Speaker 1: Welcome to Trilliance. I'm Joel Webber and I'm Eric bel Tunis.
Speaker 1: I'm really looking forward to this episode. Eric, we this
Speaker 1: is all you. You You were the one that was like,
Speaker 1: we've got to talk about white label issuers. What is that? Yeah,
Speaker 1: so a white label issuer. Um. I'm not sure if
Speaker 1: there's a perfect metaphor, but say you have an idea
Speaker 1: for an ETF, but you don't really have a big
Speaker 1: company a lot of infrastructure, um, nor do you want
Speaker 1: to spend the time on that or the money. But
Speaker 1: you want an e t F out there. That is
Speaker 1: your idea. There are some companies now that you can
Speaker 1: go to. They have all everything taken care of for you.
Speaker 1: All you do is give them some money. They do
Speaker 1: all the sort of infrastructure work on on your fund.
Speaker 1: They hook you up with even lead market makers and
Speaker 1: the whole nine yards. A lot going on beneath the surface,
Speaker 1: which we should We're going to explore in this episode.
Speaker 1: At the end of the day, boom, you have an
Speaker 1: e t F is treading on all these changes, and
Speaker 1: then your main job is to market it right and
Speaker 1: if it's active, I guess you have to pick the
Speaker 1: stocks and do your strategy, but they take care of
Speaker 1: everything else. So this is called the white label business
Speaker 1: and it's it's big, it's growing quickly. Um, there's the
Speaker 1: three big ones we have on today, who I'm calling
Speaker 1: the big three in their own regard. But the reason
Speaker 1: I wanted to explore this is Goldman just mentioned they're
Speaker 1: going to start a white label business themselves. This was major.
Speaker 1: This is the first massive firm that saw this as
Speaker 1: a potential. And if Goldman has their own clients saying, hey,
Speaker 1: I wanna launch an e t F can you help me?
Speaker 1: That is such a good sign for the E t
Speaker 1: F industry if Goldman sees this. So but these the
Speaker 1: people we have on today have been doing this for
Speaker 1: a long time, and they're also people who they know
Speaker 1: everything going on the e t F business Like they're
Speaker 1: they're they just have a lot of an interesting seat
Speaker 1: to the e t F game. Joining us for this
Speaker 1: episode West Gray of Alpha Architect, Mike Venudo Title Financial Group,
Speaker 1: and Garrett Stevens of Exchange Treated Concepts, this time on
Speaker 1: Trillions White Label et F s WES Mike Garrett woken
Speaker 1: to Trillions than awesome to be here again, likewise, appreciate
Speaker 1: it Okay, Mike, I've got an idea for an e
Speaker 1: t F. I come to you, You give me an
Speaker 1: e t F in a box, and then I get
Speaker 1: to wrap it. This is like perfect for the holidays, right,
Speaker 1: I just put Goldman wrapping paper on it. Yeah, let's
Speaker 1: not put Goldman wrapping paper on it. Let's put title
Speaker 1: wrapping paper on it. Um. But yeah, it's a chassis,
Speaker 1: it's a wrapper, it's a structure, right, And it's just
Speaker 1: a better way to deliver things. And the most successful
Speaker 1: ETFs we've seen are ones that already have a successful
Speaker 1: idea and a less successful wrapper. And if we can
Speaker 1: just enhance the return to the end investor by putting
Speaker 1: it in ETF, it's a win win for everybody. Um,
Speaker 1: let's let's rewind the clock here a little bit and um.
Speaker 1: You know, er, I want to talk to you because
Speaker 1: in my mind I could be wrong, but you were
Speaker 1: the first white label issue I believe. I remember once
Speaker 1: writing it might even been my first book. I wrote
Speaker 1: How Faith Shares that you had a company called faith
Speaker 1: Shares and it didn't work out, so you used your
Speaker 1: exempt of relief to help others launch their funds. And
Speaker 1: you had this huge success and I, UM, I wanted
Speaker 1: to use the word resurrected because of the sort of
Speaker 1: I was like, they resurrected themselves into this new entity.
Speaker 1: And it's you know, a great story of when one
Speaker 1: door closes, another one opens. Can you talk about that
Speaker 1: process and how you sort of got the idea for this? Yeah,
Speaker 1: so that's exactly what happened. You know, we launched the
Speaker 1: five faith shares funds. They were just not successful and
Speaker 1: gathering assets, and you know, it was a classic story
Speaker 1: of starting a new business and it you know, taking
Speaker 1: twice as long and costing twice as much as it
Speaker 1: was supposed to Originally. When when we launched the business,
Speaker 1: you know, you still had to get exempt of relief
Speaker 1: back in those days. So this was two thousand eight,
Speaker 1: two thousand nine. Um. If you remember the market environment
Speaker 1: in two thousand and eight when we were trying to
Speaker 1: raise startup capital to launch a new financial services company,
Speaker 1: was really terrible timing for that, but we got it done.
Speaker 1: Two thousand nine, we finally got our exemptive relief. It
Speaker 1: took about a year from the SEC to grant that.
Speaker 1: We spent nearly a million dollars in legal fees alone
Speaker 1: to get the exemptive relief. Back in those days, you know,
Speaker 1: those added expenses and added time took away from, frankly,
Speaker 1: the viability of the products once they got to market.
