1 00:00:00,040 --> 00:00:02,440 Speaker 1: Kathy Web of course, founder, CEO and CIO of ARC 2 00:00:02,520 --> 00:00:06,000 Speaker 1: invest Kathy, Merry Christmas, Happy holidays. So great to have 3 00:00:06,120 --> 00:00:09,840 Speaker 1: you here. Let's start there with the news because we 4 00:00:09,880 --> 00:00:11,680 Speaker 1: do have this story on the Bloomberg Tell tell us 5 00:00:11,720 --> 00:00:14,120 Speaker 1: little bit about this overhaul and your thinking when it 6 00:00:14,200 --> 00:00:18,560 Speaker 1: comes to how you are thinking about the investment strategy 7 00:00:18,560 --> 00:00:20,759 Speaker 1: for you guys, specifically when it comes to crypto. 8 00:00:22,360 --> 00:00:26,320 Speaker 2: Sure, and Merry Christmas. Very happy to be here again, Carol, 9 00:00:26,480 --> 00:00:33,840 Speaker 2: Katie and Massive. So we're as optimistic about bitcoin as 10 00:00:33,960 --> 00:00:37,839 Speaker 2: we ever have been, but there were there are a 11 00:00:37,920 --> 00:00:44,240 Speaker 2: few regulatory and tax uncertainties, and we had been waiting 12 00:00:44,440 --> 00:00:48,920 Speaker 2: for the discount between GBTC. 13 00:00:48,479 --> 00:00:51,479 Speaker 3: And NAV to narrow. 14 00:00:51,600 --> 00:00:54,000 Speaker 2: It was as high as fifty percent at one point 15 00:00:54,080 --> 00:00:56,800 Speaker 2: last year when there was great uncertainty around all of 16 00:00:56,840 --> 00:01:01,000 Speaker 2: the turmoil in crypto generally, and now it's a single 17 00:01:01,120 --> 00:01:06,120 Speaker 2: digit and there are now other products out there that 18 00:01:06,680 --> 00:01:10,040 Speaker 2: we can use to gain exposure to bitcoin in this moment, 19 00:01:10,240 --> 00:01:13,160 Speaker 2: and it's just a moment of uncertainty between now, we 20 00:01:13,240 --> 00:01:18,200 Speaker 2: think and January January eighth to tenth, somewhere in that 21 00:01:18,319 --> 00:01:22,000 Speaker 2: range perhaps, but we will out of an abundance of 22 00:01:22,040 --> 00:01:23,760 Speaker 2: caution didn't want to take any risk. 23 00:01:24,640 --> 00:01:26,720 Speaker 4: And I mean, let's get a little bit specific here, 24 00:01:26,720 --> 00:01:30,120 Speaker 4: because we're talking about the ARC Next Generation Internet ETF. 25 00:01:30,160 --> 00:01:32,840 Speaker 4: The ticker there is ARC W and I think what 26 00:01:32,959 --> 00:01:36,000 Speaker 4: caught a lot of people's attentions is that you completely 27 00:01:36,080 --> 00:01:39,639 Speaker 4: sold down your remaining stake of the Grayscale Bitcoin Trust. 28 00:01:39,760 --> 00:01:42,520 Speaker 4: Instead on the same day you bought into the pro 29 00:01:42,600 --> 00:01:47,240 Speaker 4: Shares Bitcoin Strategy ETF. Of course that tracks bitcoin futures, 30 00:01:47,280 --> 00:01:49,920 Speaker 4: it doesn't actually hold the physical bitcoin. 31 00:01:49,960 --> 00:01:52,400 Speaker 3: Can you explain that shuffle? What was the thinking there? 32 00:01:53,720 --> 00:01:57,960 Speaker 2: Sure a couple of things. First of all, biddo with 33 00:01:58,040 --> 00:02:02,800 Speaker 2: pro Shares is already a proved there's no regulatory uncertainty 34 00:02:02,960 --> 00:02:06,440 Speaker 2: having to do with it, so we chose to maintain 35 00:02:06,480 --> 00:02:11,959 Speaker 2: our exposure through biddo for the time being. And as 36 00:02:11,960 --> 00:02:16,760 Speaker 2: I mentioned before, there are some tax and regulatory uncertainties 37 00:02:16,919 --> 00:02:20,960 Speaker 2: still as part of this process. We don't know exactly 38 00:02:21,040 --> 00:02:25,760 Speaker 2: who's going to be approved and whether they've met all 39 00:02:25,880 --> 00:02:29,960 Speaker 2: the criteria that the SEC has put before us. 40 00:02:30,240 --> 00:02:33,240 Speaker 3: We know we have, but we. 41 00:02:33,160 --> 00:02:37,960 Speaker 2: Don't know if others, including GBTC have We just don't know. 42 00:02:39,480 --> 00:02:41,560 Speaker 3: So again, out of an abundance of. 43 00:02:41,560 --> 00:02:46,000 Speaker 2: Caution and gbt's discount again, it was as much as 44 00:02:46,080 --> 00:02:47,799 Speaker 2: fifty percent relative. 