WEBVTT - Strategas’ Todd Sohn on the Active ETF Boom 0:00:16.120 --> 0:00:19.119 Welcome to Inside Active, a podcast about active managers that 0:00:19.200 --> 0:00:21.720 goes beyond sound bites and headlines and looks deeper into 0:00:21.720 --> 0:00:26.520 that processes, challenges and philosophies and security selection. I'm David Cohne, 0:00:26.760 --> 0:00:29.360 I lead mutual fund and active Research at Bloomberg Intelligence. 0:00:29.720 --> 0:00:34.320 Today my coast is Athanasius Sarah Vegas, ETF analyst at 0:00:34.440 --> 0:00:35.520 Bloomberg Intelligence. 0:00:35.600 --> 0:00:37.720 Ethan, thanks for joining me. Yeah, man, thanks having me on. 0:00:38.360 --> 0:00:40.760 So we were recording live from the Exchange conference in 0:00:40.800 --> 0:00:43.280 Las Vegas hosted by Beta five. So I do want 0:00:43.280 --> 0:00:45.400 to thank Todd brosen Booth and the folks of Betterfi 0:00:45.560 --> 0:00:48.000 for having us. We are joined by our old friend 0:00:48.000 --> 0:00:52.760 Todd Son, Chief ETF Strategists at Strategists Asset Management. Todd, 0:00:52.800 --> 0:00:54.760 thanks you for joining us today on the sunny day. 0:00:54.800 --> 0:00:56.000 Hey, it's great to be with you guys. 0:00:56.680 --> 0:00:58.600 So this episode's gonna be a little different than our 0:00:58.640 --> 0:00:59.880 typical Inside Active. 0:01:00.440 --> 0:01:01.320 I'm going to actually. 0:01:01.160 --> 0:01:04.160 Ask you both questions as opposed to Ethan and I 0:01:04.360 --> 0:01:06.679 kind of going back and forth, and so I want 0:01:06.680 --> 0:01:09.000 to kind of get the current state of active ETFs 0:01:09.040 --> 0:01:11.199 and then at the end we'll do a lightning route. 0:01:11.920 --> 0:01:15.200 So Todd let's start with you, what flow has surprised 0:01:15.240 --> 0:01:16.199 you most this year? 0:01:17.560 --> 0:01:21.760 So to start an active you're at twelve percent of 0:01:21.800 --> 0:01:25.760 assets and forty percent of year today flows. I don't 0:01:25.800 --> 0:01:29.360 know if any category specifically surprises me, but it's the 0:01:29.520 --> 0:01:32.600 balance right year to date or the trail or trailing 0:01:32.680 --> 0:01:36.319 year fourtune and twenty billion equity, three hundred and eighty 0:01:36.360 --> 0:01:39.160 to fixed income, and two hundred and seven billion to 0:01:39.680 --> 0:01:42.039 option incomes. Right, So this is everywhere, This is not 0:01:42.160 --> 0:01:45.520 just cornered into one area. I think that's the breath 0:01:45.560 --> 0:01:48.200 of it is really impressive. What do you think, Eithan? 0:01:48.320 --> 0:01:51.160 Yeah, I mean I kind of agree with Todd. Nothing 0:01:51.200 --> 0:01:55.480 really sticks out. So like you're saying flows into international 0:01:56.720 --> 0:02:00.360 Emerging Markets v X, you know it's passed, but like 0:02:00.400 --> 0:02:03.040 av EM has taken in quite a bit of money, 0:02:03.120 --> 0:02:05.680 you know, some of the optional overlays. So honestly, I 0:02:05.680 --> 0:02:08.960 don't think there's anything that shocking and active. I know 0:02:09.000 --> 0:02:11.520 it's not a debate with Todd, but I kind of 0:02:11.520 --> 0:02:14.200 agree there there's not really anything that stands out. What 0:02:14.240 --> 0:02:16.600 about like anything that should be getting closed but isn't. 0:02:16.840 --> 0:02:20.000 Oh, you know, I would love to see more to 0:02:20.280 --> 0:02:26.079 active small cap because small cap industies are flood right 0:02:26.160 --> 0:02:28.280 Russell two thousand, which I think we all refer to, 0:02:29.160 --> 0:02:32.519 was it forty percent unprofitable zombie companies galore? And yeah, 0:02:32.520 --> 0:02:36.440 there's moments in market regimes where you actually want Russell 0:02:36.440 --> 0:02:37.840 two thousand exposure, Right, you want to go out and 0:02:37.840 --> 0:02:42.040 buy junk. But as a cycle's mature and the credit 0:02:42.040 --> 0:02:45.520 backtop changes, I like having