Speaker 1: And you know, we ended up closing three of the
Speaker 1: five funds after about eighteen months. When we did that,
Speaker 1: we had other firms start calling us basically to say, look,
Speaker 1: can we buy you We just want your exemptive relief right.
Speaker 1: We don't want to wait a year with the SEC.
Speaker 1: We want to get to market faster because once you
Speaker 1: had that exemptive relief, you can launch funds in seventy
Speaker 1: five days and that's the statutory review period the SEC
Speaker 1: staff has to review a new prospective filing, so it's
Speaker 1: much faster, and we had all the infrastructure there. You know,
Speaker 1: the multiple series trust model had been around in the
Speaker 1: mutual fund world for a long time, but no one
Speaker 1: had done anything like it in the E t F
Speaker 1: business at that point. So you know, once we had
Speaker 1: people call and saying, hey, can we just buy your infrastructure,
Speaker 1: that's really where you know, I had the idea like, look,
Speaker 1: why don't we use what we have here launch funds
Speaker 1: for other people? Because if someone had had this out
Speaker 1: and available when we launched ours. We could have saved
Speaker 1: a ton of time, a ton of startup capital, and
Speaker 1: been to market you know, a lot faster and probably
Speaker 1: had a much higher chance of success than than what
Speaker 1: we ended up with. So that's how we got here.
Speaker 1: And to just talk about real quick, your first couple clients.
Speaker 1: I when I think of you, I think of robo
Speaker 1: um and when I think of white label et f
Speaker 1: that are hits. Robot again is one of them that
Speaker 1: comes to mind. There's been a couple of pretty big hits.
Speaker 1: Was that the first one? Or how did the first
Speaker 1: couple come about? And did did they come to you
Speaker 1: have the idea for robot or were you like, hey,
Speaker 1: I got this thing. Yeah, no, No, they came to us.
Speaker 1: So UM, they were not the first. They actually very
Speaker 1: first fund we launched was y mlp UM an MLP
Speaker 1: e t F for firm called Yorkville at the time. UM.
Speaker 1: That one actually did very well. It ended up with
Speaker 1: something like four hundred million something like that before they
Speaker 1: ended up selling that to Vannack after a few years
Speaker 1: had a successful exit there. UM Alpha Clone was one
Speaker 1: of the other ones we launched early. That one ended
Speaker 1: up doing doing well also a few hundred million dollars
Speaker 1: in that fund. Um. And then and then of course
Speaker 1: Robo was the biggest success. You know, it's typical of
Speaker 1: the E. T F business right in in that fund.
Speaker 1: So it you know, organically picked up. I think it
Speaker 1: was ninety or a hundred million dollars within the first
Speaker 1: sixty or ninety days. But then it's set there, you know,
Speaker 1: for three or four years at that level, just kind
Speaker 1: of churning, waiting, building a track record. And then its
Speaker 1: theme hit right, it came into vogue. People started hearing
Speaker 1: on the news about drones and about robotics, you know,
Speaker 1: ruling warehouses and taking factory jobs, and everything was about
Speaker 1: that on the nightly news and everything. That fund picked
Speaker 1: up two billion dollars the next year after sitting at
Speaker 1: a hundred million for three or four and so that's there. Oh,
Speaker 1: you love to see it. I love when I love
Speaker 1: it's I called the indie feel good hit of the year.
Speaker 1: Robo was definitely that one year. Um, every year there's
Speaker 1: a couple and uh, it's fun to watch because it's
Speaker 1: hard to be an indie independent issuer or somebody using
Speaker 1: a white label. Um, you need a little luck, you
Speaker 1: need the stars to align and um, it's nice when
Speaker 1: it happens because I want that part of the industry
Speaker 1: to thrive, so others want to take chances because of
Speaker 1: the India is where you see the innovation in my opinion, Yeah, no,
Speaker 1: I agreed. And you know what's interesting about our our
Speaker 1: business and the funds that we launched, It's launched by
Speaker 1: experts in the field. Right. It's not very often someone
Speaker 1: comes to us with an idea that they have, you know,
Speaker 1: they've never done before, which is different than a lote
Speaker 1: of the major issuers. You know, you're I Shares or
Speaker 1: some of these big firms. They're looking to launch products
Speaker 1: that they can market and sell. The people who come
Speaker 1: to us, you know, our our experts and what they do.
Speaker 1: Our MLP fund was done by people who have been
Speaker 1: investing in m LPs for many years. The robo guys
Speaker 1: were investors in the space and knew it and not
Speaker 1: find an E t F that fit what they wanted
Speaker 1: to do. The uranium fund we launched, you know, again,
Speaker 1: somebody who's intimately familiar with that industry had been in
Speaker 1: it for many years, so you come up with better products.
Speaker 1: In my opinion, when you have experts working on it
Speaker 1: and wanting to launch it and coming through someone like
Speaker 1: us rather than a marketing team trying to decide, you know,
Speaker 1: what product they think they can sell and trying to
Speaker 1: you know, throw stuff against the wall and see what sticks. Okay, well,
Speaker 1: I'm gonna bring you in here. I've got a big idea.
Speaker 1: Maybe no expert, but I got ideas. Um and uh
Speaker 1: so I'm gonna give you a call. What happens next?