45 00:02:47,400 --> 00:02:50,160 Speaker 3: To NAV So not only have we enjoyed this year. 46 00:02:50,480 --> 00:02:54,680 Speaker 2: The run in bitcoin itself, but we've had the nice 47 00:02:54,800 --> 00:02:58,920 Speaker 2: closing of that discount, so it's been double good news 48 00:02:58,960 --> 00:02:59,320 Speaker 2: for us. 49 00:02:59,560 --> 00:03:02,320 Speaker 1: You've talked about January tenth, Kathy, I think in another report, 50 00:03:02,440 --> 00:03:04,720 Speaker 1: is that possible, whether it's you or somebody else in 51 00:03:04,800 --> 00:03:08,600 Speaker 1: terms of the first spot bitcoin ETF actually getting approval. 52 00:03:10,360 --> 00:03:14,200 Speaker 2: Well, we think the probabilities have gone up because the 53 00:03:14,280 --> 00:03:19,600 Speaker 2: SEC has been highly engaged compared to what was happening before. 54 00:03:19,639 --> 00:03:24,440 Speaker 2: Before it was just denying approval, denying approval, and we 55 00:03:24,600 --> 00:03:30,640 Speaker 2: just kept putting our filing in again, you know, try, try, 56 00:03:31,760 --> 00:03:35,320 Speaker 2: ugged and determined, and so here we are. We think 57 00:03:35,360 --> 00:03:38,080 Speaker 2: we're first in line, and that's why there is this 58 00:03:38,440 --> 00:03:42,360 Speaker 2: January tenth deadline. But we like the idea that the 59 00:03:42,440 --> 00:03:45,680 Speaker 2: SEC has been so engaged, and it's not just with us, 60 00:03:45,720 --> 00:03:49,560 Speaker 2: it's others as well. We think a number of a 61 00:03:49,680 --> 00:03:52,080 Speaker 2: number of funds could be approved at the same time, 62 00:03:52,960 --> 00:03:55,760 Speaker 2: and they've been asking not only one set of questions, 63 00:03:55,760 --> 00:03:57,080 Speaker 2: but follow up questions. 64 00:03:57,160 --> 00:03:59,480 Speaker 3: And again that's a very good sign. 65 00:03:59,600 --> 00:04:02,200 Speaker 1: Well speak engage, Oh go ahead, please no no, no. 66 00:04:01,960 --> 00:04:04,720 Speaker 3: None of the last few questions have been very technical 67 00:04:04,960 --> 00:04:08,040 Speaker 3: and so more derriguer. 68 00:04:08,360 --> 00:04:10,800 Speaker 2: And you know, you'd expect them to be asking these 69 00:04:10,880 --> 00:04:14,200 Speaker 2: questions as we head toward an approval. Now it's not 70 00:04:14,240 --> 00:04:17,159 Speaker 2: one hundred percent certain, and so we want to make. 71 00:04:17,040 --> 00:04:17,960 Speaker 3: That clear as well. 72 00:04:18,839 --> 00:04:22,440 Speaker 2: This is the SEC and we never know, you know, 73 00:04:22,600 --> 00:04:24,000 Speaker 2: what might happen along the way. 74 00:04:24,120 --> 00:04:26,520 Speaker 1: Regulators can be tricky, that's for sure. Hey, listen, you 75 00:04:26,560 --> 00:04:29,920 Speaker 1: mentioned engagement. Let's talk about engagement with your funds overall 76 00:04:29,920 --> 00:04:33,160 Speaker 1: and especially the ARC Innovation Fund up seventy two percent 77 00:04:33,279 --> 00:04:37,600 Speaker 1: year to date, easily aptperforming some of the major market benchmarks, 78 00:04:37,600 --> 00:04:40,159 Speaker 1: still down sixty five percent from the high back in 79 00:04:40,240 --> 00:04:43,479 Speaker 1: February of twenty twenty one. For you, though, a lot 80 00:04:43,480 --> 00:04:45,760 Speaker 1: of critics, we bring up your name, we bring up ARC, 81 00:04:45,920 --> 00:04:47,479 Speaker 1: and you have a lot of fans, and you have 82 00:04:47,520 --> 00:04:50,240 Speaker 1: a lot of critics. There's a lot of discussion. Does 83 00:04:50,279 --> 00:04:52,960 Speaker 1: it feel though a little bit like a victory lap 84 00:04:52,960 --> 00:04:53,360 Speaker 1: this year? 85 00:04:55,240 --> 00:04:58,320 Speaker 2: Well, you know, we are very happy that a couple 86 00:04:58,320 --> 00:05:02,960 Speaker 2: of things have happened, that this idea that interest rates 87 00:05:03,000 --> 00:05:08,080 Speaker 2: were going to continue moving higher has been proven incorrect. 