Jason Schwarz Discusses Asset Management (Podcast)

and manages a decent sum of assets themselves. But they are a far more interesting and complicated firm that I had any idea prior to doing some research for this conversation. Uh. They are involved in all sorts of really fascinating things, and I think the average person or even the person who works in finance may not really be all that familiar uh with what Wilshire actually does. And I found

this conversation to be quite fascinating. So, with no further ado, my interview of Jason Schwartz of will Share fund Management. My special guest this week is Jason Schwartz. He is the president of Wilshire Funds Management and will Share Analytics, where he has worked since two thousand and five. He has an A bian government from Hamilton College and an MBA from the Marshall School of Business at USC. Will Shire is probably best known for the Wilshire five thousand

stock index. They advise on approximately a trillion dollars in institutional assets, another hundred and eighty billion dollars in broker dealer and r i A assets, and their mutual fund and other related businesses have approximately fifty billion dollars in assets under management. Jason Schwartz, Welcome to Bloomberg. Thanks very great to be here. Um So, I was really fascinated about talking to you because, like many people, I'm familiar with Willshire due to the five thousand index, and we'll

get into that index a little later. But as I was doing a little reading about the farm before our conversation, I was really astonished at the history, the various business lines you you guys have. It's it's really a fascinating company. Tell us a little bit about your background and how did you find your way to Wilshire. Sure so, um I uh, I grew up here in New York and you know it was was exposed to finance, um investment management.

I had an early kind of internship at at an R I a a multi family office here that was engaged in some you know, manager research, manager selection activities. So I had a bit of a uh some early exposure to to that, you know, being able to sit across the tabble from uh you know, portfolio managers and investment managers and really really interesting um. But I, you know, like a lot of young people, I I sort of had a number of um uh you know, career experiences

in my twenties before I went to business school. I did a little bit of sales and marketing, a little bit of technology, a little bit of finance, and I got to business school. Uh and I and I chose to go to uh spend two years in southern California at USC not nothing worse weather in the world, you know, and and it you know, as a twenty six year old it it seemed like a nice place to to park for a couple of years. But uh, you know, as a as a you know, as a New Yorker,

I would then you know, immediately return right. It was not a place to stay. Um and you know, after about three months, uh there felt like, um, you know, this place certainly isn't isn't so bad? And and I'll say that's really where um we all have sort of

pivotal moments. And and I was uh started business school in two thousand and one, right, so post kind of dot com bubble, and uh, you know, job market was still was still tough, and you know, after business school, I just needed a job, right And and was um, I think like a lot of young people, was you know, cast a wide net and wash you know, looking for jobs. I would say not necessarily in in my areas of passion,

per se um and and and um. In my second year of business school, Barry we uh I was I was part of this um seminar and applied portfolio management, which allowed us to kind of manage a portion of the school's endowment and really get kind of a taste for for managing assets, managing money. And as part of that, we were able to visit a number of of different

investment organizations up and down the West Coast. And one of the firms that we met was Dimensional Fund Advisors d f A, which if you've ever been to their office in Santa Monica, they had at the time they had the top uh two floors of this gorgeous ability looking right out at the ocean, and we're being hosted by a number of folks at at at d f A, and there's maybe ten of us, and we're sitting in this boardroom looking out over the ocean. It's maybe eighty degrees.

The beach is packed with spectacular And I reached to my friend who's sitting next to me, Craig Greenwald, and I said, Craig, I don't care what I do. I just want to work in this building. And so, you know, flash forward two years. I was working as a management consultant because I just needed a job after business school and that seemed like a respectable thing to do. And um, I was still, you know, sending out resumes and uh, two years after business school, I you know, i'd probably

sent Wilshire um a bunch of resumes. Had done some research and it turned out willsher was in the same building as d f A and so and so is that where you were still working or has the headquarters since moved? We are still there, and so you get you get that actual view that you were every single moving for. And I'm more impressed that USC actually gave their NBA students part of the endowments and run How

how did that work out? That was great? I mean that was you know, I UM owe a huge debt of gratitude to that program and the UM professor Supin cou who worked with us. It was a great, a great opportunity and UM we we were divided into a few different teams. UM there was like a MidCap group, there was a large cap group. You know, some folks in the community had had donated money for us to UM you know, kind of mess around with an experiment with you mean, separate from the usual alumni donation to

the foundation. A separate pool of money was raised for this is for the NBA students to sort of get their feet wet correct managing real asset. That's right, that's wow,

that's fast. What was the performance like? Oh man, it was you know, that's a long time ago Thererea's I would say that was not an easy period to be an investor, right after the dot COM's, right before the financial core certainly, right, I mean it was it was you know, we were still we had all through the nineties, right, were raised on you know, go go growth stocks and technology,

and so it was a completely different you know, paradigm shift. Uh. You know, value was was obviously doing well, um, but small caps and growth were not. You know. But what was interesting is is for me, UM, it brought to

the forefront the different roles really within investment organizations. And so interestingly, I, you know, had at that point developed a facility with numbers and was you know, kind of studying the space and and all of the you know, modern portfolio theory and uh, but I, you know, had realized that where my passion really um was at at that point was was not so much being an analyst in the trenches with the numbers every day all day.