Speaker 1: And what do you look for to bring successful products
Speaker 1: to market? Yeah? So, unfortunately we've been surviving in this
Speaker 1: terrible business called e t F for you know, mist
Speaker 1: ten years now. So usually on our first call, my
Speaker 1: job is to anti sell going into the ETF business.
Speaker 1: Right Like, this is so expensive. You gotta have five
Speaker 1: years ready to go. You gotta light money on fire.
Speaker 1: If you don't, if you're not ready for war, just
Speaker 1: go back home. Yes, I am the cold shower because
Speaker 1: we don't want people, uh to get into something that
Speaker 1: they're not really ready for. Right. Um And and even
Speaker 1: though obviously our objective of our et F hit level
Speaker 1: platform is to lower bears entry to allow a lot
Speaker 1: more people to you know, access this great rapper, it's
Speaker 1: I just feel It's very important to make sure people
Speaker 1: understand that. You know, it's not a panacea. It's a
Speaker 1: lot of work, a lot of effort. But the good
Speaker 1: news is when you segment into people that you know,
Speaker 1: they listen to your pain trains story and they're they're
Speaker 1: still standing there, that means they're probably pretty well fit
Speaker 1: to be successful in the et F industry. I feel
Speaker 1: I know you were in the military. I feel like
Speaker 1: this is the basic training. If you can make it
Speaker 1: through those couple of weeks, maybe you're good. Um, quick question,
Speaker 1: explain to us again. We'll stick with West on this one.
Speaker 1: What do you do? Um? So I have the idea.
Speaker 1: Let's say my idea is, um, Philadelphia based companies. You
Speaker 1: probably tell me to go away. You'd probably colder. Let's
Speaker 1: just assume I'm standing after your whole speech, Um, what
Speaker 1: are you going to do for me? Exactly? Yeah, so
Speaker 1: you really There's there's kind of three areas of e
Speaker 1: t F needs. Right, there's legal compliance and just broad
Speaker 1: based brain damage I call it. Uh, there's portfolio management
Speaker 1: and train execution, and then there's marketing and distribution. Right,
Speaker 1: those are kind of like the three big levels you
Speaker 1: can pull. So different white labels are different. We what
Speaker 1: we do is we deal with all the brain damage,
Speaker 1: so the legal compliance, regulatory component, we do, all the
Speaker 1: portfolio manager train execution component. But the marketing and distribution
Speaker 1: we keep that open architecture, and I think the gentleman
Speaker 1: on the call have have actually offer those services. But
Speaker 1: that's our core focus is how the heck do we
Speaker 1: get you to market as cheap as humanly possible with
Speaker 1: full transparency and totally ran key from operational standpoint. But
Speaker 1: you've got to do the selling and distribution and everything. Okay,
Speaker 1: So Mike, when West gives someone a cold shower, um,
Speaker 1: maybe they come running to you. What do you do
Speaker 1: that's different than than what West does? That's a great question.
Speaker 1: You know. It's funny because all three of us share
Speaker 1: leads and put people back to each other. Um, you
Speaker 1: know for some of these cold showers and for some
Speaker 1: of the things that different people want. Uh, you know,
Speaker 1: for for Eric, I just reserved the tickers C S,
Speaker 1: t K for cheese steak, so we can do it. Yep. Um,
Speaker 1: So uh, what do we really do? So our our
Speaker 1: process includes more of an assessment. We do kind of
Speaker 1: that McKenzie style report and we do come back with
Speaker 1: the same kind of thing that Wes or Garrett will saying, hey,
Speaker 1: you're not ready, or you are ready, or you need
Speaker 1: this to be ready. A right, So we we go
Speaker 1: through all four kind of buckets. We do strategy, product, uh, sales,
Speaker 1: and marketing, and we score everybody against everyone else we've
Speaker 1: ever done this too, um, and then we come back
Speaker 1: and say, here's your ProForma, here's your your assessment score,
Speaker 1: and yes we want to work with you, or no,
Speaker 1: we think you should either go back to the drawing
Speaker 1: board or call West or called Garrett. And you know,
Speaker 1: I guess the question for all you guys, are you
Speaker 1: what you obviously do all this work for them? Is
Speaker 1: this an upfront cost or do you get like a
Speaker 1: percentage of the expense ratio? I guess I'll just all
Speaker 1: three of you start with Garrett. Yeah. So you know,
Speaker 1: we do a lot of consultation with them upfront. Right,
Speaker 1: there's a lot of education that goes into it. Let's
Speaker 1: figure out your product, let's help you get the idea
Speaker 1: kind of nailed down here, make sure we all like it,
Speaker 1: make sure we can do it. Frankly, right with all
Speaker 1: the forty Act regulations, involved. Once we're all comfortable with
Speaker 1: that and everyone's agreed, we're ready to get going. They
Speaker 1: do pay a set up fee to get the product
Speaker 1: to markets, so that covers the legal that covers in
Speaker 1: the exchange listing fees. You know, we build custom websites,
Speaker 1: marketing materials, you know, all of those things to get
Speaker 1: to market. That's a fixed fee for all of that.
Speaker 1: Once you get to market. Then what we charge at etc.
Speaker 1: For our portion of it is a number of basis
Speaker 1: points with an annual minimum, and then all of the
Speaker 1: other expenses to run the fund or just direct pass
Speaker 1: throughs from the service providers, and so we break it
Speaker 1: all out provide transparency on it. Um. But we've just
Speaker 1: basically done a cost plus model is how we operate.
