I don't mean investors who are doing fixed

745
00:40:53,640 --> 00:40:58,440
Speaker 4: income all every day, but for most retail investors in particular,

746
00:40:58,480 --> 00:41:00,920
Speaker 4: I think people have a much more from affinity to

747
00:41:01,400 --> 00:41:03,480
Speaker 4: stocks than they do for bonds in terms of kind

748
00:41:03,480 --> 00:41:07,080
Speaker 4: of the understanding. Bonds feel complicated at times, it feels

749
00:41:07,080 --> 00:41:09,880
Speaker 4: like an it's a world we don't quite understand, whereas

750
00:41:10,000 --> 00:41:13,719
Speaker 4: equities you kind of you know, you know, Google or

751
00:41:13,760 --> 00:41:15,920
Speaker 4: whatever it is. And so I think there's always been

752
00:41:16,360 --> 00:41:19,840
Speaker 4: a sense of kind of outsourcing those decisions kind of

753
00:41:19,880 --> 00:41:23,920
Speaker 4: more so. The other thing is that the the indexing

754
00:41:24,040 --> 00:41:28,719
Speaker 4: market in fixed income has been slower to evolve. So

755
00:41:28,800 --> 00:41:31,040
Speaker 4: you mentioned the AG, and people tend to when they

756
00:41:31,040 --> 00:41:34,560
Speaker 4: think about fixed and indexing, they automatically go to the AG. Sure,

757
00:41:34,680 --> 00:41:36,760
Speaker 4: the AG is one index, and it's a very specific

758
00:41:36,840 --> 00:41:39,040
Speaker 4: index in terms of what it is. It doesn't have

759
00:41:39,040 --> 00:41:42,200
Speaker 4: a huge amount of credit in it, for example, But

760
00:41:42,280 --> 00:41:47,080
Speaker 4: there are other indices with Blueberg for which we have

761
00:41:47,160 --> 00:41:50,480
Speaker 4: products like Universal that actually are much more representative of

762
00:41:50,640 --> 00:41:53,719
Speaker 4: fixed income. So part of it also is you know,

763
00:41:53,719 --> 00:41:55,840
Speaker 4: what are you benchmarking yourself against? And I think we

764
00:41:55,880 --> 00:41:58,959
Speaker 4: went through that experience with equities, and we are going

765
00:41:59,040 --> 00:42:01,200
Speaker 4: to go through that or going through that experience with

766
00:42:01,560 --> 00:42:03,799
Speaker 4: fixed income. And the other thing we're seeing with fixed

767
00:42:03,840 --> 00:42:07,239
Speaker 4: income is that we're developing and building the more granular

768
00:42:08,160 --> 00:42:11,040
Speaker 4: strategies in fixed income. So we're carving up the market

769
00:42:11,239 --> 00:42:14,320
Speaker 4: in fixed income the way we did inequities through ETF.

770
00:42:14,440 --> 00:42:17,080
Speaker 4: So if you want to own zero to three year

771
00:42:17,120 --> 00:42:19,520
Speaker 4: government bonds, own SCALF, if you want to own long

772
00:42:19,600 --> 00:42:22,760
Speaker 4: term trgies, own TLT, if you want to earn bits

773
00:42:22,760 --> 00:42:25,920
Speaker 4: of the different types of credit crossover, you can now

774
00:42:26,000 --> 00:42:28,160
Speaker 4: do that through ETFs. So you know, it is an

775
00:42:28,200 --> 00:42:32,840
Speaker 4: amazing tool. And what's fascinating about fixing btfs is that

776
00:42:32,920 --> 00:42:36,160
Speaker 4: some of the fastest growing users are asset managers, so

777
00:42:36,239 --> 00:42:39,239
Speaker 4: fixed income managers using ETFs as a way to be

778
00:42:39,239 --> 00:42:41,880
Speaker 4: better at their job. And I think again that's that

779
00:42:42,000 --> 00:42:46,640
Speaker 4: blending of indexing. But even in the equity world, you know,

780
00:42:46,680 --> 00:42:50,160
Speaker 4: equity indices are revolving. We were saying, if you look

781
00:42:50,200 --> 00:42:53,000
Speaker 4: back to two thousand, you know, the top seven, you know,

782
00:42:53,040 --> 00:42:55,360
Speaker 4: the whole kind of SMP was worth the equivalent to

783
00:42:55,400 --> 00:42:57,439
Speaker 4: what the top seven stocks were worth, you know, six

784
00:42:57,480 --> 00:43:00,719
Speaker 4: months ago. And so you mentioned earlier in the program

785
00:43:00,760 --> 00:43:04,719
Speaker 4: equal weight SMP. We're seeing a lot of demand right

786
00:43:04,760 --> 00:43:09,239
Speaker 4: now for things like equal weight or capped indices. We

787
00:43:09,320 --> 00:43:12,440
Speaker 4: launched a top twenty fund top TI. We did the

788
00:43:12,440 --> 00:43:15,680
Speaker 4: same thing with NASTAC. You know, even the S and

789
00:43:15,719 --> 00:43:19,240
Speaker 4: P five hundred. Owning the top twenty stocks versus owning

790
00:43:19,880 --> 00:43:22,920
Speaker 4: the five hundred stocks is a very, very very different game.

