Are “Buffered” ETFs the Next Big Thing?

have Bruce Bond here. He is co founder of Innovator Capital Management, but you might know him a little better potentially as the co founder of power Shares Capital Management back in the day. And let me let's not understate that he recognized smart Beta before it was a household name. So, and Carolyn, what was the thing that a little spark that made you say we should talk to Bruce Bond

right now? Sure? So, before I covered exchange traded funds, I covered these byzantine products known as structured notes, which have a pretty horrible reputation. It was a really fun beat to cover. It was hated by a lot of people with um pretty critical stories on that industry. But what's really interesting here is that these are e t f s that sort of make better and change the structure of a structure note and make it a bit

more accessible for investors. So it's sort of the marriage of these two worlds that I used to cover um and let me give you some stats on this, so the that we call them buffer or downside protection ETFs before Bruce is going to go into what they do, but they're pretty instant hit um and I'm a little shocked by the numbers. We've got one point eight billion. There's another issue where that has some but that's quite a bit especially I know the markets not up a

lot per se, but it's not down either. These to me have their biggest potential when the market goes down because people tend to search for that like after the fact. So the fact that they got this much and they're a little more on the complicated side, which tends to be a tougher self for e t s typically, but I could see why they have appeal. They do limit your side and that is a very powerful concept. So I'm excited to dive into this time on trillions downside

protection with Bruce Bond. So Bruce, welcome to Trillions. Thank you for having me. So you're You're like, we've set this up. You're kind of a legend in the ETF industry.

Why did you do this? What was the idea? Well, I, you know, I really didn't intendo coming back to being all honesty with you and uh my partner John Southard, he bought a life insurance product that had some type of kind of a defined outcome within the product and he was like, you know, it's really amazing this isn't available in an e t F. I mean, the value proposition here is really neat and uh, it's surprising people don't have access. What do you what is that? Look like,

what is the benefit of that? The benefit of the defined outcome where the buffery TF is? Eric said, you know, um is the ability for an investor to purchase an e t F in today a to understand their outcome a year in the future, depending on what the SMP five does. So instead of just going to the mercy of the market hoping for the very best, hoping it doesn't go down, which is what most people do, you know that you have a buffer toward losses on the downside,

but you're going to participate on the upside. And until now that has not been available in an E t F. So let me stop you right there, because when when someone might here participate in the upside, but let me you're downside, they may go that that sounds too good to be true. Um, just go into that a little bit. Why isn't it too good to be true? And how much of the upside do you get? Do you get it all? No? You know, well you might get it all,

and the thing is you don't really know. So the buffers, there are three different buffers, right, There's a there's a nine percent buffer protects your first nine percent of losses. There's a fifteen percent buffer that protects the first fifteen percent, and then there's a thirty percent buffer, and that buffers

you from negative five to negative thirty five percent. So there's three levels, depending on how concerned you are about where the market is and how much capit you want to preserve and that, and so with each level, as Eric was pointing out, each level, it costs a little bit more to have that buffer, and therefore your cap is adjusted a little bit as you get more buffer. This seems like something that should have happened already. We thought the same thing. I think we were really shocked.

Initially we said, you know, we should do this. This is a tremendous value to investors. Let's there must be some reason it can be done. It's like a structural problem you know within an e t F that it's not or it's a regulatory probably the regulators won't allow it because that, and the more we dug into it, the more we looked at realize, you know, what, this

is possible. There were some structural things we had to do, some kind of aha moments that we had to overcome that hadn't been done in the E t F before. And that's the reason some people, I think gave up on the idea and never accomplished it, because effectively, you're sort of putting an insurance policy inside an e t F and wrapping it up in a breed in a sense, exactly right, speaking of the burriedo, So what is it? What is in it? So? What is in the e

t F? There are seven options positions in the E t S So not I'm not buying equities like I would usually do with an E t F. I'm right, I'm getting options right, and you own options solely with this breedo have a name. Well, well, you don't defined outcome or you know buffer yeah exactly exactly. Buffer for t F. I mean I think buffer e TF, so buffer yeah exactly, that will work. Uh So basically, h there's seven positions in there, and these positions are designed

