WEBVTT - ETF Lawyer-Regulator-Industry Veteran Dalia Blass 0:00:05.800 --> 0:00:11.800 Walkner Chollion's I'm Joe Webbert and I'm Eric Belchernas. Eric, 0:00:11.800 --> 0:00:15.040 you do some conferences. You recently went to the conference 0:00:15.080 --> 0:00:18.959 on Emerging Trends in Asset Management, and you seem to 0:00:18.960 --> 0:00:21.079 think you walked out of there as a really big deal. 0:00:23.400 --> 0:00:25.680 I walked out of there a lot smarter. A lot 0:00:25.680 --> 0:00:27.240 of times when I do a conference, I want a panel. 0:00:27.240 --> 0:00:28.760 I don't go for the whole thing. Yeah, but this 0:00:28.800 --> 0:00:30.600 one seems special. I got an email from the current 0:00:30.600 --> 0:00:33.639 director of Investment Management. It's their first conference. They had 0:00:33.680 --> 0:00:36.600 seen me do a book presentation about a year ago, 0:00:37.000 --> 0:00:38.720 and they were like, this guy'd be good to give 0:00:38.800 --> 0:00:42.640 some sort of, you know, alternative take on the ETF market. 0:00:42.920 --> 0:00:46.080 There were several people there, a lot of lawyers and 0:00:46.120 --> 0:00:47.200 a lot of people from the SEC. 0:00:47.200 --> 0:00:49.680 Several people like there are like five people there, and 0:00:49.800 --> 0:00:51.640 one of them happened to be Gary Ginsler, the head 0:00:51.680 --> 0:00:52.240 of the SEC. 0:00:52.479 --> 0:00:54.120 Yeah, he spoke. So that's why I went because I 0:00:54.160 --> 0:00:55.720 wanted to see him speaking some of other people. So 0:00:55.760 --> 0:00:58.000 I went and just stayed the whole time, and I 0:00:58.080 --> 0:01:00.200 was at the end, but I soaked up a lot 0:01:00.760 --> 0:01:03.520 and I wanted to sort of somehow get this onto 0:01:03.520 --> 0:01:06.319 the podcast, and I found the way to do that 0:01:06.520 --> 0:01:09.120 because I met Dalia Blass, who used to be the 0:01:09.160 --> 0:01:12.080 head of Investment Management at the SEC, and I got 0:01:12.120 --> 0:01:14.600 to meet her at dinner a little bit more and 0:01:14.640 --> 0:01:17.720 we expanded. I saw her on the panel and some 0:01:17.760 --> 0:01:19.480 of the things she was talking about our stuff we 0:01:19.520 --> 0:01:22.199 write about all the time. So I thought we could 0:01:22.200 --> 0:01:24.640 dive a little bit into what the SEC does some 0:01:24.680 --> 0:01:27.000 of the current topics that were brought up at this event, 0:01:28.040 --> 0:01:29.959 because this is the first one, and you know sc' 0:01:29.959 --> 0:01:32.240 is not usually this open, but they were pretty open. 0:01:32.240 --> 0:01:35.360 They're trying to, i guess, be a little more available 0:01:35.400 --> 0:01:37.520 to people and say exactly what they're doing. And I 0:01:37.560 --> 0:01:38.840 thought it was a good time to check in on 0:01:38.880 --> 0:01:42.840 all this. And she has a very interesting background and 0:01:42.880 --> 0:01:45.520 I had seen, you know, and heard of her obviously 0:01:45.600 --> 0:01:47.800 over the years, but finally got to meet her, and 0:01:47.960 --> 0:01:50.600 believe it or not, she accepted my invitation to join 0:01:50.640 --> 0:01:51.200 the podcast. 0:01:52.160 --> 0:01:54.840 So we're gonna speak with Dalia Blass, who is the 0:01:54.880 --> 0:01:58.880 former SEC Division of Investment Management head. After that, she 0:01:58.960 --> 0:02:01.840 went to Blackrock where she was head of external Affairs, 0:02:01.920 --> 0:02:06.400 and now she's a partner at Sullivan and cremwell this 0:02:06.520 --> 0:02:12.000 time on trillions. Dahlia Bluss, Dahlia, welcome to Trillions. 0:02:12.040 --> 0:02:12.880 Thank you for having me. 0:02:13.080 --> 0:02:16.800 So how was Eric received within this conference that he 0:02:16.840 --> 0:02:19.359 seems to think everybody really cared about what came out 0:02:19.360 --> 0:02:23.320 of his mouth, How was it really, honestly truthfully? 