791
00:43:23,480 --> 00:43:28,000
Speaker 4: And so even something like large cap US equities, which

792
00:43:28,000 --> 00:43:30,520
Speaker 4: you would have thought there was nothing else to innovate in.

793
00:43:31,080 --> 00:43:33,359
Speaker 4: Even that has been the area where we've probably done

794
00:43:33,360 --> 00:43:35,800
Speaker 4: more in the last six months than many other areas

795
00:43:35,800 --> 00:43:39,480
Speaker 4: because the dynamics of the US equity market have shifted

796
00:43:39,480 --> 00:43:41,960
Speaker 4: so much in the last couple of years and investors

797
00:43:41,960 --> 00:43:42,919
Speaker 4: are looking for different things.

798
00:43:43,239 --> 00:43:43,680
Speaker 3: Come me up.

799
00:43:43,719 --> 00:43:47,399
Speaker 2: We continue our conversation with Steve Cohen, black Rock's Chief

800
00:43:47,440 --> 00:43:51,799
Speaker 2: Product Officer and head of Global Product Solutions, discussing what

801
00:43:52,000 --> 00:43:56,520
Speaker 2: goes into product development in finance. I'm very ritt alts.

802
00:43:56,560 --> 00:44:13,759
Speaker 2: You're listening to Masters in Business on Bloomberg Radio. I'm

803
00:44:13,800 --> 00:44:17,640
Speaker 2: Barry Ridults. You're listening to Masters in Business on Bloomberg Radio.

804
00:44:18,120 --> 00:44:21,000
Speaker 2: My extra special guest this week is Steve Cohen. He's

805
00:44:21,080 --> 00:44:25,759
Speaker 2: black Rocks Chief Product Officer and head of Global Product Solutions.

806
00:44:26,080 --> 00:44:31,040
Speaker 2: He also sits on black Rocks Global Executive Committee. Since

807
00:44:31,080 --> 00:44:34,320
Speaker 2: we've been talking about technology and you mentioned the top seven,

808
00:44:35,160 --> 00:44:40,000
Speaker 2: I'm legally obligated to ask a question about artificial intelligence

809
00:44:40,040 --> 00:44:45,120
Speaker 2: and AI. What is AI doing to your business of

810
00:44:45,200 --> 00:44:49,879
Speaker 2: developing new products? How we thinking about either AI as

811
00:44:49,880 --> 00:44:54,120
Speaker 2: an asset class or actually deploying AI to help build

812
00:44:54,200 --> 00:44:55,120
Speaker 2: new products.

813
00:44:55,800 --> 00:44:59,319
Speaker 4: I think we're seeing AI in probably three areas. The

814
00:44:59,360 --> 00:45:02,640
Speaker 4: first one is, obviously, AI is an investment theme, which

815
00:45:02,680 --> 00:45:06,640
Speaker 4: is very well publicized, et cetera. And we're seeing that

816
00:45:06,760 --> 00:45:13,080
Speaker 4: through things like data centers, obviously, stocks, credit, et cetera.

817
00:45:14,040 --> 00:45:18,759
Speaker 4: The second one is AI in terms of investment strategy.

818
00:45:19,840 --> 00:45:24,120
Speaker 4: For example, Blackrock were very fortunate to have a systematic

819
00:45:24,920 --> 00:45:28,920
Speaker 4: group investment group that has a forty year track record

820
00:45:28,920 --> 00:45:32,840
Speaker 4: and history of delivering really great performance. And you know,

821
00:45:32,840 --> 00:45:35,040
Speaker 4: they would argue they were doing AI well before it

822
00:45:35,080 --> 00:45:37,680
Speaker 4: was called AI, when it was called machine learning or

823
00:45:37,680 --> 00:45:39,000
Speaker 4: whatever it was called before Black around.

824
00:45:39,000 --> 00:45:42,920
Speaker 2: Most people think it's a new thing. You know, Watson

825
00:45:43,800 --> 00:45:46,520
Speaker 2: played Jeopardy and I forgot the one was a deep

826
00:45:46,520 --> 00:45:47,560
Speaker 2: blue played.

827
00:45:47,360 --> 00:45:48,400
Speaker 3: Chess and go.

828
00:45:48,719 --> 00:45:50,160
Speaker 2: Those were thirty years ago.

829
00:45:50,280 --> 00:45:52,719
Speaker 4: Yeah, so you know, it's gone through its iterations and

830
00:45:54,320 --> 00:45:58,560
Speaker 4: so you know, and they've got some fantastic examples of

831
00:45:58,600 --> 00:46:02,640
Speaker 4: the way they've used machine learning stroke now AI to

832
00:46:03,160 --> 00:46:07,920
Speaker 4: really understand you know, every single day they will pass

833
00:46:08,640 --> 00:46:12,680
Speaker 4: thousands of reports, earnings calls, et cetera.

834
00:46:12,760 --> 00:46:13,640
Speaker 3: Transcript for.

835
00:46:15,120 --> 00:46:19,640
Speaker 4: Sentiment and you know, and the result, the investment results

836
00:46:19,680 --> 00:46:23,160
Speaker 4: of those of those signals that they create are really

837
00:46:23,239 --> 00:46:27,520
Speaker 4: quite quite fascinating and very lucrative in terms of investment alpha.