to provide you this outcome over one year period. I think the important thing for people listening is to understand is that, uh it runs for a year, the outcome period, but then it just resets after a year and then you get another, uh year of the same thing. So what doesn't change is the length of the outcome period

is a year, and also the buffer doesn't change. So if you bought the nine percent buffer, we're going to have that for a year, and then it's going to reset the next year and you're gonna have it again for another year. Year. Is almost like a contract basically in a sense, it's just when you buy the options positions. These are what are called flex options, and it's really

a very simple option. What it lets you allows you to do is put a custom option together, and what that means is you can have a specific start day and a specific end date, and so all the options start on one day and end on one day and then they reset that day and go into a new set of those the following year. And so you just keep doing that year after year, getting as much of the upside of the options industry will give you, but

with a nine percent buffer, fifteen or thirty. And this is kind of solving in a way, you know that problem we talk about with lever gtfs. They reset every day and yeah, and therefore you don't actually get the quarter or the month of that leverage. You only get it one day. With this a little bit, right, Yeah, I mean you I have to come out quarterly. Now. You could buy them in between, but it's ideal to

buy them on that date. And essentially this is a strategy that you could actually do on your own, right, You're just packaging something that might be a little more on the institutional side, Yeah, into an e t F. Yeah, I think that's a great point. I mean, like all e t F you could buy all those securities on your own if you wanted to write. I mean, it's it's just actually, this one is much more complicated than some of those because you have to understand first of

all options, how options work. You also have to understand how to put that position together in order to achieve that outcome for you. So it's more complicated than it would be to put together some type of another et F package. UM and I think the the idea of a one year outcome PARI. If you think about most of the ETFs that we buy that supposedly are going to provide some downside buffer. Typically there's a switching strategy, switches in and out, may not switch at the right time,

might switch at the wrong time. And with these I think the thing that can't be overstated is that an investor advisor they can buy today and understand very clearly. Do I think how much? Do I think the market is gonna go out next year? Oh? I think it's gonna be up all right. Well, I'm gonna get all the upside of the market if I get this. But let's say China doesn't come through, the market crashes, it

could go down tenner fitting. Well, I want to have that buffer in there, so I'm gonna get all the upside that I think is there, and I'm also going to be buffered against all the potential downside I think is there? Uh downside, I don't know what you're talking about right now. It doesn't seem like there could be any downside exactly. Can you take us to the one that's maybe around this maturity and take us through the last twelve months and what it did versus what it

was set up to do up. Yeah, I'll be happy to And and one other thing I want to mention to you. We started out initially offering these quarterly on the calendar quarters, and we kind of decided early on if we did a billion dollars in assets and these within the calendar quarters, when we got to that asset level, we would offer a monthly. So back in June we started offering these funds on a monthly basis. So you have a nine fifteen and buffer every single month being

issued the first of the month. That means, you know, there will be thirty six funds in the market achieving these defined outcomes for investors. The reason that's really important is that an investor can know. As Eric said, you know, people like to buy in early or they want to be at the beginning. I mean, that's part of how these started. The reason they like that is they want to know, Okay, I if I get in, I have

a buffer starting at zero. It goes down right away, and I have all the upside right there, and they don't want to have to think about buying in the middle and that they just want to participate. So we have them every single month now, and having them every month at the beginning of every month makes some a very powerful tool for advisors for a lot of different reasons.

Now let's talk about the portfolio, right, So is this aiming to replace, uh, the equity portion of your portfolio, like the whole thing, or to be like an overlay. I'm seeing people think about all the our ways you could do it just as an overlay over your whole portfolio and say, you know, I want additional exposure the SMP five hunder to the market in general, So I'm gonna buy this, but I have a buffer built in.

