WEBVTT - The 2019 ETF Halftime Report 0:00:07.240 --> 0:00:13.440 Welcome on Trillians. I'm Joel Weber and I'm Eric bel Chernis. Eric. 0:00:13.520 --> 0:00:16.560 We're halfway through the year and it's time for a 0:00:16.560 --> 0:00:20.560 halftime report, the first you know what we're doing today? Okay, 0:00:20.560 --> 0:00:23.880 half the report podcasts, and we brought some people to join. 0:00:24.520 --> 0:00:27.960 One of them is a regular, Todd Todd rosen Bluth, 0:00:28.240 --> 0:00:31.960 who if people anyone listening who's in THETF industry knows 0:00:31.960 --> 0:00:35.480 this guy very well and knows some of his great 0:00:35.520 --> 0:00:38.520 work both for cf R A and on Twitter, which 0:00:38.760 --> 0:00:41.440 he uh coming like a recurring character. I like it, right, 0:00:41.560 --> 0:00:43.640 and and here he is again. Yeah, he's kind of 0:00:43.680 --> 0:00:45.720 like Tom Hanks on Family Ties. You know how he 0:00:45.760 --> 0:00:48.680 came in once in a while, is the Yes, that 0:00:48.760 --> 0:00:51.960 is exactly pretty good reference. Right. Yeah. We also have 0:00:52.000 --> 0:00:56.040 another character who is also a frequent guest, Sarah Ponzac 0:00:56.040 --> 0:00:58.880 from Bloomberg News also has a podcast of our own, 0:00:58.880 --> 0:01:02.360 now hosting a podcast called Welcomes Up Channel's Plague. So 0:01:02.520 --> 0:01:03.840 what we want to do is talk to Todd and 0:01:03.880 --> 0:01:07.760 Sarah about a couple observations from the first half of 0:01:07.760 --> 0:01:10.360 the year, and maybe even a couple I don't know 0:01:10.400 --> 0:01:19.840 of corystal Ball style predictions exactly this weekend Brilliance twenty 0:01:19.959 --> 0:01:24.200 nineteen halftime report. Todd Sarah, thanks for joining on Trilliance 0:01:24.640 --> 0:01:29.240 observation number one big observation. Who wants it? Yeah, I'll start. 0:01:29.640 --> 0:01:31.560 So this has really been the year of fixed in 0:01:31.640 --> 0:01:34.920 comm ETFs. More than half of the net inflows have 0:01:35.000 --> 0:01:37.960 gone into fixed in comm ETFs this year. It's about 0:01:38.720 --> 0:01:41.680 of the overall et F pie. But what's quite compelling 0:01:41.680 --> 0:01:43.360 to us at t F A is a couple of things. 0:01:43.400 --> 0:01:47.280 One is the range of products that have gained interest. 0:01:47.400 --> 0:01:50.040 You've got high yield, you've got long term treasuries like 0:01:50.080 --> 0:01:53.160 t L T and I e F. You've got the 0:01:53.280 --> 0:01:56.760 ultra short products that were popular in two thousand and 0:01:56.760 --> 0:02:02.280 eighteen have stayed popular bill SHV along with the active 0:02:02.320 --> 0:02:05.400 ones like mint and jps T. And then the second 0:02:05.400 --> 0:02:07.760 part of this is again the range of products. So 0:02:08.280 --> 0:02:11.360 using Bloomberg datly earlier this week, I saw, you know, 0:02:11.400 --> 0:02:14.120 more than a hundred fixed in com ETFs have gathered 0:02:14.160 --> 0:02:17.480 over a hundred million dollars of net new money this year. 0:02:17.600 --> 0:02:20.079 So it's not just the big boys that are gathering assets, 0:02:20.200 --> 0:02:23.000 but we're seeing a range of products, both large and small, 0:02:23.360 --> 0:02:26.000 that are popular and that's a great sign for ETF adoption. 0:02:26.160 --> 0:02:29.120 Why what's happening, Well, you've got a couple of things happening. 0:02:29.160 --> 0:02:32.320 Many investors are expecting the Fed to not only have paused, 0:02:32.320 --> 0:02:34.560 but actually cut interest rates. We had see afraid don't 0:02:34.600 --> 0:02:37.160 think that's going to be happening as aggressively as the 0:02:37.160 --> 0:02:39.960 broader market does. But you have investors that are willing 0:02:40.000 --> 0:02:42.600 to take on risk in order to get the yield. 