88 00:05:08,240 --> 00:05:11,240 Speaker 2: And I think even the FED, while there is that 89 00:05:11,279 --> 00:05:14,760 Speaker 2: small possibility. Even the FED is now starting to talk 90 00:05:14,800 --> 00:05:16,960 Speaker 2: about the other side of the interest rate move and 91 00:05:17,040 --> 00:05:20,440 Speaker 2: so I do believe all we've seen so far is 92 00:05:20,520 --> 00:05:21,880 Speaker 2: a reaction to that. 93 00:05:22,040 --> 00:05:24,680 Speaker 3: Macro phenomenon or judgment call. 94 00:05:25,520 --> 00:05:29,240 Speaker 2: We went through our flagship strategy and all of our 95 00:05:29,279 --> 00:05:32,839 Speaker 2: strategies went through a very difficult time from February twenty 96 00:05:32,880 --> 00:05:34,760 Speaker 2: one through December of twenty. 97 00:05:34,440 --> 00:05:37,760 Speaker 3: Two, as interest rates, first of all. 98 00:05:37,920 --> 00:05:42,480 Speaker 2: Were presumed to move up or forecasts move up, and 99 00:05:42,520 --> 00:05:44,880 Speaker 2: then when they did move up, so it was almost 100 00:05:44,960 --> 00:05:46,159 Speaker 2: like a double discounting. 101 00:05:46,600 --> 00:05:48,400 Speaker 3: And so we've seen the. 102 00:05:48,279 --> 00:05:54,479 Speaker 2: First installment of the correction there to the upside for 103 00:05:54,600 --> 00:05:58,560 Speaker 2: our funds with this notion and as again the forecast 104 00:05:59,120 --> 00:06:02,120 Speaker 2: that interest rates will come down, and you know, we 105 00:06:02,520 --> 00:06:05,960 Speaker 2: would presume that if they do come down for the 106 00:06:06,080 --> 00:06:08,840 Speaker 2: reasons we think they're going to come down, the most 107 00:06:08,839 --> 00:06:13,359 Speaker 2: important one being deflation, then our funds will be in 108 00:06:13,440 --> 00:06:19,400 Speaker 2: good shape because we are very our companies thrive on deflation. 109 00:06:19,640 --> 00:06:23,880 Speaker 2: Technologically enabled innovation is deflationary. 110 00:06:24,000 --> 00:06:25,240 Speaker 5: So Kathy, a very good morning too. 111 00:06:25,279 --> 00:06:28,240 Speaker 6: It's Manus, first time we've met on So we're going 112 00:06:28,279 --> 00:06:29,719 Speaker 6: to move to a deflationary environment. 113 00:06:29,760 --> 00:06:31,320 Speaker 5: We'll come back to the big macrocoll in a moment. 114 00:06:31,400 --> 00:06:32,960 Speaker 6: Just let's square it away before I talk to you 115 00:06:33,000 --> 00:06:36,000 Speaker 6: about the flows in the funds, which is how much 116 00:06:36,160 --> 00:06:39,720 Speaker 6: interest rate cuts do you presume? Are you forecasting? Leave 117 00:06:39,720 --> 00:06:42,159 Speaker 6: the forecast of everybody else's side? Well, what do you 118 00:06:42,200 --> 00:06:43,719 Speaker 6: what do you presume will happen next year? 119 00:06:44,640 --> 00:06:47,840 Speaker 2: Well, we put up a chart in one of our 120 00:06:47,920 --> 00:06:51,120 Speaker 2: in the in the Nose, which is a YouTube video 121 00:06:51,160 --> 00:06:54,520 Speaker 2: that I do every every month Employment Friday. 122 00:06:55,040 --> 00:06:59,920 Speaker 3: And in that chart you will find a race. 123 00:07:00,240 --> 00:07:04,320 Speaker 2: It's the metals to gold ratio, so metals price to 124 00:07:04,400 --> 00:07:09,200 Speaker 2: goal price, and there has been an extremely tight correlation 125 00:07:09,360 --> 00:07:14,760 Speaker 2: between that ratio and long term interest rates. In October 126 00:07:14,960 --> 00:07:19,160 Speaker 2: we published it or early November, and what you will 127 00:07:19,320 --> 00:07:23,520 Speaker 2: see is that there was a very wide gap that 128 00:07:23,600 --> 00:07:24,400 Speaker 2: had developed. 129 00:07:24,760 --> 00:07:28,480 Speaker 3: The metals to gold ratio was near its low for. 130 00:07:28,480 --> 00:07:33,040 Speaker 2: The past twelve fifteen years, and interest rates were at 131 00:07:33,120 --> 00:07:35,480 Speaker 2: their highs five percent. 132 00:07:36,120 --> 00:07:37,160 Speaker 3: The correlation. 133 00:07:37,440 --> 00:07:40,760 Speaker 2: If you just eyeballed that chart, the correlation suggested that 134 00:07:40,880 --> 00:07:44,320 Speaker 2: rate should go to two percent. Now, maybe they won't 135 00:07:44,320 --> 00:07:46,360 Speaker 2: go all the way to two percent, but we think 136 00:07:46,520 --> 00:07:50,160 Speaker 2: that long term interest rates are way above where they're 137 00:07:50,200 --> 00:07:52,680 Speaker 2: going to end because of deflation. 