Speaker 1: And well, Mike, you guys are similar, Yeah, very similar.
Speaker 1: Set up fee and then a fixed costs and then
Speaker 1: declining BIPs costs as you get bigger, with the objective
Speaker 1: of of allowing the operators to basically leverage our operating
Speaker 1: leverage as much as possible. Yeah, so again same model.
Speaker 1: UM are slight differences are we do have ad on
Speaker 1: services the marketing and sales that you can pay hard
Speaker 1: dollars for and uh. We also offer fun financing right
Speaker 1: if somebody comes to us and has a great idea
Speaker 1: and wants to launch it but doesn't have the full
Speaker 1: financial backing. Uh. In cases where we really like the idea,
Speaker 1: we'll put up our own economics and you know, own
Speaker 1: a part of the profit. I think the key thing though,
Speaker 1: for all three of us is none of us really
Speaker 1: make any money on the minimums. Right. That's the brain
Speaker 1: damages West likes to call it, or I call it
Speaker 1: the headache business. The minimums are just there to pay
Speaker 1: for the the you know, the day to day. The
Speaker 1: real way we make money is when our clients make money,
Speaker 1: right Like, Um, we are not interested in having a
Speaker 1: fund that stays at million for six years. Like. That's
Speaker 1: not gonna make us money or make the client happy.
Speaker 1: It's not gonna make etc. Happy. It's not gonna make
Speaker 1: et f architect happy or alf architect happy. Um. So
Speaker 1: we're really partners with our clients at the end of
Speaker 1: the day, all three of us. You know, Joel, they're
Speaker 1: talking about this. I just went through the process of
Speaker 1: writing a book. They're like publishers. This reminds me a
Speaker 1: lot of the publishing business or there you want hits man. Yeah,
Speaker 1: And one thing the publishers look for, and I've learned
Speaker 1: this over with the two books I wrote, is a platform.
Speaker 1: Do you have reach? You know, are you in the media,
Speaker 1: do you go to conferences? Like basically can you sell
Speaker 1: the book? It seems like there's a similar vibe here.
Speaker 1: I guess, um, let me go back to Mike, because
Speaker 1: somebody you just took on is this guy, Um meet
Speaker 1: Kevin and he's a YouTuber with two million subscribers, but
Speaker 1: he's not in the financial business. How much do you
Speaker 1: look for, say, can you bring your own assets like
Speaker 1: b y O A versus Hey, you've got this huge
Speaker 1: platform and we're we'll roll the dice with you because
Speaker 1: you've got reached. Yeah. So the number one determining success
Speaker 1: of an et F is seed capital, right, Like if
Speaker 1: you go through the list of all the hits, I mean,
Speaker 1: Robo as a hit, like yes, but it's because they
Speaker 1: had like ninety million in seed capital and they waited
Speaker 1: for the market to come to them. And they're all great,
Speaker 1: awesome people with great knowledge and that's ace, but the
Speaker 1: market had to come to him and they had to
Speaker 1: survive through seed capital. So an absence of seed capital
Speaker 1: call it we We pretty much tell anyone who doesn't
Speaker 1: have twenty million, you probably don't want to do this, right, Um,
Speaker 1: the in absence you have network or platform, right, so
Speaker 1: fis on our platform, we're on their platform. Meet Kevin
Speaker 1: George Noble with what he does on Twitter spaces, um,
Speaker 1: Adam Curran with his radio show for y'all, like a
Speaker 1: platform is the closest substitute for seed capital. I do
Speaker 1: want to talk about greatest hits because that's the fun part,
Speaker 1: right So, West, if you had one hit that you
Speaker 1: were the most proud of, what would it be. I'm
Speaker 1: gonna say the fund that started our et F white
Speaker 1: label business, which would be per Tolls Freedom Fund um
Speaker 1: F R d M. And it's you know, just it's
Speaker 1: just her literally, uh and she's already got two in
Speaker 1: her seventy mill and that fund maybe it's higher at
Speaker 1: this point. And and you can kind of see the
Speaker 1: writing on the wall just based on number emails and
Speaker 1: crates and activity that comes with that. The pitch when
Speaker 1: she came to you, How how formed was it? It
Speaker 1: was very well formed and and long story short, you know,
Speaker 1: we've been in the et F business for a long
Speaker 1: long time, and we're we're running asset management business called
Speaker 1: alf Architect, and we had no interest in ever opening
Speaker 1: our infrastructure to anybody because you know, we just say, hey,
Speaker 1: we're low cost infrastructure provider. Why would we want to
Speaker 1: give us other people? And then Perth, who I known
Speaker 1: for probably five six years prior. You know, she's always
Speaker 1: pitched me on freedom and you know, obviously used to
Speaker 1: be in the Marine Corps and I'm a huge fan
Speaker 1: of you know, go America, Freedom, all that kind of stuff,
Speaker 1: and so I was obviously amiable to her idea at
Speaker 1: the outset. And then finally, uh, you know, after enough
Speaker 1: strong arm and and twisted my elbow, uh, we said, fine, part,
Speaker 1: We're we're gonna do it. You're gonna be our guinea
Speaker 1: pig into you know, doing et F servicing for someone else.