an active manager to be 0:02:45.600 --> 0:02:47.560 at the wheel to find those companies that eventually grow 0:02:47.639 --> 0:02:49.200 up in graduate of the bigger induscy. So I would 0:02:49.200 --> 0:02:54.239 like to see more activity down there. Okay, so I'll 0:02:54.240 --> 0:02:56.880 start again, Todd, what what's over hype right now? Not 0:02:57.040 --> 0:03:01.120 to btfs, it's oh, it's overhyped. I don't. We're sitting 0:03:01.160 --> 0:03:03.920 in front of a live batch of people are exchanged 0:03:04.280 --> 0:03:07.680 which are you sure I might get in trouble? So 0:03:09.280 --> 0:03:12.200 there's two area. I think it's derivative based stuff, right. 0:03:12.639 --> 0:03:15.040 I think it's fascinating that in the last three years, 0:03:15.080 --> 0:03:17.800 option income ETFs have taken it more than divin and ETFs, 0:03:17.960 --> 0:03:22.160 so the way investors are getting income has changed. Does 0:03:22.160 --> 0:03:24.320 that mean it's overhyped? I think certain segments of it 0:03:24.360 --> 0:03:27.880 are right, Single stock income ETFs, I think are overhyped, 0:03:27.880 --> 0:03:29.520 and there's a lot of issues in terms of the 0:03:29.520 --> 0:03:33.240 tax front, and then I don't know buffers. I don't 0:03:33.240 --> 0:03:36.200 know buffers. Depending on who I'm talking to, strike a chord. 0:03:36.320 --> 0:03:38.840 Some people love them and some people are like, I 0:03:38.880 --> 0:03:41.640 don't get it, and they're an eighty billion dollar category 0:03:41.640 --> 0:03:44.400 and I they're a little complex for me, and I'm 0:03:44.440 --> 0:03:47.160 wondering how much more ceiling there is. I get it 0:03:47.160 --> 0:03:49.600 that they're coming from the structured outcome space and that's 0:03:49.640 --> 0:03:52.839 a big area, but I don't know. I think there's 0:03:52.840 --> 0:03:55.040 so many other alternatives now in the income space and 0:03:55.080 --> 0:03:57.440 the downside protection space that I wonder if maybe that's 0:03:57.440 --> 0:03:58.480 the overhype area. 0:03:58.600 --> 0:04:02.160 Even yeah, I think with overhype, I know the leverage 0:04:02.200 --> 0:04:05.120 stuff that counts as active, that for sure, because you 0:04:05.200 --> 0:04:08.400 see all these filings coming out. It's companies that already 0:04:08.440 --> 0:04:10.200 have an ETF on them, So I don't really get 0:04:10.240 --> 0:04:12.160 what the advantage is. They're like, why are you launching 0:04:12.480 --> 0:04:15.640 another two x TESLA ETF that exists out there already, 0:04:16.160 --> 0:04:18.920 So unless you're literally competing on price point, but I 0:04:18.960 --> 0:04:20.880 don't even know if that's even a big advantage in 0:04:20.960 --> 0:04:24.800 something like single stock leverage buffers too, I think are 0:04:24.800 --> 0:04:27.559 a little bit overhype. Not the strategy, but the number 0:04:27.600 --> 0:04:28.680 of products that are out there. 0:04:28.720 --> 0:04:30.359 That's definitely it's. 0:04:30.360 --> 0:04:32.640 Getting really kind of saturated product wise. 0:04:33.160 --> 0:04:35.760 The buffers are the minions of the ETF industry, the 0:04:36.200 --> 0:04:38.680 little yellow guys, right, there's like a thousand of them 0:04:38.880 --> 0:04:42.479 and there's no difference. So this is more marketing than flows, 0:04:42.800 --> 0:04:46.159 you think in terms of it's such an easy message 0:04:46.240 --> 0:04:48.599 or an advisor, and I get it right, It makes sense, 0:04:48.720 --> 0:04:52.239 especially if you are an older generation. You're close to retirement, 0:04:52.279 --> 0:04:55.600 you're scared of an eighty seven moment, right, or you're 0:04:55.640 --> 0:04:57.279 about to buy a house or a boat. 0:04:57.760 --> 0:05:01.280 You want the downside protection. Yeah, yeah, I think they 0:05:01.600 --> 0:05:05.240 agree with Todd. They're like really easy to sell, kind 0:05:05.240 --> 0:05:08.080 of taking the place of lovall, maybe even eating some 0:05:08.120 --> 0:05:10.880 of your bond exposure. So, like I said, you know 0:05:10.920 --> 0:05:13.440 your outcome, right, there's no surprises. And whether or not 0:05:13.480 --> 0:05:15.479 they're efficient and that's like a done a debate, but 0:05:15.520 --> 0:05:18.400 I think that I get why people investors want to 0:05:18.480 --> 0:05:18.960 use these. 