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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Let's go now to

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Speaker 1: the intersection of public and private markets. About two weeks ago,

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Speaker 1: State Street and Apollo launched a new kind of ETF,

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Speaker 1: granting access to private assets in the public market. Within

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Speaker 1: hours of the launch of priv the SEC sent both

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Speaker 1: firms a strongly worded letter listing multiple concerns. For more

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Speaker 1: on that, we're pleased to say. Annapaglia joins us now.

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Speaker 1: She is the executive vice president and chief business officer

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Speaker 1: at State Street Global Advisors, that is one of the

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Speaker 1: firms behind the new ETF. I'm also joined by my

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Speaker 1: ETF IQ co host, Katie Greeifeld.

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Speaker 2: Katie, great to see.

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Speaker 3: You both, especially not on a Thursday. Usually we talk

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Speaker 3: on Mondays. So Trina also, great to see you in

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Speaker 3: studio with us. And I want to start with the

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Speaker 3: SEC because it was really unusual to see the SEC

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Speaker 3: send this letter post launch, really specifically laying out their concerns.

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Speaker 3: What did your conversations look like with the SEC pre launch.

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Speaker 3: I think there's a lot of confusion about how this happens,

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Speaker 3: and I'm just wondering if you discuss these issues with

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Speaker 3: the agency prior to actually trading beginning.

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Speaker 2: Sure, Katie.

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Speaker 4: First of all, thank you for having me, and I

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Speaker 4: know that this is the hot topic of the day

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Speaker 4: or the last couple of weeks, so I'm really happy

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Speaker 4: to have this conversation with you today. Let's put that

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Speaker 4: into perspective, because it is true that we get additional

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Speaker 4: comments from the SEC after we launch the fund, but

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Speaker 4: I would also say that this is not a unique

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Speaker 4: I mean, it happens from time to time. This fund

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Speaker 4: that had been in registration for five months, so if

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Speaker 4: you compare that to a traditional fund launch that takes

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Speaker 4: usually seventy five days, that will tell you that we

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Speaker 4: have had a very healthy dialogue with the SEC. Four

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Speaker 4: rounds of comments and we answered those comments.

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Speaker 2: And then the way.

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Speaker 4: Are some lingering ones without the process have concluded it

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Speaker 4: had not. We got the new comments and we answered

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Speaker 4: those within twenty four hours.

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Speaker 2: So in the last couple of weeks.

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Speaker 4: I think that's more drama than it was warranted was

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Speaker 4: created in the market. And I have read so much

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Speaker 4: stuff that I think it's worthwhile trying to distinguish facts

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Speaker 4: from fiction. So the one thing that I've been reading is,

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Speaker 4: you know, this fund that may not be fully operated

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Speaker 4: in compliance with the forty Act.

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Speaker 2: I mean that's fiction.

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Speaker 4: This fund is being managed, administered, operated in full compliance.

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Speaker 2: With the forty Act. That's a fact.

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Speaker 4: Interesting, then I have also read something to the effect

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Speaker 4: that we have not fully addressed the comments from the SEC.

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Speaker 4: There was a line around when is the next shoe

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Speaker 4: gonna drop? Now I know a thing of two about shoes,

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Speaker 4: and I can tell you that that's fiction.

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Speaker 2: There are no other shoes to drop.

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Speaker 4: And as you can see on Edgar, even the correspondence

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Speaker 4: of the secs so that the stuff has no additional comments.

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Speaker 2: That's a fact.

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Speaker 3: So given that, and given that you were having these

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Speaker 3: conversations with the SEC leading up to launch and the

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Speaker 3: fund did go effective, were you surprised to see this letter?

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Speaker 3: Certainly from where I was sitting at my desk in

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Speaker 3: the newsroom, I was surprised to see it.

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Speaker 4: So I was surprised and not surprised, because again, this

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Speaker 4: construct is novel, and it's not the first time that

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Speaker 4: the SEC gives you comments after a registration statement is effective.