Speaker 1: And so we kind of started it basically with her
Speaker 1: um and so once we made that decision to engage
Speaker 1: in the business, you know, there was no looking back.
Speaker 1: You know, now the rest is history. But I've always
Speaker 1: liked her idea. It was always very well baked. It's
Speaker 1: just like anything when you launch a fund, you know,
Speaker 1: it's a long game thing. And she's been playing the
Speaker 1: long game and she's finally winning it. Mike, I'm gonna
Speaker 1: ask you the same question, what what's the what's the
Speaker 1: greatest hit that you're most proud of? I mean, we've
Speaker 1: had some awesome hits, and I think I normally would
Speaker 1: just go with the biggest one, like our part, But
Speaker 1: I'm gonna bring out a real in d one. Um.
Speaker 1: There's this company sp Funds. They were at eighty million
Speaker 1: dollar r i A focused on Sharia compliant. They are
Speaker 1: are sleeper hit, right, Nobody would ever think that this
Speaker 1: was gonna hit. Now it's like three million, three different funds.
Speaker 1: They have the only secook fund. They have a Sharia
Speaker 1: real estate fund with US Sharia SMP five hundred with
Speaker 1: the full license, and their little eighty million dollar r
Speaker 1: a A is now almost four hundred million all in
Speaker 1: because they embraced the et f rapper to get the distribution,
Speaker 1: to get the access, like the wire houses call us
Speaker 1: about it, like West and J can tell you, Uh,
Speaker 1: Garrett can tell you, like it's freaking hard to to
Speaker 1: get the uh the wirehouses to call you. So that's
Speaker 1: my sleeper hit. That's the one that was out there
Speaker 1: for six seven months and then uh College radio made
Speaker 1: it a hit awesome and Garrett, what about you, Well,
Speaker 1: Robo is certainly the one, you know, that we're most
Speaker 1: known for. One of our biggest you know, individual funds
Speaker 1: UM e m q Q was another one that was
Speaker 1: really kind of the first of its kind. When when
Speaker 1: we did that, it's it's the you know, the Amazons
Speaker 1: and UM those kind of companies of the emerging markets,
Speaker 1: and so it's really an interesting thesis there that really
Speaker 1: took off and and was interesting. You know, say, one
Speaker 1: of our other, you know, bigger clients that has turned
Speaker 1: out to be a really interesting model is Cabana, and
Speaker 1: so they've got eight funds with us at this point.
Speaker 1: But they're an s M A manager and what they
Speaker 1: did was converted those s M A s into E
Speaker 1: t F s and so they're running the same strategies
Speaker 1: they ran as s M A s in e t fs.
Speaker 1: So what they're able to do is give their clients
Speaker 1: a much more tax efficient vehicle, a lot lower trading
Speaker 1: costs when they're just trading you know, the E t
Speaker 1: F s themselves, and they're underlying our our other E
Speaker 1: t F s UM same strategy just a lot more
Speaker 1: tax efficient vehicle. And it's been a really interesting thing
Speaker 1: to be a part of, and it's been a big
Speaker 1: kind of success story. We're seeing a lot of interest
Speaker 1: in that space. And uh, my question for you, just
Speaker 1: to pick you as a proxy amongst the three, what
Speaker 1: percent of the pitches you here end up becoming an
Speaker 1: E t F? Roughly, I would say under maybe, Um, look,
Speaker 1: there's this the era of field of dreams is over right.
Speaker 1: You can't just build it and they'll come. I've tried that,
Speaker 1: like I tried it with Garrett right, and he was
Speaker 1: a great person to work with. Right before we were
Speaker 1: a white labeler. We used a white labeler and um,
Speaker 1: had I listened to Eric, I'd be quite a bit
Speaker 1: more richer. You know. We did the t E t F,
Speaker 1: which was the E t F that tracked the whole
Speaker 1: et F industry. And Eric said, you should have kept
Speaker 1: that to you should have got the ticker meta. Um.
Speaker 1: I really wish I would have. But by the way,
Speaker 1: hold on, Joel, Joel, Joel needs to know this. I
Speaker 1: advised him to use Meta. Mark Zuckerberg paid Will Hershey Roundhill,
Speaker 1: the equivalent of a small Caribbean island for that ticker.
Speaker 1: We would Mike wouldn't even be on this call right
Speaker 1: now if he had done that and listened to me. Joel,
Speaker 1: what do you think of that? I mean, I'm gonna
Speaker 1: say that there are ten percent of things that come
Speaker 1: out of your mouth that that broken flock is right.
Speaker 1: I'll take it at least I'm right a little bit.
Speaker 1: All right, Um, go ahead, you were so, you were
Speaker 1: so right, Um, but you know my problem was I
Speaker 1: had the wrong product for the wrong time, right, and
Speaker 1: and you gotta be honest with people about it. Um.
Speaker 1: It all sounded great at the right at that time,
Speaker 1: but you know I didn't have the runway. I didn't
Speaker 1: have those things. I learned all the mistakes. And the
Speaker 1: beauty of what the three of us do nowadays is
Speaker 1: because we've made all the mistakes ourselves, we help prevent
Speaker 1: others from making them. We can guide people through to
Speaker 1: the all the necessary conditions that can allow for you
Speaker 1: to be successful. Um, West, I want to ask you
Speaker 1: that question. You know, what percent do you take on?