But we're also seeing uh advisors some taking their entire piece of their equity exposure and just say, I'm buying this with my for my equity exposure. I'm not going to We're at a tenure bull market. We gotta be getting somewhere near the top. I'm gonna buffer my clients against the loss that's going to happen here over the next few years. I don't want to. I don't want them exposed to that. And uh so we're seeing a

good bit of that as well. The other thing we're seeing a lot of is gonna saying I don't want to expose my clients to fixed income right here, rates are super low. I'm not getting paid to hold them. Rates move around. I'm taking a huge amount of risk. I'm just gonna take some of that fixed income out. I'm gonna move it over into the equity market, get a good buffer there, get the upside of the equity market,

and not risk myself in the debt market. Right now, of all the moments in time that you could bring a product like this to market, it seems like it would be a pretty great one. So what what have the inflo has been like? Because you guys launched when Yeah, we launched last August basically, so about a year ago. We launched the July series in August because we're trying to get it, you know, to July. So we've had one full year in that product and then in October

we'll have our next full year in that product. The July one did exactly what it was supposed to do.

But to give you an example, we started out no one knew what they were, how they worked, or anything, and so you know, we brought them out and we probably in the first couple of weeks did maybe ten million bucks in the three Across the three ended the year we had maybe a hundred and fifty million dollars in those three and then now we're probably in the defined outcome alone, probably around the one point three one

point four billion dollar mark. It's a pretty successful year. Yeah, yeah, I mean listen, you know, UH there's a lot of E t F providers uh that are struggling out there to get visibility, to get asked uts. We're not in any of the big distribution UH systems right now, so we are doing this uh hand to hand, going through the r I A channel, explain it to them how they work, what they are, and they're being embraced by

that channel. So, like any new sensation, once you hit a billion dollars, people start to look at look, maybe I'll get into that. And you do have somebody filing First Trust has put in filings to track a cbo E index that does something very similar. There's look like it's ten percent buffer series years or nine I just real quick try to suss out how theirs will be different or the same as yours. Yeah, well, you know,

they've had their filings in for a while. I mean, it took us a long time to get our filings approved by the SEC. So they basically have duplicated our products and just made them slightly different levels, is what they've done. So we came out with a nine percent buffer, the fifteen buffer, and the thirty buffer. They did a ten buffer and a twenty five buffer. So those are the two that they have versus the three that we have. There's another competitor to that. They're not an actually any

t F structure. They use ETFs. It's a lot of capital. They're called M plus funds, so they're unit investment trust or u i T that uses options on e t f s in the underlying um, so a different legal structure. But the founders, they're the guys running these funds, are these old school structured note guys. They ran the structure note desk at BAML for a while, so I do see some similarities there. They like to say they offer customization, so you can sort of customize what that payout structure

is going to look like. For your note, but another player out there in the space. Yeah, So how big do you think that this overall slice of the e t F kingdom might become? And I'm asking you this because you're somebody who is there in the beginning of smart data, right, and that's become a huge, uh you know, plus of the overall one billion of the overall et F market. This seems like something that a lot of

people could say, we can do this. Yeah, well, you know, this one is harder to do than those I mean, everybody. The the thing about this is, remember we had the SMP five hunter. We got different buffer levels. With those, everybody can come out with their own slice of well, this is how I do it, and this is how you know, it's kind of like act of management almost this one. But I would say that I think the

size of the market is tremendous. If you think about a lot of the insurance products, people that invest in structured outcomes and insurance, you know, is multiple multiples of billions. Structure product market is you know, multiples of billions. You know, there's probably a true one or two trillion dollars within that those marketplaces. So, um, we think there's a tremendous opportunity in this space, and primarily because people don't have

reliable downside protection. You know, they have so called downside protections, but there's always things that can go wrong. Rather than saying I know I have this buffer, this is the buffer I have. I'm good with that. I'm totally willing to give up some of my upside. You know, if you think the investable assets today from individuals are in the baby boomer's hands basically, and they're right at retirement.