138 00:07:52,880 --> 00:07:54,280 Speaker 6: Okay, well, let's we'll come back to that and see 139 00:07:54,320 --> 00:07:55,760 Speaker 6: whether we get to the two percent douvel. I'm going 140 00:07:55,800 --> 00:07:57,760 Speaker 6: to ask you about the flows into the funds, which 141 00:07:57,840 --> 00:08:00,320 Speaker 6: is obviously you know, as Kinle just said you you've 142 00:08:00,360 --> 00:08:02,000 Speaker 6: got a bit of a victory lap going on at 143 00:08:02,000 --> 00:08:02,440 Speaker 6: the moment. 144 00:08:02,440 --> 00:08:06,520 Speaker 5: But this is the first year of outflows. Have those 145 00:08:06,560 --> 00:08:07,480 Speaker 5: outflows stopped. 146 00:08:07,520 --> 00:08:09,560 Speaker 6: You've had a great performance in the back part of 147 00:08:09,600 --> 00:08:14,080 Speaker 6: this year. Have the outflows stopped and has that bleed stopped? 148 00:08:15,480 --> 00:08:19,400 Speaker 2: Yes, Well, we were very gratified at our asset retention 149 00:08:19,760 --> 00:08:22,840 Speaker 2: in twenty one and twenty two. In fact, we had 150 00:08:22,920 --> 00:08:26,440 Speaker 2: net inflows if you combine both years of more than 151 00:08:26,520 --> 00:08:32,720 Speaker 2: eighteen billion dollars and this year one, what might expect 152 00:08:33,120 --> 00:08:38,360 Speaker 2: that those who averaged down into the very steep declines 153 00:08:38,400 --> 00:08:42,120 Speaker 2: that we were seeing in twenty two especially might take 154 00:08:42,160 --> 00:08:45,720 Speaker 2: some profits. So we have had I know, for our 155 00:08:45,760 --> 00:08:51,560 Speaker 2: flagship strategy, it's roughly five hundred million dollars in outflows, 156 00:08:51,600 --> 00:08:55,080 Speaker 2: maybe for all of our strategies one point eight million, 157 00:08:55,160 --> 00:08:59,000 Speaker 2: so maybe ten percent of the inflows that we enjoyed 158 00:08:59,240 --> 00:09:01,720 Speaker 2: during twenty one one in twenty two. So again we're 159 00:09:01,840 --> 00:09:07,920 Speaker 2: very gratified and grateful to our clients for the support 160 00:09:08,280 --> 00:09:09,600 Speaker 2: that we continue to receive. 161 00:09:10,320 --> 00:09:12,160 Speaker 5: So has the outflow stopped? 162 00:09:13,640 --> 00:09:17,880 Speaker 2: We have had days of on balance very recently, yes, 163 00:09:18,720 --> 00:09:19,040 Speaker 2: And I. 164 00:09:19,000 --> 00:09:22,000 Speaker 3: Think part of this is many people do. 165 00:09:23,600 --> 00:09:26,640 Speaker 2: Tax management towards the end of the year, and so 166 00:09:26,679 --> 00:09:32,880 Speaker 2: some of the outflows might have been associated with clients 167 00:09:32,960 --> 00:09:35,760 Speaker 2: who got in at a high cost base, and we're 168 00:09:35,800 --> 00:09:37,480 Speaker 2: just harvesting some tax losses. 169 00:09:37,520 --> 00:09:38,520 Speaker 3: But I think we're through that. 170 00:09:39,400 --> 00:09:41,559 Speaker 1: Do you find a little surprising, though, Kathy, considering the 171 00:09:41,640 --> 00:09:44,160 Speaker 1: run up or do you I'm curious about the conversations 172 00:09:44,160 --> 00:09:46,360 Speaker 1: you do have with investors considering the year that you're 173 00:09:46,360 --> 00:09:48,400 Speaker 1: having and then to see those flows, it's got to 174 00:09:48,400 --> 00:09:49,160 Speaker 1: be a little disheartening. 175 00:09:49,440 --> 00:09:51,920 Speaker 3: Yeah, Oh no, no, no, no, not at all. 176 00:09:52,280 --> 00:09:58,040 Speaker 2: Actually, we put out a piece for Resolute, our distributor who, 177 00:09:59,000 --> 00:10:04,400 Speaker 2: and we basically showed them, if you rebalance our strategy 178 00:10:04,440 --> 00:10:07,200 Speaker 2: when there have been big moves one way or the other, 179 00:10:07,640 --> 00:10:11,720 Speaker 2: if you rebalance regularly or based on a rule like 180 00:10:12,200 --> 00:10:16,120 Speaker 2: when the funds up fifteen percent relative to everything else, 181 00:10:16,280 --> 00:10:20,800 Speaker 2: takes some profits. And what it showed that study showed 182 00:10:21,080 --> 00:10:25,160 Speaker 2: that if