Speaker 1: And I guess of the ones you don't take gone?
Speaker 1: Are they mostly like one man shows or one person
Speaker 1: shows where they're just some guy or girl out there
Speaker 1: just looking to launch an e t F or are
Speaker 1: they like big companies active managers let's say that just
Speaker 1: severely overestimate the demand for their stuff. Well, I mean
Speaker 1: the other guys could probably tell you you see everything
Speaker 1: under the sun when you're in this business. And we
Speaker 1: we've gotten much better at just putting out information and
Speaker 1: segmenting to the buyers that we actually want and and
Speaker 1: really are number one thing that we're looking for as culture. Right,
Speaker 1: So if you're coming in, we call them et f innovators,
Speaker 1: like the Perth Tolls of the world. You know, just
Speaker 1: for karma's sake, I don't care if you're damned near broke.
Speaker 1: But if you have a great idea, you have the passion,
Speaker 1: you have the culture, you've got a long game mentality,
Speaker 1: you know, we're gonna probably help you out. Um. And
Speaker 1: then on the flip side, like you could be the
Speaker 1: greatest thing since sliced bread, have billions of dollars, but
Speaker 1: you know, your compliance nightmare, your culturally just it's not
Speaker 1: like somebody I want to deal with or your jerk.
Speaker 1: We don't care. We're not going to do business with
Speaker 1: that person, right. Um, So for us that there's a
Speaker 1: huge aspect of like cultural fit and mentality to win,
Speaker 1: and it's it's really not um as tied into like
Speaker 1: you know, how rich you are, how much au M
Speaker 1: you are, it's just because we think culture wins in
Speaker 1: the end. And just to follow up UM West and
Speaker 1: then if if anybody else wants to come into this,
Speaker 1: we've talked and I know you and I've talked about conversion.
Speaker 1: So there's launching a new e t F for a company,
Speaker 1: and then there's converting something right into an e t F.
Speaker 1: And are you seeing more request for conversions of say
Speaker 1: mutual funds or separate accounts and is that something you
Speaker 1: guys are also doing. Yes, I mean that's pretty much
Speaker 1: exclusively what we're doing right now. So so next year
Speaker 1: we're gonna probably launch another thirty funds, and I'd say
Speaker 1: nine of them we're gonna be tied to either mutual fund,
Speaker 1: hedge fund, or sim a conversions because that's really what
Speaker 1: we're focused on. Like I said, we'll always do the
Speaker 1: E t F entrepreneur that shows up with passion desire
Speaker 1: to win, but that's not frankly our focus. Uh, we're
Speaker 1: kind of all in on the conversion game at this point.
Speaker 1: How about you, Mike. I wanted to chime in on
Speaker 1: this one too, So Um, I was on with a
Speaker 1: twenty billion dollar mutual fund shop yesterday talking through the
Speaker 1: conversion stuff. Where in the process of doing one right now,
Speaker 1: and I'm excited about that. I would say the first
Speaker 1: wave for all of us the last couple of years
Speaker 1: has been s m A and hedge funds converting. You know,
Speaker 1: doing that that one's a lot easier. The mutual fund
Speaker 1: conversion takes more time and effort, and it's not the
Speaker 1: playbook isn't as cookie cutter because there's all kinds of
Speaker 1: aspects to it. Like some people still have mutual funds
Speaker 1: where individuals have subscribed directly, meaning they don't even have
Speaker 1: a brokerage account. So when you convert, where do you
Speaker 1: send those shares? Right? So there's and then you have
Speaker 1: the issues of if it's a wire house, are they
Speaker 1: gonna let the E t F stay on if they're
Speaker 1: no longer getting there? Um, there's a proper word for it,
Speaker 1: but I'm just gonna call it kickback. Uh. And So
Speaker 1: I've seen a lot of interesting things happening here, some
Speaker 1: really cool things that have come up though lately there's
Speaker 1: one that we're talking to that's a mutual fund that's
Speaker 1: uh kind of short biased and it's the type of
Speaker 1: thing that people want to trade. But since the mid
Speaker 1: two thousands where we had all those issues with mutual funds,
Speaker 1: people can't trade them anymore. If you buy him, you
Speaker 1: have to hold them thirty days. That's not true. It
Speaker 1: inn e t F. So it like totally makes sense
Speaker 1: that they would convert that mutual fund to an e
Speaker 1: t F because the e t F allows for trading,
Speaker 1: like allows you to get in and get out, an
Speaker 1: optionality and all that. We've also seen like the success
Speaker 1: we had with Gotham Joel green Blott's company, he created
Speaker 1: an e t F that was the core equity holdings
Speaker 1: in his mutual funds. So he's got five or six
Speaker 1: mutual funds, all of them have the same core equity holdings,
Speaker 1: and then they have options on the edges for different
Speaker 1: buffers within those mutual funds. Now by having an e
Speaker 1: t F that he just holds in the mutual fund,
Speaker 1: he's literally passing on the benefits the tax benefits of
Speaker 1: the e t F to the mutual fund holders. Um.