They don't want to make their money with yeah, where I got and they're like they're they're like, do I really want to lose my money? Do I really want to take all this risk on? And and so if they can buy something like this and say I still have access to the upside, but I'm buffered against losses, um, you know, that's a tremendous value proposition for them. But insurance isn't free. How insurance it's seventy nine basis points and that's all in. It's a unitary fee like most

ETFs have today. And so that's all anyone's gonna pay. And that is if if you go out and try to replicate this on your own, it's gonna be more expensive than that. If you go out and try to buy a structure product, annuity, anything like that, it's gonna be much more expensive, regardless of what the documentation says. Um you know. Sometimes I know within the annuity products they say they're free in this and that, But I mean, if you try to get out any year, you know,

there's a leve percent UH redemption fee. So I think you have to just be careful and and and look at for what the beauty of these products is, you can get out any time, you can buy them anytime you're not held. You know, there's even instructured product. You know, if they're kind of tie you up, it doesn't happen here. You have the transparency. You can see exactly what's in

the portfolio. There's no counterparty rist remember with the other ones, you know, you're relying on the insurance company to be in business, or you're relying on the bank that issued the note on a structure note to be in business. You know, like our thirty percent product. You know, i'd like to say if the market crashes is down thirty percent, you don't want to hope those guys are gonna stay in business. You want to know you got what you own,

and that's the important time. Can I play a quick game, yes? Can we guess of the nine percent know exactly what you're doing? Yes? And the thirty percent buffer, which is the most popular, I'm going thirty. I'm going fifteen. Also, full disclosure, I knew the answer, but but like, break it down. What's the percentages between each three? It's it's probably fifteen and then the nine and then the third. Yeah, well,

I mean you're good listen to thirty. The way to think about that is and and uh, I think we thought it was gonna be a huge seller at the beginning. To um is that in the cost the same, Yeah, the costs are the same. Is that if you're in the thirty, you're what you're saying is I'm willing to risk five percent, right, that first five percent you can lose,

but I don't want to risk anything else. And so that's somebody who thinks the market is really gonna completely crash and they're willing to take the risk on the five. The other ones they started zero, And so I think that maybe why fifteen has been a little more that

changed through the year though, Yeah, it's interesting. Um, it depends on where the funds are trading, the et f s are trading in the market, because we see a lot of people like right now, I haven't seen the numbers for today, but like the October series is very like over the last few weeks has been very successful. He's taking a lot of assets right now because right around its starting point, it's starting asset our dollar price,

and so you can get in today. You can have the same buffer and the same cap that you did day one, but you only got a month and a half left. So they're saying, wow, I got a ten percent cap and I got a fifteen percent buffer. I like that, you know, for a month and a half. So we're seeing a lot of people participate in the middle, which we didn't know of what happened, but we've seen a lot of assets flowing in the middle. I was recently at an event and uh, these came up for

the downside of the buffer, ETFs came up. One of the analysts that I was on a panel with said something to the effect, I haven't looked into this yet that well, you're only getting the price and it doesn't have divot in there. So that's kind of like a cost that you're not seeing. Can you address that? Yeah, well, you get the price return of the SMP five with these. You don't get the return of the SMP five hundred

with the dividend. Some people look at the dividend as a buffer in a sense, and I think that's why we've priced ours at a nine percent, and you know we don't have it lower than that if you think about it. If you if you think about it that way as a two or three percent, then if you look at nine percent and fiftcent, it's pretty well spaced out. Most people, Uh, look at the two percent and they'll make that, but that's not enough for them. They want

more buffer than that. And so you know, the dividend isn't included. So if you think that the market is gonna be down two percent or less, you probably go ahead and stick with it. If you want more buffer than that, then you need to buy these. You mentioned sp Uh, what all do you think you could do this for? Put this rapper around? That's a good question. Currently, we have the SMP five hundred, we have the ms c I EFA and the ms c I Emerging Markets.