0:02:23.600 --> 0:02:27.280 So, Eric had a really good presentation, aside from the 0:02:27.320 --> 0:02:29.560 fact like a lot of bar charts whatnot. Sorry Eric, 0:02:29.600 --> 0:02:33.320 I wasn't paying attention to those. But he explained some 0:02:33.520 --> 0:02:38.960 really complicated principles around ETFs and ETF investing in a 0:02:39.000 --> 0:02:42.720 way that really resonated, very very plain English, and was 0:02:42.760 --> 0:02:45.600 talking about the trends in the space that you know, 0:02:45.680 --> 0:02:48.560 we're really interesting. I think the most interesting trend you 0:02:49.320 --> 0:02:52.200 talked about, Eric is how much the AUM, the assets 0:02:52.200 --> 0:02:56.120 of the management for ETFs frankly have like doubled at 0:02:56.160 --> 0:03:00.640 least since the ETF fruls. So that made me happy 0:03:01.600 --> 0:03:03.640 to hear it that since you know, I was the 0:03:03.639 --> 0:03:07.680 director when we did the ETF rules. So great, you know, 0:03:07.919 --> 0:03:11.920 great stats and it was just really understandable, which was great. 0:03:11.960 --> 0:03:14.040 And one quick thing on that I found when Gary 0:03:14.040 --> 0:03:17.200 Genser spoke, he was going through several topics. He'd be 0:03:17.240 --> 0:03:19.480 like private equity, we're looking at this. We need to 0:03:19.520 --> 0:03:22.040 be careful about this. Then he'd be like, money market funds, 0:03:22.040 --> 0:03:23.960 we're looking at this, We're gonna be careful this. It 0:03:24.000 --> 0:03:26.240 seems like ETFs got a pretty much a pass. He 0:03:26.320 --> 0:03:29.400 basically said, you know, ETFs, look, they're great. They brought 0:03:29.400 --> 0:03:31.800 diversity and convenience to investors, and he kind of just 0:03:31.800 --> 0:03:34.600 went on, So I'll give you some credit for that. 0:03:34.639 --> 0:03:36.840 I guess the ETF rule maybe cleaned up all the 0:03:36.880 --> 0:03:38.960 things they were looking at, but it didn't seem like 0:03:39.000 --> 0:03:40.920 that was on his radar compared to the other things. 0:03:41.240 --> 0:03:43.720 I think it was a product lineup that was sort 0:03:43.720 --> 0:03:45.680 of like, this is working really well. It worked really 0:03:45.680 --> 0:03:47.520 well in March twenty twenty, thank you so much, let's 0:03:47.600 --> 0:03:51.600 move on to other areas. And it was heartening to 0:03:51.640 --> 0:03:53.920 hear that, quite frankly, because I think you would recall 0:03:54.120 --> 0:03:57.920 for years before twenty twenty, it was always that the 0:03:58.080 --> 0:04:00.280 where's the moment that ETFs will break? Or is the 0:04:00.320 --> 0:04:03.840 moment ETF's That was always the narrative, So it was 0:04:04.040 --> 0:04:05.840 it was really heartening to see that this is a 0:04:05.840 --> 0:04:10.280 product that actually was a pressure valve. In March twenty twenty. 0:04:10.200 --> 0:04:13.600 Yeah, and I think this was the one. March twenty 0:04:13.640 --> 0:04:15.600 twenty is when I think all the doubters, the some 0:04:15.760 --> 0:04:18.960 worry articles kind of were like, okay, they're good because 0:04:18.960 --> 0:04:21.200 you're right. There was especially fixed income ETFs. There was 0:04:21.200 --> 0:04:23.440 all this worry about it. And then when the FED 0:04:23.480 --> 0:04:25.520 stepped in to buy them, I think that really sealed 0:04:25.520 --> 0:04:27.200 the deal. It's like, well, the Fed's going to use them, 0:04:27.640 --> 0:04:28.520 they must be okay. 0:04:29.560 --> 0:04:32.880 Yeah, there was a sense of the ETFs we were 0:04:33.000 --> 0:04:34.840 helping in March twenty twenty. As I said, it was 0:04:34.839 --> 0:04:37.680 like a pressure valve release sort of, you know, mechanic 0:04:37.720 --> 0:04:40.719 if you will, And ETFs played that role really well 0:04:41.480 --> 0:04:45.000 and the government acknowledged that. So it was I agree 0:04:45.040 --> 0:04:48.080 with you in his speech. It was really interesting how 0:04:48.160 --> 0:04:51.479 he dealt with ETFs compared to the other pieces that 0:04:51.520 --> 0:04:52.119 he talked about. 