838
00:46:28,000 --> 00:46:31,280
Speaker 4: And so we're really seeing a huge demand right now

839
00:46:31,320 --> 00:46:36,319
Speaker 4: for systematic investing. And this is something that historically people

840
00:46:36,360 --> 00:46:38,440
Speaker 4: were nervous was because it was a black box and

841
00:46:38,480 --> 00:46:41,239
Speaker 4: they didn't understand it. And now people are using things

842
00:46:41,280 --> 00:46:43,600
Speaker 4: like chat, GPT, et cetera, which is a black box,

843
00:46:44,000 --> 00:46:45,919
Speaker 4: but they're seeing the value they're getting. And so what's

844
00:46:45,960 --> 00:46:49,560
Speaker 4: interesting is is a psychological shift and a greater acceptance

845
00:46:49,600 --> 00:46:54,800
Speaker 4: of saying, actually systematic investing using AI. That's really interesting

846
00:46:54,800 --> 00:46:57,080
Speaker 4: and exciting. And so I think the second thing is

847
00:46:57,080 --> 00:47:00,719
Speaker 4: we're seeing it through using AI to be better investors.

848
00:47:01,440 --> 00:47:04,040
Speaker 4: And then the third one is product development, and so

849
00:47:04,160 --> 00:47:07,400
Speaker 4: how can we use the data that we are able

850
00:47:07,440 --> 00:47:13,600
Speaker 4: to collect and effectively deploy big data and the AI

851
00:47:14,160 --> 00:47:17,319
Speaker 4: that we've developed in house that sits on that to

852
00:47:17,440 --> 00:47:20,000
Speaker 4: identify what are some of those themes that are coming up,

853
00:47:20,040 --> 00:47:22,000
Speaker 4: what are some of the things that clients are talking

854
00:47:22,040 --> 00:47:25,280
Speaker 4: about or being picked up in the news or whatever

855
00:47:25,320 --> 00:47:29,000
Speaker 4: it is, and be more kind of systematic, I would say,

856
00:47:29,000 --> 00:47:31,839
Speaker 4: in being able to see what those are. And also

857
00:47:32,080 --> 00:47:34,000
Speaker 4: we are able to use it to test and stress

858
00:47:34,040 --> 00:47:37,000
Speaker 4: test strategies that are new in different market environments. So

859
00:47:37,360 --> 00:47:40,800
Speaker 4: it's a really again, it's a really exciting time for

860
00:47:41,200 --> 00:47:43,480
Speaker 4: product development because it's giving us new tools that we

861
00:47:43,520 --> 00:47:44,920
Speaker 4: didn't have before.

862
00:47:45,640 --> 00:47:49,680
Speaker 2: So Blackrock tends to come out with these very well

863
00:47:49,719 --> 00:47:53,799
Speaker 2: thought out, very rational products. And the question that I've

864
00:47:53,840 --> 00:47:57,719
Speaker 2: been thinking about when I first started doing my homework

865
00:47:57,760 --> 00:48:00,359
Speaker 2: for this is what are some of the crazy years

866
00:48:00,400 --> 00:48:03,279
Speaker 2: that you looked at and said, yeah, no, that's just

867
00:48:03,320 --> 00:48:06,720
Speaker 2: a bridge too far, Like what hasn't come out because

868
00:48:06,719 --> 00:48:10,320
Speaker 2: it was just too either not solving a problem or

869
00:48:10,840 --> 00:48:13,440
Speaker 2: just too wild and reckless.

870
00:48:13,560 --> 00:48:15,919
Speaker 4: Oh, there's a whole treasure shove of Yeah, we could

871
00:48:15,920 --> 00:48:18,919
Speaker 4: do another podcast, I'm sure. But you know, typically what's

872
00:48:18,960 --> 00:48:23,400
Speaker 4: interesting about it is there are two reasons why you

873
00:48:23,520 --> 00:48:26,719
Speaker 4: might end up like that. One is it's it's a

874
00:48:26,760 --> 00:48:29,879
Speaker 4: crazy idea, but there's just really no demand for.

875
00:48:29,840 --> 00:48:34,120
Speaker 2: It, and well that's an easy business which is an

876
00:48:34,120 --> 00:48:34,960
Speaker 2: easy business decision.

877
00:48:35,200 --> 00:48:38,080
Speaker 3: The second time often is you're just too early, uh huh.

878
00:48:38,120 --> 00:48:39,360
Speaker 3: And you know, I.

879
00:48:39,360 --> 00:48:43,360
Speaker 2: Mean there could have been an ETF for eth and

880
00:48:43,440 --> 00:48:46,480
Speaker 2: bitcoin ten years ago if the SEC would have allowed it.

