Speaker 1: Welcome to Trallians. I'm Joel Webber and I'm Eric beltunas Eric.
Speaker 1: But it's about to help people get ready for that.
Speaker 1: The analysts and Bloomberg Intelligence that you work with and
Speaker 1: lead have helped us come up with a list. What's
Speaker 1: going to be on this list? Well, this list is
Speaker 1: essentially called the outlook um Outlooks are one of those
Speaker 1: required things that we haven't b I We have a
Speaker 1: lot of freedom, but a couple of things we have
Speaker 1: to do, primers and an outlook. Now we're a little late.
Speaker 1: A lot of outlooks coming out in November, smoothing in October.
Speaker 1: We put out ours out in December, and we look,
Speaker 1: We look at the year that just happened, obviously, and
Speaker 1: then we sort of forecast forward what we think and
Speaker 1: just cope with an overall theme. Our overall theme this
Speaker 1: year was that the era of the e t F
Speaker 1: will be here for a while, and largely because of
Speaker 1: the flows. The volume and the number of launches were
Speaker 1: just so high and extraordinary for the market being completely decimated.
Speaker 1: Both stocks and bonds had one of the worst years ever.
Speaker 1: You would think that would put a suppressive force on
Speaker 1: most of those things, but they almost reached records of
Speaker 1: everything again. So you have a crystal ball and you
Speaker 1: look into it and tell me that E t f
Speaker 1: s are gonna keep getting bigger. Yeah. Absolutely. I mean
Speaker 1: we always had this phrase on the team that we've
Speaker 1: used in fact our twenty twenty one outlook, I think
Speaker 1: was bowl markets are good for ets, but bear markets
Speaker 1: are even better, and we were right. This year showed
Speaker 1: exactly that. So but I actually stunned at how much
Speaker 1: they both the launches and the flows in particular, uh,
Speaker 1: almost six billion dollars and flows I would have guessed lower.
Speaker 1: I would have guessed more like three four and mutual
Speaker 1: funds almost a trillion, and outflows. So this shift to
Speaker 1: e t f s and passive has expedited in this
Speaker 1: kind of brutal environment. So I don't know, I feel justified.
Speaker 1: I'm glad I voted my career to this stuff because
Speaker 1: it's it's definitely growing. It's the vehicle of the century. Okay,
Speaker 1: So who's gonna be joining us? And how are we
Speaker 1: gonna structure this one? So we have the whole team here.
Speaker 1: I think this might be the first time everybody is here.
Speaker 1: We might have done what this once before. So you've
Speaker 1: got Athanasio, Sara Fagus, and James Seffert who are both
Speaker 1: here in the studio with us, who are on regularly.
Speaker 1: We've got Henry jim Over in Europe and Rebecca Soon
Speaker 1: in Hong Kong. And Henry leads up Europe, Rebecca leads
Speaker 1: up Asia. And so everybody's going to give their two
Speaker 1: cents from where they sit this time on Trillions, the
Speaker 1: twenty three outlook, Henry, Rebecca, Athanasios, James. Welcome back to Trillions, Henry,
Speaker 1: first time, welcome, Hello, How are you doing? Before we
Speaker 1: hear from everybody? Eric, you want to tell us how
Speaker 1: great you are? That wasn't how I asked you to
Speaker 1: set me up. Okay, fine, listen, Um, we've been right
Speaker 1: a lot. I gotta be honest, like our calls have
Speaker 1: been pretty good. One thing about outlooks that I find
Speaker 1: frustrating on the cell side is they tann't tend to
Speaker 1: just repackage the past with the future tents, and what
Speaker 1: happens is the future tends to change. So they're wrong
Speaker 1: a lot. Honestly, We've made a lot of calls that
Speaker 1: were against the grain, and I just want to take
Speaker 1: a victory lap here I'm sorry. Now I will go
Speaker 1: over the ones we got wrong. We have a couple
Speaker 1: wrong too, but here's the ones we got right. Over
Speaker 1: the past two years, ARC would hang tough, called it
Speaker 1: got it right. They've seen influence. This year, the SEC
Speaker 1: would approve a bitcoin futures et F and pro Shares
Speaker 1: would be the first out with it. This was all James,
Speaker 1: He nailed it. We picked up a lot of crypto
Speaker 1: people because we were the most aggressive on that call,
Speaker 1: and it both turned out to be correct. We Um
Speaker 1: also said bear markets would expedite the e t F
Speaker 1: and passive move. UM yours truly said an inverse Jim
Speaker 1: Kramer et F would be filed, and it was um.
Speaker 1: We thought that mutual fund to et F conversions would
Speaker 1: grow quickly, and they have. They're actually getting Uh. Fidelity
Speaker 1: just jumped in that that call is not totally right yet,
Speaker 1: but it's in the right direction. Um. And when March,
Speaker 1: when the bond sell off and the and everything was
Speaker 1: really going bad and bondy TF showed like discounts and stuff,
Speaker 1: I said, listen, bond ETFs are gonna double in assets
Speaker 1: over the next three years. And I said that rate
Speaker 1: in the dark of the night before the FED even
Speaker 1: came in. They're almost there. It's still we got a
Speaker 1: year ago, but there are two thirds of that asset level.