0:02:42.880 --> 0:02:46.320 We've seen credit the fault risk be relatively low. And 0:02:46.320 --> 0:02:48.480 then you've got folks that don't believe that aren't willing 0:02:48.480 --> 0:02:50.919 to hide under the mattresses, uh the way they did 0:02:50.919 --> 0:02:53.560 in two thousand and eighteen. And so both both camps 0:02:53.600 --> 0:02:55.320 are winning out again, a sign that e t F 0:02:55.400 --> 0:02:58.640 s are held, not often just traded. I'll jump in 0:02:58.680 --> 0:03:01.880 on this because the love for fixed income was part 0:03:02.080 --> 0:03:04.680 of one of my observations. To put a number on it. 0:03:04.720 --> 0:03:08.240 We've seen about seventy billion dollars go into fixed income 0:03:08.560 --> 0:03:10.520 so far in the first half, and that's the most 0:03:10.560 --> 0:03:13.560 for any half ever, So that gives you an idea. 0:03:13.639 --> 0:03:17.320 And now the amount of assets under management across fixed 0:03:17.320 --> 0:03:20.000 income products is now at an all time high, so 0:03:20.120 --> 0:03:23.840 around seven hundred and fifty billion dollars, and as Todd said, 0:03:23.840 --> 0:03:26.840 it's unbelievable. You see love for short term products, you 0:03:26.880 --> 0:03:29.720 see love for long term products, even in the belly 0:03:29.919 --> 0:03:32.400 of the curve. And it just goes to show that 0:03:32.480 --> 0:03:34.960 at this point in time, yes, a lot of people 0:03:35.000 --> 0:03:37.520 do believe that interest rates will be lower for longer, 0:03:38.000 --> 0:03:41.480 but it's still not set in stone. And I'll jump 0:03:41.520 --> 0:03:44.120 in here too with a couple of comments. Fixed income 0:03:44.160 --> 0:03:46.720 relative to itself, these et f s are definitely it's 0:03:46.720 --> 0:03:48.440 a banner year their own record to have their most 0:03:48.440 --> 0:03:51.560 flows ever. But when you use it relative to US equities, 0:03:51.640 --> 0:03:53.880 I find sometimes that numbers are touch distorted because of 0:03:53.920 --> 0:03:57.480 the January outflows that were a result of tax loss harvesting. 0:03:57.720 --> 0:04:00.320 If you take those away, it's not quite as drum attic. 0:04:00.760 --> 0:04:03.320 But that said, it is dramatic and it's worth pointing out. 0:04:03.680 --> 0:04:07.200 What's also interesting is active fixed income mutual funds have 0:04:07.360 --> 0:04:10.200 also been hauling in the cash. I think they could 0:04:10.240 --> 0:04:13.200 be right around the seventy billion mark based on the 0:04:13.280 --> 0:04:16.000 numbers we have so far extrapolating into June, so that 0:04:16.040 --> 0:04:18.960 would be a banner year all around for fixed income 0:04:19.040 --> 0:04:21.520 and the idea that it's across the curve is also interesting. 0:04:21.560 --> 0:04:26.160 Normally it was all ultra short and short. Some years 0:04:26.160 --> 0:04:28.680 it's all long term, some years it's high yield. It 0:04:29.400 --> 0:04:33.160 this the diversity is interesting. Geo VT is a ticker 0:04:33.200 --> 0:04:36.479 that to me represents this year. Geo VT is the 0:04:36.560 --> 0:04:42.440 I Shares Treasury et F which invest in all treasuries 0:04:42.480 --> 0:04:45.279 across the curve right from A to Z, and that 0:04:45.440 --> 0:04:47.919 is taking in four point six billion. It's uh. I 0:04:47.960 --> 0:04:51.000 think it's just squeeze into the top ten of inflows 0:04:51.040 --> 0:04:53.720 and it's not that big, so that one's punching way 0:04:53.760 --> 0:04:56.240 above its weight. And to me, that's representative of this year. 0:04:56.279 --> 0:04:58.520 If I had to pick a sort of poster child 0:04:58.600 --> 0:05:00.640 for this year and flows, it would probably geo VT. 0:05:00.880 --> 0:05:02.400 And what do we think the second half of the 0:05:02.480 --> 0:05:05.240 gear is gonna look like for fixed income? We're getting 0:05:05.279 --> 0:05:09.120 to the predictions already on it. So we think that 0:05:09.320 --> 0:05:11.080 we think money is going to continue to pour in, 0:05:11.200 --> 0:05:14.080 so even if the FED does not, So we don't 0:05:14.080 --> 0:05:17.320 believe that the FED is going to be conversation ultimately 0:05:17.360 --> 0:05:20.159 is about the FED. Well, it's it's about the FED, 0:05:20.200 --> 0:05:23.240 and it's also about investors using e t f s uh, 0:05:23.279 --> 0:05:26.279 and fixing comm ETFs from more of a strategic perspective. 