0:05:20.040 --> 0:05:21.840 So eighth, I'm gonna start with you on this one. 0:05:22.000 --> 0:05:25.080 Are we in a golden age of active ETFs or 0:05:25.200 --> 0:05:26.400 just a hot streak. 0:05:26.160 --> 0:05:28.400 Oh man, I mean this is great. We do have 0:05:28.440 --> 0:05:33.000 more active ETF than passive. Again that includes all the definitions. 0:05:33.080 --> 0:05:37.880 Is not just like alpha seeking stock pickers. Probably, I 0:05:37.920 --> 0:05:40.920 think Golden age. I think when you know, with the 0:05:40.960 --> 0:05:46.240 ETF fool making active more conducive and easier, cutting costs down, 0:05:46.360 --> 0:05:49.480 having an index provider, things like that, I think it's 0:05:49.520 --> 0:05:52.360 definitely going to be, you know, opening the door for 0:05:52.480 --> 0:05:55.960 more active. Then you have share classes coming to again, 0:05:56.160 --> 0:05:59.919 another big floodgate opening for active Golden age assets. And 0:06:00.360 --> 0:06:03.119 I don't know, but products probably like this is probably 0:06:03.160 --> 0:06:05.560 the start of just some massive influx of more active 0:06:06.880 --> 0:06:07.400 same question. 0:06:08.120 --> 0:06:11.960 I think it's got to be Golden Age, right, And 0:06:12.040 --> 0:06:14.440 the backdrop for me, I agree with everything insane. You 0:06:14.480 --> 0:06:18.320 got share classes, you have conversions. Everyone is coming into 0:06:18.360 --> 0:06:20.080 the pool now because they realize that's where the flows 0:06:20.080 --> 0:06:23.160 are going. Right. ETFs treat money better, largely speaking the 0:06:23.200 --> 0:06:26.920 mutra funds. But for the other art angle of this 0:06:27.080 --> 0:06:29.839 is we are in an environment where and I know 0:06:29.880 --> 0:06:32.440 everyone probably doesn't like this topic. Ten stocks make up 0:06:32.480 --> 0:06:34.440 forty percent of the S and P five hundred. If 0:06:34.440 --> 0:06:36.520 you're on large cap blend, if you on large cap growth, 0:06:36.560 --> 0:06:40.119 if you're own quality momentum, you own the same stocks, right, 0:06:40.200 --> 0:06:43.440 So this is where active and depending on if it's 0:06:43.480 --> 0:06:47.080 large cat, midcaps, wall cap international, right, having a handed 0:06:47.080 --> 0:06:50.240 the wheel to at least differentiate or diversify portfolios. I 0:06:50.240 --> 0:06:52.680 think that's so important. And I as much as the 0:06:52.680 --> 0:06:54.560 concentration might be coming off a boil, it could come 0:06:54.680 --> 0:06:58.360 right back in a given environment. So I don't see 0:06:58.400 --> 0:07:00.760 it slowing down. This is literally everyone is in the 0:07:00.760 --> 0:07:02.640 pool here in Vegas. 0:07:02.720 --> 0:07:06.120 But if the regime changes, like say, we see less volatility, 0:07:06.279 --> 0:07:07.840 but could the momentum fade a little bit? 0:07:08.800 --> 0:07:12.040 You probably see it slowed down. Like, I wonder if 0:07:12.040 --> 0:07:14.200 that forty percent of your today flows number start goes 0:07:14.200 --> 0:07:16.760 down to thirty percent. But I think you have a 0:07:16.960 --> 0:07:18.720 I wonder if there's a floor now in the twenty 0:07:18.760 --> 0:07:20.280 five percent area, right, whatever the number is, I think 0:07:20.320 --> 0:07:23.080 there's a floor on flows. And we just have to 0:07:23.080 --> 0:07:24.120 figure out what the celia is. 0:07:25.040 --> 0:07:26.800 Okay, So Todd, I'm gonna start with you on this. 0:07:27.320 --> 0:07:29.560 What act did ETF change the game? 0:07:29.840 --> 0:07:33.960 Is it? Arm Jep's a good question. It has