Speaker 1: Bond ETFs crushed it this year in terms of flows. Um,
Speaker 1: big passive fund companies should democratize their voting. They should
Speaker 1: decentralize it. They did. Vanguard, Fidelity, and Schwab all announced plans.
Speaker 1: E s G would confuse people and then struggle to
Speaker 1: break two to three percent market share. I was probably
Speaker 1: the most aggressive and negative on this, but they are.
Speaker 1: I mean, they haven't seen any flows this year. Even
Speaker 1: black Rock sold out the e s G funderal model.
Speaker 1: They'll exist. I just don't think they're gonna grow beyond
Speaker 1: I guess that one's not quite done yet. And then
Speaker 1: I said two would be the last crypto super Bowl.
Speaker 1: Now I said it because I thought they might approve
Speaker 1: a spot et F and that would pull people off
Speaker 1: the exchanges and make them lower their fees for trading.
Speaker 1: I didn't say it because I thought there would be
Speaker 1: some big scandal with f t X. But I think
Speaker 1: that is going to be the last curve of surouable.
Speaker 1: So indirectly got that one. Something we got wrong. We
Speaker 1: thought hold on, let's just okay, let's just take a moment, okay,
Speaker 1: and just saver as long as you can save. He that,
Speaker 1: but that's also you know, let's hear about the ones
Speaker 1: that you you missed, all right, um, Ethan and I
Speaker 1: in particular, we thought multi factor et s would take
Speaker 1: over Smart Beta. That's when you put all the factors together. Uh.
Speaker 1: Turns out people like their factors severally, but you know,
Speaker 1: multi factors there, they got a legit like niche, but
Speaker 1: they definitely didn't. They're not going to take over UM.
Speaker 1: I think it's interesting in e t F land sometimes
Speaker 1: when they when they merge, when they put too much together,
Speaker 1: like you want. I know, Joel, you've been asking about
Speaker 1: this everything e t F. I think sometimes that doesn't
Speaker 1: actually work. People actually like the pieces sometimes more than
Speaker 1: everything together. And that's I think the case here. We
Speaker 1: also thought that the JP Morgan and Goldman like SMP
Speaker 1: five hundred knockoff ETFs would get bigger and JP would
Speaker 1: pull out of SPY and IVV and put it in
Speaker 1: their own e t F s, and they haven't. The
Speaker 1: SNP five under brand name is more powerful than we thought. UM.
Speaker 1: And then fixed income smart bait, and we thought this
Speaker 1: would be a much bigger deal by now it's really
Speaker 1: it's still pretty small. I think it's fifty sixty billion equity.
Speaker 1: Smart Bait is one trillion. So there's a whole disconnect
Speaker 1: there and it just hasn't grown like we thought. James,
Speaker 1: do we miss anything. Yeah, there's one that I got
Speaker 1: to call myself out on. I thought we'd have an
Speaker 1: ethereum future zt F two based on the fact that
Speaker 1: we got bitcoin futures and feed different things. But that
Speaker 1: has not happened. Um, so we got I got that
Speaker 1: one wrong me personally. All right, congratulations on being great. Listen,
Speaker 1: I'm sure you could do the same thing with Business
Speaker 1: Week articles. I know. So this is my version of that.
Speaker 1: Let me have it in my life here and and
Speaker 1: we roll the dice on these takes. Sometimes we put
Speaker 1: ourselves out on a limb. We'd don't we don't play
Speaker 1: it safe. We are in our your head issue. The
Speaker 1: thing that we got right was the weak link in
Speaker 1: crypto was going to be the brokerages, and that's it
Speaker 1: was a broadway. We didn't say FTX specifically, but listen,
Speaker 1: let's pet each other on the back right now, go
Speaker 1: all right, Ethanasios, let's talk about what's your number one man? Well,
Speaker 1: I'll start grim Um. I think closures are going to
Speaker 1: pick up. We did the episode on the graveyard. I
Speaker 1: think a couple on Halloween. Uh. There's two parts of
Speaker 1: the equation, obviously, launches and closures. I don't see launches
Speaker 1: slowing down. It was a you know, despite the market
Speaker 1: being tough, launches still came in pretty strong this year.
Speaker 1: You had last year, you had a lot of crazy
Speaker 1: stuff coming to the market. I actually think that other
Speaker 1: part of the equation is going to pick up. I
Speaker 1: think people threw a lot of product out that's not
Speaker 1: gonna you know, you need a bowl market, and I
Speaker 1: don't think we're gonna have that next year, or you know,
Speaker 1: it might be a tough from market. So I think
Speaker 1: we're gonna see closures start to pick up on people
Speaker 1: or issue or start to clean up their lineups. So
Speaker 1: do you think more closures than than this year? Uh? Yeah,
Speaker 1: I don't. I mean this year was higher than last year.
