Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Hey Joel here, Before
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Speaker 1: Joel Webber and I'm Eric. So here we are in December,
Speaker 1: and this year, if you think about ETFs, we'll go
Speaker 1: down in the record books for the for pretty significant reason.
Speaker 2: Yeah, that reason to say the least. So there's three
Speaker 2: main records, write or metro that ETFs we track all year, launches, flows,
Speaker 2: and volume. Right, those are like we call it the
Speaker 2: triple crown. Normally, in a good year you get flows
Speaker 2: and launches are up, right, everybody's happy, but volume isn't
Speaker 2: high because volume tends to go up and people are
Speaker 2: nervous are tweaking their portfolio. Right, So in twenty twenty two,
Speaker 2: when the market was down, volume was a record. So
Speaker 2: the last two years it hasn't gotten to that point.
Speaker 2: But this year the volume broke the twenty twenty two record,
Speaker 2: even though it was mostly a good year. The flows
Speaker 2: also in record territory, and the launches, man, they've blown away.
Speaker 2: They might even get close to doubling the old record.
Speaker 2: So we have the real rare triple crown and each
Speaker 2: of these record it's going to get broken by double
Speaker 2: digit percentages. So this is like you know, every year,
Speaker 2: I'm like this, this has to be as good as
Speaker 2: it gets, Like this is ETFs in their prime, but
Speaker 2: this has to be it. Joe, I'm saying it right now,
Speaker 2: like I feel like they can't do this again. So
Speaker 2: it's I think it's good to just look at what happened,
Speaker 2: what's inside of those numbers, and what might happen next year.
Speaker 1: Now you've a questioned, have we ever had a triple
Speaker 1: crown before?
Speaker 2: Yes, don't laugh twenty twenty one. I know that sounds
Speaker 2: like it was only four years ago, but it's rare.
Speaker 2: It's only happened a few times in thirty years. The
Speaker 2: reason twenty twenty one did it is because you didn't
Speaker 2: have that twenty twenty two record of volume, so volume
Speaker 2: was a little easier to get it get over. And
Speaker 2: the other thing is twenty twenty one, if you remember,
Speaker 2: was an awesome year for stocks, right, that was like
Speaker 2: the last awesome year where I think stocks were up
Speaker 2: like twenty five percent or something. Everything was going right
Speaker 2: in twenty twenty one until the Fed raised rates in
Speaker 2: twenty twenty two. That's why I do think this year,
Speaker 2: after the tariff tantrum came and went, it has some
Speaker 2: twenty twenty one vibes.
Speaker 1: So joining us to talk about the Triple Crown Todd Son,
Speaker 1: He's a senior ETF fund and technical strategist with Stratigis Securities.
Speaker 1: And Katie Greifeld, processor reporter with Bloomberg News as well
Speaker 1: as the co host of Money Stuff and I'll so
Speaker 1: like a TV.
Speaker 3: Phenomen the close etf IQ all of it.
Speaker 1: This time on Trillions Triple Crown. Todd, Katie, welcome back
Speaker 1: to Trillions.
Speaker 4: This is my super Bowl. I appreciate being here.
Speaker 1: Super Bowl Triple Crown. We got a lot going on.
Speaker 3: I am thrilled for the opportunity, though I will say
Speaker 3: I thought we were going to be talking about horses,
Speaker 3: so well, a little bit.
Speaker 1: Of a I've getten the perfect segue. Well, hold on,
Speaker 1: can we start every every triple crown has a horse's name, right,
Speaker 1: Like twenty twenty one would should have had a horse's name.
Speaker 1: If twenty twenty five had a horse, what would you
Speaker 1: name it?
Speaker 3: Oh? My god, Joel, I need like seven seconds.
Speaker 2: Of gena di Gen. The Vanguardians are always there, but
Speaker 2: this year the Digen's really showed up.
Speaker 1: I mean Degen, the horse.
Speaker 4: I think Degen is perfect.
Speaker 1: Hey, all right, By the.
Speaker 2: Way, speaking of horses, can we just take one quick
Speaker 2: little personal note here and talk about Katie's neck tattoo?
Speaker 2: Oh my god, So she got a neck tattoo. Can
Speaker 2: you tell us the story behind this? Because I am intrigued?
Speaker 2: Just really, I know horses are involved.
Speaker 3: Yeah, really quick. I had a pony named Batman from
Speaker 3: my parents. Bought him when I was eleven, which is crazy.
Speaker 3: And he passed away this past May, the day before
Speaker 3: my thirty second birthday. So that was a long term relationship.
Speaker 3: That horse was like a brother. So I always knew
Speaker 3: I was going to get the bat signal once he
Speaker 3: left this earth.
Speaker 1: But and you actually got a neck tattoo.
Speaker 3: I did, but it's hidden. You'll never see it on TV.