We just started that and we're gonna have those quarterly. Why did you pick those? Really, what we're doing is working from the trading level back because you need to have options at trade enough that allow these UH products to be established on them, and so you need to have a very liquid market, and so there's only really

about five or six markets that allow that. So those two international markets as well as the Accus and as the Russell two thousand, and we're gonna be introducing the the Nazac one and the Russell two thousand here in October, so we have five of them, and and and with the emerging markets and those we just did the fifteen percent buffer, so we don't we're not doing every month. We didn't do all three levels. It's it's it's very expensive to bring a new product out every month for

all of them. So we're just doing the fifteen percent buffer for each of those until they gain enough assets and enough interest and everyone's educated, and then we'll start to introduce some more when it makes sense. What would you like to do but looks really complicated, You know it would be it would be a hit, but it'll

take some work to get there. You know. What we really want to figure out a way to do and we haven't quite got there yet, but to put together a product similar to this that relates to people for like lifetime fixed income, to be able to incorporate something like that for fixed income for people within this type of structure, using the option structure to be able to do that um like options for bonds that well, we we've looked at a lot of different structures on how

we could do this, and we haven't arrived on one that we like a lot, but we're we're looking at all types of different things to to determine is there a better way to deliver some type of an income product of people as they're nearing retirement now kind of the decumulation phase of you know, everybody's accumulating their assets and they don't have a real efficient way to to spend that down now, and so to help them do that and make it last as long as possible, how

much you know about your consumer and their age, because this is like if you're right around retirement age, this is like a perfect thing, Like I'm not getting any yield on my fixed income um and I can basically hedge my exposure to equities. It seems great for me right. Yeah, how much of this is actually in that baby boom, Well,

I would imagine a good bit of it. But um, what we're seeing, like Carolina mentioned, um, advisors are getting ahold of this for their business and they're saying, holy smokes, I'm putting us across all my clients because it just makes too much sense from a strategic standpoint to be able to have better outcomes. You know, one of the things strategi strategists want when they're investing their assets is they want to have a better understanding of what are

their risks and what outcomes will they have. This gives them more control over the potential outcomes rather than one of the market crashers I'm not sure what will happen. It gives them a little more control. And so strategists, I think, are attracted to these products because of that, Carolyn, What could go wrong? What if the market goes down? What the market goes down, you're gonna well in the nine percent, you would lose thirty five last nine you know,

so you know you uh. The way I if you think about these products, I think a great way to really think about them is if the market goes down, you're going to outperform the market by the amount of the buffer, depending on how much the market is down right, So you're gonna beat the market of the markets down. If the market is flat, you're gonna be with the market. And the market is up slightly but below the cap,

you're gonna meet the market. The only time you're gonna underperform the market is if the market has a huge boom year and and you get capped out and you don't get all the upside that And think about how many uh, you know, funder active managers can beat the market, very very few on the downside or the upside. And so this gives people, you know, they're gonna beat the market, and you know, three out of the four scenarios, it's it's a pretty good opportunity to be able to participate

in something like this. Would you ever add leverage to the upside and them thinking back on the traditional structured note structure or is where you know you get two times the underlying up to a cap and then some buffer on the downside. Any interest from clients that you've heard to add some juice to that upside return people like Jews. But you know, the the SEC has moratorium on leveraged E t F s and so right now, um, you know that's not possible, but you know we were

hoping in time that something like that will be possible. Eric, have you have you guys covered this at all? Yeah? So, um, my colleague James Seffert has kind of a it's one of his focus ideas. Every one of every analyst in Bloomberg Intelligence has to have a focus idea. Mine is that there will be more more closures than launches in the next twelve months. It's kind of a call. If you will not something will go up and down, but just the call in our industry, his is that these

will were bullish. We think that if they can get you know, over a billion in this kind of market, if the market goes down, they should really do well because people are gonna definitely want downside protection there. So we find that the fact that they could pull this off. So he has a great note go to b I E t F you can read the whole things. So, yeah, we've covered it, and that note is maybe three mini

notes for a total of like say twelve bits. I'm wondering about the economics of this on your side, because this is not like a typical e t F. You're you're dealing with options. Obviously it's coming through with basis points to the consumer, But what does it look like on your side? UM, from a from a cost perspective, Yeah, well, from a cost perspective, we are working with Milliman UH Financial Essay Management. Don't know you're familiar with them out