to 0:07:34.000 --> 0:07:38.320 be ARC because they were the first one to say, hey, 0:07:38.520 --> 0:07:40.560 we're going to show you. We're literally going to email 0:07:40.600 --> 0:07:43.760 you our trades every single night. We're gonna be transparent 0:07:43.800 --> 0:07:47.200 about our holdings. And they proved you that an active 0:07:47.200 --> 0:07:49.640 equity fund can work in the ETF matter. And this 0:07:49.760 --> 0:07:54.560 was before the ETF rule of all that. I think 0:07:54.560 --> 0:07:57.960 it has to be them. And then once JP Morgan 0:07:58.000 --> 0:08:01.200 had Premium Income come out, they showed that, hey, derivatives 0:08:01.320 --> 0:08:03.600 in ETFs in an active matter are also going to 0:08:03.640 --> 0:08:05.720 be important because people on income they went downside protection, 0:08:05.760 --> 0:08:08.160 they want leverage all that. So that would be the 0:08:08.880 --> 0:08:10.840 you know, the the second leg of the change in the. 0:08:10.800 --> 0:08:13.240 Game was your pick, Ethan. I mean, Ark is a 0:08:13.240 --> 0:08:17.320 good one. That's probably the best pick, honestly, because then 0:08:17.360 --> 0:08:22.000 it kind of completely dismantled, like semi non transparent ETFs 0:08:22.000 --> 0:08:23.880 and all that. All that model then just became like 0:08:23.960 --> 0:08:27.160 obsolete when you know, Kathy was out there putting our 0:08:27.200 --> 0:08:29.840 holdings daily. But I'd say, if I had to pick 0:08:29.880 --> 0:08:34.360 another one, I think that whole buffer category not change 0:08:34.360 --> 0:08:36.680 the game. But it created a brand new category, which 0:08:36.679 --> 0:08:39.240 I think is so rare to see in ETF. So 0:08:39.360 --> 0:08:42.080 it's there's very little white space. So to have a 0:08:42.120 --> 0:08:45.120 new product come out and literally create a brand new category. 0:08:45.720 --> 0:08:49.480 They became really successful. I think that was a big 0:08:49.520 --> 0:08:51.600 game changer, and they think that just feeds into what 0:08:51.640 --> 0:08:53.920 was Todd was saying was just the ability to put 0:08:53.920 --> 0:08:56.920 derivatives in ETFs. I think that was definitely a big 0:08:57.000 --> 0:08:59.480 whether you don't want to define that as active, but 0:09:00.080 --> 0:09:02.640 that definitely, you know, change the game a lot. 0:09:03.160 --> 0:09:07.400 Okay, it's an if you're CEO of an issue and 0:09:07.480 --> 0:09:10.320 you could launch your own active ETF tomorrow, what would 0:09:10.320 --> 0:09:10.520 it be. 0:09:11.040 --> 0:09:11.920 That's a scary thought. 0:09:12.000 --> 0:09:17.680 Yeah, you know three x no, okay, just depending seeing 0:09:17.720 --> 0:09:20.480 where the market is now and when there's white white space, 0:09:20.880 --> 0:09:25.120 I'd probably try to crack the private equity like you 0:09:25.160 --> 0:09:28.240 know it probably work on something there just because you know, 0:09:28.440 --> 0:09:31.880 like we mentioned, there's there's more active ETFs than passive. 0:09:32.559 --> 0:09:34.640 I don't want to go into buffers is probably really 0:09:34.800 --> 0:09:38.200 competitive option overlay and covered calls that so is that? 0:09:38.280 --> 0:09:40.160 So I think private equity, if you can get a 0:09:40.240 --> 0:09:43.880 jump on it and get in to that category pretty early, 0:09:43.920 --> 0:09:46.079 I think that could be a game changing ETF. I 0:09:46.080 --> 0:09:48.120 would be mentioned similar to ARC, but so I'd probably 0:09:48.120 --> 0:09:52.040 be trying to focus in that in that space, would. 0:09:51.800 --> 0:09:55.559 You launch God, if it's already launched, is out a problem. 