Speaker 1: I think it will be pretty high. I could probably
Speaker 1: is just another call we have to pat ourselves in
Speaker 1: the back. Next year, I think we could be a
Speaker 1: really rough year. For closures. Okay, I guess we're starting
Speaker 1: off on a bad note. Henry, first time on trillions
Speaker 1: number one. Sure, I don't know if there's a whow you,
Speaker 1: but what's allowing me is um active ETS. I think
Speaker 1: Active is going to be uh continue their rocket tractory
Speaker 1: in the US and the Europe. In Europe were falling
Speaker 1: close behind two reasons. One, I think investors in the
Speaker 1: US are starting to look beyond the structure and looking
Speaker 1: at the strategy itself, so don't really care if it's
Speaker 1: active or index anymore. In Europe, I don't think we've
Speaker 1: actually finished the consolidating the ETS story. Um, so before
Speaker 1: you can talk about active ETS, we have to get
Speaker 1: the ETS story down first. However, people are still gravitiing
Speaker 1: tourist Active. Yeah, it's interesting. Um semi transparent or non
Speaker 1: transparent Active just total flop another call we got right,
Speaker 1: I should have put that on the list. Oh my god, Sorry,
Speaker 1: I'm annoying every listener right now. They're like, all right, dude,
Speaker 1: it's just the patent the back show. We'll have a
Speaker 1: roast next time. Okay. Uh, my other shoulder, but transparent
Speaker 1: Active doing great Capital group came in transparent. They got
Speaker 1: like five or six billion fidelity. Like there's a lot
Speaker 1: of the transparent Active is doing just fine. I mean
Speaker 1: Active is really I think carving out a nice niche, right, Tom, Yeah,
Speaker 1: I think going back to your other there's another patent
Speaker 1: the back, but the Cathy would call I think her
Speaker 1: being transparent and her having that success might even kill
Speaker 1: that narrative that you need to be non transparent to succeed. Yeah,
Speaker 1: and so I think I think the non transparent Active
Speaker 1: is probably gonna slowly it lives in a very very
Speaker 1: small niche, if not just go away eventually, and transparency
Speaker 1: will will be how they do active. I think what's
Speaker 1: what we're seeing though, also with the adoption of active
Speaker 1: is a lot of intermediary not intermangors like I ra
Speaker 1: A S are coming in. We have white labels are
Speaker 1: trying to start out their own et S shops and
Speaker 1: launching their active strategies because there's no more stigma if
Speaker 1: there ever were on active ets. So they're just bringing
Speaker 1: out there there there either they're trying improving strategies to
Speaker 1: act to space or the strategies that weren't working out
Speaker 1: that well, they're putting it into the et F wrapper
Speaker 1: to try them out, so I'm gonna see how big
Speaker 1: growth there. I do have one variation on this active call,
Speaker 1: which is I think that you're going to see um
Speaker 1: big legacy companies like Franklin Templeton Fidelity. At least, this
Speaker 1: is what I would do. I will come out with
Speaker 1: my best ideas funds, a concentrated portfolio, just twenty five
Speaker 1: stocks like Cathy would style, but it's the best ideas
Speaker 1: of your whole brain trust and make that a separate
Speaker 1: et F and then just keep your mutual funds because
Speaker 1: they're good cash cows right now, or convert them. But
Speaker 1: then I think that a concentrated active fund fits well
Speaker 1: on our otherwise boring beta core allah Cathey would and
Speaker 1: I think she showed that. So I think we might
Speaker 1: see legacy sort of archives itself a little and come
Speaker 1: out with these best idea funds. That's just my call,
Speaker 1: but you know, we'll see. Yeah, we's gonna have calls.
Speaker 1: Do I'm only like, I'm only batting eight fifty, But
Speaker 1: we'll see, we'll see, we'll see. Okay, James, what's your
Speaker 1: number one? Yeah, So I'm gonna actually look a little
Speaker 1: bit beyond here. A tad But so I mean, first
Speaker 1: start by saying when I talk about mutual funds and everything,
Speaker 1: I'm about to say, I'm excluding money market funds. We
Speaker 1: don't really we don't consider them to be the same
Speaker 1: type of situation when you're looking at ets first, mutual
Speaker 1: funds um But so the one that is, we think
Speaker 1: that passive could pass active and assets for ets and
Speaker 1: mutual funds by the end of three Right now, the
Speaker 1: trend is accelerated. Eric mentioned earlier, it actually has slowed
Speaker 1: down in some furrors of the market. So one of
Speaker 1: the reasons why passive tends to overtake or pass gain
Speaker 1: market share and active during bear markets it is because
Speaker 1: active has historically been so much larger. So if you're
Speaker 1: a tent trall and you go down ten percent, that's
Speaker 1: a lot more money that's going down if E t
Speaker 1: F s are half or less than half that size,
Speaker 1: So the bear market really hurts. You see outflows on
Speaker 1: top of that, and then E t F really gained
Speaker 1: market share. But what's happened now on the equity side
Speaker 1: of things, there's passive equity assets are larger than active
Speaker 1: equity assets, and the mutual fund ETF space combined, so
Speaker 1: the exact opposite is happening. That said, we're still seeing
Speaker 1: enough growth in the ETF to overcome that that that
Speaker 1: lead that PASSI have had. So passive should be losing
Speaker 1: more money than active in this bear market, but they're
Speaker 1: not because so much money is pouring out. So because
Speaker 1: of that, we think the trend is going to be.