Speaker 3: You'll only hear about it on this podcast and maybe
Speaker 3: money stuff and maybe on my Twitter.
Speaker 2: Where's your tattoo?
Speaker 1: I'm in free? Okay? So this was the DJ far.
Speaker 2: This was far I could I could see midlife crisis
Speaker 2: creeping up sometimes since.
Speaker 1: Yeah, where's gonna like skip that one? Okay? So let's
Speaker 1: start with launches. How significant you said double digits for everything?
Speaker 1: Like how how many launches were there so far? Obviously
Speaker 1: there could be more between it on the end of
Speaker 1: the year.
Speaker 2: We're around nine hundred and thirty launches this year with
Speaker 2: four weeks to go. Now, last year the record was
Speaker 2: I think seven hundred and ten seven to twenty, but
Speaker 2: the record before that was like five hundred and fifty,
Speaker 2: So we're probably gonna double the five fifty record, which
Speaker 2: was only two years ago. Whether we get to the
Speaker 2: reason we could get there's an outside shot. There's a
Speaker 2: bunch of three x and five xctfs that were filed,
Speaker 2: like I'm talking like four hundred of them, and they
Speaker 2: do come due maybe in December. I don't think the
Speaker 2: SEC is gonna allow them, but if they did, we're
Speaker 2: talking like it could be a couple hundred five X. Yeah,
Speaker 2: I know that they're gonna they love to push the
Speaker 2: envelope in this industry. They feel like they have a
Speaker 2: workaround where they can use swaps plus options to kind
Speaker 2: of like get around this sort of because you're not
Speaker 2: allowed to have three xs in a ETF. I think
Speaker 2: the SEC is not going to allow any of that.
Speaker 2: We'll see, but if if they did, that could be
Speaker 2: like dozens and dozens, if not one hundred, in short
Speaker 2: order because they're all in this like major competition to
Speaker 2: get out because none of them. You got to be
Speaker 2: first to market in the leverage area to have like
Speaker 2: the most of the assets. The other thing is the
Speaker 2: ETF share class, although that's probably going to get pushed
Speaker 2: more into twenty twenty six. Even DFA, who I think
Speaker 2: will be first, is probably not going to launch this year.
Speaker 2: So we're looking at probably anywhere between one thousand and
Speaker 2: like eleven fifty I would say, when all the dust settles.
Speaker 2: So that's probably what a sixty seventy percent increase over
Speaker 2: last year's record.
Speaker 1: Todd How successful will those launches be, I.
Speaker 4: Think it depends on what you're looking at. Going back
Speaker 4: to DIGEN, leverage was a huge part of this year.
Speaker 4: Right There's been one out of every four maybe a
Speaker 4: third of launches have been involved leverage, right, and part
Speaker 4: of this is a single stock leverage space. So this
Speaker 4: year you've had over two hundred of those involving single
Speaker 4: stock leverage. And I think the interesting part is you're
Speaker 4: just we're just throwing stuff at the wall. You started
Speaker 4: with blue chip companies Tesla and Video few years ago,
Speaker 4: and now we're just going for anything sub ten billion
Speaker 4: that might catch fire. So back to your question how
Speaker 4: successful they are, A lot of them are at risk
Speaker 4: of closure if the actual equing market does decline like
Speaker 4: a twenty twenty two. I think a lot of them
Speaker 4: are gonna close. But they have fully really contributed to that,
Speaker 4: to that launches aspect, and Eric mentioned the three x
Speaker 4: five x potential. Man, this thing's not slowing down.
Speaker 2: And these these two x stockyt has charge one hundred
Speaker 2: basis points, so all you need is like one hit
Speaker 2: to be set for life. And so it's almost like
Speaker 2: a lottery system for the issuers because they just get
Speaker 2: one hit, they're good. And what I found interesting is
Speaker 2: I get Tesla and Navidio two X being big hits. Okay, fine,
Speaker 2: but there's stuff that gets put out that I've never
Speaker 2: heard of the stock droll. I'm like, I have to
Speaker 2: like google it, and I'm like, it's some random quantum
Speaker 2: stock that is like a small cap, and all of
Speaker 2: a sudden, I look up the things trading like twenty
Speaker 2: thirty million a day. It's got one hundred million, and
Speaker 2: so you even got mid range hits. I wouldn't call
Speaker 2: it a blockbuster, but there's a lot of appetite, and
Speaker 2: so the industry is feeding the digens because the digens
Speaker 2: are hungry.
Speaker 3: I will say, I mean to Todd's point, we'll see
Speaker 3: if this turns into closures. It's also going to be
Speaker 3: interesting if we do get into the really highly leveraged
Speaker 3: stuff three times five times, whether or not those funds
Speaker 3: will eventually be closed or whether they're going to implode
Speaker 3: in some way, because I think that was one of
Speaker 3: the more interesting tales of the past couple months that
Speaker 3: you had that European listed three times AMD product. There
Speaker 3: was a single day where AMD announced some partnership. I
Speaker 3: think it was with open Ai. It feels like everything
Speaker 3: is with open Ai.