0:09:55.840 --> 0:09:59.160 I put on my Fatigua's hat. I'm just gonna copy 0:09:59.240 --> 0:10:05.600 somebody tigus Macro Thematic Opportunities ETF Thematic Diversification, Right, that's 0:10:05.600 --> 0:10:09.160 what I would launch. It is live, not to be 0:10:09.320 --> 0:10:11.760 the promo here, but it takes thematic funds and it 0:10:11.800 --> 0:10:13.760 puts them all in one fund together rather than taking 0:10:13.760 --> 0:10:16.520 the single theme risk. So that's what I would launch, 0:10:16.559 --> 0:10:19.120 even though it is live. I stay o by that. 0:10:19.679 --> 0:10:24.120 If TRTIGAZ did not exist, what would I do? I 0:10:24.120 --> 0:10:26.680 would do something in the derivative space because there's still 0:10:26.679 --> 0:10:29.880 a lot of opportunity there and it fits both channels, 0:10:29.920 --> 0:10:34.840 retail and institutional. Right. Retail loves income. The institutions want 0:10:34.960 --> 0:10:37.120 the how to hedge, how to protect. 0:10:37.960 --> 0:10:42.040 Okay, do you think active ETFs are competing well with 0:10:42.360 --> 0:10:44.520 mutual funds or passive ETFs right now? 0:10:44.600 --> 0:10:47.240 Eighthan you go first, I think both. 0:10:49.080 --> 0:10:49.280 Yeah. 0:10:49.320 --> 0:10:52.320 I think it's just it's still the same argument, like 0:10:52.520 --> 0:10:54.800 active versus passive, but now it's just all being moved 0:10:54.840 --> 0:10:58.080 over into the ETF. So yeah, it's I think it's 0:10:58.080 --> 0:11:02.800 competing with everyone. You know, passive for sure. I think 0:11:03.760 --> 0:11:05.360 I don't know if it's a head to head competition. 0:11:05.400 --> 0:11:10.760 I think it's just evolving to live alongside passive, right. 0:11:10.800 --> 0:11:12.840 So a lot of the active stuff we're talking about, 0:11:13.000 --> 0:11:16.760 you know, buffers or see you know, leverage single stock, 0:11:17.000 --> 0:11:19.480 that's not going to be a core position, right, sort 0:11:19.480 --> 0:11:22.120 of like a satellite position alongside passes. So I think 0:11:22.160 --> 0:11:23.680 that's how they're sort of learning to live. 0:11:24.200 --> 0:11:24.480 Uh. 0:11:24.520 --> 0:11:27.120 And then yeah, it's just this is all just the 0:11:27.160 --> 0:11:29.160 you know, the money moving over from mutual funds and 0:11:29.200 --> 0:11:31.680 the ETFs, so you're kind of competing with everything. And 0:11:31.720 --> 0:11:34.560 then also I think the thing to mention obviously ETF 0:11:34.600 --> 0:11:38.000 trading is so high even though it's a passive vehicle, right, 0:11:38.040 --> 0:11:40.920 people just constantly trading these passive ETFs. I think in 0:11:40.920 --> 0:11:43.040 a way that's active too, right, So they're also maybe 0:11:43.080 --> 0:11:45.040 kind of competing on that level. 0:11:45.120 --> 0:11:45.760 But yeah, I. 0:11:45.679 --> 0:11:50.160 Think in ETFs everyone's competing with everyone all the time. 0:11:51.360 --> 0:11:58.080 I fairn I agree with Athanasios I wonder I do 0:11:58.200 --> 0:12:02.199 lean though towards the passive, right, because we know, largely speaking, 0:12:02.960 --> 0:12:05.040 all the money that's coming out of active equity mutual 0:12:05.080 --> 0:12:08.320 funds is probably going to passive That's been a function 0:12:08.360 --> 0:12:11.160 of zero percent interest rates in the last decade and 0:12:11.200 --> 0:12:16.439 some other market mechanics. So now you have to negotiate 0:12:16.440 --> 0:12:19.360 with an advisor. You know, you have your core, but 0:12:19.760 --> 0:12:23.199 you should consider this active as either a replacement or 0:12:23.280 --> 0:12:25.320 a compliment. Like you need to get the dollars away 0:12:25.320 --> 0:12:27.360 from the core now, which is largely passive, into active. 0:12:27.440 --> 0:12:30.640 So for me, I think, if I'm really choosing one, 0:12:30.679 --> 0:12:33.079 it's the passive index funds because they're too good of 0:12:33.120 --> 0:12:33.440 a deal. 0:12:33.960 --> 0:12:36.199 Okay, but if we if we single out just you know, 0:12:36.200 --> 0:12:39.680 if we've got traditional active which is security selection versus 0:12:39.720 --> 0:12:41.720 kind of the new active which is to fly an 0:12:41.720 --> 0:12:44.440 outcome leverage and things like that, you don't think there's 0:12:44.840 --> 0:12:47.720 any movement with the traditional like styles and the active 0:12:47.720 --> 0:12:49.840 ETFs kind of taken away from passive at all or 0:12:50.000 --> 0:12:50.920 just more of a compliment. 