Speaker 1: It could happen by December. That's next year. I think
Speaker 1: it's definitely going to happen by We would need a
Speaker 1: massive regime shift of the last fifteen to twenty years
Speaker 1: for that not to be the case. What percent of
Speaker 1: the funds market is passive when it comes to equity, Uh,
Speaker 1: it's so it's about okay, what about fixed than um
Speaker 1: fixed income it's a it's about third. It's in the
Speaker 1: mid thirties. And what this is, what's total total? It's
Speaker 1: about So that you're saying that's going to go to
Speaker 1: fifty one or fifty point one at the end of
Speaker 1: next year, theoretically by December three, I think could happen.
Speaker 1: It's going I would bet a lot of like you
Speaker 1: would be you would I would be very confident that's
Speaker 1: gonna happen. In Now, let's shift to mutual fund to
Speaker 1: e t F that's a whole another like sort of war.
Speaker 1: We're looking at what is that person, what percentage of
Speaker 1: assets the ETFs have relative to mutual funds, and where
Speaker 1: do you see that going? Yeah, so again x money markets,
Speaker 1: because there are trillions of dollars in money markets. But
Speaker 1: we're about so if you take ets mutual funds, et
Speaker 1: s makeup about and based on the current trajectory and
Speaker 1: all the stuff we're talking about E t f s democratizing,
Speaker 1: revolutionizing finance. People still pointing the ts. I think it's
Speaker 1: gonna happen by It could happen within five years. So
Speaker 1: that's a big jump to go from twenty eight to fifty.
Speaker 1: But at the current rate of change, it's it's not
Speaker 1: that crazy to put out there. And I think most
Speaker 1: people listening might actually feel like, I can't believe ETFs
Speaker 1: only have twenty eight percent end of those assets. But
Speaker 1: the media has really shifted to covering a t f
Speaker 1: s and mutual funds don't get much coverage. We're actually
Speaker 1: hiring somebody to cover mutual funds because a lot of
Speaker 1: our clients actually want to read about there's still twenty
Speaker 1: trillion in them and they've kind of been left behind
Speaker 1: by the media, but they still have a ton of money,
Speaker 1: and you know, it's slipping. But this is going to
Speaker 1: take a long time for this all the playout, but
Speaker 1: I agree with James, they will become the majority at
Speaker 1: some point. Alright, your number two number two one is,
Speaker 1: you know, beating the SMP is hard right over time,
Speaker 1: it's just really hard to beat the index. So we
Speaker 1: looked at this year. Actually a lot of ETFs did
Speaker 1: better than the SMP five hundred, and it's because it
Speaker 1: was a violatle market. And so I think next year,
Speaker 1: if we're gonna be violat again, I think it will
Speaker 1: be a good opportunity for other et f that'll perform.
Speaker 1: Now I get it, not every ETF is supposed to
Speaker 1: perform the market, but I think when you have a
Speaker 1: market like we did this year, a lot of stuff
Speaker 1: like value, energy, active, smart beta, things like that tend
Speaker 1: to do well. So I'll probably be looking for a
Speaker 1: lot of the same stuff next year. So more opportunities,
Speaker 1: more trading, more ways to beat the market. So I
Speaker 1: think that's you know, people don't realize not every ETF
Speaker 1: is just supposed to be like an active strategy or
Speaker 1: smart beta, A lot of people will trade throughout of them, right,
Speaker 1: So there's just as many energy ETFs as there are
Speaker 1: tech ETFs. And energy was really great this year, so
Speaker 1: I think it will give opportunity to a lot of
Speaker 1: things that were left for dead to be able to
Speaker 1: perform next year. So that's something I'd be looking at.
Speaker 1: A couple of comments. This is very interesting to me.
Speaker 1: I think this also speaks to the fact that a
Speaker 1: lot of smart beta e t f s tend to
Speaker 1: be designed by people who overweight fundamentals and like stuff
Speaker 1: that you learned in your cf A class that stuff
Speaker 1: matters now they don't like, actually designed smart batts to
Speaker 1: go after nonprofitable tech companies which work clearly for a while,
Speaker 1: and left all these value funds which use you know,
Speaker 1: more classic fundamentals like price to earnings ratios and stuff.
Speaker 1: They now are kind of working. There what they They
Speaker 1: were designed with a lot of evidence and now there
Speaker 1: it's working because the market is value these things that
Speaker 1: tend to always be valued after the bull market comes down, right,
Speaker 1: it is a return a mean version kind of thing. Um.
Speaker 1: And then to your point of the stuff like if
Speaker 1: energy does well, you'll probably see a couple more energy
Speaker 1: ETF launched, and so the product will start to go
Speaker 1: towards the things that are working value energy materials and
Speaker 1: then all there there where you're going to see some
Speaker 1: out performance. Yeah. I agree. It's like spurs basketball, right,
Speaker 1: like back to fundamentals. I think that's gonna work next year.
Speaker 1: Last year was all like aliops and like you know,
Speaker 1: and we're going crazy. I think this year it's going
Speaker 1: to be just back to like most boring basketball. Yeah,
Speaker 1: you know, pick and rolls, like just basic basic. I'd
Speaker 1: like that metaphor that it works, Henry, Let's here what
Speaker 1: else you got for Europe. For Europe, my synkoll is
Speaker 1: actually fixed income products UM. This last month for example,
Speaker 1: bad massive flows UM back into e tps in general
Speaker 1: and have the flows were into fixed income whereas they
Speaker 1: only make up total assets. So in terms of fixing income,
Speaker 1: my cul for next year is going to be fixing
Speaker 1: in products for income generation and UH for combating inflation.