of Chicago. They have offices around the world, but they're the subadvisor for the products and UM. They're one of the larger insurance overlay contractors in the world, and so they sub advise. In fact, they recently did the Transamerica e t F work with Transamerica on that UH and our billion dollars, I think they seated that with So Milliman is our sub advisor, do a very good job and know exactly what they're doing. So we have to

pay them, and we have everyone else to pay. The reason, and this one is difficult to do and expensive to do, is that we have to have thirty six funds, which would normally take three funds to accomplish the same thing. And by having to have a new fund every month in order to bring the best value possible, there's a big expense in doing that, and that's the reason it's necessary for us to have a little higher expense ratio. Although that fee is pretty much in line with some

fancier or smart data products, isn't it. Yeah, it's it's up there. But this is a institutional kind I mean, this is they're doing a lot of legwork and it was first. Usually things get priced down is there are more and more products, so I was given all you'd have to do on your own. I mean that it just you can just you heard Bruce describe all this.

It sounds like kind of a pain, to be honest, whereas smart bait a lot of times it's it's there is there is their formula, and that's their intellectual property. But honestly, it's just holding stocks. It's not as difficult as something like this. So and obviously the flow show people aren't that worried about it. Out these are specialty products like leverage ETFs, there charging nobody cares um so and that's good for you because it is hard to carve out a living in the et F world anymore.

Everything has been priced down pretty low. So from a business standpoint, it's pretty remarkable. Feet what you're what you're doing UM it is you know a lot of people like there was a couple of lunches for zero and negative fee that didn't get any assets. So I think you have to innovate and next your one way around the vanguard effect. Yeah, you know, and and I think the thing that you don't want to lose on this is to get this type of buffer, this type of

protection of the market. If they wanted to go buy this somewhere else, it's going to be much more expensive. So it is very economical for any other way that they could buy this type of protection in the marketplace. Okay, so you've seen a lot from where you started UM in power Shares, rise of smart Beta. Now you've got this new whole idea. What do you how do you feel about the et of industry as a whole? Where's

it going? Where where else could innovate? Well, I mean I think that Uh, you know, when when we were power Shares, we did the first thematic fund, we did the first active fund. What was it what was the first the metic I think it was water Oh p h O, yeah, yeah, it's first thematic fund. Check it out. Yeah, yeah, So you know we did we were a lot of first, and we innovated a lot. We had the first e t F of e t F s, you know, so we we pushed the envelope and a lot of things.

And um, we think in this area where we're at, where um, you can use other types of products to deliver outcomes that people haven't really considered within the et F structure, that there's growth potential there. We think that the equity market, and you know, pretty much the fixed income market has been sliced pretty thin, you know, and there there aren't a lot of other rocks to be turned over to. You might have people discover this new thing that comes up and another hack or another you know,

cannabis or you know whatever or something like that. But I think generally to establish a process of investing something that brings true value across the portfolio, not just a one hit wonder type of thing. You know, you have to look at areas where there are true growth potentials and they contribute to people, you know, across the portfolio. And we think this area that we're in now that you know there are there are legs there and there

are other opportunities going forward. It's um, sorry, I have to say p h O came out in two thousand five. I think that probably makes it the first theme ETF. You're right, million dollars. Yeah, you know what, I think we did. We did. I think the tickers should have been used for the Vietnam ETF, But that's another story. What about clean energy might have been before that? Clean energy I would call E s G. I would call water. I mean there's an E s G. Didn't they given

exist back? I know you were firing on all clers we pay asked on the internet, the Internet. Yeah, so exactly. You know the e t F better than anybody. While we're on the topic, the SEC is wrestling internally over whether to prove a bit coin ETF. My take is the E t F structure can handle almost anything. You can put Mickey Mickey mental rookie cards in it, and it would probably be the best possible deal given the arbitrage that the market makers can do. Um, what's your

take on that? Do you think that a bitcoin would be fine? An e t F would all work out and not not to say it with stuff the volatility, but it would track it pretty well. I think probably, you know, I would have Magnan. I'm not really up on all the cryptocurrencies. But I think it probably would. And and because it prices, and you can see the prices long and the prices are reliable, you should be