you are disciplined that way, that over any 183 00:10:25,520 --> 00:10:32,400 Speaker 2: rolling five year period, it is highly likely almost one 184 00:10:32,480 --> 00:10:35,080 Speaker 2: hundred percent I'm not quite sure if it's quite that high, 185 00:10:35,080 --> 00:10:40,080 Speaker 2: but that you will beat the market, meaning as measured 186 00:10:40,120 --> 00:10:42,960 Speaker 2: by the Nasdaq or the SMP over a rolling five 187 00:10:43,040 --> 00:10:46,719 Speaker 2: year period. And so a lot of our funds are 188 00:10:46,760 --> 00:10:51,720 Speaker 2: with advisors who are very sophisticated and responded somewhat perhaps 189 00:10:51,720 --> 00:10:56,240 Speaker 2: in this tax management part of the year to that message. 190 00:10:56,360 --> 00:10:58,040 Speaker 1: I feel like we can't talk. We have to talk 191 00:10:58,080 --> 00:11:01,280 Speaker 1: about Tesla any laon MUSCA and just a conversation on 192 00:11:01,360 --> 00:11:05,319 Speaker 1: Twitter X. This has been I think from day one 193 00:11:06,040 --> 00:11:08,199 Speaker 1: right in terms of you starting out that you've had 194 00:11:08,200 --> 00:11:11,000 Speaker 1: this investment in Tesla, and I remember when we first 195 00:11:11,040 --> 00:11:13,360 Speaker 1: talked and you were getting started, you talked about him 196 00:11:13,360 --> 00:11:15,960 Speaker 1: being the next Thomas Edison and how his vehicles would 197 00:11:15,960 --> 00:11:20,600 Speaker 1: turn the US economy upside down. Having said that, there's 198 00:11:20,600 --> 00:11:23,199 Speaker 1: an evolution and the eed world has changed, how are 199 00:11:23,200 --> 00:11:25,720 Speaker 1: you thinking it's still a top holding? How are you 200 00:11:25,760 --> 00:11:27,800 Speaker 1: thinking about the Tesla story right now? 201 00:11:28,880 --> 00:11:29,880 Speaker 3: Well, first of. 202 00:11:29,880 --> 00:11:33,400 Speaker 2: All, Carol, thank you very much for letting me interview 203 00:11:33,720 --> 00:11:34,280 Speaker 2: that time. 204 00:11:34,360 --> 00:11:36,120 Speaker 3: That was nearly ten years ago. 205 00:11:36,440 --> 00:11:40,400 Speaker 2: Arkass is about to celebrate this tenth year anniversary and 206 00:11:40,440 --> 00:11:44,720 Speaker 2: you gave us that opportunity, So thank you. The world 207 00:11:44,800 --> 00:11:51,000 Speaker 2: is evolving. Actually, I think even more closely to what 208 00:11:51,040 --> 00:11:55,880 Speaker 2: we expected, because we expected a lot of traditional auto 209 00:11:55,960 --> 00:11:59,280 Speaker 2: manufacturers to see the writing on the wall and rush 210 00:11:59,440 --> 00:12:04,160 Speaker 2: as cool as they could into scaling big time into 211 00:12:04,280 --> 00:12:07,600 Speaker 2: electric vehicles. And what has happened recently, both GM and 212 00:12:07,640 --> 00:12:11,959 Speaker 2: Ford have said we're stepping back. We're not going to 213 00:12:12,040 --> 00:12:17,120 Speaker 2: do this until it's profitable. The problem with that is, 214 00:12:17,160 --> 00:12:20,160 Speaker 2: in order to be profitable, they need to scale. 215 00:12:20,320 --> 00:12:21,440 Speaker 3: That's how this works. 216 00:12:21,520 --> 00:12:25,040 Speaker 2: These are learning curves that they are riding down, and 217 00:12:25,080 --> 00:12:25,520 Speaker 2: those are. 218 00:12:25,440 --> 00:12:26,720 Speaker 3: Expressed in costaclines. 219 00:12:26,800 --> 00:12:30,640 Speaker 2: So the fact that they're pulling back means there's more 220 00:12:30,760 --> 00:12:33,960 Speaker 2: share for Tesla and others who choose to go for 221 00:12:34,040 --> 00:12:35,680 Speaker 2: it and Cave. 222 00:12:35,760 --> 00:12:37,960 Speaker 4: I want to keep the conversation going on elon Musk, 223 00:12:37,960 --> 00:12:40,640 Speaker 4: but I want to bring it to the Arc Venture Fund. 224 00:12:40,679 --> 00:12:44,880 Speaker 4: Of course, it's not an ETF. You invest in private companies, etc. 225 00:12:45,240 --> 00:12:46,920 Speaker 4: In there, and you take a look at the portfolio. 