But but if I could, gosh, if I could get a role that allowed me to engage with clients and and and do some of the other things related to working in this industry, wouldn't that be great. Let's talk a little bit about the product you're probably best known for, the Wilshire five thousand, which contains these days about thirty five hundred stocks. Is that right? Why doesn't the Wilshire

five thousand have five thousand stocks? So, um, you're you're correct that there's just under thirty five hundred stocks today in the Wilshire five thousand. UH. The Wilshire five thousand was UM created in nineteen seventy four, and at the time it was the first really broad based measurement of the US equity market. And still today when people refer to the total you know, US stock market, they're often

referencing the Wilshire five thousand. So UM, you know, it was a really important innovation for US, UH dating back to the to the seventies. And and the reason um there was roughly five thousand securities when the Wilshire five

thousand was launched. UH, the peak was UM as you probably know about seventy five hundred securities UH in right, So that was you know, in an environment where companies were racing to go public right to say the least, to say the least, and so uh you know, post dot Com crash, there were a number of de listings. There were companies that clearly went out of business, so

that dramatically lowered the count delistings. A lot of listed stocks ended up going pink sheets and boarding boards, and especially the micro I think there was some thousand or two thousand microcaps that fell off fell off the radar, So there really aren't five thousand investable companies to put in the in the five thousand even if you wanted

to write and I think the other the other. Um. You know, key theme in today's environment really is around private capital, right, so companies are staying private for longer UM and are able to do so without needing to go to the public equity markets to raise capital. So so there is you know, the the I p O environment has not been what it was in the nineties, and so therefore there are roughly publicly traded securities today.

Look at look at companies like uber and we Works and giant multibillion dollar firms years ago, they never would have been able to get that large, to say the least. So so let's talk a little bit about UM what your assets look like and what the company actually does. So you have we were talking to all, you have about a hundred and eighty billion dollars in assets under management. How does that break down? Is that stocks, bonds, non

public assets? That what's the mix of that? So UM we UM we have about a hundred eighty billion dollars in assets that we advise on for what we call financial intermediaries, and these are organizations financial institutions that ultimately serve individual investors. And so this this really for us, for for our organization, stems from the work that we've done in the institutional space. So um, you know, we

talked about the Wilshore five thousand. The Wilshur's first decade in the nineteen seventies was really as a as one of the early pioneers in applying technology to solve investment management problems, and so um, the WISH five. I have to interrupt you at this point and point out that your founder is literally a rocket scientist who was that JPL before forming Uh will shure that's right, Yeah, that's right.

So that's that is a really important it's a great story, but it's also a really important part of our heritage. So Dennis Tito, Uh Wilshre's founder, currently our our chairman and CEO, still active in the business. Uh was a JPL and was was an aerospace engineer. And this was at a time where the most powerful computer technology, UH was resident NASA JPL where they were, you know, trying to figure out how to how to program the trajectory of of unmanned spacecraft. And so as the space race

was winding down and that was really Dennis's calling. He was called to, uh to participate in that um so late sixties, early seventies, Dennis was was thinking about how to transition and and you know, ultimately how to make some money and and really recognized at an early point that intersection of investment technology UM or information technology and and finance. And so the first product that Wilshare launched in nineteen seventy two was was one of the first

commercially viable ways to calculate an equity beta. And so that was nine seventy two. And take you for granted, you could do the log onto a Bloomberg or even use a website and generate half the data points. We just take for granted that didn't exist back and this was the stuff of I mean, this predates me um uh. This was the stuff of slide rules and and and you know really sort of you know, uh, hard computational math and so applying really strong math to solve investment challenges.

Um So, the first you know, commercially viable way to measure an equity beta, which became our kind of multi factor risk attribution model which exist today. By the way, multi factor attribution risk model. Right, so you're trying to figure out what is it it is that's actually driving a market's gains? How do you attribute that to to

what specific elements? In fact, that's exactly right. So if you are able to decompose a manager's return into its component pieces and isolate, you know, all sorts of different factors, um, you can basically separate was this manager good at picking stocks or was this manager Benett fitting from an overweight to energy or technology or momentum or certain just really leveraging up and taking a lot of risks or a lot of right. So so it's it's for us the

essence ultimately of investment management. And we talk about how we got there starts with with the foundation and risk management, and so those tools didn't exist, so will surebuild them through the seventies and you know other tools like UM. You know, one of the first asset liability models for pension funds in order to match the future liabilities and

obligations to their current portfolio. Is that that's exactly what'sing that all these things we take for granted did not exist at one point in time, and not a hundred years ago. We're talking thirty five years. That's right, and and and and the pace of change continues to be you know, rapid, but as much as uh, the business has changed clearly um, you know, risk and the ability to measure UM and present that information is critically important.