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Speaker 4: So now it was unfortunate because it was made up

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Speaker 4: very public in a fund that had been you know,

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Speaker 4: in registration for five months, and where the flash lights

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Speaker 4: were but to me, that is part of a dialogue

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Speaker 4: with the SEC now was that ideal was not ideal,

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Speaker 4: But the fact that we addressed it within twenty four

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Speaker 4: hours tells you the health of the conversation and the

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Speaker 4: dialogue that we had with the stuff and with the

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Speaker 4: omission over the prior months.

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Speaker 1: Thank you for sharing all of that. The other thing

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Speaker 1: we can't help noticing is that this ETF was launched

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Speaker 1: during a shift change at the SEC. Gary Ginster has gone,

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Speaker 1: Paul Ekins has not yet been confirmed. There's an interim chair.

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Speaker 1: Do you think that that impacted this whole process for you?

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Speaker 2: I wouldn't say.

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Speaker 4: I wouldn't say that it is because I have been

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Speaker 4: working with the SEC, with the staff for almost two

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Speaker 4: decades now and I have the highest respect for the staff.

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Speaker 4: And even if the chairs and the leadership is changing,

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Speaker 4: there are some very incredible experts of Fortiact EXPERSUS securities

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Speaker 4: experts at the SEC that are not changing with the administration.

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Speaker 4: So I don't think. I don't think that the change

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Speaker 4: in administration and an impact. And whether this funder went

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Speaker 4: to market or.

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Speaker 3: Not, yeah, it's a good reminder it's not just the

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Speaker 3: guy at the top. You know, there's all these teams

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Speaker 3: within the agency as well. So this obviously, like you mentioned,

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Speaker 3: has been a hot topic. I have a podcast with

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Speaker 3: Matt Levine called Money Stuff, and we've been talking about

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Speaker 3: it on that podcast, and we had actually a listener

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Speaker 3: right in basically asking about the relationship with Apollo. They asked,

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Speaker 3: with the advent of a private credit ETF, isn't adverse

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Speaker 3: selection an inherent issues?

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Speaker 2: So I'm wondering.

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Speaker 3: Whether State Street has the expertise in house to evaluate

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Speaker 3: what Apollo is putting into the ETF.

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Speaker 2: We do.

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Speaker 4: We do have the expertise in house. Not only did

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Speaker 4: we have the expertise in house when thinking about the

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Speaker 4: h this fund and how to structure this fund, but

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Speaker 4: we also made the new hire set to make sure

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Speaker 4: that we had the right talent in seats. In the end,

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Speaker 4: s SGA is the UH is the advisor. By design.

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Speaker 4: We wanted us to be in a position to make

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Speaker 4: selections and have investment discretion on what task sets to

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Speaker 4: take or not to take from Apollo, and that type

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Speaker 4: of expertise was critical.

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Speaker 3: And you mentioned, you know, it was unfortunate that this

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Speaker 3: letter came after the ETF had already launched it. It's

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Speaker 3: out in the public like that, and I want to

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Speaker 3: bring that conversation to flows that have come into the ETF.

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Speaker 3: This is a first of its kind ETF, so there's

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Speaker 3: typically a way and c sort of period. But it's

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Speaker 3: only taken in two days of net inflows since it's launched.

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Speaker 3: Told me about five million dollars in assets so far.

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Speaker 3: Do you think that that overhang is impacting muting flows

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Speaker 3: to any extent.

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Speaker 4: It's funny you say that, because in this cases, success

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Speaker 4: is in the eyes of the beholder. If I look

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Speaker 4: at if I look at the treading volume, so I

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Speaker 4: separate the trading volume of from flows. Treading volume for

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Speaker 4: this fund that's been incredibly healthy. Let's remember it's an

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Speaker 4: active ETF. And if you look at all the other

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Speaker 4: active funds or even the wider ETF universe, all new

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Speaker 4: funds have registered are roughly an average of four million

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Speaker 4: dollars a day of treading volume. This fund that has

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Speaker 4: been an on par with the average, and at times

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Speaker 4: it has even been healthier than the average. And the

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Speaker 4: first ding, the first day it registered, the five million

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Speaker 4: dollars of trading volume, and we got to to creates

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Speaker 4: in the first two trading days, which you know, it

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Speaker 4: may sound like only two, but it's very unusual for

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Speaker 4: a new active fund that to ever creates in the

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Speaker 4: first week. I mean with active strategies. As you may appreciate,

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Speaker 4: people wait for the fund to create a little bit

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Speaker 4: of a performance record, the trading record.