0:05:26.360 --> 0:05:29.400 So you do see a tactical shift based on what's 0:05:29.400 --> 0:05:31.560 going to happen with the FED and the dot plots 0:05:31.560 --> 0:05:34.160 and things to that effect. But you are seeing some 0:05:34.200 --> 0:05:37.839 of these low cost core products continue to gather assets 0:05:37.920 --> 0:05:41.080 regardless of what's going on with the yield curve. And 0:05:41.160 --> 0:05:43.440 so we think we're seeing products like A G, G 0:05:43.800 --> 0:05:46.800 and B and D from ice Shares in Vanguard respectively, 0:05:46.839 --> 0:05:49.520 among other products that are just increasingly being used as 0:05:49.520 --> 0:05:53.520 a replacement in the institutional marketplace and being being a 0:05:53.560 --> 0:05:57.800 replacement for some mutual funds or for individual bonds as well. 0:05:58.520 --> 0:06:01.359 I mean, and all of these are products that have 0:06:01.400 --> 0:06:03.039 been around for a little bit in fixed income space. 0:06:03.120 --> 0:06:05.960 Is there any is there any new products that have 0:06:06.160 --> 0:06:09.560 been kind of a shocker or a surprise for you? Well, 0:06:09.600 --> 0:06:11.960 I mean when the fixed incomes. Yeah, Well, we're seeing 0:06:12.000 --> 0:06:14.760 more and more of these ultra short active products that 0:06:14.839 --> 0:06:17.760 gained some traction in two thousand eighteen that likely we're 0:06:17.760 --> 0:06:20.920 gonna be just parking money and I think we expected 0:06:20.920 --> 0:06:23.279 that and others did as well, and we've seen investors 0:06:23.320 --> 0:06:26.800 continue to move into those products. So Wisdom Tree has 0:06:26.839 --> 0:06:31.719 a floating rate UH treasury oriented product that that skyrocketed 0:06:31.760 --> 0:06:35.440 in two thousand and eighteen. Us f R has really 0:06:36.800 --> 0:06:39.000 somebody say floating rate. Yeah, but you know what, it's 0:06:39.000 --> 0:06:41.840 continued to pour in money. And we've seen JPST from 0:06:41.920 --> 0:06:45.480 JP Morgan other products. These are relatively new products, these 0:06:45.480 --> 0:06:48.600 are not three years old, and yet they're gathering significant assets. 0:06:48.800 --> 0:06:50.880 And the fact of the matter is, yes, a lot 0:06:50.960 --> 0:06:53.120 of this has to do with where interest rates are going, 0:06:53.200 --> 0:06:55.680 but it also has to do with where we are 0:06:55.760 --> 0:06:57.920 in the economic cycle and where we are in the 0:06:57.920 --> 0:07:01.800 market cycle, because as Todd mentioned, people also use these strategically. 0:07:01.880 --> 0:07:04.480 So people now, if they truly believe that we are 0:07:04.520 --> 0:07:07.600 towards the end of the economic cycle, which pretty much 0:07:07.680 --> 0:07:10.480 is consensus at this point in time, you could say, 0:07:10.600 --> 0:07:13.200 although there's people who don't believe in the economic cycle either, 0:07:13.200 --> 0:07:15.040 I think it will go on forever. This this time 0:07:15.120 --> 0:07:17.240 is different. This time is different, but still people are 0:07:17.240 --> 0:07:19.920 going to these products to use as a hedge. So yes, 0:07:20.040 --> 0:07:23.679 positioning regarding interest rates, but also just a strategic hedge. 0:07:23.880 --> 0:07:26.720 And if the FED is accommodative as they have been, 0:07:26.960 --> 0:07:29.240 it's gonna be good for all all of this. But 0:07:29.400 --> 0:07:33.320 if they do get hawkish suddenly and people start freaking out, 0:07:33.880 --> 0:07:36.400 it's going to as as everybody said, you will see 0:07:36.440 --> 0:07:38.800 flows two different products, but it probably will take down 0:07:38.840 --> 0:07:41.480 the overall number in my opinion. So the seventy billion 0:07:41.520 --> 0:07:44.520 we saw to me could double to one forty if 0:07:44.520 --> 0:07:48.520 the Feds, you know, relaxed accommodative. If the Fed turns 0:07:48.520 --> 0:07:50.720 hawk ish, I could see that struggling, maybe ending up 0:07:50.920 --> 0:07:53.360 ending up