0:12:52.400 --> 0:12:54.640 I think it varies on where you are, Okay, honestly, 0:12:54.679 --> 0:12:56.960 Like like we could go, we could do a tour 0:12:57.000 --> 0:13:00.000 around this conference, and some people say, well, I don't 0:13:00.200 --> 0:13:03.600 like passive because it's skewed. Some people are I don't 0:13:03.679 --> 0:13:06.040 like active because sometimes I don't trust the managers. You know. 0:13:07.000 --> 0:13:09.760 I think with a lot of the stuff that's come out, 0:13:09.760 --> 0:13:12.440 it's sort of like switched. Before it was like we 0:13:12.480 --> 0:13:14.959 mentioned Kathy, would you invest in the fund? You investing 0:13:15.000 --> 0:13:16.520 the stock pickers, right, But I think a lot of 0:13:16.520 --> 0:13:19.360 the ETFs have made you the stock pickers are sort 0:13:19.360 --> 0:13:22.160 of like replacing a lot of that traditional stockpicking and 0:13:22.160 --> 0:13:23.640 you're doing it yourself. So that's why I think some 0:13:23.679 --> 0:13:27.800 of the successful active stuff is not that stock picking 0:13:27.840 --> 0:13:32.160 security selection active. It's the derivatives, it's the leverage, it's 0:13:32.760 --> 0:13:34.079 kind of that stuff. So I think in a way 0:13:34.120 --> 0:13:37.360 that's you've stopped subbing out that stock picking ability and 0:13:37.440 --> 0:13:39.319 just investors are doing it themselves. 0:13:40.400 --> 0:13:44.240 But unfixing come side. You still see your role they 0:13:44.240 --> 0:13:47.880 fixing active. It's interesting because you know, you follow the 0:13:47.960 --> 0:13:50.719 mutual fund and full as closely active fixing commutical, but 0:13:50.760 --> 0:13:55.640 you still don't know, right yep. And yet there is 0:13:55.960 --> 0:13:59.240 a massive amount of active fixed income ETFs and they're 0:13:59.240 --> 0:14:00.920 doing well too. But it's like both sides of the 0:14:00.960 --> 0:14:03.840 industry are winning there. Yeah, right, a littly unique. 0:14:03.920 --> 0:14:06.200 Yeah, it's a good point. They've been pretty safe, right, 0:14:06.240 --> 0:14:10.400 bond managers in mutual funds from the you know, competitive 0:14:11.200 --> 0:14:12.839 you know, like intrusion of ETFs. 0:14:12.880 --> 0:14:16.560 For sure, what part of the active ETF story hasn't 0:14:16.600 --> 0:14:19.720 played out yet, so you can answer this question what 0:14:19.920 --> 0:14:21.440 part has not played out yet? 0:14:21.480 --> 0:14:26.000 I wonder if it's fixed income maybe, you know, let's 0:14:26.000 --> 0:14:29.960 see in ETFs active fixed income I think is about 0:14:29.960 --> 0:14:32.960 twenty two twenty three percent of assets. I mean, that's 0:14:32.960 --> 0:14:35.480 still pretty good. But I just wonder if you're in 0:14:35.520 --> 0:14:37.880 this different rate regime than we've been in the last 0:14:37.920 --> 0:14:39.680 forty years, and that's gonna be where the opportunity. Yeah, 0:14:39.720 --> 0:14:42.160 now tricky parties. I don't know what's going on private credit, 0:14:42.400 --> 0:14:45.640 what the implications does that have. Maybe having an active 0:14:45.640 --> 0:14:49.640 manager might make sense then, but I think there's more 0:14:49.680 --> 0:14:51.800 to go there. It's just a matter of where is 0:14:51.800 --> 0:14:53.200 it coming from, because if it's not coming from utral, 0:14:53.320 --> 0:14:55.160 it's got to be sourced from another area too, Right, 0:14:55.360 --> 0:14:59.560 But there's so many incredible exposures now in active fixed income. 0:15:01.680 --> 0:15:03.840 The due diligence process is going to be really competitive. 