So this was this was Wilshur's first decade and was you know, really known as a as a pioneering provider of these types of risk applications. In one we we launched one of the first full service US consulting businesses. And and the goal here was to not just provide tools, but to provide advice to pension funds and foundations and endowments to help them apply some of these tools, asset liability management, to create acid allocation policies, to help them

select managers, to help them build their portfolios. UM. And So this is this, this is when you think of UM, the work that investment consultants do in helping pension funds uh you know, create uh you know investment programs designed to serve their participants really in perpetuity. Wilshire has been at the forefront of that business for UM for almost three decades. Wow, quite fascinating. Let's talk a little bit about how the business has changed at will Share over

the past, um a couple of decades. You've been there for fifteen years. You've certainly seen a lot of changes. And we were discussing previously how the firm just really began as a technology and analytics company. How has the

past decade or two changed your business model? Sure? Well, I I joined Wilshare in two thousand five into what was at the time of relatively new, um new business that Wilsher had created called Wilshire Funds Management and UM, you know, this was in its early days, and that the idea behind Wilsher Funds Management was to take the firm's institutional expertise, it's risk management capabilities and provide investment advisory solutions designed really for financial advisors and their individual

investor clients. And so UM, you know, our first clients at at the time and we only had a handful were insurance companies, UM and some broker dealers that we're looking for the same types of multi asset, multi manager kind of risk managed solutions that that you know, our pension fund clients were were able to to, you know, to have. So that means not just going out and buying a mutual fund. But having access to a suite

of different different managers and different asset classes, is that right? Right? So it's it's you know, when we look at the things that institutional investors UM do well, and they tend to invest in a lot of things, a lot of asset classes, right, they own a lot of asset classes.

They're highly diversified. UM. They typically implement those views with managers UM also now increasingly you know, passive components of those portfolios UM, and they blend everything together in a way that's designed to to really optimize a particular outcome. Financial advisors, you know, in many cases and most cases are doing the same thing. Uh, certainly those that are using funds or fund products or ETFs to build portfolios. And so you know, the market has been shifting to UM.

You know that of of more of an advice embedded model, and Will Shure has been able to participate in that, and so I you know, it's fortuitous the timing of when I joined the firm. But you know, over the last you know, decade or so, we've grown, you know, rapidly, UM as one of the you know, premier providers of these types of services to the intermediary market. So let me ask you about a division that caught my eye when I was doing a little homework. What is the

Wilshire Segregated Portfolio Companies. Right, so these are, um, these are at a fancy name for our Cayman hedge fund platform and so these are you know, this is a platform that was created actually in two thousand and five,

right around the time that I joined. At the time it was created, there was this this belief that still exists in some respects today that that you know, if you're able to, you want to hire a hedge fund, right, you want that that hedge funds trading prowess, You want their exceptional ability to uh to to buy securities and generate performance. But um, you know, many people may be uncomfortable with the operational risk that comes with that, the fact that, uh you know, you don't have a lot

of transparency or control over those assets. Necessarily you're just a an investor in an LP. And how do you pick out of the eleven thousand funds and pick out of the eleven thousand So we set out to solve that in two ways, one of which was structural, where if we could essentially just have the hedge fund manager run a separate account right where they just have trading authority, but will share controls the counterparty relationships, etcetera. UM and

will share as a fiduciary. Right, would would vide a level of of you know, trust to the market, to our clients. And then the other you know element of that is if we could identify you know, highly skilled investment managers using our research platform, using the fact that we you know obviously are engaged in a lot of these activities for you know, a trillion dollars in assets. We have a combination of buying power we have we think the ability to separate you know, skill from luck, etcetera.

So and a pretty big network, Uh contain their ind correct you guys do something similar on the private equity side, you break it out separately or is it all part of the same platform. So that's a different that's a different business unit wills for private markets UM and and you know, similar in the sense that that that businesses is you know today looks much like a private equity

asset manager. UM you know started out as as building customized fund of funds for for institutional investors and today uh, you know, has a large array of a fund of funds increasingly customized advisory work in the private markets. Uh makes sense. I've been racking my brain trying to figure out who a competitor tools sure is and I can't really think of anybody. I mean maybe S and P, but even them, it's not really the same. Like who

do you look at as actual competitors, if anybody? Right, So, I think you have to look at the different components of our business business, which you know, as you've noted, is broad based. You know, look on the consulting side of our business. UM, a lot of you know, large fortuitous competitors there, the the you know, the the Towers, the AONs um, the mercers of the world. Uh, you know, as well as a number of mid market players you know in the work that we do. UM in the

financial intermediary market. UM. You know morning Star is a you know, a formidable competitor obviously as a great brand in the retail advisor community. UM, you know, certainly on the index side of our business, right uh. Uh you know foot see M, S, C, I, SMP. On the private market side, probably firms like Hamilton, Lane and and others. So, so you know, because we don't do one thing we have, um,