Speaker 1: That's the circular financing.
Speaker 2: It's very circular.
Speaker 3: Yeah, but it was an inverse AMD fund right, and
Speaker 3: it AMD surge double digits and this fund had to close,
Speaker 3: so that's certainly going to be fun to watch. The
Speaker 3: other thing I would add to this conversation is, you know,
Speaker 3: there's a lot of these single stock funds that are launching.
Speaker 3: That probably explains the high number of new funds coming
Speaker 3: to market. There's also a lot of new issuers who
Speaker 3: are coming to market as well, who are behind these funds.
Speaker 3: I know there's a Bloomberg Intelligence stat that I think
Speaker 3: there's sixty new ETF firms that have entered the industry
Speaker 3: over the past two years, which is also pretty stunning.
Speaker 2: Yeah, and now there's I think there's three hundred total
Speaker 2: firms and six hundred brands. One quick thing on the
Speaker 2: on the leverage Ethnosius to this study on my team
Speaker 2: that found that if they put the three X and
Speaker 2: forget forget five x, just three x. If they do
Speaker 2: all these stocks and three x, there is going to
Speaker 2: be an implosion like every other week, because a lot
Speaker 2: of them go up thirty three percent or down thirty
Speaker 2: three percent pretty regularly. What's also interesting about the negative
Speaker 2: three x AMD in Europe is almost all of these
Speaker 2: leverage ETFs are launching are long like It's almost like
Speaker 2: a nine to one or ten to one long to short. However,
Speaker 2: in that little pullback we had like two or three
Speaker 2: weeks ago, everybody freaked out about it was like four
Speaker 2: percent from all time highs, and people are ready to like,
Speaker 2: you know it, call it the years over. They saw
Speaker 2: some launches of inverse of these quantum because people are like,
Speaker 2: oh wait, we forgot things can go down. So some
Speaker 2: of these launches, they're probably gonna put the inverse out
Speaker 2: so you can bet the other way. Now there's inverse
Speaker 2: and long. I think that does increase the likelihood of
Speaker 2: a couple of terminations. However, I Ehan and I talk
Speaker 2: about this all the time. We're like, we don't think
Speaker 2: the degends care. You know that scene in Mad Max
Speaker 2: Fury Road. They're just like cruising along and like one
Speaker 2: of the cars just wipes out, and nobody they just
Speaker 2: look behind them and they just keep going like nobody
Speaker 2: really cares. They just keep driving. That to me is
Speaker 2: what I think this will feel like. If we have
Speaker 2: an implosion, like if the Granite Chair is something has
Speaker 2: to close, they'll just go, oh, that's a shame, and
Speaker 2: they'll just keep degending as we go forward.
Speaker 4: It's a big portion of the numbers.
Speaker 2: The media will be like, oh my god, you know, implosion,
Speaker 2: I get, but I don't think the users care. They're
Speaker 2: just like whatever, onto the next one. Classic media, Well,
Speaker 2: come on, termination, implosions pretty good. Yeah, I know all these.
Speaker 3: Fun words, we don't usually get to use them.
Speaker 1: By the way, just to bring it back to ponies, Yeah,
Speaker 1: to be a triple Crown you gotta to be a
Speaker 1: triple crown winner. You gotta win a the Kentucky Derby,
Speaker 1: be the Preakness, and see the Belmont, which is launches.
Speaker 1: Is that the Derby?
Speaker 2: To me, the Kentucky Derby would be flows. That's the
Speaker 2: most important because that's that is net new cash coming in.
Speaker 2: That's that's votes.
Speaker 1: Okay, so we've messed up our order already, but let's
Speaker 1: go ahead. Let's start talking about flows.
Speaker 2: The flows this year droll one point two four trillion
Speaker 2: with a T and there're still a month ago and
Speaker 2: podcast about this. I think they'll see sixty billion in December.
Speaker 2: That's about the monthly haul lately, and so I think
Speaker 2: we're gonna end it one point three trillion. Now, that'll
Speaker 2: be two hundred billion over the record. The record last
Speaker 2: year is one point one trillion, and again that was
Speaker 2: that was the record, Like it's just record after record.
Speaker 2: When we look at that number, it's enormous. If I
Speaker 2: take you over to mutual funds collectively, I think they're
Speaker 2: around negative seven hundred billion in outflows. So there's like
Speaker 2: more money going to ETFs than leaving mutual funds. All
Speaker 2: the equity side is worse. And if we look at
Speaker 2: the number of ETFs that are taken in flows, we
Speaker 2: are at three thousand, three hundred and seventy nine of
Speaker 2: four thousand, seven hundred and sixty nine. So that's I mean,
Speaker 2: the getting is good. I mean, everybody's getting bites. If
Speaker 2: you're in that, if you're in that one thousand, that's
Speaker 2: not you should probably just pack it up. I mean,
Speaker 2: because if you can't catch fish in this environment, like
Speaker 2: you are using the wrong bait, you're a bad fisherman.