0:04:52.160 --> 0:04:55.200 So you got to the sec September of twenty seventeen 0:04:56.160 --> 0:04:58.839 before times how much how much did you know about 0:04:58.839 --> 0:05:00.599 ETFs when you got there. 0:05:01.160 --> 0:05:01.880 So that was my. 0:05:02.080 --> 0:05:04.720 Third tour of duty because we speak military terms in 0:05:04.760 --> 0:05:07.760 the government, so believe it or not, I was the 0:05:07.800 --> 0:05:11.480 staff attorney that did the original ETF proposal in was 0:05:11.520 --> 0:05:14.479 it seven eight and it took a second try to 0:05:14.480 --> 0:05:17.440 get it to finals. So I've lived ETF, said the 0:05:17.440 --> 0:05:20.000 Commission since a very long time ago. 0:05:20.120 --> 0:05:23.800 Okay, all right, she like tour of duty. I mean 0:05:24.040 --> 0:05:26.000 when you do that, is that is that for real? 0:05:26.080 --> 0:05:27.840 Is it like how we talk about it? 0:05:27.839 --> 0:05:30.039 It is it's your tour of duty in the government, 0:05:30.080 --> 0:05:32.440 even when you're in civilian service. So that was that 0:05:32.520 --> 0:05:34.240 was my third tour in twenty seventeen. 0:05:35.640 --> 0:05:37.599 Yeah, if you got into ETS, I feel like if 0:05:37.640 --> 0:05:40.559 you got into ETS before twenty ten, especially two thousand 0:05:40.560 --> 0:05:43.200 and eight, you're like an og kind of you know, 0:05:43.240 --> 0:05:46.520 you're not oog like you know, Bob Tole and those 0:05:46.560 --> 0:05:50.640 guys and Nate most but second level because the industry 0:05:50.680 --> 0:05:52.840 was only like four hundred billion back then. Again today's 0:05:52.839 --> 0:05:53.480 seven trillion. 0:05:54.320 --> 0:05:58.119 So when you first started to work on ETF stuff 0:05:58.120 --> 0:06:00.719 at the SEC were what were the concerns that you 0:06:00.760 --> 0:06:01.880 were wrestling with then? 0:06:02.880 --> 0:06:05.839 So you know, ETFs, as Eric mentioned, it was a 0:06:05.839 --> 0:06:10.120 growing space, but nothing nothing compared to where it was 0:06:10.160 --> 0:06:14.000 in twenty eighteen when we reproposed. A lot of it 0:06:14.080 --> 0:06:18.040 was still index. Some of the actives were starting the 0:06:18.080 --> 0:06:23.480 conversations around the non transparent, the veiled ETFs but there 0:06:23.520 --> 0:06:26.760 were none on the market at all. The questions there 0:06:26.760 --> 0:06:28.599 were more, and if you look at the old proposal, 0:06:29.000 --> 0:06:32.720 we tried to enshrine the index ETF versus active ETF. 0:06:33.360 --> 0:06:36.480 It was just simplistic, if you will, compared to where 0:06:36.520 --> 0:06:39.279 we ended up after a lot more experience with the 0:06:39.320 --> 0:06:40.360 product in the marketplace. 0:06:40.880 --> 0:06:43.240 Let's go into the nineteen forty Act a little bit. 0:06:43.279 --> 0:06:45.719 This is the main act that governs a lot of 0:06:45.720 --> 0:06:49.480 the fund's world, the nineteen forty Act. ETFs always needed 0:06:49.520 --> 0:06:52.680 an exception to the nineteen forty Act. And I guess 0:06:52.680 --> 0:06:54.440 can you just talk a little bit about how ETFs 0:06:54.440 --> 0:06:56.360 are structured. I think some people don't realize they're actually 0:06:56.360 --> 0:06:58.599 they are mutual funds to a degree, they just have 0:06:58.640 --> 0:06:59.600 this extra exemption. 