able to get it. You know. Interesting thing along those lines, Eric, is back when we had the financial crisis, and remember Fannie May and all those guys were holding all those mortgages. I tried to get them to take those trillion dollars and mortgages or whatever they were and just put them in an e t F and let the e t F trade and let the market determine and the value of the pool, and then that would have equitized all that right. But you know obviously didn't listen to me there. Wow,

what a story. Yeah, I think we buried the lead. You know, do you have that he Edits a little magazine like you know, I tried to. I hadn't went to d C and tried to you know, tell them, guys, you know you want to get this, get rid of This is a way to do it. Actually, And have you have you gone and back tested your product and you know, showing what it would have been like during the financial cred We have and we we provide that

to advisors all the time. One thing that's really interesting by this product if if you think about it, all products that we typically buy or that I've ever sold, or a better part of it, I've looked at historically and I've said, okay, what has what did that do in the past? Well, we kind of know what the SUPs, S ANDP is done, right, So this is one product where you actually think forward. You think about, okay, what

do I think that Margot will do next year? And then you buy the one that you think is going to give you the outcome that you want for that following year. And so this is much more of a forward looking product in than any product I've actually been involved with in the past. One thing I would think of if if you can and pitch me, I might say, well, this is why I use treasuries. You know I have treasure an allocation to treasuries and cash. That buffer is

my equity position. How do you sell against that? Or is that somebody just probably wouldn't buy it? Well, no, they might buy it, but I would say, okay, so that debt exposure reduces your upside potential. Right right, market goes up, You've got half your money in there, you got half the upside right, potentially apparently right, and so you buy this while you got all the upside. We just saw the buffer in there, you know what I mean?

So it it uh, you know, that's a drag. That's like if you think about a mutual fund manager, right, they hold too much cash, they have cash drag, right, So that's drag on people's portfolios. Here. You don't on that. You put it in equities. You get the upside of the market and you can. I think the important thing to remember on the cap is if you get uh, if you run up and you think you're getting slow close to the cap, you could roll of the new fund and the next month get a new cap and

lock in your game. You can get the step up. So it gives you that flexibility to be able to adjust your position as you go, which I think is is really a phenomenal feature. He's pretty good, he's you're very smooth. You know, how much of your day is spent explaining these two people or how much of your week? What percentage of your week are you? I don't know a good bit and and uh, I mean this is

my job. We're pretty passionate about it because it's really a neat product, and uh it you know, it has its drawbacks. I mean, it can get capped out. I mean, and you have those things. But even with the cap I mean, I do say, remember you're not locked in there. You could roll to the new one. If you start to get a cap roll into the new one. I

mean they I would tell you. I mean, for John and I to come back into the industry after selling power shares, there was we didn't need to come back and try in an industry that is super crowded, super difficult. You know, the bologna has been life's pretty thin. You know what it's left for anyone? Yeah? Yeah, blowny whether you know we had to come back for something meaningful. It's almost like this isn't It's like another meat. That's

the equity. You can't slice it anything. Yeah. One question, I have you got the month option, You've got the year option. Could you go out farther than that? I think? Yeah, I mean now we can go longer right where you could have a three year and you know, those are

some of the things we've evaluated. And uh, the reason we kept it at a year and we did the three and we're just sticking with that for now is we want to stay with the most simple, straightforward structure so that people can really get their minds around it.

And I think that in time, you know, as people become very comfortable, we'll probably add some other bells and whistles that we think add value, like maybe a longer date or you know, other other things that we've looked Dad, Carolyna, thanks for joining us as always, Thank you, Bruce Bond, thanks for joining us on Trillions than thanks for listening to Trillions until next time. You can find us on the Bloomberg terminal, Bloomberg dot com, Apple Podcasts, Spotify, and

wherever else you like to listen. We'd love to hear from you. We're on Twitter, I'm at Joel Weber Show, He's at Eric fall Tunas, and you can follow Innovator e t F S at Innovator E t S. Trillions is produced by Magnus Hendrickson. Francesca Levy is the head of Bloomberg podcast Bye