881
00:48:46,560 --> 00:48:48,480
Speaker 4: If they were allowed it, yeah, yeah, So sometimes it's

882
00:48:48,480 --> 00:48:51,480
Speaker 4: the regulatory Yeah, it could be. It could be that

883
00:48:51,560 --> 00:48:53,960
Speaker 4: the industry, the industry in the broad sense of the word,

884
00:48:54,000 --> 00:48:57,120
Speaker 4: regulators or whatever, aren't quite ready. You're not you're not

885
00:48:57,160 --> 00:48:59,239
Speaker 4: able to actually build the thing that you've got an

886
00:48:59,280 --> 00:49:01,560
Speaker 4: idea for. It could be that the market is not

887
00:49:01,640 --> 00:49:04,080
Speaker 4: quite ready. Fixed income ETFs is a good example. We

888
00:49:04,080 --> 00:49:07,680
Speaker 4: looked at things ten years ago and decided that actually

889
00:49:08,400 --> 00:49:12,160
Speaker 4: the fixed income market wasn't ready. We weren't quite ready

890
00:49:12,200 --> 00:49:15,759
Speaker 4: to be able to do that in an ETF A

891
00:49:15,800 --> 00:49:18,040
Speaker 4: decade on, and by the way, we launched a bunch

892
00:49:18,080 --> 00:49:21,040
Speaker 4: of those as well, knowing that it would take a

893
00:49:21,080 --> 00:49:24,480
Speaker 4: long time. We didn't expect to launch it it would

894
00:49:24,480 --> 00:49:26,880
Speaker 4: take off straight away, knowing that it would take time

895
00:49:26,920 --> 00:49:28,920
Speaker 4: for the kind of market to get there, but we

896
00:49:28,920 --> 00:49:32,680
Speaker 4: were comfortable we could manage that fund. And so often

897
00:49:32,719 --> 00:49:34,920
Speaker 4: you end up in a situation where you're kind of

898
00:49:34,920 --> 00:49:38,600
Speaker 4: waiting for maybe the liquidity of the market to be

899
00:49:38,680 --> 00:49:41,600
Speaker 4: broad enough that an ETF works. So you know it's

900
00:49:41,600 --> 00:49:43,160
Speaker 4: going to work in the future, it's just a little

901
00:49:43,200 --> 00:49:45,200
Speaker 4: bit early now. So it a couple of different reasons

902
00:49:45,239 --> 00:49:46,200
Speaker 4: why that may be the case.

903
00:49:46,480 --> 00:49:49,840
Speaker 2: So that raises a question what's next on the product roadmap?

904
00:49:50,000 --> 00:49:54,439
Speaker 2: So We've talked about digital and crypto, we've talked about

905
00:49:54,520 --> 00:49:58,560
Speaker 2: fixed income, and we've also talked about privates. What are

906
00:49:58,600 --> 00:50:00,840
Speaker 2: you seeing as the next ten years.

907
00:50:01,400 --> 00:50:04,040
Speaker 3: It's really across the whole waterfront of what you just said.

908
00:50:04,080 --> 00:50:08,640
Speaker 4: I mean, obviously with HPS and GIP, with our new partners,

909
00:50:09,160 --> 00:50:12,120
Speaker 4: there's a lot of opportunity we believe to develop in

910
00:50:12,160 --> 00:50:14,840
Speaker 4: the private credit and the infrastructure space, and also the

911
00:50:14,880 --> 00:50:20,000
Speaker 4: crossover of those kind of areas. I think, this crossover

912
00:50:20,040 --> 00:50:22,080
Speaker 4: of public and private markets and what does that look

913
00:50:22,120 --> 00:50:24,759
Speaker 4: like in portfolios, whether that's within a fund or in

914
00:50:24,840 --> 00:50:28,080
Speaker 4: a portfolio, I think is going to be a big

915
00:50:28,239 --> 00:50:31,520
Speaker 4: and very interesting theme. And the third area I think

916
00:50:31,600 --> 00:50:35,480
Speaker 4: is we you know, we constantly obviously we're always working

917
00:50:35,520 --> 00:50:40,799
Speaker 4: with our active portfolio managers to develop better strategies and

918
00:50:40,880 --> 00:50:44,160
Speaker 4: new ideas they have, but we are always always looking

919
00:50:44,200 --> 00:50:47,480
Speaker 4: back as well, because I think you can fall into

920
00:50:47,480 --> 00:50:49,640
Speaker 4: the trap of thinking you've done it. And I mentioned

921
00:50:49,680 --> 00:50:52,680
Speaker 4: the example of you know, US large cap equities and indexing,

922
00:50:52,960 --> 00:50:55,040
Speaker 4: and why would you ever look at that as an

923
00:50:55,040 --> 00:50:58,839
Speaker 4: innovation area because these markets keep changing and I think

924
00:50:58,880 --> 00:51:01,319
Speaker 4: the world where the world we're in right now, and

925
00:51:01,400 --> 00:51:03,320
Speaker 4: a good example of the last six months, the number

926
00:51:03,320 --> 00:51:06,400
Speaker 4: of clients around the world, particularly outside the US, who

927
00:51:06,480 --> 00:51:10,200
Speaker 4: are questioning their US dollar exposure is pretty significant. And

928
00:51:10,239 --> 00:51:12,200
Speaker 4: what does that mean for time? Look at the move

929
00:51:12,280 --> 00:51:15,400
Speaker 4: in gold suddenly that is you know the thing visual

930
00:51:15,840 --> 00:51:18,480
Speaker 4: and so you know, you see you have to I

931
00:51:18,480 --> 00:51:21,440
Speaker 4: think you have to be willing to question the environment,

932
00:51:21,480 --> 00:51:24,640
Speaker 4: the macro, the market environment and say, actually, what does

933
00:51:24,680 --> 00:51:25,239
Speaker 4: that mean for.