Speaker 1: So that could be fixed for inflation, actually could be
Speaker 1: fixed income, or it could be hard assets. So I
Speaker 1: keep an eye out also for UM for like gold
Speaker 1: bullion and other medals funds UM. There's a lot of
Speaker 1: cryptocurrency e tps here in Europe, and I think um
Speaker 1: some investors saw it as a store of value. Given
Speaker 1: the current situation, I think we'll see some people um
Speaker 1: flowing out of the cryptocurrency TVs and back into a
Speaker 1: gold bullion or other metals. Inflation and Income m E
Speaker 1: t p s are mar caul for next year. Yeah,
Speaker 1: so piggybacking on what Henry said here in the US,
Speaker 1: we've fixed active fixed incommutual funds have It's been a
Speaker 1: it's been a little bud blood bath so far in
Speaker 1: two they've seen hundreds of billions of dollars and now
Speaker 1: I think we have four hundred billion right now. Yeah,
Speaker 1: half a trillion. Hold on half a trillion is six
Speaker 1: times more than any other year of outflows, so it's
Speaker 1: the record six times over. Yeah, So fixed income has
Speaker 1: been active fixing. Commutual funds specifically have been crushed. But
Speaker 1: et f s we've taken in a decent amount of
Speaker 1: money and fixed income despite this rising rate environment, despite
Speaker 1: the worst performance virtually ever for fixed income, and the
Speaker 1: et f s are still taking in money. So that's
Speaker 1: that goes into the fact that I talked about equity
Speaker 1: wasn't gaining as much market share on the passive side
Speaker 1: of things, but on the fixed income side of things,
Speaker 1: it's really ramped up. Like we've seen a couple percentage
Speaker 1: points ramp up in the passive verse active side of
Speaker 1: things and on the E t F side of things
Speaker 1: because of this mass outflow from mutual funds and into
Speaker 1: e t s. At the same time, I think there's
Speaker 1: a demographic a shift as well. Here a lot of
Speaker 1: fixed in commutual funds were bought by boomers when they
Speaker 1: were young, and their four one case, they're now seventy
Speaker 1: eight years old. And if the Feds aggressively hiking I
Speaker 1: if I was a boomer at that age, I might
Speaker 1: not want to wait around. I might just take I
Speaker 1: had a good run. It was like thirty year of
Speaker 1: lowering of rates. I mean it was brilliant. I might
Speaker 1: just cash out. I also think that the e t
Speaker 1: F s are used more by institutions and allocators now
Speaker 1: to pinpoint what they want right now. Like Tom had
Speaker 1: a great note on the cash like a TS which
Speaker 1: now yield four percent. So now you just buy one
Speaker 1: of these cash like ats. You can buy any exchange
Speaker 1: gives you four percent yield, you've got some cash you
Speaker 1: wait to deploy to equities. So I think e t
Speaker 1: f s are used for their tool purposes, whereas the
Speaker 1: mutual funds were used a little more for like the
Speaker 1: whole enchilada. Yeah, we we we we. We've talked on
Speaker 1: the show about the single stock ets and that potential
Speaker 1: growth area which hasn't really panned out. But one area
Speaker 1: that has panned out is a single bond ets, the
Speaker 1: one from FM Acceleration. They have hundreds of millions of
Speaker 1: dollars they just launched this year, and they're targeting specific
Speaker 1: on the run rolling of treasuries, which basically allows you
Speaker 1: if you if you watch Bloomberg TV or CNBC, they
Speaker 1: talk about specific points on the curve. These e t
Speaker 1: f s allow you to actually target those exact things
Speaker 1: that economists are talking about, and they're seeing significant uptick.
Speaker 1: People want to invest in these things, these on the
Speaker 1: run good treasuries. Yeah, and this brings up a point
Speaker 1: people are like, oh my god, single stock ETF, single
Speaker 1: bond ETFs, like this is ridiculous. Like but here's the
Speaker 1: thing that people always underestimated about ETFs is convenience. Consumers
Speaker 1: love convenience. Make it easy. They will come, people will
Speaker 1: buy that. It's a pain to go out and short Teslas.
Speaker 1: So there's an inverse Tesla. Just hit click you O,
Speaker 1: you're on that. That trade is now on. Or it's
Speaker 1: a pain to go buy the treasury. Now you just
Speaker 1: buy this thing. It trades on exchange. Like Microsoft, you
Speaker 1: now own this one bond. So I think that is
Speaker 1: going to happen, the single stock, single bond, and even
Speaker 1: you know who knows single commodity, we're gonna see a
Speaker 1: move into this area. That's said with the single stock,
Speaker 1: I do think it's going to be more limited than
Speaker 1: people think. This whole spaghetti at the wall, nobody needs
Speaker 1: single stock viser like inverse viser. It's probably gonna have
Speaker 1: like six or seven stocks that people care about. Obviously,
Speaker 1: Tesla's the first example could be meta. If it starts
Speaker 1: to get volatile, there could be flavor of the month
Speaker 1: that comes in and out and they single stock it
Speaker 1: um and then you're gonna see a single stock where
Speaker 1: they're gonna call options on it like Tesla covered call ETF.
