Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Let's go now to
Speaker 1: the intersection of public and private markets. About two weeks ago,
Speaker 1: State Street and Apollo launched a new kind of ETF,
Speaker 1: granting access to private assets in the public market. Within
Speaker 1: hours of the launch of priv the SEC sent both
Speaker 1: firms a strongly worded letter listing multiple concerns. For more
Speaker 1: on that, we're pleased to say. Annapaglia joins us now.
Speaker 1: She is the executive vice president and chief business officer
Speaker 1: at State Street Global Advisors, that is one of the
Speaker 1: firms behind the new ETF. I'm also joined by my
Speaker 1: ETF IQ co host, Katie Greeifeld.
Speaker 2: Katie, great to see.
Speaker 3: You both, especially not on a Thursday. Usually we talk
Speaker 3: on Mondays. So Trina also, great to see you in
Speaker 3: studio with us. And I want to start with the
Speaker 3: SEC because it was really unusual to see the SEC
Speaker 3: send this letter post launch, really specifically laying out their concerns.
Speaker 3: What did your conversations look like with the SEC pre launch.
Speaker 3: I think there's a lot of confusion about how this happens,
Speaker 3: and I'm just wondering if you discuss these issues with
Speaker 3: the agency prior to actually trading beginning.
Speaker 2: Sure, Katie.
Speaker 4: First of all, thank you for having me, and I
Speaker 4: know that this is the hot topic of the day
Speaker 4: or the last couple of weeks, so I'm really happy
Speaker 4: to have this conversation with you today. Let's put that
Speaker 4: into perspective, because it is true that we get additional
Speaker 4: comments from the SEC after we launch the fund, but
Speaker 4: I would also say that this is not a unique
Speaker 4: I mean, it happens from time to time. This fund
Speaker 4: that had been in registration for five months, so if
Speaker 4: you compare that to a traditional fund launch that takes
Speaker 4: usually seventy five days, that will tell you that we
Speaker 4: have had a very healthy dialogue with the SEC. Four
Speaker 4: rounds of comments and we answered those comments.
Speaker 2: And then the way.
Speaker 4: Are some lingering ones without the process have concluded it
Speaker 4: had not. We got the new comments and we answered
Speaker 4: those within twenty four hours.
Speaker 2: So in the last couple of weeks.
Speaker 4: I think that's more drama than it was warranted was
Speaker 4: created in the market. And I have read so much
Speaker 4: stuff that I think it's worthwhile trying to distinguish facts
Speaker 4: from fiction. So the one thing that I've been reading is,
Speaker 4: you know, this fund that may not be fully operated
Speaker 4: in compliance with the forty Act.
Speaker 2: I mean that's fiction.
Speaker 4: This fund is being managed, administered, operated in full compliance.
Speaker 2: With the forty Act. That's a fact.
Speaker 4: Interesting, then I have also read something to the effect
Speaker 4: that we have not fully addressed the comments from the SEC.
Speaker 4: There was a line around when is the next shoe
Speaker 4: gonna drop? Now I know a thing of two about shoes,
Speaker 4: and I can tell you that that's fiction.
Speaker 2: There are no other shoes to drop.
Speaker 4: And as you can see on Edgar, even the correspondence
Speaker 4: of the secs so that the stuff has no additional comments.
Speaker 2: That's a fact.
Speaker 3: So given that, and given that you were having these
Speaker 3: conversations with the SEC leading up to launch and the
Speaker 3: fund did go effective, were you surprised to see this letter?
Speaker 3: Certainly from where I was sitting at my desk in
Speaker 3: the newsroom, I was surprised to see it.
Speaker 4: So I was surprised and not surprised, because again, this
Speaker 4: construct is novel, and it's not the first time that
Speaker 4: the SEC gives you comments after a registration statement is effective.