934
00:51:27,160 --> 00:51:29,200
Speaker 3: Things that we kind of thought we'd done?

935
00:51:30,000 --> 00:51:31,719
Speaker 4: And I think that creates a lot of opportunity for

936
00:51:31,840 --> 00:51:34,560
Speaker 4: our clients to reinnovate things.

937
00:51:34,920 --> 00:51:37,279
Speaker 2: So before I get to my favorite questions, I have

938
00:51:37,440 --> 00:51:41,400
Speaker 2: one last broad question for you. What do you think

939
00:51:41,800 --> 00:51:47,239
Speaker 2: investors and clients are not thinking about talking about overlooking

940
00:51:47,320 --> 00:51:50,520
Speaker 2: but perhaps should be aware of it? Could be an

941
00:51:50,640 --> 00:51:54,520
Speaker 2: asset of geography, a data point of policy. What is

942
00:51:55,239 --> 00:51:59,800
Speaker 2: below the radar that really should be front and center.

943
00:52:00,680 --> 00:52:02,239
Speaker 4: I think there are things that are kind of half

944
00:52:02,239 --> 00:52:04,400
Speaker 4: on and half off the radar, are like, you know,

945
00:52:04,480 --> 00:52:08,759
Speaker 4: the impact of what's happening in demographics and immigration and

946
00:52:08,840 --> 00:52:11,920
Speaker 4: changes like that, and what does that mean for inflation

947
00:52:13,360 --> 00:52:16,640
Speaker 4: for the different types of income streams that people are

948
00:52:16,640 --> 00:52:19,800
Speaker 4: going to need is something that's it's kind of talked about,

949
00:52:20,160 --> 00:52:22,680
Speaker 4: but always slightly in the background. I think that's going

950
00:52:22,760 --> 00:52:25,240
Speaker 4: to come more and more to the form it ties

951
00:52:25,239 --> 00:52:27,719
Speaker 4: into the fiscal policy kind of which is very much

952
00:52:27,800 --> 00:52:30,160
Speaker 4: kind of talked about. I think that's one thing. I

953
00:52:30,160 --> 00:52:32,480
Speaker 4: think the second thing is we're still we're still living

954
00:52:32,520 --> 00:52:35,759
Speaker 4: through a lot of the post COVID impact. And you know,

955
00:52:35,760 --> 00:52:39,480
Speaker 4: we COVID is kind of done and it feels like

956
00:52:39,520 --> 00:52:41,440
Speaker 4: it was many, many years ago, but there are a

957
00:52:41,480 --> 00:52:43,560
Speaker 4: lot of industries, and luxury is a good example, which

958
00:52:43,600 --> 00:52:46,680
Speaker 4: is still being impacted by what happened then, both in

959
00:52:46,760 --> 00:52:49,200
Speaker 4: terms of the lockdown and then the immediate kind of

960
00:52:49,200 --> 00:52:51,239
Speaker 4: boom that happened afterwards. There are still a lot of

961
00:52:51,239 --> 00:52:52,920
Speaker 4: things that are still trying to work their way through

962
00:52:53,040 --> 00:52:56,280
Speaker 4: the through the system, as it were, and that tends

963
00:52:56,280 --> 00:52:58,160
Speaker 4: to be something I think people have kind of forgotten,

964
00:52:58,160 --> 00:53:02,480
Speaker 4: but from an investing standpoint, is actually pretty important.

965
00:53:03,560 --> 00:53:05,680
Speaker 2: I completely agree with you. It's funny. We were just

966
00:53:05,840 --> 00:53:09,520
Speaker 2: having a conversation the other day about housing and someone

967
00:53:09,640 --> 00:53:13,600
Speaker 2: asked why we have such a shortfall of single family

968
00:53:13,640 --> 00:53:16,840
Speaker 2: homes in the United States, not even talking about affordability

969
00:53:16,880 --> 00:53:20,760
Speaker 2: of homes, just sheer number. And the answer was, that's

970
00:53:21,440 --> 00:53:25,799
Speaker 2: a hangover from the financial crisis fifteen sixteen years ago.

971
00:53:26,239 --> 00:53:30,759
Speaker 2: Following that boom and bust, a lot of builders shifted over,

972
00:53:30,840 --> 00:53:34,480
Speaker 2: pivoted over to multi family houses and apartment buildings, not

973
00:53:34,640 --> 00:53:37,560
Speaker 2: single fans. So it's fifteen years ago and we're still

974
00:53:37,880 --> 00:53:42,000
Speaker 2: still suffering the effects of it. It's amazing how long

975
00:53:42,000 --> 00:53:44,520
Speaker 2: a tail some of these things happen. All Right, tom

976
00:53:44,760 --> 00:53:46,799
Speaker 2: I don't have you all day. I know you have

977
00:53:46,880 --> 00:53:49,600
Speaker 2: a flight to catch tomorrow, so I have to get

978
00:53:49,640 --> 00:53:52,160
Speaker 2: you out here at a decent hour. Let's run through

979
00:53:52,200 --> 00:53:55,359
Speaker 2: some of our favorite questions, starting with tell us about

980
00:53:55,400 --> 00:54:00,279
Speaker 2: your mentors who helped shape your career.