0:15:04.160 --> 0:15:07.680 But I think that that's one area. I'm sure if 0:15:07.720 --> 0:15:10.280 James Safer here you say crypto by the way. 0:15:10.560 --> 0:15:15.080 Yeah, don't, yeah, don't don't remind them. What do you 0:15:15.080 --> 0:15:18.040 think an Yeah, I think bonds is a good point because, uh, 0:15:18.280 --> 0:15:21.680 they were doing active bond ETFs for a while, right, 0:15:21.840 --> 0:15:23.920 like some of their ones have been really really early 0:15:23.960 --> 0:15:26.520 on products. I don't know if some of it's just 0:15:26.560 --> 0:15:30.080 because tax wise, it's not a huge advantage to being 0:15:30.120 --> 0:15:33.160 an ETF and versus a mutual fund on the bond side, 0:15:33.200 --> 0:15:36.640 just because you know how income gets distributed and whatnot. 0:15:36.720 --> 0:15:39.320 But could also be what Toddo was mentioning just kind 0:15:39.320 --> 0:15:41.800 of the rate regime. So that area, for sure, I 0:15:41.800 --> 0:15:44.720 think probably could be developed. I think also issuers kind 0:15:44.720 --> 0:15:47.520 of pivoted away from focusing on bond ETFs for a 0:15:47.560 --> 0:15:50.280 while just because you know, buffers had come online and 0:15:50.840 --> 0:15:53.680 people kind of get annoyed with the egg after twenty 0:15:53.760 --> 0:15:55.800 twenty two, so they're like, hey, you know, I'm not 0:15:55.800 --> 0:15:57.760 going to be focusing on bonds as much. So there's that, 0:15:58.120 --> 0:16:02.080 and then yeah, maybe like alts, like you know, I know, 0:16:02.120 --> 0:16:04.560 hedge funds, you know, people weren't buying all ETFs, like 0:16:04.760 --> 0:16:07.080 you know, in huge numbers. But I think if someone 0:16:07.120 --> 0:16:08.960 can maybe figure out a decent old space, if you 0:16:08.960 --> 0:16:12.280 want to put crypto in that profile, fine, but sort 0:16:12.280 --> 0:16:13.720 of like you know, how can we get like true 0:16:13.720 --> 0:16:17.400 alts in an ETF could be an interesting on tap. 0:16:17.600 --> 0:16:20.520 I like the managed futures. I'm a little bit of 0:16:20.560 --> 0:16:23.280 a junkie with that. Try me. I have a CMT, right, 0:16:23.320 --> 0:16:26.000 I like trends. I don't know how big the managed 0:16:26.000 --> 0:16:28.760 future space is an estimate neutral funds, but it's tiny 0:16:28.760 --> 0:16:35.120 and ETFs and depending on the environment, Like right now, 0:16:35.200 --> 0:16:38.040 managed futures have outperformed the Q since October. Right there's 0:16:38.040 --> 0:16:41.040 a place for them. So I have to imagine that's 0:16:41.040 --> 0:16:45.400 another big, huge area of opportunity going forward. So where 0:16:45.440 --> 0:16:46.320 you think about it. 0:16:46.160 --> 0:16:50.560 As a baseball game, and you take active ETFs all encompassing, 0:16:50.640 --> 0:16:53.880 whether in traditional or the newer styles, what in. 0:16:53.840 --> 0:17:00.400 And were you in man the second third? It's early, okay, 0:17:00.480 --> 0:17:03.960 I mean I think it's super early, encompassing super early. 0:17:04.240 --> 0:17:06.880 I was ben going little further like fourthly, but we're 0:17:06.920 --> 0:17:08.800 not out of like the seventh in stretch yet or 0:17:08.840 --> 0:17:11.160 anything like that. But I was gonna, uh, but there's 0:17:11.200 --> 0:17:13.120 gonna be a lot. It'll be interesting to see how 0:17:13.200 --> 0:17:16.480 much like we can always launch products, right, but how 0:17:16.520 --> 0:17:20.119 that asset transfer works and how successful they're gonna be 0:17:20.160 --> 0:17:22.919 in raising assets. I think that is still we have 0:17:22.960 --> 0:17:24.520 to see kind of more in that. But I think 0:17:24.760 --> 0:17:27.359 said twelve percent twelve percent of assets, and what was 0:17:27.359 --> 0:17:30.440 the percentage of flows forty percent, that's pretty good. Yeah, 0:17:30.680 --> 0:17:33.640 and obviously the end every year that flows total folds 0:17:33.760 --> 0:17:35.439 keep going up, right, So it's forty percent of a 0:17:35.480 --> 0:17:39.919 growing number. But again, is that enough to justify that 0:17:40.080 --> 0:17:43.040 half the market, more than half the market is active ETF? 0:17:43.160 --> 0:17:48.119 So you know, so I still agree that we're early on, 0:17:48.280 --> 0:17:50.320 but I don't know if we're whether in the market. 