Speaker 1: You gotta go what jumps out to you in that category,
Speaker 1: just the flows.
Speaker 2: Yeah, I mean, first of all, vou one hundred and
Speaker 2: twenty four billion, it has a real shot to get
Speaker 2: to one forty one fifty that's also a record so
Speaker 2: for a single year, and then IVV is right behind it.
Speaker 2: I would say if anything was kind of shocking this
Speaker 2: year would be the cash like ETFs did better ask
Speaker 2: GOV the treasuries and gold GLD at nineteen billion, that
Speaker 2: old dog, there's cheaper gold ETFs. So for that old warhorse,
Speaker 2: to you know, I'm sticking with the horse teams.
Speaker 3: I love this.
Speaker 2: Yeah that for that to finish in eighth place is
Speaker 2: pretty is pretty compelling this year. But to me, the
Speaker 2: flows were summarized this year as Okay, i am not
Speaker 2: going to try to time the market, so I'm going
Speaker 2: to buy equities and I'm not going to let anything
Speaker 2: scare me. Even during the tariff tantrum, the investors were
Speaker 2: not scared. They're like, I'm buying equities. However, they did
Speaker 2: want to get some protection on the side, so they
Speaker 2: bought gold and treasuries, So we saw some safety dance
Speaker 2: going on with those plus the equities, which for ETFs
Speaker 2: is good because that means just they're buying everything pretty.
Speaker 4: Much beta with the side of beltunas there we go.
Speaker 2: Well, no, that would be like two x crypto, which
Speaker 2: is also what was going on.
Speaker 4: The One of the area that does stand out in
Speaker 4: terms of inflows is a revival and thematic funds too, right,
Speaker 4: nuclear power generation, I guess ai, if you want to
Speaker 4: call it that without data centers, data, yeah, I guess
Speaker 4: data centers too, without without really a massive participation from
Speaker 4: from the ARC Funds.
Speaker 3: Right.
Speaker 4: I think back to twenty twenty one, the prior record
Speaker 4: that was led by thematic funds. ARC did big business then,
Speaker 4: and now you've owned it, owned the air, Yeah, they were.
Speaker 4: They were the thematic player. Now that's really spread out across.
Speaker 4: So Thematic Funds are back, I think as a compliment
Speaker 4: to the voo the ivvs of the world too. So
Speaker 4: that's pretty interesting to me. And then on the names
Speaker 4: that haven't participated two areas. Maybe this is a twenty
Speaker 4: twenty six story small caps, right, people gave up on
Speaker 4: small caps.
Speaker 2: Let's unpack that.
Speaker 1: Hold on what's the other one?
Speaker 4: Low volatility?
Speaker 1: Okay, oh, okay factor.
Speaker 2: I don't even know what to attack first, small caps.
Speaker 2: I'm gonna tell I'm gonna give you the counter. Yeah,
Speaker 2: these mag seven stocks and others. Anytime a company is
Speaker 2: worth anything, now it just gets bought. It's like the
Speaker 2: Lakers taking all the good players before they even go
Speaker 2: to college, you know what I mean? So small caps
Speaker 2: used to be a prospect area of like good companies
Speaker 2: that just iPod and like they're rising stars. Well they
Speaker 2: wait later to IPO until they're large caps. They skip
Speaker 2: that area, and if they're worth anything, they get bought
Speaker 2: by these big companies who the mag seven has acquired
Speaker 2: almost nine hundred different companies. So isn't small caps really
Speaker 2: just a dumping ground now instead of like a farm system.
Speaker 4: They have a structural problem, right, these companies, as you said,
Speaker 4: they either get acquired or once they IPO they're already
Speaker 4: a large cap. It's interesting though, they've had a good
Speaker 4: run here last eight months, probably because of the quantum
Speaker 4: stuff and the Meme esque type funds which are basically
Speaker 4: the top of the Russell two thousands, So maybe the
Speaker 4: tune is changing.
Speaker 1: Do midcaps even exist anymore? I just look in most
Speaker 1: small caps.
Speaker 3: Yeah, they definitely do. Though I hear so many beautiful
Speaker 3: bowl cases built around small caps and also mid caps,
Speaker 3: and I mean, to Eric's point, it seems like there's
Speaker 3: been so many false dons. The supply problem though, that
Speaker 3: you guys are talking about is really interesting that you
Speaker 3: don't have these smaller companies coming to market, and it
Speaker 3: feels like tech companies are the last true conglomerates in
Speaker 3: terms of just buying everything up that looks promising.