981
00:54:00,360 --> 00:54:02,160
Speaker 3: So I've I think I've been very lucky.

982
00:54:02,200 --> 00:54:05,759
Speaker 4: I've in each stage of my career, I've always had

983
00:54:05,840 --> 00:54:10,600
Speaker 4: I think somebody who has been whether a manager or

984
00:54:10,640 --> 00:54:15,440
Speaker 4: a mentor, but really helped me think through and frankally

985
00:54:15,480 --> 00:54:18,600
Speaker 4: just supported me in my career. I think, to particularly

986
00:54:18,640 --> 00:54:22,759
Speaker 4: jump out one is the person who actually took me

987
00:54:23,000 --> 00:54:27,640
Speaker 4: to eye Injie Bearings and who I first worked with there,

988
00:54:27,880 --> 00:54:30,800
Speaker 4: who sadly is no longer with us, but was just

989
00:54:30,840 --> 00:54:34,799
Speaker 4: an incredible friend and in quite a pivotal time in

990
00:54:34,840 --> 00:54:38,120
Speaker 4: my career, really helped me think through what do I

991
00:54:38,160 --> 00:54:40,799
Speaker 4: want to do next and kind of set me on

992
00:54:40,840 --> 00:54:43,279
Speaker 4: that next kind of journey. And then the other one,

993
00:54:43,320 --> 00:54:46,120
Speaker 4: I have to say a shout out to someone who

994
00:54:46,160 --> 00:54:48,120
Speaker 4: was very early in my career, who I worked with,

995
00:54:48,840 --> 00:54:50,640
Speaker 4: who I kind of looked up to in terms of

996
00:54:50,840 --> 00:54:52,320
Speaker 4: their success, who became my wife.

997
00:54:52,400 --> 00:54:54,080
Speaker 3: So that became a kind of a good men.

998
00:54:54,239 --> 00:54:57,120
Speaker 4: She continues to mentor me in slightly you know, different

999
00:54:57,120 --> 00:54:59,200
Speaker 4: more direct ways.

1000
00:54:58,480 --> 00:55:01,600
Speaker 2: That's a nice a couple of mentors. Let's let's talk

1001
00:55:01,600 --> 00:55:03,440
Speaker 2: about books. What are some of your favorites. What are

1002
00:55:03,480 --> 00:55:04,520
Speaker 2: you reading recently?

1003
00:55:05,280 --> 00:55:10,040
Speaker 3: A big fan arm of people like Ian McEwen.

1004
00:55:10,880 --> 00:55:15,240
Speaker 4: I know the names, Martin Amos, They're just great, great authors.

1005
00:55:15,600 --> 00:55:19,000
Speaker 2: Give us some titles, Martin Amis and Ian and.

1006
00:55:19,000 --> 00:55:22,160
Speaker 4: Yeah, there's a great book Ian McEwen called Sweet Tooth,

1007
00:55:22,160 --> 00:55:24,040
Speaker 4: which is all about it's got a great twist which

1008
00:55:24,080 --> 00:55:27,520
Speaker 4: I won't go into, but it's nineteen fifties, nineteen sixties

1009
00:55:27,600 --> 00:55:31,520
Speaker 4: kind of spies in the in the UK. And there's

1010
00:55:31,520 --> 00:55:34,040
Speaker 4: a book by Martin Amos.

1011
00:55:33,760 --> 00:55:38,319
Speaker 3: Which is the first I can't remember the full title.

1012
00:55:38,320 --> 00:55:40,840
Speaker 3: It's Time something, but it's written backwards.

1013
00:55:41,000 --> 00:55:44,160
Speaker 2: I kind of remember my wife reading something like that

1014
00:55:44,160 --> 00:55:46,680
Speaker 2: from Martin A MSA, I don't remember the title.

1015
00:55:46,760 --> 00:55:50,360
Speaker 4: Fast it's fascinating. He writes it backwards, so everything happens backwards.

1016
00:55:50,440 --> 00:55:54,399
Speaker 4: So the day starts with the character going to bed,

1017
00:55:55,239 --> 00:55:58,959
Speaker 4: and it's the it's written in the as the consciousness

1018
00:55:59,040 --> 00:56:03,440
Speaker 4: of the man, and so it's brilliant.

1019
00:56:03,560 --> 00:56:08,439
Speaker 3: It's just I'll dig up the very cleverly written sound.

1020
00:56:08,440 --> 00:56:13,520
Speaker 4: A good story, not quite inception, but it's in that

1021
00:56:13,600 --> 00:56:20,799
Speaker 4: guise of trying to think about how time works. And yeah,

1022
00:56:20,840 --> 00:56:22,920
Speaker 4: I won't spoil it for you, right right, but it's

1023
00:56:22,920 --> 00:56:25,160
Speaker 4: the kind of book where even the most simple paragraph

1024
00:56:25,239 --> 00:56:27,040
Speaker 4: you kind of reread it because you're trying to get

1025
00:56:27,040 --> 00:56:29,400
Speaker 4: your head around the fact that it's being written backwards.