which I think is a great strength. Um. You know, we compete with different people in different parts of the market. Makes sense. You know. Earlier we were discussing Dennis Tito, whose background was astronautics and aeronautics and uh, he also is somewhat famous for being the world's first paying space tourist. He went up to the was it the International Space Station? Is that right? Um? So given that background, how did that impact how will Shure developed? Was that significant or

just an interesting footnote? Yeah? I mean I think we it's consistent with our you know, our heritage. UM. And Dennis, uh, you know, this was this was his passion early in his career and um, you know, had an opportunity. It's actually a remarkable story of persistence. UM, because you know, it was a difficult thing to do. He was I think at the time, the oldest Uh. I think it might have been the oldest person. He's gonna kill me for saying this, but the oldest person um launched into

launched into space, let alone as a as a civilian. Uh. He had to train you know for six months in in in in Russia, where they you know, really tried to get him to drop out. Um, and you know, and will we tell the way we tell the story is, you know, this is a guy who's has been focused

on risk management his whole career. You know, My understanding of the way that the payment of structed was structured was, you know, there was you know, a certain amount to pay him up, bring him up to space, and then uh, you know, a larger amount to bring him back down. Another words, create an incentive to keep him alive. That's exactly right, That's very that's very, very funny. So we were we were discussing, Um, I'm gonna say that again.

So the firm was pretty early in the world of index is the wilsh for five thousand and seventy war I think that was the year Van Guard launched. So you were right there at the beginning of uh the indusseries. Back then, most indexes were used as benchmarks. Now they're really used as investment vehicles. How has that affected, uh, the world of investing and how has it affected your firm? Sure, well, it's you know, for as a manufacturer of of indexes,

it's it's certainly an economic opportunity. I think you know what started out as you know, indexes as benchmarks as you as you know it is as really uh blossomed or skyrocketed into is a great proliferation of indexes UM, you know, and part of that is because you know, asset managers are looking for very discrete ways of measuring their performance and in some cases, you know, looking for

ways to to tell a story against a benchmark. Let's just get a better benchmark or different benchmark UM, which which you know, I think is is I would say, isn't uh not a particularly healthy part of the industry.

But I think the their element which has been you know, good for our business UM and those that are that are able to you know, as a as a branded entity create indexes is you know, you have all this this intellectual property, You've got these smart people, You've got these quants, right and now increasingly with you know, factor based you know, quantitative strategies UM, one can create UM you know, investment ideas, right, and so the pace of

innovation around investment ideas, which can then be translated into an index right, which can then be licensed to a manufacturer and et F firm to package that license package that that index UM and deliver that to the marketplace. Is you know, is creating another wave of of uh you know, product growth. And that's everything. That's everything from smart data to factor based investing too, E s G too, pretty much you name it. There's an index for there's

an index underlying that strategy. Um, there's a crypto index coming out, there's a weed index coming out. I mean it's it's astonishing if you could come up with an investing style someone either has or is about to make an index. Is that a growth opportunity or are we now over indexed? Well? I think um, uh, probably both. I mean it's a huge opportunity for us. Um we're

participating in that. I think, you know, for us, it's it's where can we bring great ideas with with partners um, you know, not in a desire to just just flood the market with with product, but it's a great way to uh you know, we think bring new innovative concepts to the marketplace. But but yeah, I mean I read there was a study recently that that looked at the number of indexes relative to total listed stocks and it was like, you know, like there's something like four times

the amount of indexes as there are just global stocks. Right, so there is clearly this vast proliferation of indexes um you know, and and you know, we could also ask the question of, you know, does the does the market need you know, to we're three thousand ETFs and I think the answer to that is probably no. There's a

there's a real Darwinian battle for survival. And when we look at the distribution of assets and e t f s, it's very much a fat head long tail sort of there's a handful of winners, it's black Rock, Vanguard and then pulling up at the number three State Street and then everybody else. Our our index is more or less the same way as it a handful of big winners

and then a thousand also rounds, right. I think in the beta space that's correct, Berry, I think you know the beta race has has has essentially is it's that's pretty much correct. And and you know and and uh I shares and and and Vanguard and um you know now Schwab and you know, a select few really own and own that market, right and and you know what is the what are the prices for you know, broad

market beta it's you know, increasingly free, right. But I think that the market for UM, you know, value add strategies, for more niche strategies, for for strategies that are designed to provide differential types of exposure, is still strong, and you know, ideas that can be packaged into solutions, not just you know, beta market beta per se um. You know, I think the market for that will continue to be strong, and great ideas will always have a place in investor portfolios.