Speaker 2: If you aren't going to enforce antitrust laws, then there's
Speaker 2: a secular change going on. Because I looked, you know,
Speaker 2: GE was the last mega company to like run the
Speaker 2: S and P five hundred, Like back in the two thousands,
Speaker 2: Ge was like the biggest thought member the.
Speaker 4: Jack Welsh It was fifty percent of the industrial sector.
Speaker 2: Yeah, I mean it was. It was the Mag seven
Speaker 2: of its day, right. It acquired seventy companies, which is
Speaker 2: a lot. Google has acquired two fifty, Microsoft two fifty,
Speaker 2: like these are another level and some of the companies
Speaker 2: that are acquired are would be top fifty names otherwise.
Speaker 2: So I think until they break up these companies, That's
Speaker 2: why I'm like, if you don't own the Mag seven,
Speaker 2: it's almost like you don't own small caps too in
Speaker 2: a way, if you think about it from a certain
Speaker 2: point of view. That's why this whole idea of like
Speaker 2: cfaing the market, I just think it's bad news. You
Speaker 2: got to think a little more like a degeneral momentum
Speaker 2: trader and just ride it because it's not the same
Speaker 2: as it was I don't And I know that's like
Speaker 2: famous last words. Things do revert, but especially.
Speaker 3: If we're comparing this to twenty twenty one and twenty
Speaker 3: twenty two, we all remember was a very dark year.
Speaker 2: However, in twenty twenty two the FED raise rates and
Speaker 2: like that that was like crack. That was like the
Speaker 2: cop showing up at the party. It's over right, take
Speaker 2: away the punch bowl.
Speaker 3: Now we're all drinking age.
Speaker 2: Is gonna it's gonna nominate some Yes, man, we could
Speaker 2: have negative rates this time next year. I mean remember
Speaker 2: that they might. They might give you money. So it's
Speaker 2: a it's not twenty twenty two next year. Unless there's
Speaker 2: some swan we're not envisioning.
Speaker 1: We'll see though. Yeah, do you want to take a
Speaker 1: flamethrower to the lowvall category? Yeah?
Speaker 2: So Athanasios wrote this great note that buffer ETFs killed
Speaker 2: the LOWVALL star.
Speaker 4: I agree with that totally. Okay, So they have a
Speaker 4: proliferation of other options problem and you just haven't needed
Speaker 4: them either. Right outside of April, there's been no reason
Speaker 4: to own low voll defensive type strategies.
Speaker 2: I mean, I just think buffers are more guaranteed. It's
Speaker 2: not guessing. It's like you know when you do that
Speaker 2: machine where you get the football helmet or the piece
Speaker 2: of candy from the from the quarter machine. Remember back
Speaker 2: in the day, You're like, I don't know what I'm
Speaker 2: gonna get. Yeah, that's more like lowvall. It'll probably go
Speaker 2: down somewhat less. Whereas the buffers they lock in your performance.
Speaker 2: And I think if you're older with a lot of
Speaker 2: money on the line, you'd rather have that guarantee than
Speaker 2: just like wing it with lowvall.
Speaker 3: A defined outcome if you will exactly.
Speaker 4: And keep in mind you get three and a half
Speaker 4: to four percent on treasury bills ETFs. Right, why am
Speaker 4: I going to own a low VOLLEYTF that I'm yielding
Speaker 4: less and I'm also taking equity risk.
Speaker 2: They're in a bad spot.
Speaker 4: Yeah, I just think it's interesting that they them and
Speaker 4: small kins have just entirely left, you know, left for dead.
Speaker 2: Well when you're in those are the reasons, though, I
Speaker 2: mean there are good reasons. They're not market reasons. They're
Speaker 2: more structural in it in a way.
Speaker 4: Right, I'd like to.
Speaker 1: Bring it back to ponies again, Yeah, thank you, which
Speaker 1: is if you've won the derby and you've won the Preakness.
Speaker 1: What is the Belmont volume? So let's talk about.
Speaker 2: Yeah, ETFs are going to trade. ETFs are going to
Speaker 2: trade in the neighborhood of sixty trillion dollars worth of
Speaker 2: shares this year.
Speaker 1: Yeah.
Speaker 2: Right now they're at fifty three point five. The old
Speaker 2: record was in twenty twenty two, right when hell was
Speaker 2: breaking loose, at forty seven trillion, so third more. Yeah,
Speaker 2: and every category is up, like fixed income, equity, come,
Speaker 2: I mean, everything is way higher than it was. So
Speaker 2: it's not just like one thing. I will say the
Speaker 2: degend factor. All those two xttfs they're they're they're like
Speaker 2: born to trade, so like they definitely had a little kick.