1026
00:56:29,520 --> 00:56:34,920
Speaker 2: Huh. Speaking of Inception, what's keeping you entertained these days?

1027
00:56:34,960 --> 00:56:37,520
Speaker 2: What are you streaming, either watching or listening to?

1028
00:56:38,080 --> 00:56:40,040
Speaker 3: So we've been on a bit of a marathon recently.

1029
00:56:40,120 --> 00:56:43,000
Speaker 4: We've done Yellowstone eighteen eighty three, nineteen twenty three, and

1030
00:56:43,160 --> 00:56:43,680
Speaker 4: land Man.

1031
00:56:43,840 --> 00:56:46,040
Speaker 2: That is all on my in my queue and I

1032
00:56:46,080 --> 00:56:49,520
Speaker 2: haven't started. I saw the first Yellowstone on a plane

1033
00:56:49,560 --> 00:56:51,320
Speaker 2: and I'm like, oh, I got to drag my wife

1034
00:56:51,320 --> 00:56:51,759
Speaker 2: into this.

1035
00:56:51,800 --> 00:56:56,040
Speaker 3: Well it's good, you need to commit, but it's well

1036
00:56:56,080 --> 00:56:59,680
Speaker 3: worth it very very yeah, very gripping, all very different

1037
00:56:59,719 --> 00:57:00,400
Speaker 3: as well.

1038
00:57:00,480 --> 00:57:06,360
Speaker 2: So you're you're a brit giving me an American Western recommendation.

1039
00:57:07,120 --> 00:57:10,680
Speaker 2: Let's let this New Yorker give you an m I

1040
00:57:10,760 --> 00:57:14,480
Speaker 2: five London recommendation. Have you seen the film Black Bag?

1041
00:57:15,680 --> 00:57:16,720
Speaker 3: I have you have?

1042
00:57:17,080 --> 00:57:18,760
Speaker 4: I saw it on a plane. I spent a lot

1043
00:57:18,760 --> 00:57:20,400
Speaker 4: of time on plane. Okay, I actually saw it on

1044
00:57:20,400 --> 00:57:22,400
Speaker 4: a plane. It was very good, very.

1045
00:57:22,240 --> 00:57:24,720
Speaker 2: Cool, upside surprise hopect very good.

1046
00:57:24,760 --> 00:57:26,960
Speaker 3: I never heard of it. And then I assume you

1047
00:57:26,960 --> 00:57:27,760
Speaker 3: watch Slow Horses.

1048
00:57:27,960 --> 00:57:30,200
Speaker 2: That's where I was about to go. Is so I

1049
00:57:30,360 --> 00:57:34,200
Speaker 2: I had my wife watching through the second season and

1050
00:57:34,240 --> 00:57:35,960
Speaker 2: she kind of tapped out. I'm trying to bring her

1051
00:57:36,000 --> 00:57:37,640
Speaker 2: in for the most recent season you've.

1052
00:57:37,480 --> 00:57:40,160
Speaker 4: Got again in We're very much the We won't watch

1053
00:57:40,200 --> 00:57:41,360
Speaker 4: it until it's all out.

1054
00:57:42,440 --> 00:57:46,480
Speaker 2: We we've made that mistake not doing that with certain things.

1055
00:57:47,040 --> 00:57:51,600
Speaker 2: It's it's incredibly big, Like what is this watching one

1056
00:57:51,640 --> 00:57:53,720
Speaker 2: show a week? What are we living in the nineties?

1057
00:57:53,800 --> 00:57:54,520
Speaker 3: I called.

1058
00:57:57,080 --> 00:58:00,920
Speaker 2: It really is? Final two questions, What sort of advice

1059
00:58:00,960 --> 00:58:04,360
Speaker 2: would you give to a recent college grad interested in

1060
00:58:04,400 --> 00:58:09,560
Speaker 2: a career in fill in the blanks? Investing ETFs, financial product,

1061
00:58:09,640 --> 00:58:12,960
Speaker 2: developing fixed income what's your advice for that person?

1062
00:58:15,360 --> 00:58:15,920
Speaker 1: Go for it.

1063
00:58:16,920 --> 00:58:19,040
Speaker 4: I think that I really think this industry is changing

1064
00:58:19,120 --> 00:58:23,160
Speaker 4: so quickly. I think it's changing faster than i've in

1065
00:58:23,200 --> 00:58:26,440
Speaker 4: my kind of career in terms of what is happening,

1066
00:58:26,520 --> 00:58:30,320
Speaker 4: which I think creates a lot of opportunity for somebody

1067
00:58:30,520 --> 00:58:33,480
Speaker 4: starting out. My advice I always give to all of

1068
00:58:33,520 --> 00:58:36,080
Speaker 4: our analysts who are starting out, in fact that I

1069
00:58:36,120 --> 00:58:38,880
Speaker 4: give it to pretty much all of our team is.

1070
00:58:38,880 --> 00:58:39,760
Speaker 3: You've got to keep learning.