Speaker 1: So there's more than one to skin. The conversion game
Speaker 1: is kind of the point, right, there's there's different aspects
Speaker 1: to it in different benefits. And Garrett, how about you,
Speaker 1: what are you what are you seeing in this conversion
Speaker 1: conversation that that's of note? Now, it's exactly the same, right,
Speaker 1: I think we're all having the same conversations, you know,
Speaker 1: probably with the same people in some cases. But you
Speaker 1: know that's what we're seeing as well, right, people they
Speaker 1: have to make conversions the hedge funds and then lately,
Speaker 1: more recently, it has been the mutual fund aspect as well,
Speaker 1: where you know, it's just a better rapper. I think
Speaker 1: we're all obviously believers in the t F rapper and
Speaker 1: you know, the mutual fund industry as a whole continues
Speaker 1: to see outflows and those are those are coming to
Speaker 1: the E t F world, and so you know, we're
Speaker 1: kind of on the front lines of that, I would say,
Speaker 1: and um, seeing the exact same thing that these guys are.
Speaker 1: We We've got a lot of conversations going on right now,
Speaker 1: a couple of filings coming with with some conversions for
Speaker 1: next year. That it's just going to be the way
Speaker 1: the way it is going forward. Okay, So how big
Speaker 1: is this conversion way of going to get Derek. So
Speaker 1: everything you guys are saying is music to my ears
Speaker 1: because we went out eighteen months ago after d f A.
Speaker 1: This was like, this was a huge moment in my opinion.
Speaker 1: D f A huge name converted in e T F
Speaker 1: UM Guinness was the first, but d f A was
Speaker 1: the first big boy. And we wrote a note saying
Speaker 1: that this is going to be over a trillion dollars
Speaker 1: converted in the next ten years, and they'll be hundreds
Speaker 1: of funds. Right now, we're about I want to say,
Speaker 1: thirty five conversions at about sixty three billion. So I guess,
Speaker 1: Garrett Um, you know you think we might hit a
Speaker 1: trillion in ten years. I do think that, Yeah, I
Speaker 1: do that. The E T F Rapper is just such
Speaker 1: a better vehicle that it really cannot be ignored. And
Speaker 1: if you're a mutual one company and you're not thinking
Speaker 1: about this right now, you're you're behind the curve. UM,
Speaker 1: your shareholders, um and investors you know, need this, need
Speaker 1: this rapper. And so I think that's you know, really
Speaker 1: going to be a huge driver of this and these
Speaker 1: assets coming out of the big fun complexes and into
Speaker 1: their own ets. Okay, well, I'm gonna bring it back
Speaker 1: to you, and I want to ask we we talked
Speaker 1: about um indies there um and you know you you
Speaker 1: mentioned Perth. I want to talk about the dynamic of
Speaker 1: like the indies like her and some of the others
Speaker 1: that we mentioned versus the more institutional players like the
Speaker 1: Goldman How is that going to play out in the
Speaker 1: white label stuff? Because if the the Goldman's and the
Speaker 1: JP Morgan's of the world just keep coming and asking
Speaker 1: for more boxes, like, how much room will there be
Speaker 1: for for indies going forward when when those institutional names
Speaker 1: throw around so much money and have the platforms they have.
Speaker 1: So I always tell people that with boutiques, they live
Speaker 1: on being fast, which is an acronym because I'm from
Speaker 1: the military, and that's basically being flat authentic, social savvy
Speaker 1: and a thought leader. And so I do not think
Speaker 1: that like, let's say Larry Fink is like, hey, I'm
Speaker 1: gonna go launch a freedom fund. Does anyone believe Larry
Speaker 1: Fink cares about freedom? Of course not everyone knows per
Speaker 1: Toll lives and dies on freedom, right, And do you
Speaker 1: want to invest with the person who wrote the book
Speaker 1: or do you want to invest with the person that
Speaker 1: you know talked about the author who wrote the book.
Speaker 1: Like most people, if the book is reasonably price, are
Speaker 1: gonna want to buy the book from the actual author.
Speaker 1: So I'm always evergreen bullish on authentic people who do
Speaker 1: what they say, They do things right, and they price
Speaker 1: their products affordably and reasonably. I don't see how the
Speaker 1: big monster firms can ever break that right. Boutique survived
Speaker 1: for a reason. They're better at their job than monster
Speaker 1: product manufacturers. Mike, you wanna you want to fight back
Speaker 1: on that? Uh, I want to say I'm not scared
Speaker 1: of Golden And at all. Honestly, I think they're gonna
Speaker 1: have a tough time with this. UM. This is a
Speaker 1: headache business. This is the type of thing where you've
Speaker 1: got to have really great people. There's only so much
Speaker 1: automation any of us can do because we are fiduciaries
Speaker 1: at the end of the day. Like, this is not
Speaker 1: this is not UM some retail widget business. This is
Speaker 1: a forty Act or thirty three act fiduciary business where
Speaker 1: you can automate a lot of things, but you can't
Speaker 1: automate out that compliance component and you can't automate out
Speaker 1: that people component. So I don't see any threat to
Speaker 1: the kinds of people that we're talking about being sold
Speaker 1: Goldman instead of US. I think Goldman did this because
Speaker 1: they see the wave. They know they know that the
Speaker 1: average investor under thirty can't even buy a mutual fund
Speaker 1: because their money is at robin Hood or so FI
Speaker 1: or public Um or whatever. And those places aren't even
Speaker 1: set up for mutual funds. You can't you can't even
Speaker 1: put in five letter tickers. Their their systems don't even
Speaker 1: allow for it, right, they don't have these contracts with
Speaker 1: all this fat and and extra money to be thrown around. Um. Honestly,
Speaker 1: I think in uh three to five years, Goldman is
Speaker 1: going to have to come by one or all of us. Okay,
Speaker 1: well that's a that's a good transition to Puerto Rico. Yeah. Um,
Speaker 1: you guys are all over the place. West is in
Speaker 1: Puerto Rico. Mike, you're in Long Island with Billy Joel
Speaker 1: and uh, Garrett, you're in Oklahoma, right, Garrett, let's end
Speaker 1: with you. We'll close this out. You know, you kind
Speaker 1: of kicked all this off back in the day putting
Speaker 1: out those funds. Um, is this business grown like you
Speaker 1: thought it would or more so, and where do you
Speaker 1: see it going? You know, it has grown more so
Speaker 1: than than actually I thought would have originally. It's um,
Speaker 1: it's really not a niche kind of business anymore. Originally,
Speaker 1: that's how we thought about it, was launching niche or
Speaker 1: thematic funds, and the acceptance of the e t f
Speaker 1: UM has really just grown so dramatically that you know,
Speaker 1: we launched funds for all kinds of issuers. You know,
Speaker 1: we launched funds for ubs, we launched funds for Alliance Bernstein,
Speaker 1: we launched a physical gold fund for the Government of
Speaker 1: Western Australia. You know, we had half a billion dollars
Speaker 1: in gold bars stored underground in the Perth Mint in Australia.