0:17:50.760 --> 0:17:52.679 You know, kind of induces this, but we see like 0:17:52.840 --> 0:17:56.199 rationalization a little bit too, right, because you know, we 0:17:56.280 --> 0:17:58.480 did a panel yesterday, it was a thousand plus these 0:17:58.520 --> 0:18:00.600 TF launches. I mean, there's a quite a bit closures, 0:18:00.640 --> 0:18:03.400 but nothing like the ratio that we've seen from launches. 0:18:03.480 --> 0:18:07.239 So at some point some of these might need to close, right, 0:18:07.280 --> 0:18:08.919 which is I don't know how many can actually be 0:18:08.960 --> 0:18:09.600 like supported. 0:18:10.520 --> 0:18:12.760 Okay, so I got one last question before we get 0:18:12.760 --> 0:18:16.679 the lightning round, so you can do this one first. 0:18:17.640 --> 0:18:24.520 What actually makes an active ETF stick differentiated portfolio or 0:18:24.720 --> 0:18:29.399 a differentiated solution? Like why am I offering it? 0:18:29.480 --> 0:18:29.680 Right? 0:18:29.760 --> 0:18:32.200 Okay? If it's stocks, I just need something that's uncorrelated 0:18:32.280 --> 0:18:35.680 or just different than the mag seven or I'm offering 0:18:35.720 --> 0:18:38.680 a solution like a buffer or option income or tail 0:18:38.760 --> 0:18:42.400 risk right, hedged equity, That to me is what makes 0:18:42.440 --> 0:18:45.240 it stick if it's just kind of run of the 0:18:45.240 --> 0:18:48.640 mill chasing performance. But you can get an active thematic 0:18:48.680 --> 0:18:53.240 funds single themes. That is, you're gonna get slippage when 0:18:53.240 --> 0:18:54.200 the time runs out. 0:18:54.840 --> 0:18:57.879 Okay, I think that was a good answer, But I'm 0:18:57.880 --> 0:19:00.680 gonna say the performance, I think Kathy is why that 0:19:00.760 --> 0:19:04.400 product was so successful. But to Todd's point, you can't 0:19:04.400 --> 0:19:07.360 control investor timing, right, So yeah, she had the good 0:19:07.359 --> 0:19:10.280 performance run people piled in later the performance sort of 0:19:10.920 --> 0:19:14.280 you know, didn't do as well, so maybe your experience 0:19:14.320 --> 0:19:16.960 with it might not be as great. But the reason 0:19:17.040 --> 0:19:19.880 she got really popular was because of performance. But then 0:19:20.280 --> 0:19:22.919 to his point about buffers, that's not a performance story, right, 0:19:23.000 --> 0:19:24.119 that's a solution story. 0:19:24.160 --> 0:19:25.120 So I think. 0:19:25.080 --> 0:19:28.119 Kathy also had a solutions story too. She was creating 0:19:28.119 --> 0:19:30.480 a new category like innovators, right, Like that didn't really 0:19:30.480 --> 0:19:33.920 exist before Kathy. So if you're gonna be like a 0:19:33.960 --> 0:19:36.320 stock picking one, it's got to be performance. If you're 0:19:36.320 --> 0:19:39.720 gonna be something like derivatives or options overlay, it has 0:19:39.760 --> 0:19:42.159 to be some sort of uh, you know, Todd mentioned 0:19:42.160 --> 0:19:44.440 some solution based thing. 0:19:45.080 --> 0:19:48.760 Okay, so it's time for our lightning round, Todd. 0:19:48.880 --> 0:19:51.159 You're our guests, so you're gonna go first, okay, And 0:19:51.240 --> 0:19:53.320 actually the first question you touched upon a little bit. 0:19:54.119 --> 0:19:57.880 And so the question is active small cap ETFs? Are 0:19:57.880 --> 0:19:59.320 you bullsh or cautious? 0:19:59.359 --> 0:20:01.760 Super bullish? All in? Okay? 0:20:01.880 --> 0:20:02.080 Great? 0:20:02.160 --> 0:20:03.760 What do you think? Yeah? Bullish? 0:20:04.000 --> 0:20:06.120 It was just like performance you think or is it 0:20:06.160 --> 0:20:08.359 like m I have a lot to ask questions. 0:20:08.400 --> 0:20:11.080