Speaker 4: So now it was unfortunate because it was made up
Speaker 4: very public in a fund that had been you know,
Speaker 4: in registration for five months, and where the flash lights
Speaker 4: were but to me, that is part of a dialogue
Speaker 4: with the SEC now was that ideal was not ideal,
Speaker 4: But the fact that we addressed it within twenty four
Speaker 4: hours tells you the health of the conversation and the
Speaker 4: dialogue that we had with the stuff and with the
Speaker 4: omission over the prior months.
Speaker 1: Thank you for sharing all of that. The other thing
Speaker 1: we can't help noticing is that this ETF was launched
Speaker 1: during a shift change at the SEC. Gary Ginster has gone,
Speaker 1: Paul Ekins has not yet been confirmed. There's an interim chair.
Speaker 1: Do you think that that impacted this whole process for you?
Speaker 2: I wouldn't say.
Speaker 4: I wouldn't say that it is because I have been
Speaker 4: working with the SEC, with the staff for almost two
Speaker 4: decades now and I have the highest respect for the staff.
Speaker 4: And even if the chairs and the leadership is changing,
Speaker 4: there are some very incredible experts of Fortiact EXPERSUS securities
Speaker 4: experts at the SEC that are not changing with the administration.
Speaker 4: So I don't think. I don't think that the change
Speaker 4: in administration and an impact. And whether this funder went
Speaker 4: to market or.
Speaker 3: Not, yeah, it's a good reminder it's not just the
Speaker 3: guy at the top. You know, there's all these teams
Speaker 3: within the agency as well. So this obviously, like you mentioned,
Speaker 3: has been a hot topic. I have a podcast with
Speaker 3: Matt Levine called Money Stuff, and we've been talking about
Speaker 3: it on that podcast, and we had actually a listener
Speaker 3: right in basically asking about the relationship with Apollo. They asked,
Speaker 3: with the advent of a private credit ETF, isn't adverse
Speaker 3: selection an inherent issues?
Speaker 2: So I'm wondering.
Speaker 3: Whether State Street has the expertise in house to evaluate
Speaker 3: what Apollo is putting into the ETF.
Speaker 2: We do.
Speaker 4: We do have the expertise in house. Not only did
Speaker 4: we have the expertise in house when thinking about the
Speaker 4: h this fund and how to structure this fund, but
Speaker 4: we also made the new hire set to make sure
Speaker 4: that we had the right talent in seats. In the end,
Speaker 4: s SGA is the UH is the advisor. By design.
Speaker 4: We wanted us to be in a position to make
Speaker 4: selections and have investment discretion on what task sets to
Speaker 4: take or not to take from Apollo, and that type
Speaker 4: of expertise was critical.
Speaker 3: And you mentioned, you know, it was unfortunate that this
Speaker 3: letter came after the ETF had already launched it. It's
Speaker 3: out in the public like that, and I want to
Speaker 3: bring that conversation to flows that have come into the ETF.
Speaker 3: This is a first of its kind ETF, so there's
Speaker 3: typically a way and c sort of period. But it's
Speaker 3: only taken in two days of net inflows since it's launched.
Speaker 3: Told me about five million dollars in assets so far.
Speaker 3: Do you think that that overhang is impacting muting flows
Speaker 3: to any extent.
Speaker 4: It's funny you say that, because in this cases, success
Speaker 4: is in the eyes of the beholder. If I look
Speaker 4: at if I look at the treading volume, so I
Speaker 4: separate the trading volume of from flows. Treading volume for
Speaker 4: this fund that's been incredibly healthy. Let's remember it's an
Speaker 4: active ETF. And if you look at all the other
Speaker 4: active funds or even the wider ETF universe, all new
Speaker 4: funds have registered are roughly an average of four million
Speaker 4: dollars a day of treading volume. This fund that has
Speaker 4: been an on par with the average, and at times
Speaker 4: it has even been healthier than the average. And the
Speaker 4: first ding, the first day it registered, the five million
Speaker 4: dollars of trading volume, and we got to to creates
Speaker 4: in the first two trading days, which you know, it
Speaker 4: may sound like only two, but it's very unusual for
Speaker 4: a new active fund that to ever creates in the
Speaker 4: first week. I mean with active strategies. As you may appreciate,
Speaker 4: people wait for the fund to create a little bit
Speaker 4: of a performance record, the trading record.