1071
00:58:40,480 --> 00:58:45,240
Speaker 4: This is constantly changing, and you've got to just you've

1072
00:58:45,240 --> 00:58:47,640
Speaker 4: always got to be on that kind of learning curve,

1073
00:58:48,120 --> 00:58:50,640
Speaker 4: and that's how you get better. It's also where the

1074
00:58:50,640 --> 00:58:52,880
Speaker 4: opportunities come from a career standpoint.

1075
00:58:52,840 --> 00:58:55,240
Speaker 2: Makes a lot of sense. Our final question, what do

1076
00:58:55,280 --> 00:58:59,120
Speaker 2: you know about the world of investing product development ETFs

1077
00:58:59,120 --> 00:59:03,760
Speaker 2: today would and helpful back in the nineteen nineties when

1078
00:59:03,760 --> 00:59:04,920
Speaker 2: you were first getting started.

1079
00:59:05,360 --> 00:59:07,160
Speaker 4: Well, if I've known that bitcoorin was going to be

1080
00:59:07,200 --> 00:59:08,760
Speaker 4: one hundred and twenty thousand, I probably would have.

1081
00:59:08,760 --> 00:59:12,200
Speaker 5: Done that's done something different, say that you know everything

1082
00:59:12,360 --> 00:59:14,880
Speaker 5: right back up the truck on Amazon in two thousand

1083
00:59:14,880 --> 00:59:18,920
Speaker 5: and two or ninety eight, or a Microsoft from the IPL.

1084
00:59:19,280 --> 00:59:21,040
Speaker 4: I think one thing it does lend itself to And

1085
00:59:21,080 --> 00:59:23,160
Speaker 4: it sounds a bit strange for somebody who started out,

1086
00:59:23,760 --> 00:59:27,480
Speaker 4: you know, on a bond trading floor doing bond maths.

1087
00:59:28,120 --> 00:59:30,560
Speaker 4: Is you realize over time only when you look back

1088
00:59:30,600 --> 00:59:33,360
Speaker 4: the power of compounding. I know everyone writes about compounding,

1089
00:59:33,360 --> 00:59:36,520
Speaker 4: and you learn about it obviously, but it's only when

1090
00:59:36,520 --> 00:59:38,520
Speaker 4: you have been around for a while and you look

1091
00:59:38,560 --> 00:59:42,520
Speaker 4: back at what compounding actually means as both an investor,

1092
00:59:42,600 --> 00:59:45,240
Speaker 4: you know, you know, managing your own kind of future

1093
00:59:45,280 --> 00:59:49,160
Speaker 4: retirement and wealth, and then or as or as somebody

1094
00:59:49,200 --> 00:59:54,600
Speaker 4: who works with clients about managing portfolios or compounding actually

1095
00:59:55,200 --> 00:59:59,400
Speaker 4: does imply. And I was thinking about that the other day.

1096
00:59:59,400 --> 01:00:04,760
Speaker 2: Actually, it's very counterintuitive. There's nothing in the natural world,

1097
01:00:05,960 --> 01:00:10,880
Speaker 2: in your ordinary experience as a mammal, that would give

1098
01:00:10,880 --> 01:00:15,440
Speaker 2: you any insight into just exactly how exponential it is. Yes,

1099
01:00:15,960 --> 01:00:18,920
Speaker 2: it's really fascinating. Well, thank you, Stephen for being so

1100
01:00:19,000 --> 01:00:22,520
Speaker 2: generous with your time. We have been speaking with Stephen Cohen.

1101
01:00:22,600 --> 01:00:27,400
Speaker 2: He is BlackRock's chief product officer and head of Global Solutions.

1102
01:00:27,960 --> 01:00:30,520
Speaker 2: If you enjoy this conversation, check out any of the

1103
01:00:30,600 --> 01:00:34,120
Speaker 2: five hundred and eighty six we've done over the prior

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01:00:34,480 --> 01:00:39,080
Speaker 2: dozen years. You can find those at iTunes, Spotify, Bloomberg YouTube,

1105
01:00:39,440 --> 01:00:42,920
Speaker 2: wherever you find your favorite podcast. Be sure and check

1106
01:00:42,920 --> 01:00:46,840
Speaker 2: out my new book, How Not to Invest The ideas, numbers,

1107
01:00:46,880 --> 01:00:49,880
Speaker 2: and behavior that destroys wealth and How to Avoid them

1108
01:00:50,160 --> 01:00:53,000
Speaker 2: at your favorite bookstore. Now, I would be remiss if

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01:00:53,000 --> 01:00:55,480
Speaker 2: I did not thank the correct team that helps put

1110
01:00:55,520 --> 01:01:00,840
Speaker 2: these conversations together each week. Alexis Noriega is my radio producer.

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01:01:00,960 --> 01:01:05,520
Speaker 2: Anna Luke is my podcast producer. Sage Bauman is the

1112
01:01:05,520 --> 01:01:09,880
Speaker 2: head of Podcasts at Bloomberg. Sean Russo is my researcher.

1113
01:01:10,560 --> 01:01:13,840
Speaker 2: I'm Barry Rudolts. This has been Masters and Business on

1114
01:01:13,960 --> 01:01:14,920
Speaker 2: Bloomberg Radio.