the year a hundred as people as the 0:07:53.360 --> 0:07:56.239 outflows from t LT and those guys maybe get offset 0:07:56.240 --> 0:07:59.280 by the inflows to the short duration stuff. All right, 0:07:59.680 --> 0:08:03.000 who's another big observation I can come in. It kind 0:08:03.040 --> 0:08:06.280 of ties in with the whole fixed income bent because 0:08:06.320 --> 0:08:08.680 even if you look at equity flows so far this year, 0:08:08.760 --> 0:08:13.040 where we have seen the focus is unbelievably defensive if 0:08:13.040 --> 0:08:15.240 you look on a sector level, and then also if 0:08:15.240 --> 0:08:17.160 you look at factors as well. So to give you 0:08:17.160 --> 0:08:20.240 an idea, the top sectors flow wise so far this 0:08:20.360 --> 0:08:25.840 year our real estate, communications, utilities, and consumer stables. Now communications, 0:08:25.920 --> 0:08:27.760 yes it holds some of those bang names, but also 0:08:27.840 --> 0:08:32.240 those dividend yielding telecom names as well. Every other sector 0:08:32.280 --> 0:08:35.640 has seen outflows. So it's pretty amazing that there is 0:08:35.720 --> 0:08:38.840 just a unison want for defense. And then on the 0:08:38.880 --> 0:08:41.959 smart beta side, we have just seen massive flows into 0:08:42.000 --> 0:08:45.240 low volatility funds. It's like the first half is the 0:08:45.280 --> 0:08:48.360 first half year of the low volatility funds because so 0:08:48.400 --> 0:08:50.880 far they've taken in more than eleven billion dollars. It's 0:08:50.920 --> 0:08:54.160 the most for any half going back to I believe. 0:08:54.240 --> 0:08:56.439 So it just shows you that on the equity side 0:08:56.440 --> 0:08:59.440 where we are seeing flows is the defensive side. And 0:08:59.520 --> 0:09:01.440 to I'm in on that. Two things on that just 0:09:01.520 --> 0:09:04.280 to first of all, low volatility ETFs are the most 0:09:04.400 --> 0:09:08.920 sellable thing ever created. What person who's like sixty doesn't 0:09:08.960 --> 0:09:11.400 want like the market with like a smoother ride. It's 0:09:11.440 --> 0:09:16.400 like you could sell the correct Yeah, it's like diet coke, right, 0:09:16.520 --> 0:09:19.319 It's like zero calorie. It's such a sellable thing. So 0:09:19.600 --> 0:09:22.040 there's an evergreen nature to low vall sweeping the world. 0:09:22.600 --> 0:09:24.360 The other thing was on those sectors though, I will 0:09:24.360 --> 0:09:26.200 say that the real estate to me is also maybe 0:09:26.280 --> 0:09:29.719 FED related as well. And yeah, so you get this 0:09:29.880 --> 0:09:31.880 because at the beginning of the year, when the FED 0:09:31.960 --> 0:09:34.960 got dovish around January fourth ish, right at the beginning, 0:09:35.440 --> 0:09:38.079 we saw this thirst for yield trade comeback, whether that 0:09:38.160 --> 0:09:42.880 be those sectors, the fixed income ETFs UH, junk bond ETFs, 0:09:43.120 --> 0:09:45.800 inflows UH, and that was kind of dying. We actually 0:09:45.840 --> 0:09:48.640 wrote a note in late about how the thirst for 0:09:48.720 --> 0:09:52.400 yield trade was possibly over um and then boom, it 0:09:52.480 --> 0:09:54.760 came right back. Even if you look in smart beta, 0:09:54.880 --> 0:09:56.920 so low ball is your number one, but below that 0:09:57.240 --> 0:10:00.880 is multi factor, so diversification at its best. And then 0:10:00.960 --> 0:10:04.199 it's dividend yields. So these dividend e t f s. 0:10:04.240 --> 0:10:06.520 And that's just another case to be made that when 0:10:06.559 --> 0:10:08.640 you have really low interest rates, you have a ten 0:10:08.720 --> 0:10:12.679 year two percent or below, people want yield and if 0:10:12.679 --> 0:10:14.800 you can go to the equity market, still take a 0:10:14.840 --> 0:10:18.200 little bit of risk, but be guaranteed a payout, that's 0:10:18.240 --> 0:10:20.880 clearly attractive at this point in time. What I think 0:10:20.960 --> 0:10:23.320 is also interesting is you cited this is strong since 0:10:23.360 --> 0:10:25.720 two thousand seventeen. What that means also is two thousand 