0:07:00.760 --> 0:07:03.520 They're open ended funds. Right, So the act, if you will, 0:07:03.600 --> 0:07:05.880 has two pieces of the closed ends, the open ends, 0:07:05.920 --> 0:07:08.440 and the open ends. The feature there is it's redeemable, 0:07:08.520 --> 0:07:10.920 like I give you back my share, you give me 0:07:10.960 --> 0:07:13.760 back my money. Right, that redeeable and within a very 0:07:13.960 --> 0:07:16.480 short time period the statute of seven days. 0:07:16.240 --> 0:07:17.480 In reality it's like a day. 0:07:18.400 --> 0:07:21.280 The ETF exemptions, which again when you grow in the 0:07:21.320 --> 0:07:23.680 exemptive application process, and I think that was one of 0:07:23.720 --> 0:07:26.360 the issues when we did the proposal in eight and 0:07:26.400 --> 0:07:29.040 definitely when we did the rule making in twenty eighteen 0:07:29.080 --> 0:07:32.560 that ended up being the final exemptions over time change 0:07:32.600 --> 0:07:36.200 because the market evolves, So the ETF providers that had 0:07:36.240 --> 0:07:39.360 the original orders had vastly different orders than the ETF 0:07:39.400 --> 0:07:42.760 providers that had orders leading up to the final rule. 0:07:43.560 --> 0:07:45.440 So when you step back and you look at that, 0:07:45.520 --> 0:07:48.360 it's not equal marketplace. You know, even though like you know, 0:07:48.400 --> 0:07:50.200 I'm going to go out and buy an ETF, I'm 0:07:50.200 --> 0:07:52.960 buying an ETF that in name looks like any other ETF, 0:07:53.000 --> 0:07:55.400 but in principle could have, you know, vastly different things. So, 0:07:55.880 --> 0:07:58.480 you know, stepping back and just saying, like, what really 0:07:58.640 --> 0:08:01.800 is different about ETF appeared to a mutual fund, and 0:08:01.840 --> 0:08:03.360 what do I need to change? And this is where 0:08:03.400 --> 0:08:04.920 when we looked at it, we're like, ETF is a 0:08:04.920 --> 0:08:07.520 redeeable security. We don't need to give an exemption from that. 0:08:07.880 --> 0:08:10.640 So when you look at the final ETF rule, the 0:08:10.760 --> 0:08:14.960 exemptions actually are a lot fewer, a lot cleaner than 0:08:15.000 --> 0:08:18.040 when you look at any exemptive application that predated that rule. 0:08:18.160 --> 0:08:20.880 And that's the experience you have and that you can 0:08:20.920 --> 0:08:23.280 do when you're looking at a rule making, which you 0:08:23.280 --> 0:08:25.320 can't really do with an exemptive order. It's still like 0:08:25.400 --> 0:08:28.000 kind of bound by a lot of history behind it, 0:08:28.040 --> 0:08:29.960 if you will a little. 0:08:29.680 --> 0:08:33.400 Bit of history. We learned that SEC kind of helped 0:08:33.480 --> 0:08:38.199 create the ETF originally after the Black Monday Report. Do 0:08:38.280 --> 0:08:41.000 people in the SEC appreciate that, A is there any 0:08:41.040 --> 0:08:44.559 internal pride about creating this whole sort of new way 0:08:44.600 --> 0:08:45.199 of investing? 0:08:46.240 --> 0:08:49.600 So if you're talking about the spiders, which took quite 0:08:49.640 --> 0:08:51.040 a few more. 0:08:50.960 --> 0:08:52.480 And a half years, yeah, Yeah. 0:08:52.640 --> 0:08:55.760 The SEC issued this huge telephone book size report that 0:08:55.920 --> 0:08:58.960 was a postmortive on the eighty seven crash, and in 0:08:59.000 --> 0:09:01.280 their talk to little bit about well, if there had 0:09:01.280 --> 0:09:04.120 been a market basking trading instrument that actually had physically 0:09:04.120 --> 0:09:07.000 backed securities instead of using the futures market in Chicago, 0:09:07.720 --> 0:09:08.920 this might have not happened. 0:09:09.000 --> 0:09:10.600 And AMX looked at that and we're like, we can 0:09:10.640 --> 0:09:10.920 do that. 0:09:11.400 --> 0:09:15.240 Yeah, So I mean, so that's it's not you know, 0:09:15.640 --> 0:09:18.839 the SEC has actually played a role in innovation. If 0:09:18.840 --> 0:09:22.040 you look at interval funds by wave example, that was 0:09:22.080 --> 0:09:25.120 created by the Commission, it was also an SEC creation, right, 0:09:25.200 --> 0:09:29.000 So and that's that's a really important point, because that's 0:09:29.000 --> 0:09:32.120 the point sometimes we don't focus on We focus on 0:09:32.160 --> 0:09:35.160 the SEC being in the administrator of like the forty 0:09:35.200 --> 0:09:37.440 Act and the other securities laws. We focus on the 0:09:37.480 --> 0:09:40.720 SEC being the examiner for compliance. We focus on the 0:09:40.760 --> 0:09:42.079 SEC being the enforcer. 