Welcome a Trillian's I'm Joel Webber and I'm Eric Balcunas.
Eric.
If there's one state that you'd like to go to other than Pennsylvania and New York, it would be Florida, Florida.
I'm a Florida Manngel, I really am. I'm destined to live there.
And you went to a trade show, which is a thing we've done before and we will probably do again. What was the trade show.
Exchange ETFs, which was formerly called Inside ETFs, but this they switched the names. Inside ETF still exist, but that's run by a different company, but the people who starred inside the ETFs left started a new conference called Exchange. At the end of the day, this is the one. This is the comic con of ETFs. This is the one I go to all year. This is one to bring my whole team to Joel, we spend the money. I've got to argue up to my managers. This is
worth the money. We all go. Everyone's there. It's intense. It's fifteen hours of networking by eight nine o'clock. I am so ready to isolate and watch like a TNT movie. You know, I am fried. I have nothing left and then you wake up and do it all over again.
So again, we sent you with a recorder so that at least some of your interactions we could, you know, end up with some tape that we could listen to some takeaways and talk about some trends and maybe get some insights and learn about a few new products.
Yeah, this is great, you know, Magnus gave me this little recorder. I mean, I could use my phone, but the recorders better. I just whip it out. I'm like, hey, can I record you? And most people there are there to talk and get attention, so it's not that hard. There's only one person I asked to record that declined. I won't say who it was, but they're lost, Joel.
This time on trillions exchanges at exchange about exchange traded funds. Okay, Eric, We got about a dozen or so people that you spoke with, tons of different products and themes. Who are going to start off with you?
Start off with Ali Doyle, who is head of ATP Listings at NASDAC. This is a perfect conference for her because you know, when you have a bunch of ETF fishers, what they want is advisors to sell to and to market to and the media, and so they're always looking for a visor by advisors getting for almost no money. It's like they're like Ladies night, they're the ladies. In Ali's case, the issuers are her clients. So this is
perfect for her. So I thought we'd start with her, and I just sort of got a feel for what she's there for and you know what kind of interactions she's having Exchange. Just to give you a quick feel for like somebody working the conference.
The Exchange conference really is our super bowl for ATF listings. You know, for us, it's a great opportunity at the beginning of the year to not just interact with our clients issuers that are already listing on NASDAK, but really get to know the broader issuer community, you know, build some new relationships and also with the market makers. You know, we'll work a lot with the trading community, and it's a great opportunity to build those relationships here at the conference as well.
And what's your pitch to them versus listing on like Nicey or another exchange.
Yeah, you know, every exchange sort of has their different take and different branding. Right now, ZECH is very aligned with innovative new products, you know, a lot of tech, you know, creativity that we're bringing to the table. So for us, you know, we really think about being a full extension of our issuers team really from pre to
post launch. A lot of that is around marketing how we can help issuers promote their products and a lot of the liquidity you know, that comes from training on Nasdak Nazak is the largest equity US equity venue, and so we take a lot of pride in that and making sure issuers know that's you know, that's who they're working with as their listing exchange.
So Joel you can see, obviously perfect for her talking to marketers. And the other reason I talked to Ali is I never met her before, even though she runs in the same circles. But we were paired together for this game show that Todd Rosenbluth put together inspired by our episode about I don't know three or four months ago where we had the trivia game. They had an on stage game show and Ali and I were partners.
How'd you guys do?
We kicked but we won legit. However, we were so in the lead that the end they felt bad and they said, Okay, this next question is worth ten was the last question, just so the people who were like below could come up and win, and to be nice, we didn't answer. We let them answer it, and they won in this sort of weird socialist way. But straight up, we got the most answers and she was on the ball, and I think we should do another game show episode for on this with people from the industry like her.
It was fun.
I like the sound of all of that. We also had a kind of a weird ending of our tribute. I said, okay, so who are we listening to next?
Jeremy Senderwick's who is a lawyer for Vetter Price. One of the biggest issues at the conference was this idea that now that the Vanguard patent is expired, all mutual funds can now add an ETF share class to their mutual fund. Bolt it right on. This is a big deal. This could be thousands of ETF share classes on mutual funds. I can't overstate it. Katie Grayfield did a whole story on it based on her time at the exchange. So I asked Jeremy, who's a lawyer works with the SEC
you know about whether this will happen this year? Sooner or later, and what the hurdles are because this is probably after the Bitcoin, this is probably the next big issue for the ETF industry.
Well, it's very tough to say because there have been a number of applications filed, but there's been no public movement on it. The SEC has put the word out to the industry that they won't be formal movement on these applications until the swing pricing proposal is settled in one way or the other.
What's the swing pricing proposal.
It's just about how navs are struck for fixed income mutual funds. I won't go into details, but I don't either. They can work it out, it's not it's something that can be worked out. And especially you have Fidelity DFA. There was some other big, gigantic company that also Morgan Stanley. Those are powerhouse asset managers and the ICI, they're all
behind this. So I have faith that these big companies are going to be able to work it out with the SEC, and in a year or so we'll have ETF share classes, which you know, again are going to be major. You know, our big theme this year for our outlook was the many roads to ETF It's one thing to launch a clone, it's another thing to convert your mutual fund. And now I have a third way, which is a share class. Speaking of bitcoin, let's go
into the bitcoin. I got a couple interviews lined up for that.
This was how much bitcoin was there at the conference.
It was a big deal. It was a lot of the buzz.
It's also in Miami.