So so let's talk a little bit about indexing and passive and I would be remiss if I did not bring up the so called robo advisors or algorithmic asset allocations. How does that fit into the Wilshire worldview? Are these potential clients? Are they competitors? Are they just hey, here's a cheap way to probably do it better than you're gonna do it yourself. What's your view on that on robos? You know, I think, um, look, I mean, I think

there's a number of things here. I think if you if you think about the way in which um, you know, in some respect, asset managers engage with the market, it's it's archaic in the sense that most asset managers don't actually communicate directly with their clients, right they that makes sense, right, and so so I think there's this opportunity which we're seeing, you know, a level of disruption where you've got this

really what is a direct to consumer model? Right? So, Um, which if we're talking about Van Gord or Swab for sure, if you're talking about all the third party robots were using State Street, Black Rock, Vangard, etcetera, they are the intermediary, right but there but you know, we take like a Better Men or a well Front or or some of

these firms. Um, it strikes me that they are you know, in in many respects disintermediate and the traditional relationship between a financial advisor and a financial advisor's client to some to something. The question I've always won it about are they pulling their clients from advisors or they pulling their clients from previous do it yourselfers who kind of said maybe I need a little help with this, and I honestly don't know. I don't know either, and I think

I think probably both. I think, you know, maybe it's similar to online banking, right, online banking and the thought there would people no longer go to branches and um, you know, self directed brokerage was going to put everybody out of business. But but no, I mean there's there's a level of self selection. I think. I think clients will matriculate from a um, you know, from essentially a

self directed uh experience to a financial advisor. I think, you know, uh, you know, as as one's needs become more complex, more of the financial planning component becomes more relevant. So you know, I see this as a as as

sort of an app as an application. I also, by the way, when we think about millennials and how millennials are going to consume investment advice, I I you know, the notion of you know, when I was a kid having dinner right around six or seven o'clock, the phone's ringing, and it's like a you know, Smith Barney broker, right and and so you know, our our kids gonna get coal called by uh, you know, by a broker at

dinner time. They don't even have landlines. The last interesting data point I saw on that was by next summer, by the summer of half of the calls coming into your mobile phone are going to be spam. So I don't know if they're gonna be people pitching stock, but I think that method of selling certainly has if not disappeared fullen by the wayside to a large degree, and was the last time anyone got a call from someone pitching them you gotta buy this, I p O. I

don't think that's happened recently. We have been speaking with Jason Schwartz, president of will Share Funds Management and will Share Analytics. If you enjoy this conversation about all things index analytics, fund management and institutional advisement, be sure and come back and check out the podcast extras, where we keep the tape rolling and continue discussing all of the above. You can find that at Apple, iTunes, Overcast, Stitcher, Bloomberg

dot com, wherever finer podcasts are sold. Be sure and check out my daily column that's at Bloomberg dot com. You could follow me on Twitter at rid Halts. We love your comments, feedback and suggestions right to us at m IB podcast at Bloomberg dot net. I'm Barry rid Halts. You're listening to Masters in Business on Bloomberg Radio. Welcome to the podcast, Jason, thank you so much for doing this. I've been looking forward to having this conversation for quite

a while. I'm sort of fascinated by what Wilsher does. It really is a unique firm compared to just about any other firm you want to put your your finger on. You guys do a lot of different things across a lot of different business lines. One business sector that I didn't get to during the broadcast portion, but I have to ask you about is and I know you don't run this division, but I'm fascinated by it. The outsourced chief Investment Officer or O c I. Oh what exactly

is that? Because I'm I'm somewhat familiar with it, but probably not as much as I should be sure, So, UM, the O c I O business model is UM essentially calls for the discretionary management of and acid owners fund more portfolio. And so so if I'm an R I A and I have a chief investment officer, or I don't have a chief investment officer, I could outsource that that responsibility. Well, so O C I O is you, as you reference in our consulting business provides this service.

UM is really resident within the institutional pension on foundation and endowment community. And what what it refers to really is is, you know the traditional way historically that that pension funds have consumed investment advices through a consultant meeting with an investment committee and board of trustees, generally providing

non discretionary advice. So the consultant would make recommendations and say, I think we should be uh, you know, using these managers and we'll do an asset liability study and and we'll you know, construct this this really powerful acid allocation. And then it's either followed or not. It's either followed or not um And you know, so with that, the uh, you know, the the asset owner has to have professional staff, they have to have governance frameworks, they have to have meetings, etcetera.