0:10:25.840 --> 0:10:28.360 sixteen was a great year for the first half for 0:10:28.400 --> 0:10:30.960 low volatility ETFs. But what was happening in two thousand 0:10:31.080 --> 0:10:34.280 the first half two thousand and sixteen is the broader 0:10:34.400 --> 0:10:38.160 market and the financial press outside of Bloomberg was freaking 0:10:38.200 --> 0:10:40.480 out that there was too much money going into low 0:10:40.520 --> 0:10:43.960 folatility ets they were actually driving the overall market, which 0:10:44.040 --> 0:10:46.920 is of course absurd given how small these e t 0:10:47.080 --> 0:10:50.200 F products are. Three fast forward three years, we're seeing 0:10:50.240 --> 0:10:52.840 the money going into it, and people are now applauding 0:10:53.000 --> 0:10:55.320 e t F investors for taking more of a lower 0:10:55.440 --> 0:10:58.559 risk approach, even though we're up seventeen percent in the 0:10:58.640 --> 0:11:02.079 broader market. That's a sign of some maturity that's out there. 0:11:02.240 --> 0:11:04.560 And I think it's also just a sign that investors 0:11:04.600 --> 0:11:06.920 are willing to wanting to have their cake and needed too. 0:11:06.960 --> 0:11:09.080 So you still want to be part of the marketplace 0:11:09.559 --> 0:11:12.079 and be up, but be down less. And and these 0:11:12.160 --> 0:11:15.200 products held up quite well in May, you know, when 0:11:15.240 --> 0:11:17.640 the market became much more volatile. I will point out 0:11:17.679 --> 0:11:20.200 though that one of the most popular low volatility funds 0:11:20.280 --> 0:11:22.160 us m V. Eric and I were talking about this 0:11:22.280 --> 0:11:24.920 the other day because actually outperformed the SMP this year. 0:11:25.000 --> 0:11:27.640 So when you think of low vall, you think of safety. 0:11:27.720 --> 0:11:30.280 You're tracking the market, but maybe you get a little 0:11:30.320 --> 0:11:33.319 bit less of a return. This year, you're actually getting 0:11:33.360 --> 0:11:36.120 more than the SPRED So it's pretty amazing. Yeah, I mean, 0:11:36.160 --> 0:11:38.599 that's got a heavy weighting still relatively high weighting, and 0:11:38.679 --> 0:11:42.680 technology for a defensive portfolio because it reduces the risk 0:11:42.960 --> 0:11:46.000 within each of those sectors. So you do have exposure 0:11:46.040 --> 0:11:48.040 to some of the growthier sectors, just in a more 0:11:48.080 --> 0:11:52.640 defensive way, so companies like MasterCard instead of Apple, for example, 0:11:52.679 --> 0:11:55.000 within technology. And but just to go back to the 0:11:55.720 --> 0:11:59.280 craze of where low Ball took in like forty billion 0:11:59.400 --> 0:12:01.719 or something. Um, don't quote me on that. It's it 0:12:01.840 --> 0:12:04.560 was a lot, uh, you know, relative to its size 0:12:05.160 --> 0:12:07.920 that year, they were outperformed by eight nine. This year 0:12:07.960 --> 0:12:11.360 it's two. So it's interesting that they've taken in so 0:12:11.480 --> 0:12:14.520 much money despite not not crushing it per se. So 0:12:14.640 --> 0:12:17.480 to me, this is more about the psychology of hey, 0:12:17.559 --> 0:12:20.199 we're late in the market. How long can the FED 0:12:20.320 --> 0:12:21.920 keep the party going. It's like the party feels like 0:12:21.960 --> 0:12:23.679 it's four in the morning now, and I know the 0:12:23.720 --> 0:12:25.920 FED just brought some new beer, but it's like, dude, 0:12:25.920 --> 0:12:28.199 I gotta get some sleep. This thing is gonna this 0:12:28.320 --> 0:12:30.000 thing is gonna bust up soon. So I think there's 0:12:30.000 --> 0:12:34.360 a general defensiveness despite the returns to talk about your 0:12:34.400 --> 0:12:37.000 rave days, is that what you're trying to say, The 0:12:37.080 --> 0:12:40.520 late nineties. Oh yeah, So this defensive posturing, though, how 0:12:40.600 --> 0:12:42.679 much your investors missing out on? What they what we've 0:12:42.679 --> 0:12:45.679 seen so far this year, So it's pretty amazing because 0:12:45.720 --> 0:12:47.959 you look at the SMP five and the SMP