Speaker 1: So I think securities like Tesla and Arc are gonna
Speaker 1: have these ecosystems built around them where there's multiple ets
Speaker 1: that do trades around the stock, but then these outer
Speaker 1: layer stocks I think will die. Like I don't think
Speaker 1: we need a g E one point five times. I mean,
Speaker 1: I think nobody's gonna buy that thoughts. I agree with
Speaker 1: pretty much everything you just said. Yeah, I agree. I
Speaker 1: think it would be concentrated in just a few names.
Speaker 1: I think the cover called the E T s are
Speaker 1: a good example of these um of income ets because
Speaker 1: people still want their exposure the equities also want a
Speaker 1: bit of income. I think you can also look at
Speaker 1: UM the defined outcome ets like innovator ets, where they're
Speaker 1: talking to the same um population which you addressed UM
Speaker 1: the boomers. They still want exposure to the overall equity markets,
Speaker 1: but they are afraid of it collapsing, so they have
Speaker 1: a cap. They have a buffer on the bottom line.
Speaker 1: What you're giving up though is a bit on the upside.
Speaker 1: But they're okay because they've already invest their money over
Speaker 1: their lifetime, so they have all these game A minutes
Speaker 1: want to lose anymore. Yeah, we don't see these products
Speaker 1: in Europe, so that's why I'm still calling for fixed
Speaker 1: income products to grow in Europe as a proxy for
Speaker 1: income genitoring ETFs like we have in the States, and
Speaker 1: a lot of what we just mentioned requires derivatives, which
Speaker 1: is a lot of people think of it's a dirty word.
Speaker 1: But what we're finding the e t F rule made
Speaker 1: it a little more liberal to use derivatives, and what
Speaker 1: we're finding is it it's not being used to go
Speaker 1: crazy with levera journey thing, but it's used to sculpt outcomes.
Speaker 1: Derivatives can really fine tune the outcome of of a strategy,
Speaker 1: and they're being used brilliantly by many companies UM, and
Speaker 1: I think will continue to see that where UM people
Speaker 1: will package up the derivatives plus some equities in a
Speaker 1: certain way to get you exactly what you want in
Speaker 1: an outcome. Rebecca, welcome back to trillions. I know that
Speaker 1: China is on your mind, tell us more so. The
Speaker 1: reason why China is on my mind is I expect
Speaker 1: China to rebound in. To put it into perspective for everyone,
Speaker 1: China has been in lockdown for almost three years now,
Speaker 1: and so what this means is people have not been
Speaker 1: able to leave their house. If they got COVID, they
Speaker 1: would be sent to a mass quarantine center. So think
Speaker 1: of squid game, big concentration camp with people, and people
Speaker 1: have not been able to move freely between the cities,
Speaker 1: and so at one point all the cities were locked
Speaker 1: down where people couldn't even leave their house for an
Speaker 1: extended period and the government was sending food to all
Speaker 1: of the homes. And so all of a sudden, after
Speaker 1: three years of being locked down, people are now reopening
Speaker 1: and allowed to move again. So this is going to
Speaker 1: be a huge impact on the economy. As people begin
Speaker 1: to shop more, leave their house, they will be traveling
Speaker 1: amongst the cities, and so this will have huge impact
Speaker 1: on the economy. To put into perspective, China is the
Speaker 1: second largest assets under management for ETS in Asia Pacific.
Speaker 1: They own roughly of the market, and so as China
Speaker 1: reopens next year, we're going to see a huge impact
Speaker 1: not only on the economy but also on E T
Speaker 1: S and so tech outlook is looking positive, Ali Baba
Speaker 1: ton Cent. You know, we expect the consumer sectors and
Speaker 1: the consumer discretion to be one of the areas that
Speaker 1: are going to grow significantly. If there were a ticker
Speaker 1: that I wanted to watch, what's the one to watch?
Speaker 1: So tickers in China are random numbers that Eric always
Speaker 1: makes fun of. Yeah, look, listen, I have the pounds
Speaker 1: on this. As you go from the US to China,
Speaker 1: like across Europe, it goes from unbridled capitalism to pure communism.
Speaker 1: It goes from like dude and like hack and move right,
Speaker 1: and then in Europe they're like there's a couple words,
Speaker 1: but a lot of times look like license plates. It's
Speaker 1: like l G nine. And then you get to China
Speaker 1: the tickers like five one, five, three four. Then the
Speaker 1: next stickers five one, yeah, and it's like, oh my god, like,
Speaker 1: how do you even know what's going on with the
Speaker 1: tickers there? It's I don't even know what's happening. I
Speaker 1: look at these tickers and it's so confusing. It defeats
Speaker 1: the purpose of a ticker. Well, we just had a
Speaker 1: new one launched here in Europe with ticker f you
Speaker 1: w fifty, So we're not we're not too bad, but
Speaker 1: I guarantee that was by accident plate that went bad.