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Speaker 2: So everything we see in.

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Speaker 4: Market the first of all, is not unexpected, is actually

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Speaker 4: better than we anticipated. So we are really pleased with

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Speaker 4: the trading volume and the attention that we are getting

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Speaker 4: from investors.

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Speaker 1: And making private assets were widely accessible to investors has

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Speaker 1: long been a goal, not just for you, but for others.

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Speaker 1: The challenge was always how to do it. At investment

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Speaker 1: firms like Blue Owl and Blackstone, some are choosing to

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Speaker 1: do it as interval funds, which would allow investors to

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Speaker 1: cash out during certain periods. Was that ever under consideration

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Speaker 1: for the private funds that you did launch.

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Speaker 4: It was everything was on the consideration. Everything is on

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Speaker 4: the table. We like to think of ourselves as a

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Speaker 4: rap pagnostic firm. We always look at the best exposure.

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Speaker 1: But you're the og ETF firm.

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Speaker 2: We are the OGETF forum.

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Speaker 4: But we do have target data funds, we have index

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Speaker 4: mutual funds and other mutual funds, So there are different

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Speaker 4: ways to repackage the content, and for us at democratizing

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Speaker 4: a private assets was paramount and this is why we

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Speaker 4: said that let's let's be very creative and see if

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Speaker 4: there is a way to incorporate this as a class

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Speaker 4: into ETFs.

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Speaker 3: So this launch was interesting from so many different levels.

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Speaker 3: But one of those levels was State Street's partnership strategy.

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Speaker 3: Because you have this partnership with Apollo, you have a

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Speaker 3: partnership with Galaxy for example, you have a partnership with Bridgewater,

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Speaker 3: and actually you just launched this all weather ETF last week,

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Speaker 3: which was really interesting to see. So private credit is

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Speaker 3: one thing, but when it comes to crypto and when

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Speaker 3: it comes to sort of risk parity strategies, theoretically State

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Speaker 3: Street could have done that in house. So talk us

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Speaker 3: through what the benefit of pursuing these really high profile

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Speaker 3: partnerships is.

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Speaker 2: Oh absolutely to us.

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Speaker 4: You know, brand matters because branded recognition is earned, is

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Speaker 4: not given, and the branded recognition really means that you

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Speaker 4: are an expert at something. And if we look at

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Speaker 4: our brand, Ssgas brand is a market leader in ETFs.

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Speaker 4: You know, we created the market with spy. We opened

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Speaker 4: the ETF market to the masses. This is what we

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Speaker 4: are good at understanding the entire ecosystem. But when we

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Speaker 4: want to build other strategies and bring them to clients,

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Speaker 4: we always look at who is the best.

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Speaker 2: In class and those strategies.

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Speaker 4: Could we have done digital assets, absolutely, but we are

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Speaker 4: not a cryptonative. That's why we partnered with a crypto native.

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Speaker 4: Could we have done risk aparity, absolutely, we would have

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Speaker 4: done it, but we partnered with those who started that

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Speaker 4: business that strategy with decades of experience the goods of

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Speaker 4: risk parity risk parity strategies. So for us, bringing together

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Speaker 4: what we do best with what other firms do best

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Speaker 4: allows us to bring these best in class solution to clients.

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Speaker 3: We have thirty seconds if that. When it comes to partnerships,

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Speaker 3: are you pursuing any others? Should we be keeping an

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Speaker 3: eye out?

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Speaker 2: You should?

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Speaker 4: You should be keeping an eye out of our new

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Speaker 4: partnerships and more with existing partnerships, because the partnership is

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Speaker 4: not transactional. It's what we can do together the entire

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Speaker 4: universal possibilities.

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Speaker 2: All right.

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Speaker 1: So it's just the beginning of these partnerships. And and

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Speaker 1: I really appreciate your joining us on a paglia from

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Speaker 1: Stagy Global Advisors