is 0:12:48.040 --> 0:12:52.480 up sevent or so we just recently hit new highs. However, 0:12:53.280 --> 0:12:54.839 much of that has been driven at least in the 0:12:54.920 --> 0:12:57.160 back half of the half, So I guess the second 0:12:57.240 --> 0:12:59.280 quarter of the year you would say, has been driven 0:12:59.520 --> 0:13:03.480 by gines and defensive sectors. So by positioning in these areas, 0:13:03.600 --> 0:13:06.680 they're actually don't seem to be missing out on all 0:13:06.800 --> 0:13:08.880 that much. Because if you look at since May, and 0:13:09.040 --> 0:13:11.880 May was when everything related to trade started to fall 0:13:11.960 --> 0:13:13.360 apart a bit, we saw a little bit of a 0:13:13.440 --> 0:13:17.360 pullback since then, where the outperformance really has been is 0:13:17.400 --> 0:13:21.200 in utilities, is in real state, is actually in consumer staples. 0:13:21.520 --> 0:13:24.040 So by positioning in these places that you would think 0:13:24.080 --> 0:13:25.640 maybe you're not going to get that much of a 0:13:25.720 --> 0:13:28.520 return on the upside, but you get protection on the downside, 0:13:28.640 --> 0:13:31.480 we're actually seeing participation in the upside as well. Yeah, 0:13:31.480 --> 0:13:33.800 and with utilities and real estate in particular, I will 0:13:33.840 --> 0:13:37.119 leave consumer stables to the side for this. They are defensive, 0:13:37.400 --> 0:13:40.000 They offer the yield, but these are also US centric 0:13:40.320 --> 0:13:43.560 place so we've had the trade fears that have been 0:13:43.600 --> 0:13:45.760 going on pretty much all of the first half of 0:13:45.880 --> 0:13:48.760 the year. The easiest way to hide from that is 0:13:48.880 --> 0:13:51.920 just to stay as local as possible, and you're local 0:13:52.080 --> 0:13:55.520 utility or your assignment property. You're not getting the same 0:13:55.559 --> 0:13:58.720 international exposure that you would within technology, which was has 0:13:58.800 --> 0:14:00.840 been a strong performer, but oviously has been much more 0:14:00.920 --> 0:14:03.680 volatile in the last couple of months. So which sectors 0:14:03.720 --> 0:14:08.199 have been the biggest losers from an outflow protective well, 0:14:08.400 --> 0:14:13.080 from an outflow perspective, the worst our financials, energy and materials. 0:14:13.520 --> 0:14:17.560 So that is just a clear cyclical play. I mean, 0:14:17.640 --> 0:14:19.560 you want to look at the areas that are tied 0:14:19.600 --> 0:14:22.840 in with the economy vs. Are them, and it shows 0:14:22.920 --> 0:14:25.400 you that E t F investors are a little bit 0:14:25.440 --> 0:14:28.040 worried at the moment. They don't want to be anywhere 0:14:28.160 --> 0:14:30.880 near these three because we've seen some pretty sizable outflows 0:14:30.920 --> 0:14:32.960 in those areas as well. Okay, Eric, do you have 0:14:33.000 --> 0:14:35.120 an observation from the first half. I do, uh, and 0:14:35.200 --> 0:14:37.000 I'll go a different track. We just did flows. I 0:14:37.040 --> 0:14:39.440 think we covered a lot. Let's go to launches we'd 0:14:39.480 --> 0:14:41.640 like to see what's launching. It gives us a flavor 0:14:41.720 --> 0:14:43.840 of what's going on in the ETS space. There was 0:14:43.880 --> 0:14:46.560 more launches than I thought, hundred and twenty nine this year. 0:14:46.920 --> 0:14:49.400 That puts us on track for what to six the 0:14:49.560 --> 0:14:53.440 ish that would about about tie the record for annual launches. 