226 00:12:47,040 --> 00:12:50,120 Speaker 4: You have SpaceX in there, and you also have X 227 00:12:50,160 --> 00:12:53,520 Speaker 4: formerly known as Twitter. And in July you had told 228 00:12:53,520 --> 00:12:55,959 Speaker 4: the Wall Street Journal that you had written down your 229 00:12:56,000 --> 00:12:59,600 Speaker 4: Twitter steak by forty seven percent. Pill us in on 230 00:12:59,640 --> 00:13:01,800 Speaker 4: the path couple of months have you written it down 231 00:13:01,920 --> 00:13:03,680 Speaker 4: further or how has that changed? 232 00:13:05,000 --> 00:13:09,520 Speaker 2: No, I think it's still there. You know, we have 233 00:13:09,640 --> 00:13:12,440 Speaker 2: to be very careful. This is an interval fund, it 234 00:13:12,559 --> 00:13:15,040 Speaker 2: is a forty act fund, and we have to mark 235 00:13:15,080 --> 00:13:19,000 Speaker 2: to market every day. The good news is our clients 236 00:13:19,040 --> 00:13:22,640 Speaker 2: can get in and have access to these amazing companies 237 00:13:22,760 --> 00:13:24,560 Speaker 2: for just five hundred dollars and. 238 00:13:24,480 --> 00:13:28,080 Speaker 3: They get quarterly liquidity. So that's the good news. The 239 00:13:28,200 --> 00:13:31,440 Speaker 3: markdowns are simply you know, if we see in the. 240 00:13:31,360 --> 00:13:35,480 Speaker 2: Secondary market employee stock trading at a steep discount, we 241 00:13:35,600 --> 00:13:38,559 Speaker 2: have to take that into account. If we see others 242 00:13:38,720 --> 00:13:43,240 Speaker 2: in the more traditional asset management work worldlike Fidelity and 243 00:13:43,320 --> 00:13:47,679 Speaker 2: others marking their holdings down, we need to take that 244 00:13:47,760 --> 00:13:51,120 Speaker 2: into consideration during our daily mark to market. So it's 245 00:13:51,160 --> 00:13:54,000 Speaker 2: an abundance of caution. We have a five year investment 246 00:13:54,040 --> 00:13:58,200 Speaker 2: time horizon. Do we think that's where X belongs in 247 00:13:58,280 --> 00:13:59,559 Speaker 2: terms of evaluations? 248 00:14:00,080 --> 00:14:01,960 Speaker 3: Absolutely not, absolutely not. 249 00:14:02,080 --> 00:14:07,120 Speaker 2: A roughly twenty ish billion dollar valuation for what we 250 00:14:07,240 --> 00:14:12,680 Speaker 2: believe truly will become the everything app think we chat pay. 251 00:14:13,640 --> 00:14:18,000 Speaker 2: Elon started his entrepreneurial career in the payments industry and 252 00:14:18,040 --> 00:14:20,080 Speaker 2: he's been thinking about this for a long time. 253 00:14:20,440 --> 00:14:21,960 Speaker 3: He now has money. 254 00:14:21,680 --> 00:14:25,440 Speaker 2: Transmitter licenses in more than half of all of the states, 255 00:14:26,360 --> 00:14:29,800 Speaker 2: which we learned on Twitter spaces or on x spaces, 256 00:14:29,840 --> 00:14:31,600 Speaker 2: I should say, the other. 257 00:14:31,480 --> 00:14:34,280 Speaker 3: Day when we had our interview with him. So that's exciting. 258 00:14:34,360 --> 00:14:36,760 Speaker 3: He's going for it, he's going for it. I will 259 00:14:36,800 --> 00:14:38,080 Speaker 3: see if that one lands. 260 00:14:38,080 --> 00:14:40,200 Speaker 4: But let's talk a little bit more about the private markets, 261 00:14:40,200 --> 00:14:43,160 Speaker 4: because obviously the private credit market has gotten a lot 262 00:14:43,160 --> 00:14:46,160 Speaker 4: of attention right now. You're looking at the private markets 263 00:14:46,160 --> 00:14:48,280 Speaker 4: through this interval fund that you have when you think 264 00:14:48,280 --> 00:14:52,080 Speaker 4: about the opportunities there on that five year horizon that 265 00:14:52,120 --> 00:14:54,760 Speaker 4: you have, do you see more so in the public 266 00:14:54,800 --> 00:14:56,560 Speaker 4: markets or in the private markets right now? 267 00:14:58,160 --> 00:15:02,240 Speaker 2: Well, now that we've had is very nice run this year, 268 00:15:03,320 --> 00:15:05,800 Speaker 2: we think the answer to that question is in the 269 00:15:05,880 --> 00:15:06,960 Speaker 2: private markets. 270 00:15:07,000 --> 00:15:08,480 Speaker 3: They're close. They're close. 271 00:15:08,840 --> 00:15:11,880 Speaker 2: What's fascinating to us is that the public markets have 272 00:15:12,000 --> 00:15:14,680 Speaker 2: been leading the private markets for the past three years. 