0:09:42.520 --> 0:09:43.640 That's the fun part. 0:09:45.320 --> 0:09:48.080 What we don't focus on and perhaps sometimes the SEC 0:09:48.160 --> 0:09:50.520 and I'm you know, I'm guilty of that, having been 0:09:50.600 --> 0:09:53.120 you know, inside the building for fourteen years. We don't 0:09:53.120 --> 0:09:57.079 sometimes focus on on the et the SEC's role in innovation, 0:09:57.960 --> 0:10:00.079 which which is really really important for a market p 0:10:00.280 --> 0:10:00.559 as well. 0:10:02.320 --> 0:10:05.400 So the ETF rule when it came about what was 0:10:05.440 --> 0:10:08.000 different about that on your third tour of duty than 0:10:08.040 --> 0:10:09.959 your previous ones and how did you why did you 0:10:10.080 --> 0:10:12.400 change your mind to get it to where it ended up. 0:10:13.360 --> 0:10:16.680 So you know that as the ETF rule, if you 0:10:16.720 --> 0:10:18.480 look at it compared to the one that was proposed 0:10:18.480 --> 0:10:21.560 in OAIT, you know, significantly different. Like just by way 0:10:21.600 --> 0:10:25.120 of one example, you don't have the index ETF versus 0:10:25.160 --> 0:10:25.920 the active ETF. 0:10:26.000 --> 0:10:26.920 You have the ETF. 0:10:27.280 --> 0:10:29.920 You don't have an idea that the ETF is is 0:10:29.920 --> 0:10:33.079 getting an exemption from being a redeeable security. It's acknowledged 0:10:33.080 --> 0:10:35.760 that it is redeeable security, it's an open end fund. 0:10:36.320 --> 0:10:40.320 So these were all things that came with lessons learned 0:10:41.160 --> 0:10:44.400 the Commission. The staff had had vastly more experienced by 0:10:44.440 --> 0:10:47.920 twenty eighteen compared to ten years earlier, and the product 0:10:47.920 --> 0:10:51.800 had grown by you know, leaps and bounds. So there 0:10:51.880 --> 0:10:55.960 that you know, the thinking had matured, the product had matured, 0:10:56.120 --> 0:10:59.800 and it continues to mature. So it's it's maybe perhaps 0:10:59.840 --> 0:11:02.280 not so good that it took ten years, But at 0:11:02.280 --> 0:11:04.560 the same time, I think the rule ended up where 0:11:04.559 --> 0:11:07.280 it is because of the more information and the more 0:11:07.320 --> 0:11:10.200 experience of staff and the Commission's had with the product. 0:11:11.040 --> 0:11:13.600 So let's switch to a topic that came up at 0:11:13.600 --> 0:11:15.760 the event. This is your panel, and it came up 0:11:15.800 --> 0:11:18.320 a couple times at the event, which was, Okay, you've 0:11:18.320 --> 0:11:21.120 got two companies, Blackrock, Vanguard, you could throw State Street 0:11:21.120 --> 0:11:23.600 in there. We'll call them the big three. They're getting bigger. 0:11:24.040 --> 0:11:28.320 They sort of more the center focus as it become 0:11:28.400 --> 0:11:30.440 like a political football because they own so much of 0:11:30.480 --> 0:11:33.280 these stocks. I think Vanguard owns about eight or nine percent, 0:11:33.520 --> 0:11:36.760 Blackrock owns about seven percent of almost every stock in America, 0:11:36.800 --> 0:11:38.920 and so the question is, like how do we deal 0:11:39.000 --> 0:11:40.600 with this because they're not getting any small They take 0:11:40.600 --> 0:11:41.840 in most of the money, so they're going to keep 0:11:41.840 --> 0:11:45.840 getting bigger. And this was a topic that was talked about, 0:11:45.880 --> 0:11:47.760 and then what was brought up was, well, the market 0:11:47.840 --> 0:11:50.120 is sort of working this out because they're going to 0:11:50.120 --> 0:11:54.280 decentralize voting and let their shareholders have a say. I guess, 0:11:54.360 --> 0:11:57.560 from your vantage point as having worked at Blackrock and 0:11:57.640 --> 0:12:00.880 the SEC, how do you see this playing out over 0:12:00.920 --> 0:12:01.920 the next ten years. 