And so with O C I oh, it's all right, consultant, all right, wil Shure, here's a billion dollars. Do it for me, right, you make the decisions, will set up the frameworks, the governance. Uh you know, there'll be certain parameters. But instead of you having to run all your recommendations through us and we meet for you know, three months six months and discuss, it's bring your best, you know, your best thought leadership to bear, but under an environment

where you have discretion. And so basically that I'm guessing here, is that really aimed at some of the smaller funds that may not have the administrative and staff and the resources to run a full ce I O office, and with all the bells, whistles and analysts, et cetera, is that the sweet spot of that. That's that's fair. I mean there's been some some larger um you know, some larger of O c IO engagements, but generally, I think you're starting to see a pretty clear bifurcation, you know,

sub a billion dollars. I think it's getting increasingly difficult to make that case for lots of overhead um, you know, and increasingly we think the market's going to go more O c I oh, sub one billion, you know, an over over a billion. They'll be all sorts of different

levels of customization. And that's especially if again I'm guessing here, but small endowments, small pension funds where there are future liabilities, and if you have a big and expensive stay relative to the size of the assets and the management, it really could be a drig on long term returns. That's absolutely right. It makes a lot of sense. I think of ETFs is just a rapper that happens to be tax advantaged versus traditional forty act mutual funds. Am I

grossly oversimplifying it? Or is that basically what E t F s are? I think that's I think that's right. So, so what does that mean in terms of you just discussed intellectual property involved in managing and creating indexes. Are we going to see more and more of those type of indexes become et F s? Uh? What's the future we we talked about a few thousand of them are out there, not all of which are attracting assets. What

what's your view on the direction of the t F industry? Yeah, I mean I think that they'll continue to be a proliferation of of e t s. I think will continue to see kind of a winner take all. Um. You know, it's early on the beta side with more simplistic et F s. Scale matters, you know, brand matters, but but you know, the barriers to entry are are pretty low, right, and and so I think you're you're going to continue to see a lot of additional e t F s. Um,

You're also going to see more funds, right. I think last year was was the first year that we uns. Yeah, I think we're gonna see more more fun products to mutual funds have just about a century of history. What what does it look like going forward for them? We think that the mutual funds will continue to exist. We're seeing fees come down, We're seeing increasingly um, you know, fees being stripped out of mutual funds. Uh, that trend will continue. UM. You know E t f s are

are certainly helpful in that respect. UM. But you know, I think we ask ourselves the bigger question of could we offer personalized s m as for individuals? Right? So, so instead of everybody's in a pool vehicle, uh, in this mutual fund via coal, Um, maybe we get to a point where technology will allow for for more mass customization, so everybody gets their own kind of s m A UM. And I think that is something that um, you know,

model delivery u m as. These are all sorts of innovations that are kind of at the at the fringe here. So someone says, I want the SMP five hundred, but I don't want I don't want gunstocks, or I don't want gambling stocks or whatever it happens to be. You get the SMP minus whatever or plus whatever it is you want. Is that what you mean by customers? Right?

And that exists today at the higher end of the market, right where where a wealthy individual can have an investment firm create a customized strategy, whether it's for for tax planning purposes or for um, you know, stripping out certain types of securities. UM. You know, E s G does

this right pretty well, pretty well. But I think that the the ability to create those types of vehicles for smaller accounts sizes will become increasingly a reality, which you know, then calls into question the viability of the mutual fund as really the kind of default package for many UH individuals. Dave Nadig is UM managing director of ETF dot com, which is owned by A. S BOW, and he is

a big believer in that exact approach. Everybody gets a custom s m A because the technology has made what used to be complicated in time consuming and expensive pretty much a couple of lines of software and off you go. I remain in unconvinced, but he and and you both seem to be thinking along the same lines with that. Is there really a big market for that today or is that a future sort of sort of UM product

that people could customize if that's what they want. I'm also thinking of things like motif where you could kind of create a theme and it's very low cost to do that. Yeah, I think it's I think it's in the future. I think the look I think their structural impediments to change in the traditional way in which investment services are are distributed. It's why you don't see e t fs on on d C menus. Right from a

record keeping standpoint, it's difficult. So I think they're they're going to continue to be kind of institutional impediments to change. But you know when we talk about robos and digital advisors and and some of these new startups, you know where you've got this sort of algorithmic way of creating you know, high volume portfolios, highly customized portfolios, and we're doing parts of this too. Um. I think we'll start to get there, but it may not be the start

with the more entrenched players. Why is it that we don't see more ETFs in four oh one K type vehicles? Is it just inertia? Are the mutual the the I'm thinking of the admiral type shares of mutual funds are very very inexpensive compared to the average et F. Certainly the spider SMP five is dirt cheap. But for for most four oh one k is the mutual funds. I want to phrase this correctly. For the better four oh one kse you have options of very very inexpensive mutual funds.

Why have any TFS fund that found their way into that? Is it simply inertia or are there other reasons? I think I think there are other reasons related to record keep the way in which record keepers UM and those you know systems, some of which are are you know, kind of older systems are designed really to for mutual funds, not for e t fs. And is that simple? Huh? That's quite fascinating. So I know, uh, I only have you for a finite amount of time. Let me jump

to my favorite questions. UM tell us the most important thing that we don't know about Jason Schwartz, How about UM? I actually started my career in Hanoi, Vietnam. Really, that's fascinating. What were you doing in Vietnam? So I I had an opportunity to go over there for a summer really as an internship UM in and UM and ended up