273 00:15:15,280 --> 00:15:23,600 Speaker 2: As our funds were falling in twenty one, private evaluations 274 00:15:23,640 --> 00:15:26,680 Speaker 2: were going to all time highs along with the Nasdaq. 275 00:15:26,760 --> 00:15:28,880 Speaker 2: They were taking their cues I suppose from the Nasdaq. 276 00:15:29,200 --> 00:15:34,000 Speaker 2: But real innovation, if you looked at our portfolios was 277 00:15:34,240 --> 00:15:38,600 Speaker 2: starting to revalue to the downside, and even more so 278 00:15:38,680 --> 00:15:42,240 Speaker 2: in twenty twenty two. We are still seeing major down 279 00:15:42,320 --> 00:15:46,160 Speaker 2: rounds taking place in the private markets. And I'm always 280 00:15:46,240 --> 00:15:49,800 Speaker 2: surprised at this sort of thing because you would think 281 00:15:49,840 --> 00:15:53,040 Speaker 2: that the private markets lead the public markets. That has 282 00:15:53,120 --> 00:15:55,000 Speaker 2: not been the case in the last few years. 283 00:15:55,240 --> 00:15:57,040 Speaker 1: Hey, Kathy, I've got to be honest with you. I 284 00:15:57,040 --> 00:16:01,560 Speaker 1: think whenever we think about Elon Musk but also erratic, 285 00:16:01,880 --> 00:16:05,160 Speaker 1: and I'm curious how you think about Elon the individuals 286 00:16:05,240 --> 00:16:08,040 Speaker 1: versus Elon the companies he's creating the things he's doing, 287 00:16:08,040 --> 00:16:11,000 Speaker 1: because I think there is time any other CEO of 288 00:16:11,040 --> 00:16:14,640 Speaker 1: a major publicly held company would I think it's safe 289 00:16:14,640 --> 00:16:15,920 Speaker 1: to say not be able to get away with a 290 00:16:15,960 --> 00:16:18,720 Speaker 1: lot of what he has done. So help us educate 291 00:16:18,840 --> 00:16:20,560 Speaker 1: us how you make sense of it of someone you 292 00:16:20,600 --> 00:16:23,200 Speaker 1: have followed, talked with for many years. 293 00:16:24,800 --> 00:16:28,200 Speaker 2: Well, first of all, very often we just look at 294 00:16:28,200 --> 00:16:31,360 Speaker 2: what he does, not exactly what he's saying, which can 295 00:16:31,400 --> 00:16:34,560 Speaker 2: often be a distraction, or it can be an advertisement 296 00:16:34,600 --> 00:16:39,440 Speaker 2: for his cars or for X or for SpaceX and 297 00:16:39,520 --> 00:16:44,720 Speaker 2: so forth. But we have a scoring system as we 298 00:16:44,840 --> 00:16:49,800 Speaker 2: are evaluating companies and their founders and their management teams. 299 00:16:50,880 --> 00:16:52,400 Speaker 3: And there are. 300 00:16:52,240 --> 00:16:56,680 Speaker 2: Six metrics and one of them is Mote and barriers 301 00:16:56,720 --> 00:17:01,840 Speaker 2: to entry, And I think Elon is a maestro of 302 00:17:02,360 --> 00:17:06,320 Speaker 2: raising barriers to entry with innovation, which that is so 303 00:17:06,560 --> 00:17:11,359 Speaker 2: much faster than anyone else. Why because he's so first 304 00:17:11,440 --> 00:17:17,840 Speaker 2: principles physics driven in his analysis of how to approach 305 00:17:18,320 --> 00:17:20,200 Speaker 2: a new idea, a big idea. 306 00:17:20,240 --> 00:17:21,520 Speaker 5: So tell me this then, Kathy. 307 00:17:21,560 --> 00:17:23,600 Speaker 6: I mean, if you look at the cohort of the 308 00:17:23,640 --> 00:17:26,840 Speaker 6: CEOs that you back Brian Armstrong, does he hit that bar? 309 00:17:27,800 --> 00:17:31,200 Speaker 5: Is he above Elon? Or is he at the money? 310 00:17:31,240 --> 00:17:34,600 Speaker 6: You've got Elon, You've got Brian, You've got Tony Wood 311 00:17:34,600 --> 00:17:35,040 Speaker 6: at Rocco. 312 00:17:35,800 --> 00:17:38,360 Speaker 5: Does anybody come close to Elon? 313 00:17:38,760 --> 00:17:41,639 Speaker 6: Or is Brian Armstrong maybe even at the money with 314 00:17:42,400 --> 00:17:43,200 Speaker 6: Elon or above? 315 00:17:44,560 --> 00:17:49,000 Speaker 2: Well, we don't actually look at the world that way, 316 00:17:49,160 --> 00:17:50,560 Speaker 2: one relative to the other. 