0:12:02.960 --> 0:12:05.520 That's a great question, and you're right. It was a 0:12:05.559 --> 0:12:07.640 topic in the i AM Emerging Trends conference that I 0:12:07.679 --> 0:12:10.400 think almost every single panel touched on, which even panels 0:12:10.440 --> 0:12:12.880 that didn't have that in their title, it seemed to 0:12:12.880 --> 0:12:16.080 be a topic everybody was interested in talking about. I mean, look, 0:12:16.120 --> 0:12:20.040 I mean the bottom line is you're here increasingly both 0:12:20.120 --> 0:12:25.479 policy makers and investors asking for changes in fund voting practices. 0:12:26.600 --> 0:12:28.360 This is not about like a big two or a 0:12:28.360 --> 0:12:29.719 Big three, or a Big four, or a Big five 0:12:29.880 --> 0:12:32.440 or a big six. It's about index funds and how 0:12:32.440 --> 0:12:36.760 they're managing their voting. And you know, some policy makers 0:12:36.760 --> 0:12:39.719 have raised questions about the increasing share of index fund 0:12:39.800 --> 0:12:43.680 voting and how those shares are being cast. And you 0:12:43.760 --> 0:12:48.559 have investors today, institutional investors who want just as they 0:12:48.640 --> 0:12:51.760 choose how their investments are being deployed into the market, 0:12:52.280 --> 0:12:54.800 they also want to say and how their shares are 0:12:54.840 --> 0:12:59.000 being voted in the market. So when you have that 0:12:59.160 --> 0:13:02.640 and not getting into merits or demerits of any around that, 0:13:03.120 --> 0:13:05.920 you look at solutions, because solutions are already starting to come about. 0:13:06.920 --> 0:13:10.280 You have solutions, I think our characterize in three buckets. 0:13:10.280 --> 0:13:13.319 You have sort of restrictive voting solutions which would put 0:13:13.360 --> 0:13:15.679 sort of parameters around what index fund managers would or 0:13:15.679 --> 0:13:20.120 would not do. You have more transparency solutions which are 0:13:20.440 --> 0:13:23.800 very limiting, and then you have market based solutions, which 0:13:23.840 --> 0:13:26.000 I in my opinion at least, I think the market 0:13:26.000 --> 0:13:28.960 based solutions are the ones that have greater promise. And 0:13:29.040 --> 0:13:32.000 if we can sort of allow them to evolve and 0:13:32.080 --> 0:13:36.720 the regulators step in a place of helping the conversations 0:13:36.760 --> 0:13:39.840 and removing any regulatory barriers, I think you can get 0:13:39.880 --> 0:13:42.640 a movement in fund voting that would actually read in 0:13:42.679 --> 0:13:44.800 your to the benefit of all investors. 0:13:45.080 --> 0:13:48.360 And so to be let's talk about the rules currently 0:13:48.360 --> 0:13:51.600 in place. A fund cannot own more than ten percent 0:13:51.640 --> 0:13:53.600 of company. I think that's the rule in the forty Act, 0:13:54.040 --> 0:13:55.839 but it doesn't say anything. But a fun complex is 0:13:55.840 --> 0:13:58.240 the forty Act came out when typically a fund was 0:13:58.280 --> 0:14:01.360 all the complex had. Now now in the past, you 0:14:01.400 --> 0:14:05.080 know whatever, eighty years the fund multiplied and now you 0:14:05.120 --> 0:14:08.160 have they have three four hundred funds. So there's no rule. 0:14:08.240 --> 0:14:09.280 And so therefore. 0:14:08.960 --> 0:14:11.520 Blackrock and Vanguard could really get bigger own more than 0:14:11.559 --> 0:14:15.520 ten percent. But that's okay because it's really thirty to 0:14:15.559 --> 0:14:20.480 fifty million investors, individual investors' money if they decentralize, versus 0:14:20.800 --> 0:14:23.120 people thinking that And this comes up all the time 0:14:23.160 --> 0:14:26.120 on Twitter, like it looks like Blackrock and Vanguard have 0:14:26.280 --> 0:14:29.920 like so much power and it's their money, but it's 0:14:29.960 --> 0:14:33.040 really a bunch of it's millions of individual investors. 