staying for a period of time. I worked for a private equity firm Uh, the US normalized trade relations with Vietnam, and so I stayed and worked for the Department of Commerce. Is fascinating, absolutely fascinating. I have a buddy who was doing a speaking tour of Asia, Michael Covil, who was a prior guest way back when did a speaking tour of Asia, Hong Kong, Beijing, went went through everywhere, ended up in Hanoi and called his roommate and San Diego

and said, send my stuff, I'm not coming home. He said. It was that fascinating of a place. Yeah, it was amazing. It's it's it's the wild West and the new face of capitalism. Is that well right, And at the time it was it was really kind of early Lee and in opening up and liberalizing the economy, and uh, you know, up until U S companies were not able to do business in Vietnam and so maybe legally right, and so

it was absolutely fascinating, absolute wild West. But it really a great way for me as a young you know, as a young person to be introduced to business, to do so in a different in a third world communist country. You know, it's where everybody should start their careers. That's very funny. Tell us about some of your early mentors who helped guide your career. Um. Yeah, so there was a guy here, Bill Aaron at at Executive Monetary Management,

was was when I first kind of um investment related jobs. Um. You know remember him telling me to really, uh you know, focus on a calling, not so much a job, and

that always stayed with me. You know it will sure, you know, uh cliche, but I certainly wouldn't be where I am today without the time UM that folks like, um, you know certainly uh Larry Devonzo who hired me, a guy named Chuck Roth Chip Castile who was a former b G. I was our c I oh, is the smartest person I ever uh worked with and was one of those guys where you know when you have them on your team and you go into a meeting, you just know you have the smartest person in the room

on your side. But I would ask these these all of these folks questions and they were gracious with their time and um, and that's really you know, Dennis became a has become a mentor to me as as as as as we've moved along. UM, that's a pretty good list. That's a good list. So let's talk about investors. What investors out there influenced the way you think about markets, thinking about investing. Who's affected your your perspective? So I for us um and for me more kind of in

that acid allocation manager selection space. Um. You know Harry marko Witz. I knew you were going to go. Yeah, it was the name on the tip of my time. Yeah. So so you know that the grandfather father of modern portfolio theory, Bill Still by the way, very active both in me and Sharon both active writing, publishing. Interesting. Yeah, anyone else before I interrupted you? Anyway, there was a

gentleman Barton wearing Um who wrote some papers. Uh he was at at at b G. I. You know that was a group that was doing some of the most powerful work in kind of we call active risk optimization. Right, how do you how do you build a portfolio of managers and really optimize that outcome and control for risk, moving from you know, sort of total return total risk to active return active risk. And I, um, you know, devoured that literature when I was early and trying to

figure things out. Very interesting. Um, everybody's favorite question. Tell us about some of your favorite books, be they fiction, nonfiction, invest and related or otherwise. Well, I you know, um, sheep is sheepish Lee. I will say that my list isn't particularly long. I have, um, I have three kids under the age of ten, so your busy. Um. But but uh, I you know I did read Shoe doog um Phil Knight, Phil Knight very recently, and I I it was one of those books that I literally couldn't

put down uh fast. They were on the verge of collapse for like the first ten years of their existence. It's amazing starting on the edge, right, and that you know that, Um, I think how he how the definition of winning changed for him. You know, originally it was, you know, win it all costs. It was this ultra competitive, sort of more narrowly defined I must be successful, um, which ultimately kind of became more of you know, we want to make contributions. We wanna you know, do things

to change people's lives. You know that it became bigger, right, And I really could relate. You know. I think a lot of us, as we sort of move along in our careers, what becomes of Gosh, you just want to I want to be successful. I wanted the company to be successful. Moves to I want. We want to you know, help help change or improve people's lives, improve their outcomes. And I really you know, he talked about that and it really resonated with me quite quite interesting. What are

you excited about right now? Uh, in the industry in whatever? Well, I think that the you know, we talked a little bit about technology. UM, I think there's a lot to be excited about technology, both as a disruptive force in

changing the way that people consume investment advice. Um. You know, the things that the ways in which we use technology today to to automate certain tasks and you know, increasingly really automating elements of the investment process, even um, the delivery of materials to clients, you know, as we think

about like you know, from paper to portal. Right, the pace of change I think that we're living in right now is so rapid and it's exciting because you know, there are elements within the financial services space that, um, you know, I've probably been untouched for a long time and to say the least at least, and so that you know, that's either horrifying, right and scary, or it's a huge opportunity. And I think it's a huge opportunity, and I'm excited to be able to participate in it.