Speaker 2: But I just think the reason this number is higher
Speaker 2: is because of the flows, which attract more issuers as
Speaker 2: Katie mentioned. And if you just have more products and
Speaker 2: more volume and more like big legacy firms trying to
Speaker 2: push through ETFs, you just have a bigger tent and
Speaker 2: it's more popular. So some of this is just the
Speaker 2: expansion of ETFs. I think the degend bit helps a
Speaker 2: little bit because people love trading. And I also think
Speaker 2: that honestly, fifty three trillion isn't what it used to be. Droll,
Speaker 2: you know, so yeah, I mean the fifty three trillion
Speaker 2: today is like ten billion ten years ago. Just kidding,
Speaker 2: it's not that crazy. But like you ever noticed, like
Speaker 2: numbers are just like they're just like this brings it
Speaker 2: back to like.
Speaker 1: Could you draw a direct line between the number of
Speaker 1: leverage gtfs and that volume? Is that? Yeah? I mean
Speaker 1: I had all these leverage dtfs come out.
Speaker 4: That's the trajectory of levered volume, which is either single
Speaker 4: stock or the index based ones, is slowly been climbing. Yeah,
Speaker 4: and that's just because you're in a bull market, and
Speaker 4: so people like to add on leverage, and whenever there's
Speaker 4: a down draft, you see the inverse volume spike. But
Speaker 4: that usage rate has definitely climbed. You think about you know,
Speaker 4: Eric and I we always talk sports. It's a player
Speaker 4: that's being constantly more involved. You can stick with the
Speaker 4: horse metaphor or a horse jockey, jockey jockey. He's using
Speaker 4: all different horses.
Speaker 2: So I can tell you five trillion, So ten percent
Speaker 2: of the volume is leverage, which is a lot because
Speaker 2: they don't make up leverage makes up one percent of
Speaker 2: the assets, ten percent of the volume, which is good
Speaker 2: because you don't want people holding the stuff, you want
Speaker 2: them to trade it.
Speaker 4: The other interesting aspect is there's other corners that will
Speaker 4: pop up every now and then outside of equity and leverage,
Speaker 4: like gold. Remember gold, probably six seven weeks ago, gld
Speaker 4: was doing massive volume and GLDM silver the whole precious
Speaker 4: metal spectrum that also contributes to that tally. So what's
Speaker 4: happening is when someone needs exposure, whether it's long, short
Speaker 4: or an adjustment, you're seeing them go to ETFs more
Speaker 4: and more and more, which I think is great for
Speaker 4: the industry. But every now and then you see an
Speaker 4: ETF that a random one pop up in the top
Speaker 4: five to ten most traded.
Speaker 2: The other thing is a lot of this volumes coming
Speaker 2: from overseas. I just traveled the world this year pretty much,
Speaker 2: and the volume isn't growing as fast as you think
Speaker 2: it would overseas. If you are a pension fund in Japan,
Speaker 2: let's say you might use EWJ over your own homegrown
Speaker 2: Japan ETF, which is weird, right, But these institutions, the
Speaker 2: bigger you are, the more you require deep liquidity. So
Speaker 2: the US is kind of like a vampire sucking liquidity
Speaker 2: from all over the world, and it's unfortunate, and there's
Speaker 2: certain ways these countries are trying to fight back, but
Speaker 2: it's hard because it's just tough. You put out of
Speaker 2: like a gold ETF in your country and then this
Speaker 2: institution is like, well, GLD trays like four billion a day,
Speaker 2: you trade like ten million a day if that, Yeah,
Speaker 2: and they don't want to they're gonna be. They're gonna
Speaker 2: they're gonna put a forty million position on They're obviously
Speaker 2: going to go to the more liquid one.
Speaker 3: You're seeing that in listings overall when it comes to
Speaker 3: companies as well, that people are listing their companies in
Speaker 3: the US because that's where the liquidity is, that's where
Speaker 3: the depth of capital markets is. And I feel like,
Speaker 3: you know, this is a tentacle of that that you're
Speaker 3: seeing the US becoming a vampire of sorts when it
Speaker 3: comes to ETFs as well. But I do think that
Speaker 3: Toddy make a good point that like the muscle memory
Speaker 3: is just there now, especially in a time of crisis.
Speaker 3: That's when you see spy volume spike. For example, people
Speaker 3: have that blueprint down that the market is in turmoil.
Speaker 3: I'm going to go to ETFs because I know I'm
Speaker 3: going to get that exposure and it's probably going to
Speaker 3: be fairly liquid, at least relative to my other options.
Speaker 4: Absolutely, I mean the one inme we didn't talk about.
Speaker 4: We's talking about leverage, but the growth of volume and
Speaker 4: launches in other option related categories, drivetive categories, right, optioning,
Speaker 4: come FX hedging, all that stuff too, that's definitely contributing
Speaker 4: as well. I mean, the options market in terms of
Speaker 4: activity is also exploded.
Speaker 1: This has been a big year for options, Katie bring
Speaker 1: us home, Yeah, home stretch of the triple crown. What
Speaker 1: do you make of all this and what do you
Speaker 1: think twenty twenty six is going to look like?