0:14:33.720 --> 0:14:36.880 So a couple of things, and number one, the restrictions 0:14:36.880 --> 0:14:40.680 on ownership. There is like a myriad of things that 0:14:40.720 --> 0:14:43.800 play here right of where the restrictions come from from 0:14:43.800 --> 0:14:46.120 federal law, from state law. There is there is a 0:14:46.120 --> 0:14:48.760 lot going on, but also sort of and you know, 0:14:48.880 --> 0:14:51.320 I've heard you say and the conference I heard it 0:14:51.360 --> 0:14:55.080 repeatedly said, you know, people saying a Blackrock Vanguard State Street. 0:14:55.240 --> 0:14:58.960 I think it's really important to remember that these are 0:14:59.400 --> 0:15:04.120 independent entities that invest independently and that you know, invest 0:15:04.640 --> 0:15:07.120 you know, on the basis of what their clients are 0:15:07.200 --> 0:15:09.920 choosing for them to invest, So we can't talk about 0:15:09.960 --> 0:15:10.680 them collectively. 0:15:11.760 --> 0:15:13.720 That's something that's really important to note. 0:15:14.160 --> 0:15:16.720 The other piece to note is that this is a 0:15:17.240 --> 0:15:21.160 very large and very diverse industry. You're talking about industry 0:15:21.160 --> 0:15:26.160 that's well over one hundred trillion dollars globally, well over 0:15:26.200 --> 0:15:27.720 like maybe one hundred and ten, one hundred and twenty. 0:15:28.320 --> 0:15:30.440 So when you look at how much they hold compared 0:15:30.480 --> 0:15:33.000 to that vast global it just gives you a sense 0:15:33.040 --> 0:15:34.600 of like how big this industry is. 0:15:34.640 --> 0:15:35.760 It's very diversified. 0:15:36.120 --> 0:15:40.440 A lot of players, a lot of choice in this industry, 0:15:40.520 --> 0:15:42.280 you know that said as I said, like, there are 0:15:42.400 --> 0:15:46.720 policymakers and investors who want different solutions when it comes 0:15:46.720 --> 0:15:50.800 to voting, but it's it's important to look at what 0:15:50.960 --> 0:15:54.240 is happening and also the benefits that these providers have 0:15:54.440 --> 0:15:56.720 brought to the to the table when it comes to voting, 0:15:56.760 --> 0:15:58.400 when it comes to the economies of scale they have 0:15:58.400 --> 0:16:02.720 created for funds. We look at any solutions in this space, and. 0:16:02.640 --> 0:16:05.040 One thing that was brought up by a lawyer from Virginia. 0:16:05.560 --> 0:16:08.120 She said something I thought was interesting, which is, there's 0:16:08.360 --> 0:16:11.000 too much demand for the regulatory supply when it comes 0:16:11.000 --> 0:16:13.640 to some of these issues like climate like the government 0:16:13.680 --> 0:16:16.200 really hasn't done a lot and so, but there's all 0:16:16.200 --> 0:16:18.560 this demand built up to do something and it's been 0:16:18.640 --> 0:16:20.760 put on the asset managers, who you could argue you 0:16:20.760 --> 0:16:22.800 are getting too much pressure for what their role is 0:16:22.840 --> 0:16:26.880 in society because of that lack of progress by the 0:16:26.920 --> 0:16:30.040 government itself. I thought that was a pretty decent point. 0:16:30.320 --> 0:16:33.280 That was somebody who was basically trying to say, chill 0:16:33.320 --> 0:16:35.360 on the asset managers. Okay, they're not going to solve 0:16:35.400 --> 0:16:39.040 everything here, but if their pressure is huge, and I 0:16:39.080 --> 0:16:43.120 do think if there was some something done with the laws, 0:16:44.280 --> 0:16:46.040 this would be there, this wouldn't be as big of 0:16:46.080 --> 0:16:48.160 a topic. So I do think that's part of a 0:16:48.280 --> 0:16:48.680 play here. 0:16:48.720 --> 0:16:50.600 Well, you've been on both sides of that, right, You've 0:16:50.640 --> 0:16:52.080 been in the government side, and you've been in the 0:16:52.080 --> 0:16:55.920 private sector, a publicly traded company, Like how do you 0:16:55.920 --> 0:16:58.160 thread that needle or how do you think the we 0:16:58.160 --> 0:16:59.240 should be threading that needle? 