Speaker 1: So in Hong Kong, you can make a charitable donation
Speaker 1: to the Hong Kong Exchange and then you can select
Speaker 1: the random numbers and so instead of having you know,
Speaker 1: you have like I said, you can tickers. Yeah, So,
Speaker 1: for instance, in Hong Kong, a lucky numbers eight. So
Speaker 1: if you want the number eight as part of your ticker,
Speaker 1: you can make a charitable donation of one million Hong
Speaker 1: Kong dollars and you'll be able to select your tickers
Speaker 1: from a list. But so for instance, for instance, in Asia,
Speaker 1: people don't like the number four, and so if your
Speaker 1: ticker has the number four in it, no one's going
Speaker 1: to buy it because it's unlucky. So we did make
Speaker 1: sure you get the right numbers communism versus thanctually. Okay, James,
Speaker 1: you're another one for us. Yeah. Um, we did do
Speaker 1: just an entire episode and essentially this, But I'm gonna
Speaker 1: have a big spot bitcoin etf um, Eric and I
Speaker 1: are on the record last year calling for likely Q
Speaker 1: three Q four that we get a spot bitcoin E
Speaker 1: tf um didn't happen. Well, no, no coming, so we
Speaker 1: we we aren't wrong yet, but we could. This could
Speaker 1: be on the things that we got wrong list. And
Speaker 1: my my call is that unless we get some sort
Speaker 1: of legislation from Congress, there's some giving the SEC more
Speaker 1: regulatory power, or the SEC just starts taking regulatory power
Speaker 1: that they might not have. Right now, we're not going
Speaker 1: to see a spot bitcoin EDF. So last year coming
Speaker 1: to my side, yeah, I think it's what this is. Well,
Speaker 1: there's a there was a lot of talk in Congress.
Speaker 1: There was multiple bills for stable coins, for different ways
Speaker 1: to do regulate crypto, and we just everything is kind
Speaker 1: of the talking is kind of slowed. There were also
Speaker 1: a few different areas that honest actually f t X
Speaker 1: was doing some things that could have helped make more
Speaker 1: regulated spot markets. Um so unless theoretically, if an exchange
Speaker 1: voluntarily comes under and registers as an exchange with SEC,
Speaker 1: maybe then we could get one. But I think we're
Speaker 1: gonna need an Act of Congress literally before we get
Speaker 1: a spot bitcoin et F. And now just to pivot
Speaker 1: to that because on in our database we consider cryptocurrency
Speaker 1: and alternative, even though you could argue it's too correlated
Speaker 1: for that, but anyway, it's an alternative alternatives in general.
Speaker 1: Though obviously had this big year last year DBMF broke out.
Speaker 1: It was like sort of ARC, not as big, but
Speaker 1: an indie star that broke out billion dollars. I know
Speaker 1: you have your bullish on alts. I am too. I
Speaker 1: don't know, they'll be like as big as I don't know.
Speaker 1: I'm bullish relative to the sercise. Now they have five billion,
Speaker 1: I can easily see them getting billion. I don't know
Speaker 1: about three billion. What do you think Let's talk about
Speaker 1: the alt side and why would that? Why do you
Speaker 1: think alts will grow? Yeah, so I'm aent with you.
Speaker 1: The problem with alts is like, right now, the market
Speaker 1: has already tanked a decent amount. Right, So the benefit
Speaker 1: of altars you have a diversified portfolio. So if you
Speaker 1: were invested in them and then the market went down,
Speaker 1: you had an alt that was actually uncorrelated to fixed
Speaker 1: income or equas, like as we talked about DBMF, which
Speaker 1: is now basically a billion dollar fund because it did
Speaker 1: exactly that. UM. So these altar are the whole point
Speaker 1: of them is the verse fire your portfolio, maybe reduce
Speaker 1: volatility and give you similar returns or higher risk adjusted
Speaker 1: performance like a sharp ratio type type of situation. But
Speaker 1: for the most part, investors still aren't biting as much
Speaker 1: as like we expect that. I feel like every year
Speaker 1: we're like, Okay, this could be the year for alternatives
Speaker 1: UM and it just hasn't been Now, granted, there was
Speaker 1: a very good year last year for alternatives UM so
Speaker 1: hopefully maybe advisors are taking more note. The other thing
Speaker 1: is the alternatives they were often very highly priced and
Speaker 1: didn't actually do what they said they were going to do.
Speaker 1: Where now we've seen some of these managed futures et F,
Speaker 1: some of these other alternative products that are actually doing
Speaker 1: what they said they're gonna do, and they're not charging
Speaker 1: a hundred basis points or whatever it may be. And
Speaker 1: even if they are charging that, some of them are
Speaker 1: doing what they said they're gonna do, giving you good
Speaker 1: sharp sharp ratio performance. And you're getting more people from
Speaker 1: the actual hedge fund world coming in and doing their
Speaker 1: thing in the E t F rapp or not an
Speaker 1: E t F company doing a half alt kind of thing. Yeah, exactly. Yeah,
Speaker 1: I still think that's gonna be a tough story to sell.