Speaker 2: So everything we see in.
Speaker 4: Market the first of all, is not unexpected, is actually
Speaker 4: better than we anticipated. So we are really pleased with
Speaker 4: the trading volume and the attention that we are getting
Speaker 4: from investors.
Speaker 1: And making private assets were widely accessible to investors has
Speaker 1: long been a goal, not just for you, but for others.
Speaker 1: The challenge was always how to do it. At investment
Speaker 1: firms like Blue Owl and Blackstone, some are choosing to
Speaker 1: do it as interval funds, which would allow investors to
Speaker 1: cash out during certain periods. Was that ever under consideration
Speaker 1: for the private funds that you did launch.
Speaker 4: It was everything was on the consideration. Everything is on
Speaker 4: the table. We like to think of ourselves as a
Speaker 4: rap pagnostic firm. We always look at the best exposure.
Speaker 1: But you're the og ETF firm.
Speaker 2: We are the OGETF forum.
Speaker 4: But we do have target data funds, we have index
Speaker 4: mutual funds and other mutual funds, So there are different
Speaker 4: ways to repackage the content, and for us at democratizing
Speaker 4: a private assets was paramount and this is why we
Speaker 4: said that let's let's be very creative and see if
Speaker 4: there is a way to incorporate this as a class
Speaker 4: into ETFs.
Speaker 3: So this launch was interesting from so many different levels.
Speaker 3: But one of those levels was State Street's partnership strategy.
Speaker 3: Because you have this partnership with Apollo, you have a
Speaker 3: partnership with Galaxy for example, you have a partnership with Bridgewater,
Speaker 3: and actually you just launched this all weather ETF last week,
Speaker 3: which was really interesting to see. So private credit is
Speaker 3: one thing, but when it comes to crypto and when
Speaker 3: it comes to sort of risk parity strategies, theoretically State
Speaker 3: Street could have done that in house. So talk us
Speaker 3: through what the benefit of pursuing these really high profile
Speaker 3: partnerships is.
Speaker 2: Oh absolutely to us.
Speaker 4: You know, brand matters because branded recognition is earned, is
Speaker 4: not given, and the branded recognition really means that you
Speaker 4: are an expert at something. And if we look at
Speaker 4: our brand, Ssgas brand is a market leader in ETFs.
Speaker 4: You know, we created the market with spy. We opened
Speaker 4: the ETF market to the masses. This is what we
Speaker 4: are good at understanding the entire ecosystem. But when we
Speaker 4: want to build other strategies and bring them to clients,
Speaker 4: we always look at who is the best.
Speaker 2: In class and those strategies.
Speaker 4: Could we have done digital assets, absolutely, but we are
Speaker 4: not a cryptonative. That's why we partnered with a crypto native.
Speaker 4: Could we have done risk aparity, absolutely, we would have
Speaker 4: done it, but we partnered with those who started that
Speaker 4: business that strategy with decades of experience the goods of
Speaker 4: risk parity risk parity strategies. So for us, bringing together
Speaker 4: what we do best with what other firms do best
Speaker 4: allows us to bring these best in class solution to clients.
Speaker 3: We have thirty seconds if that. When it comes to partnerships,
Speaker 3: are you pursuing any others? Should we be keeping an
Speaker 3: eye out?
Speaker 2: You should?
Speaker 4: You should be keeping an eye out of our new
Speaker 4: partnerships and more with existing partnerships, because the partnership is
Speaker 4: not transactional. It's what we can do together the entire
Speaker 4: universal possibilities.
Speaker 2: All right.
Speaker 1: So it's just the beginning of these partnerships. And and
Speaker 1: I really appreciate your joining us on a paglia from
Speaker 1: Stagy Global Advisors