Speaker 3: I do think it's interesting that we haven't talked about
Speaker 3: active really at all. I mean, sort of through talking
Speaker 3: about all of these options based ETFs, these single stock ETFs,
Speaker 3: those count as active in terms of classification, but they
Speaker 3: aren't traditional stock picking. But it feels like that was
Speaker 3: another big story in twenty twenty five, It was the
Speaker 3: story in twenty twenty four, and I have to imagine
Speaker 3: it'll be a big part of the story in twenty
Speaker 3: twenty six as well.
Speaker 1: Well. And when you think about that, what was it sixty?
Speaker 1: Was it sixty? New issuers? Like, where's the white space here?
Speaker 1: It's got to be mostly active.
Speaker 3: Yeah, especially when you think of share classes actually arriving
Speaker 3: in twenty twenty six. I think that a lot of
Speaker 3: your traditional mutual function with their mutual fund lineups, probably
Speaker 3: a portion of which is active or going to try
Speaker 3: to grab that ETF lifeline.
Speaker 4: Don I think if there are more cuts to interest rates,
Speaker 4: perhaps there are down the line. I would keep an
Speaker 4: eye on the seven trillion in money market assets, not
Speaker 4: that those are gonna go to stocks, but as Katie mentioned,
Speaker 4: active and an active fixed income because you're gonn want
Speaker 4: to get yield somewhere if you're not getting in from
Speaker 4: money market funds, and ETFs are the next best way
Speaker 4: to play that.
Speaker 2: Also, the ETF share class, if that comes out again,
Speaker 2: you're inviting the fox into the henhouse because these clients
Speaker 2: who are sitting in this mutual fund, which again it's
Speaker 2: like owning a compact disc in terms of technology, they're
Speaker 2: gonna want to transfer over to the ETF class. And
Speaker 2: now if they can do it with no text consequence,
Speaker 2: this could be a real boon for ETF flows. This
Speaker 2: isn't the same as organic sentiment. When you see real
Speaker 2: true organic sentiment like a GLD this year, or you know,
Speaker 2: like VOU, it's interesting. Some of this BYOA sentiment where
Speaker 2: it comes over isn't quite as interesting. But to nerds
Speaker 2: and like people follow in the industry, it's it's very important.
Speaker 2: So there could be this drainage from mutual funds into
Speaker 2: ETFs that simply are the legacy managers sort of like
Speaker 2: slowly moving their clients over taking the little bit of
Speaker 2: cannibalism hit because the ETFs won't charge quite as much
Speaker 2: as they used to make, but it helps them like
Speaker 2: be where the fish are biting now and like fight
Speaker 2: another day. And this is something that I think will
Speaker 2: drive flows and something that Katie wrote about with Capitol Group.
Speaker 2: If you look at some of these legacy stock picking
Speaker 2: firms from like that were really big in the nineties,
Speaker 2: t ROW, Capitol Group, DFA, if you look at their
Speaker 2: mutual funds, they see outflows. You look at their ETFs,
Speaker 2: they all see inflows. Now, we can't do one for
Speaker 2: one there, but clearly there's some cannibalization going on there,
Speaker 2: and that I don't know is that active working or
Speaker 2: is that just like the current clients of this active
Speaker 2: shop are finally moving over to the new format that's
Speaker 2: different than getting fresh bites. That's why a jetpyr or JPST.
Speaker 2: When something is an organic hit, or even the bitcoin ETFs,
Speaker 2: that's why it's so exciting, and we like grab it
Speaker 2: like a dog on a bone because I'm like, it's
Speaker 2: hard to do this. And by the way, can we
Speaker 2: just I want to cover one of the speaking of
Speaker 2: organic hits, this guy Bruce Bond. This this billionaire now
Speaker 2: I guess he is.
Speaker 4: He's a billionaire.
Speaker 2: This guy he built up power shares sold to Investco
Speaker 2: and instead of just like going to retire in an island,
Speaker 2: he grew another firm called Innovator, which made the Buffer
Speaker 2: ETFs just sold it. Katie reported that he sold it
Speaker 2: for two billion dollars. Can you tell us about this deal,
Speaker 2: because to me, that's another organic hit that is hard. Yeah.
Speaker 3: Well, it sort of loops back to what we were
Speaker 3: talking about. With all these upstarts entering the industry, I
Speaker 3: have to imagine the Bruce Bond model is kind of inspiring.