Speaker 1: So it's really this huge spectrum of players in this
Speaker 1: and that's only going to get bigger, you know. And
Speaker 1: to the point about Goldman, you know, jumping into this
Speaker 1: as well. You know, our view on that is that
Speaker 1: it's really Goldman looking probably more for trading revenue right there.
Speaker 1: I don't think anyone's convinced they really want to be
Speaker 1: a white label issuer. I think they're looking for a
Speaker 1: way to get a piece of the trading business out
Speaker 1: of this. If you try on their website, it all
Speaker 1: it says is to contact your Goldman representative, so you
Speaker 1: can't even do it if you're not a Goldman client
Speaker 1: with them at the moment. So to Mike's point, we
Speaker 1: really don't see them as at We see it as
Speaker 1: just another validation of people wanting to get into this industry.
Speaker 1: So I think it it's really only going to grow significantly.
Speaker 1: You know, the world continues to shrink, trading products continue
Speaker 1: to be able to be spread around the world, lots
Speaker 1: of different areas and avenues. You know, you've got folks
Speaker 1: in Europe doing similar things. Now you've got was Stone
Speaker 1: is just gotten into this in Europe, obviously a huge
Speaker 1: name over there and and doing interesting things. Han is
Speaker 1: over there. So it's really um you know, I think
Speaker 1: the growth potential is still just massive for all of us. Okay,
Speaker 1: I'm gonna ask a question of each of you. Mike
Speaker 1: knows what's coming. It's our favorite kicker question that we
Speaker 1: ask on each episode of Trillions. Mike, I'm going to
Speaker 1: kick it off with you your favorite et F ticker
Speaker 1: other than your own, and I gotta I gotta admit
Speaker 1: that you've had a great one before. I can't remember it,
Speaker 1: but you can't repeat it, and you can't use anyone
Speaker 1: in your stable of white label ETF either. I totally
Speaker 1: get it. Oh man, favorite ticker, now, Man, I should
Speaker 1: have remembered that this was coming, so you, magnus, you
Speaker 1: can edit out me floundering here trying to think on
Speaker 1: uh you know, And I'm gonna go with the original
Speaker 1: one that my partner Giermo did, which was lit. That's
Speaker 1: a global X one right, It's very clear what it is,
Speaker 1: and it was ahead of its time, and it was
Speaker 1: one of the first the Mattox and it always reminds
Speaker 1: me of how I got to build this company because
Speaker 1: both Guerremo and I came from the outside this industry
Speaker 1: and we met at Global X and build titled together.
Speaker 1: Wes uh. You know, I have to give shout out
Speaker 1: to meb probably and his marijuana fun toke Ye. I
Speaker 1: always found that one to be pretty entertained. So the
Speaker 1: field that is point for two. Oh, I wonder where
Speaker 1: that came from. That that et F was seriously inspired
Speaker 1: Garrett Um. You know, I think um one of my
Speaker 1: favorite just tickers as Jet Super easy to remember. Our
Speaker 1: descriptive um pretty good. We do have some that we
Speaker 1: sub advise that we didn't launch, but we sub advice
Speaker 1: for Round Hill and those guys have great tickers. You know,
Speaker 1: they've got weed, they've had, they did have meta. They
Speaker 1: do a really good job with theirs. Mike Garrett West,
Speaker 1: thanks for joining us on Trillions. Thank you, thank you.
Speaker 1: I appreciate it. Thanks for listening to Trillions until next time.
Speaker 1: You can find us on the Bloomberg Terminal, Bloomberg dot com,
Speaker 1: Apple Podcast, Spotify, and wherever else you like to listen.
Speaker 1: We'd love to hear from you. We're on Twitter. I'm
Speaker 1: at Joel Weaker Show. He's at Eric Falcunos. This episode
Speaker 1: of Trillions was produced by Magnets and Drew Ye