0:16:59.480 --> 0:17:03.240 So when you look at asset managers, you know, asset 0:17:03.280 --> 0:17:08.200 managers are looking at their clients, their clients aret of 0:17:08.240 --> 0:17:11.760 ones that provide the mandates. For the institutional clients, the 0:17:11.960 --> 0:17:15.800 mandates can be more complicated, obviously, and but for even 0:17:15.840 --> 0:17:18.720 for retail retail invests on the basi of funds, and 0:17:18.760 --> 0:17:22.240 funds have very specific mandates and the client is choosing that. 0:17:22.800 --> 0:17:26.760 So you know, for for asset managers, the first point 0:17:26.920 --> 0:17:30.600 that the foundation is client choice. Everything else comes from 0:17:30.600 --> 0:17:33.000 that choice the client makes. And you have a lot 0:17:33.000 --> 0:17:36.160 of clients who are very interested in the e SG 0:17:36.280 --> 0:17:41.680 space and funds that target certain you know, client solutions 0:17:42.119 --> 0:17:46.000 or certain solutions to very pressing social policies. That is 0:17:46.040 --> 0:17:49.680 what the client wants, right And so you know, asset 0:17:49.720 --> 0:17:53.080 managers are just that they're not the asset owners. They 0:17:53.080 --> 0:17:56.040 are the asset managers when it comes to the government, 0:17:56.200 --> 0:17:58.440 you know, where you would look for, what you'd look 0:17:58.480 --> 0:18:02.199 for as a regulated entity, and in this really complex space, frankly, 0:18:02.280 --> 0:18:05.520 is clarity. What is the roadmap, What can you do, 0:18:05.640 --> 0:18:08.480 what can you not do? And have that clarity so 0:18:08.520 --> 0:18:11.280 that you can fulfill your mission, especially here for advisors 0:18:11.280 --> 0:18:14.560 as a fiduciary to the clients who are entrusting you 0:18:15.000 --> 0:18:16.280 with their assets. 0:18:23.240 --> 0:18:26.520 Let's talk about ESG related accept the funds themselves. So 0:18:27.040 --> 0:18:29.600 one of Genser's current priorities, or at least one of 0:18:29.640 --> 0:18:32.400 his things he's looking at, is ESG ETFs. And I've 0:18:32.400 --> 0:18:34.840 traveled around, I've worked with our ESG team. There's a 0:18:34.960 --> 0:18:39.280 huge debate about what you're actually getting with an ESGTF. 0:18:39.840 --> 0:18:42.440 Some like the biggest one ESGU, which is the one, 0:18:42.560 --> 0:18:44.679 the biggest one. The holdings look a lot like the 0:18:44.760 --> 0:18:46.600 S and P. There's a couple of things taken out, 0:18:46.600 --> 0:18:48.600 but it's very close, just a little tilt away from 0:18:48.640 --> 0:18:51.760 the index. Then there's ones that go more hardcore. We 0:18:51.800 --> 0:18:55.159 actually have a scoring system. We try to help investors. 0:18:55.200 --> 0:18:59.080 But how much is naming an issue with the sec 0:18:59.240 --> 0:19:02.520 when a product comes in, how much do you need 0:19:02.560 --> 0:19:04.520 to worry about what it holds and what it does 0:19:05.160 --> 0:19:08.280 versus just sort of letting a lot of freedom in 0:19:08.400 --> 0:19:10.040 what you name it and what you hold as long 0:19:10.080 --> 0:19:11.359 as you spill it out in the perspectives. 0:19:11.920 --> 0:19:15.359 So like, without getting into any any specific funds or 0:19:15.520 --> 0:19:19.399 or or fund names, I'm not a portfolio manager, and 0:19:19.520 --> 0:19:20.280 you don't want me to be. 0:19:20.200 --> 0:19:21.200 A portfolio manager. 0:19:21.960 --> 0:19:28.960 When you look at ESG, the term itself, in my opinion, 0:19:29.119 --> 0:19:34.160 is a problem. It's it's it's very imprecise. It brings 0:19:34.200 --> 0:19:39.560 together three very broad terms under this one you know 0:19:39.800 --> 0:19:43.440 one one Moniker, if you will, and you know, let 0:19:43.480 --> 0:19:46.680 me illustrate with the most simplistic of examples, and I will, 0:19:46.800 --> 0:19:49.400