Speaker 1: I mean, DBMF, they they've they've filed UM or I
Speaker 1: think about the launch a mutual fund here based on
Speaker 1: the same strategy here in europs are based on the
Speaker 1: same strategy. But it's gonna be a tough story. I mean,
Speaker 1: I remember when else on the product side. UM two,
Speaker 1: you're you're either selling um um product in one or
Speaker 1: two sent since the cash woman's attention, their imagination vers
Speaker 1: just having to spend you know, a good ten to
Speaker 1: fifteen minutes. I mean, just from a time resource perspective,
Speaker 1: as well as the the salesperson's time, it's it's it's
Speaker 1: gonna be a hard sell. That said, the sixty and
Speaker 1: the forty went down this year. Everybody thought the forty
Speaker 1: was supposed to offset the sixty. If that continues, if
Speaker 1: the sixty and the forty continue to be correlated, I
Speaker 1: think all value goes up because then it's at least
Speaker 1: something that would offset the sixty and the forty. That
Speaker 1: I think is why I would slightly disagree with what
Speaker 1: you're saying. But that said, I still all this will
Speaker 1: be very small relative to big beta and and in
Speaker 1: our cat in the way we look at things in
Speaker 1: our systems. Some of stuff Henry was talking about, like
Speaker 1: cover called income ets. A lot of people would consider
Speaker 1: those also to be like alternatives because they tend to
Speaker 1: smooth out the returns. You lose some of the upside,
Speaker 1: but you also limit your downside when you do stuff
Speaker 1: like that. So if you include those into the alternatives,
Speaker 1: the space is much bigger. But the true hedge fund
Speaker 1: type strategies, Um, there's only a handful that are of
Speaker 1: of any significant size. And I'm not sure I'm gonna
Speaker 1: we need to see more people come into space. Maybe
Speaker 1: fees get lower. Then advisors who really are looking for
Speaker 1: some alternative to just the sixty, maybe they'll come in.
Speaker 1: But I'm with you, I don't think we get to
Speaker 1: a couple hundred billion in assets. I don't think that's
Speaker 1: going to happen in this space. About two years ago,
Speaker 1: I said, we need a rock star like Cliff Fastness
Speaker 1: or a Vanguard. Vanguard does have a market neutral mutual
Speaker 1: fund that charges like twenty basis points. Needs to get
Speaker 1: rock star or cheap like. It needs to be Cathy
Speaker 1: Wood or vanguarded that category. And it's yet to really
Speaker 1: have that. Andrew Beers turning into a little bit of
Speaker 1: a rock star, but he came from the indie world.
Speaker 1: But a Cliff Fastness or a Vanger coming in would
Speaker 1: definitely jump start flows. I think anything else, Yeah, just
Speaker 1: one last thing that I just keep thinking about and
Speaker 1: comes up and and I can't rid of it. Is
Speaker 1: this the cultural wars have like came into the E
Speaker 1: T f LD like we used to just do our
Speaker 1: E t F thing, and I think politics will be
Speaker 1: over here. But after E s G came out and
Speaker 1: then the the E s G reaction and now you've
Speaker 1: got you know, strive and anti E s G and um,
Speaker 1: it's really brought the political realm into the E t
Speaker 1: F realm. And then the voting right Florida just said
Speaker 1: they're not going to invest in black Rock because they
Speaker 1: talk E s G too much. And that's become an
Speaker 1: interesting part of our job now is trying to, I
Speaker 1: don't know, walk around this without taking making political stances
Speaker 1: and trying to treat both sides fairly. But I don't know.
Speaker 1: It's a little unfortunate, but it is here to stay.
Speaker 1: I don't see this going away. I think everything has
Speaker 1: become political politicized, including E t F somehow. I mean,
Speaker 1: aside from the political thing, I think anything that could
Speaker 1: be E t F I will try to be E
Speaker 1: t F. I s whether it's I think it's just
Speaker 1: they've made it so easy, so I think things might
Speaker 1: get a little crazy, not just outside the political But
Speaker 1: that is a good point that the more the core
Speaker 1: of the portfolio gets boring and the more passive was Ironically,
Speaker 1: the crazier E t F launches are going to get
Speaker 1: because they're going to compete for that of your portfolio
Speaker 1: where you're looking for fun stuff, vaultile stuff, narratives just
Speaker 1: foam cure your fomo a little bit. So ironically passives
Speaker 1: rise had less to crazier E t F launches. Yeah,
Speaker 1: I mean Will Hershey over Aroundhill is a good example
Speaker 1: of this. He's launching a suite of products that are
Speaker 1: basically taking advantage of the same way that we have
Speaker 1: single stock ETFs, except he's doing like very small, like
Speaker 1: concentrated like ten stock or less portfolios on certain themes.
Speaker 1: So again making that way more concentrated active side of
Speaker 1: your portfolio. And I'm with them both. I think that's
Speaker 1: exactly what's gonna happen. Yeah, we're bullish. Hot sauce. Hot
Speaker 1: sauce is here to stay. It might get hotter hot
Speaker 1: the hot sauce will get hotter. James, Henry, Rebecca Eric
Speaker 1: thanks for joining us on Trillions. Thanks for having me.
Speaker 1: It's great to be on the show. Thanks for having me.
Speaker 1: Look forward to seeing everyone in Thanks for listening to Trillions.
Speaker 1: Until next time you can find us on the Bloomberg Terminal,
Speaker 1: Bloomberg dot com, Apple podcasts, Spotify, and wherever else you
Speaker 1: like to listen. We'd love to hear from you. We're
Speaker 1: on Twitter, I'm at Joel Webber Show. He's at Eric Falcuna's.
Speaker 1: This episode of Trillions was produced by Magnus DRIs Bye