0:14:53.880 --> 0:14:56.680 I'm surprised by this, given how rough the fee war 0:14:56.760 --> 0:14:58.880 has gotten and how some we saw some launches that 0:14:58.920 --> 0:15:02.360 came out at zero fee and negative fee. I thought 0:15:02.400 --> 0:15:04.600 this would put a little more fear into the bones 0:15:04.720 --> 0:15:07.000 of people who had e t F s lined up, 0:15:07.040 --> 0:15:09.640 But they're coming out like crazy still, probably because the 0:15:09.680 --> 0:15:12.360 e t F continue to take in most of the flows. Uh. 0:15:12.520 --> 0:15:15.280 Interesting on the top ten list, like so the new launches, 0:15:15.400 --> 0:15:17.080 which are the rookies of the year, Which ones are 0:15:17.120 --> 0:15:19.520 taking in the most cash? Barely any big names? I 0:15:19.600 --> 0:15:21.680 mean yes, the top two are E s G. That's 0:15:21.680 --> 0:15:24.440 also a shocker. Um I've been barished on E s G, 0:15:24.600 --> 0:15:27.360 but these two have overcome that. It's the I Shares 0:15:27.400 --> 0:15:30.040 and the Deutsche Bank, mostly because all that money came 0:15:30.080 --> 0:15:34.160 from one investor, a European pension funds, so institutions could 0:15:34.200 --> 0:15:36.480 be the way for E s G. Four that's interesting 0:15:36.520 --> 0:15:40.760 observation from those. Also two big thematic ETFs in the 0:15:40.840 --> 0:15:44.160 top ten, the global X cloud computing. There was already 0:15:44.160 --> 0:15:46.680 one of the market, but the global X came in 0:15:46.880 --> 0:15:48.880 and it's already got four hundred million. That is a 0:15:48.960 --> 0:15:51.280 shocker to me. It charges the sixty eight basis points 0:15:51.720 --> 0:15:53.720 and it shows you can still innovate and win because 0:15:53.760 --> 0:15:56.440 this one is much more targeted than Sky the first 0:15:56.440 --> 0:15:58.720 trust one, and it's doing a lot better this year. 0:15:58.720 --> 0:16:00.840 I think it's up six percent for the Sky flat 0:16:01.200 --> 0:16:03.920 because it goes after the smaller, more pure play companies. 0:16:04.360 --> 0:16:07.680 That's interesting. And then finally on the list, you've got Yolo, 0:16:08.320 --> 0:16:10.600 which is the marijuana et F. I was shocked it 0:16:10.680 --> 0:16:12.560 took people so long to do a me too potty 0:16:12.640 --> 0:16:14.480 t F. I was this is probably the most no 0:16:14.640 --> 0:16:17.400 brainer launch you could ever think of, because there's definitely 0:16:17.520 --> 0:16:20.440 enough interest. Mj is now a billion dollars ish, I 0:16:20.760 --> 0:16:22.800 would be not I wouldn't be surprised if we see 0:16:22.800 --> 0:16:24.760 a couple more potty tfs come out all out of 0:16:24.760 --> 0:16:27.320 the robotics craze of a year ago. Um, but as 0:16:27.400 --> 0:16:29.960 they keep coming out, they're gonna law of diminishing returns 0:16:30.000 --> 0:16:33.400 will kick in, but the tickers should be really something. 0:16:33.680 --> 0:16:36.880 I'm anticipating some crazy tickers in that space. But anyway, 0:16:37.200 --> 0:16:40.080 on the flip side, there's been ninety one closures. That's 0:16:40.120 --> 0:16:43.160 also shockingly high. If you extrapolate that, you get to 0:16:43.240 --> 0:16:46.160 one eight and one eighty would crush the record. I 0:16:46.200 --> 0:16:48.080 think the old records about a hundred and twenty five. 0:16:48.680 --> 0:16:50.520 So this tells me that yes, there's a lot of 0:16:50.560 --> 0:16:52.440 innovation and a lot of excitement, but there's a lot 0:16:52.480 --> 0:16:55.120 of Darwinism going on, and you have an industry I 0:16:55.200 --> 0:16:57.720 think that's maturing. That's my takeaway on that. Well, you've 0:16:57.760 --> 0:16:59.800 got two camps in that you you kind of glossed 0:17:00.080 --> 0:17:03.120 for the cheap products that have come out this year, 0:17:03.160 --> 0:17:05.399 and for understandable reasons, because they haven't been gathering as 0:17:05.440 --> 0:17:08.680 much assets the ultra cheap or free products. Maybe we'll 0:17:08.720 --> 0:17:11.000 come back to that one later on, but thematic has 0:17:11.080 --> 0:17:14.200 really been the way of investing for launching new products 0:17:14.280 --> 0:17:17.440 because you can be differentiated in how you interpret the 0:17:17.560 --> 0:17:20.879 themes we now have. I think now our third and 0:17:20.960 --> 0:17:24.600 our fourth related gaming et F will probably see ten 0:17:25.040 --> 0:17:27.399 at some point because that's such a broad open area. 0:17:29.160 --> 0:17:31.480 I triggered myself on this. I just don't get it. 0:17:31.560 --> 0:17:33.680 But what I do get. But but you're a fan 