Tell us about a time you failed and what you learned from the experience. Um. So you know long list here, um I you know, I hiring is an area where um so challenging, so challenging, right, and I think it's it's an area to where you know, uh, you go to school and you learn. You you go to graduate school,

you learn a little bit more. Uh. You know, you you have opportunities to to work in different jobs and assuming one doesn't work in a human resources capacity, you know, hiring is not ever really something that that I think we learn how to do right. Not it's not a class and class it's not taught. Um. So you have this you know belief that it's kind of intuitive. Great

people just hire great people. Um And and I think it's something at I personally actually spend a lot of time on trying to get better, trying to approach it from more scientific way. And and you know, so failure would failures would clearly be the times we got it wrong, the times I made a mistake, Um, wrong person, want, wrong role, not a great fit. Um you know in all of this sort of classic in retrospect biases that

that that prevail. Um, but there's you know, that's sort of top of my list right now in terms of I think that's the hardest thing that any company has to do. It. It's just this is a little bit of luck. It's just one of those things that I've had. I've had numerous people sitting in that seat say variations of what you're saying. Hiring good people is the hardest thing to do because it's just not a natural skill set.

It's amazing. What do you do for fun? What do you do out of the office to kick back, relax and uh have a good time. So, um, I have um actually become slightly obsessed with Olympic weightlifting really yeah, so that's that's become kind of my my hobby. What do you what do you be? No, no, no, it's this. This is this is the clean and jerk and this is the snatch. So these are the two lifts that are in the Olympic. Yeah. That is not easy to do. Yeah.

So so that's I mean, and there there's a reason the Olympic lifts, right, and that's become um a real probably you know, the most challenging and a physical thing. Um, and I've done which which has been how did you

find your way into that? That's a yeah. So so I think a lot of if you're going to gyms these days, the sort of cross fit, um, you know, flipping over tires, slipping over tires and harpies and and and uh pull ups and and including some of these lifts and she you know folks you know dropping barbells and you know, chalk flying, and you know, after years of just you know, more of kind of the bench press and and you know, whatever it was to kind

of just stay in shape. You see these guys slamming bars and and that would be a great way to to kind of blow off scheme and um and yeah, I just started, you know basically just you know, had somebody kind of walk me through it and continue to to uh to try to progress and and enjoy it. So, so what do the Olympians do in in those sort

of way what sort of numbers? Well, so we think about the the the some of the best lifters are lifting from a barbell from the ground, from a dead yeah, on the ground, over two times their body weight over their heads. So if you just think about it from the standpoint four hundred plus pounds, you know, over their head um in a variety of ways. And and what's what's what's really interesting is it's not just about brute strength.

It's about speed and technique and and that's where it becomes this, you know, and and obviously the sort of the mental kind of agility. But um so, it's funny. It's funny you say speeding technique. I was just having a conversation last night. The woman who won the US Open in in Forest Hills. I'm drawing a blank on her name, was a whole big issue with Simmena Williams. And she crushes the ball like a hundred and thirty five. She can't be more than a hundred pounds, soaking wet,

she's this tiny thing. And the answer is it's all technique.

It's not power. You're not just muscling it through. I had no idea that was true for U, for Olympic deadlifts like well, and I would sort of say that it's it's actually true for a lot of things in life, thankfully, thankfully right for those of us who aren't necessarily six to inject yes absolutely and um our our last two questions, what sort of advice would you give to a millennial or someone just starting their career, uh, if they were

interested in going into finance first, I would say, there's a lot of different roles within, you know, within the finance realm, and so you know, I'm a good example of I'm actually I didn't rise to the ranks as an investor and so um, you know, I've been always more focused on the client and business side of the business of investment management. And so you know, there's there's a number of different roles available and to sort of

learn about industries and roles, um, you know, is incredibly important. Um. The other I would say, and sort of take a page from Phil knights um memoir about seeking a calling and and really using your twenties, where the currency is really less about you know, how much money you're making and should be more about the knowledge both about you know, what makes you tick um and what you did what doesn't and and really to ultimately try to find that calling,

because it's it's the true calling that's gonna make uh, you know, the hard work more fulfilling, the disappointments you know easier to bear, and the highs you know when those highs come. UM, and this is what what Phil Knights says, that there's nothing like it. And that's been certainly my experience and our final question, what is it that you know about the world of investing today that

you wish you knew twenty years ago? Well, you know, I'll say that, UM, simple beats complex almost all the time. And UM, you know, I think that's something that you know, the further I've come, you know, the more kind of the realization that the really complex difficult to unpack. UM, you know, strategies, whether it's investment managers, whether it's you know,

the latest kind of whiz bang you know idea. UM. Oftentimes you know really well diversified uh, portfolios, UM you know really good Uh you know investment managers or passive products, UM do really really well. We have been speaking with Jason Schwartz. He used the president of Willsher Funds Management

and wilsh your analytics. If you enjoyed this conversation, we'll be sure to look up an inch rore down an inch on Apple iTunes and you could see any of the previous let's call it two dred and twenty prior conversations that we've had. We love your comments, feedback, end suggestions right to us at m IB podcast at Bloomberg dot net. I would be remiss if I did not think our crack staff who helps put this together each week. Attica val Brun is our project manager, Medina Parwana is

my producer. Taylor Riggs is our booker. Michael Batnick is our head of research. I'm Barry Rehults. You've been listening to Masters in Business on Bloomberg Radio