317 00:17:50,600 --> 00:17:52,480 Speaker 3: In terms of management teams, we. 318 00:17:52,480 --> 00:17:56,359 Speaker 2: Do look from our scoring system at the scores which 319 00:17:56,400 --> 00:18:02,280 Speaker 2: include MOTE, management, people and culture, execution, Hutian valuation that 320 00:18:02,400 --> 00:18:07,560 Speaker 2: might surprise people and product and service leadership and thesis risks. 321 00:18:07,600 --> 00:18:11,800 Speaker 2: Those are the six scores, and both well, all three 322 00:18:11,840 --> 00:18:15,760 Speaker 2: of them score very highly. Which one scores the highest? 323 00:18:15,920 --> 00:18:18,400 Speaker 2: They are actually very close to one another, to be. 324 00:18:18,359 --> 00:18:21,000 Speaker 5: Honest, they're very close to one another. 325 00:18:21,119 --> 00:18:25,480 Speaker 6: So I mean, obviously Coinbase is one of your key holdings. 326 00:18:25,520 --> 00:18:29,000 Speaker 6: We've talked a little bit about that. The other feature 327 00:18:29,000 --> 00:18:33,000 Speaker 6: that we want to talk about is AI. I'm curious 328 00:18:33,040 --> 00:18:36,600 Speaker 6: to know in open ai the valuations have ranged between 329 00:18:36,600 --> 00:18:39,280 Speaker 6: eighty billion to one hundred billion. Will you take a 330 00:18:39,320 --> 00:18:42,720 Speaker 6: position in open ai? Is that going to be part 331 00:18:43,320 --> 00:18:46,040 Speaker 6: of your holdings as you explore the next development of 332 00:18:46,080 --> 00:18:47,440 Speaker 6: AI and your holdings. 333 00:18:48,359 --> 00:18:57,560 Speaker 2: Well, in our private portfolios, we are already exposed to Andthropic, 334 00:18:57,680 --> 00:19:02,320 Speaker 2: which has been a major beneficiary of the drama around 335 00:19:02,359 --> 00:19:05,720 Speaker 2: open ai that we all witnessed a few months ago. 336 00:19:06,920 --> 00:19:10,520 Speaker 2: But if you look at GPT four, which is the 337 00:19:10,680 --> 00:19:15,200 Speaker 2: latest large language model that open ai has published, it 338 00:19:15,240 --> 00:19:20,520 Speaker 2: is way above others in terms of performance. So there 339 00:19:20,560 --> 00:19:24,320 Speaker 2: you have it, the pros and the cons. So we 340 00:19:24,480 --> 00:19:28,200 Speaker 2: can't tell you what we're going to do in that portfolio, 341 00:19:28,240 --> 00:19:33,000 Speaker 2: but we are so impressed at how open ai has 342 00:19:33,080 --> 00:19:36,720 Speaker 2: led the industry. We're also impressed, however, at the open 343 00:19:36,800 --> 00:19:40,200 Speaker 2: source models, and we'd like to encourage more. 344 00:19:40,040 --> 00:19:40,960 Speaker 3: Of that movement. 345 00:19:41,359 --> 00:19:45,640 Speaker 2: We know that Meta Platforms has with Lamaitu and it's 346 00:19:45,680 --> 00:19:50,719 Speaker 2: working on others, is moving very quickly and making great strides. 347 00:19:50,800 --> 00:19:56,840 Speaker 2: So for much lower cost open sources, free companies can 348 00:19:56,920 --> 00:19:58,480 Speaker 2: get close. 349 00:20:00,119 --> 00:20:01,719 Speaker 3: That at GPT four but close. 350 00:20:01,800 --> 00:20:04,320 Speaker 2: So we want to see the open source movement in 351 00:20:04,440 --> 00:20:06,280 Speaker 2: the venture fund we also own. 352 00:20:06,640 --> 00:20:09,960 Speaker 1: Kathy, we've got a oh sorry, no, no, no, we 353 00:20:10,440 --> 00:20:12,000 Speaker 1: never have enough time with you. Can I ask you 354 00:20:12,080 --> 00:20:15,439 Speaker 1: a really quick question five seconds? Any ETFs coming our 355 00:20:15,480 --> 00:20:17,000 Speaker 1: way from you guys next year? 356 00:20:18,400 --> 00:20:21,720 Speaker 3: Well, real quickly. As you may know, we bought a 357 00:20:21,760 --> 00:20:26,359 Speaker 3: company in London. Yeah, they have some very interesting funds. 358 00:20:26,400 --> 00:20:27,440 Speaker 3: All right, Gonna leave it there. 359 00:20:27,520 --> 00:20:30,240 Speaker 1: Like we said, we always leave our audience wanting more 360 00:20:30,280 --> 00:20:32,119 Speaker 1: from you, but we so appreciate all the time you 361 00:20:32,160 --> 00:20:35,000 Speaker 1: gave us. Happy New year of course, Kathy would founder 362 00:20:35,119 --> 00:20:37,639 Speaker 1: CEO CIO of ARC Investor. You missed any of it, 363 00:20:37,800 --> 00:20:39,719 Speaker 1: check it out at Bloomberg dot com.