0:17:33.760 --> 0:17:37.600 of the five quality large cap smart Beta fund, I 0:17:37.720 --> 0:17:41.560 am because it's the in house expertise that puts me 0:17:41.640 --> 0:17:44.919 to sleep. I will, I will blow your mind right 0:17:44.960 --> 0:17:47.440 now if you don't get the gaming thing. I have 0:17:47.520 --> 0:17:50.800 a younger brother, actually he was a professional gamer. Well 0:17:50.840 --> 0:17:55.480 now he's retired, but believable, and this is a this 0:17:55.600 --> 0:17:59.240 is a thing. I'm sure, this is I'm sure, but 0:17:59.320 --> 0:18:03.280 we now again we have now more gaming related et 0:18:03.560 --> 0:18:06.119 s out there than home building related e t f s. 0:18:06.280 --> 0:18:09.080 What I just think is interesting is that we're seeing 0:18:09.119 --> 0:18:10.760 a lot of these innovations that are out there. I 0:18:10.880 --> 0:18:15.040 shares his launched products in the thematic and trend oriented space. 0:18:15.080 --> 0:18:17.000 We've seen State Street launch it. We're seeing some of 0:18:17.000 --> 0:18:20.240 the bigger boys come in, and that's gonna against spur 0:18:20.320 --> 0:18:23.760 additional innovation and adoption because you've got to find where 0:18:23.760 --> 0:18:25.879 the puck is going to uh to skate to it 0:18:26.040 --> 0:18:28.679 and and these smaller firms are really doing a good 0:18:28.760 --> 0:18:31.040 job of launching these products. In my view, the real 0:18:31.440 --> 0:18:34.639 reason thematics are are becoming big business is the modern 0:18:34.760 --> 0:18:38.880 portfolio is real low cost core. Right, you know, you've 0:18:38.920 --> 0:18:41.320 got this building block of like a baby five bits 0:18:41.480 --> 0:18:45.520 for the whole thing, International, Developed, emerging markets, US equity bonds. 0:18:46.160 --> 0:18:48.159 Then to have fun on the outside, to try for 0:18:48.200 --> 0:18:50.680 a little outfit, you could do a factor factor e 0:18:50.760 --> 0:18:53.520 T F. You could do a single country or thematics 0:18:53.800 --> 0:18:56.880 and I think thematics again for advisors, are easy to explain. 0:18:57.480 --> 0:18:59.359 You can buy into the story and then you put 0:18:59.440 --> 0:19:02.000 them on top. That's why we like the hardcore thematic 0:19:02.080 --> 0:19:04.520 ones because we're assuming you're using it as a little 0:19:04.560 --> 0:19:06.760 hot sauce on top of the portfolio, so we say 0:19:06.800 --> 0:19:08.400 you might as well go all the way and try 0:19:08.440 --> 0:19:10.720 to really capture. So that's why that thematic capture score 0:19:10.760 --> 0:19:13.240 that we create I think is crucial and hopefully you know, 0:19:13.359 --> 0:19:16.480 helps people navigating because now a lot of these categories 0:19:16.480 --> 0:19:20.359 have three or four e T s to pick from. Robotics, cybersecurity, 0:19:20.400 --> 0:19:23.160 cloud computing, you name it. But what the other part 0:19:23.200 --> 0:19:25.639 of that from an asset management perspective is you can 0:19:25.800 --> 0:19:30.119 charge forty five, fifty sixty eight basis points for these 0:19:30.160 --> 0:19:32.880 products and still be able to gather assets as opposed 0:19:32.920 --> 0:19:36.280 to even though we've seen competition the floor is considerably 0:19:36.359 --> 0:19:40.520 higher for these products overall, whereas I Shares has three 0:19:40.600 --> 0:19:42.600 and four and five basis point products. It's a lot 0:19:42.680 --> 0:19:45.760 harder to become profitable if you're a public company that way. 0:19:45.880 --> 0:19:48.080 That's true, and that gets us to the shiny object 0:19:48.280 --> 0:19:52.080 stuff we've talked about. If you're hardcore and concentrated, you 0:19:52.200 --> 0:19:55.000 have the shiny object potential because you're in smaller companies. 0:19:55.280 --> 0:19:58.160 And when some of these products hit, they hit big. 0:19:58.359 --> 0:20:00.800 I mean, they don't perform by two or three percentage points, 0:20:01.040 --> 0:20:03.800 they are performed by twenty percentage points, so nobody cares 0:20:03.800 --> 0:20:06.320