Speaker 3: How you would want your career to play out if
Speaker 3: you're one of these people with an ETF startup. The
Speaker 3: fact that he built power shares, he sold that he
Speaker 3: built Innovator just sold to Goldman for two billion dollars,
Speaker 3: just identifying a need that people were going to desire
Speaker 3: seeing what wasn't yet in the ETF wrapper. I mean,
Speaker 3: structured products have been around for a long time, but
Speaker 3: Innovator was one of the first to put that into
Speaker 3: the ETF wrapper in a way that could be packaged
Speaker 3: and sold and pitched to people. And it's interesting that
Speaker 3: Goldman decided to buy Innovator versus try to build it
Speaker 3: in house. They do have buffer ETFs, they have three,
Speaker 3: i believe, with thirty million in assets, but opted instead
Speaker 3: to buy Innovator, which is really an interesting move.
Speaker 2: It is and Joel, ten years ago, if I had
Speaker 2: told you an active manager is going to come out
Speaker 2: with products to charge ninety basis points and they're going
Speaker 2: to make a killing and they're going to see quarterly
Speaker 2: flows break records every other year, I'm like, that's impossible.
Speaker 2: We're in the Vanguardian era. It's impossible. But that's what
Speaker 2: he did, and he did it by curing anxiety because
Speaker 2: these boomers are all nervous as well. Because they made
Speaker 2: a ton of money and they don't want to lose
Speaker 2: at all.
Speaker 1: It's not quite Dejon though, is it.
Speaker 2: No? No opposite. This is if djens are looking for
Speaker 2: like adrenaline, these boomers are looking to sleep at night. Yeah,
Speaker 2: so they're like, I'll give you a bunch. I'll give
Speaker 2: up a lot of upside if you cure my downside.
Speaker 2: So I don't feel like worry about it. So Bruce
Speaker 2: Bond these if you own the stock market and the
Speaker 2: money market fund, some people say like it's is as
Speaker 2: good as owning this long term. But the guarantee is powerful,
Speaker 2: and I think the emotions and psychology of investors are
Speaker 2: underlooked here. The other thing I will say is Goldman
Speaker 2: has been pretty quiet since Brian Lake joined. Now, Brian
Speaker 2: Lake is the driver of JEPY. I mean, he came
Speaker 2: out with the two biggest active funds on the planet
Speaker 2: and he went to Goldman and he like disappeared. Hadn't
Speaker 2: heard from him in a while. This is interesting. I
Speaker 2: feel we'll have some other big news from Goldman. But
Speaker 2: get this, even with this acquisition, twenty eight billion dollar firm,
Speaker 2: Goldman moved from seventeenth place to fifteenth place. Think about it.
Speaker 2: You're Goldman Sachs, one of the biggest brands in the world.
Speaker 2: You've been in the ETF market fifteen years. You just
Speaker 2: bought a firm for two billion dollars and you still
Speaker 2: a point five percent market share. That's how brutal this
Speaker 2: industry is. Droll, and that's how big Vanguard and black
Speaker 2: Rock are, by the way, I mean, it's just the
Speaker 2: numbers are staggering. It's like when you look at like
Speaker 2: the planets and you see like Earth and Neptune. They
Speaker 2: put Jupiter on there and you're like, oh my god.
Speaker 2: Like it's just another level of these big firms, and
Speaker 2: it just shows you how tough this industry is. But
Speaker 2: the reason it's so tough is because the products are
Speaker 2: also good, are pretty competitive, and the investors like it.
Speaker 2: So it's hell for issuers, heaven for investors.
Speaker 4: Final thought, I mean, good job of you on that reporting, Katie.
Speaker 4: It was a team effort and with Emily two right,
Speaker 4: it was.
Speaker 3: Me, Emily GRIFFEO and Todd Gillespie.
Speaker 4: I think this is very bullish ETFs the go along
Speaker 4: with the triple Crown. I'm very curious to see now
Speaker 4: do other asset managers start looking to that mid to
Speaker 4: lower tier for interesting issuers out there.
Speaker 1: I think so Tony she's from.
Speaker 2: I mean, we've long felt that the asset management industry
Speaker 2: in ten twenty years from now will look like the airlines.
Speaker 2: There'll be three gigantic brands owning seventy five percent of
Speaker 2: all the assets, basically black Rock, Vanguard and State Street
Speaker 2: plus like ten of the isshoers. And then they'll be
Speaker 2: like real specialty niche like Alaska Air or like Costa
Speaker 2: Rica Air.
Speaker 1: Sounds like a bunch of large caps and small caps.
Speaker 1: Oh see what I did there?
Speaker 2: I don't know. I don't know if that was a zinger.
Speaker 2: I'm not sure what that was all right, But all
Speaker 2: I do know is consolidation is coming.
Speaker 1: It has to, yep, exactly, Todd Katie, thanks for joining
Speaker 1: us in Tricks.
Speaker 4: Thanks thanks a lot, great to pet with the guys.
Speaker 1: Thanks for listening to Tricks until next time. You can
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Speaker 1: produced by Magnus Hendrickson and Ryan Kessler. Amy Keane is
Speaker 1: our executive producer. Sage Bauman is the head of Bloomberg Podcasts.
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