It is in Miami, right, Yeah, So a couple things. First, I moderated the crypto panel, which I think, according to all the articles on it was the most attended. They had this thing called Silent Disco where you put the headphones on. They ran a headphones stroll. We sold the place out, and this is like early in the morning, you know, when everybody's hungover and stuff and doing just back from yoga on the beach and all that stuff. We sold it out. It was one of the better sessions,
I thought. And then Gray Scale had the huge booth. They kind of took all the attention with this massive booth. And then they had a huge drone show at the end of the last night where they had drones making the bitcoin sign and the blockchain. And so definitely, if I ten years from now, when I think back on all these conferences, to me, this will be the bitcoin ETF one.
Okay, so who's the first guest to talk about bitcoin?
Well, we should open with the big dog, Blackrock. So we got Jay Jacobs, who's us head of Thematics and Active Equity. This is the guy who's out there marketing ibit, which is black Rocks Bitcoin ETF, which is already i think like six seven billion dollars again smashing records for a ETF that's six weeks old. So I have two clips for him. The first is on basically why black Rock did this. This is a little out of character. They had never filed in previous and we just sort
of hous it going. So that's the clip the first one.
It's been incredibly exciting. I think going into this launch, we knew there would be a lot of interest. We heard from clients over several years that they were looking at a bitcoin ETF as really being kind of the silver bullet for getting really you know, high quality, efficient, easy access to bitcoin, and so a lot of our expectations have been met so far. I think what's interesting is who's buying it, And I think early on, when you see this amount of money coming into new ETF.
It's a lot of people who already developed an investment thesis around bitcoin. These are people who maybe already decided they wanted exposure, but weren't happy with how they were getting the exposure, and the ETF is kind of that great way to get precise exposure to bitcoin alongside stocks
and bonds in their portfolio. What we haven't seen yet is people who are just starting that investment journey where they have not previously really considered bitcoin because they couldn't get exposure to it, and now they're learning about the asset, going through the education, they're trying to understand how it
fits in a portfolio. And this is going to be a longer term process for a lot of investors who are really kind of starting it, you know, in a lot of ways, kind of their first day of understanding bitcoin.
And let's go over to the second clip, which is selling to advisors. This is the big target market for bitcoin, the boomers, just I mean, how do you position this to an advisor in a.
Missouri One of the things we hear a lot from advisors is that they have clients that already own bitcoin and they are looking for a better way to get exposure to it. Their clients either don't want to deal with hot you know, cold storage, hot hot wallets, they don't want to deal with you know, trading it a on a crypto exchange, and so the ETF really solves a lot of challenges for them. So frankly, a lot of the conversations we've had, I've been around, my client
has exposure to this. They want a better way to get exposure to it going forward.
So listen, Joel, you know, forget the society's going to collapse. L Salvador uses it. This guy you could you could talk to. This is the guy who's promoting bitcoin ETFs. This is a Again, I can't overstate how they've taken this sort of wild subculture sure and streamlined it into a guy like.
Jay plugged and played it into a big ETF conference.
Well, but also just listen to the way he talks. If you're in Missouri and you're conservative, you're managing client assets, you would hear this person out, whereas a lot of the stuff you hear from the bitcoin be scary. It would just scare advisors off. So translating the bitcoin message through the sort of prism of people like Jay and Blackrock. Again, this is why we were so bullish.
Also also interesting that, as he points out, the people who were familiar with this stuff already are the early adopters, and there's so much more room for growth there when you think about anybody who might entertain doing this and come into the asset cold. All right, who's next?
The other The number two in the race is Fidelity. They've taken in again, I think five to six billion. Greg Friedman, who heads up all the ETFs.
First mover is important, but this is a big enough category with so much anticipation that there's probably room for a few of us to actually be at the levels that we are. But we're thrilled with the early returns and is succeeded expectations.
And we saw that you added some to a model in Canada. Your conservative allocation model for fidility had a one percent crypto. Are we possibly going to see, you know, Fidelity and others incorporate these into models.
I would anticipate. I don't know when. This is an exciting asset class, no different than you know, fixed income or equity.
So there you go, man. This is again Fidelity has tons of advisors. Blackrock doesn't have an advisor network. They're just an asset manager. But Fidelity has like advisors, like a lot of our parents would use a Fidelity advisor. And they've already put a one percent allocation in their model in Canada. And this again speaks to the power of how much Fidelity can just sort of bring assets in just by telling all their advisors we're into this,
you know, from the home office nucleus. So again, a lot of this stuff is very powerful.
It's like this now for the thing, and suddenly it's like institutional money is pouring into this. Yeah, okay, who's next? Okay not bitcoin?
No, we got two more?
Oh jeez, more bitcoin. This really was the bitcoin cover.
Look, I'm trying to look. We're going to look back. This was the bitcoin okay. Kathy Chrisky, one of my favorit people in the industry, has a great personality. She's the investo's commodity strategist, so they also have bitcoin etf now. She's all into commodity. She's been on ETFIQ. She always says the two w's Warren Weather good for commodities. And her message on bitcoin was interesting because as a commodities person,
how much does she accept bitcoin or reject it? And I asked her about the use case because all these other commodities have a use case, even gold. Well, what's bitcoin's use case for her?
It is a currency, right, even though it's not used primarily as a currency, but it is a sort of store of value. And that's where when people get like they don't understand bitcoin, I said, let's go back to digital gold.
Now.
When I first joined the bitcoin team, because bitcoin's a commodity, I was frustrated by any analysis I saw about digital gold and people saying like, oh, quarter of the gold investors are gonna shift to bitcoin.
I was like, are you kidding?
Have you met a gold investor? You're gonna have to pry that gold out of their dead hands, right, they don't sell their gold. I was like, but now like understanding that it is a store of value, right, and especially the younger generation, they've been in this asset class for so long and yet now they have a more an easier access point with the ETF. But really, like, I feel like it is like a currency. It is a store of value like gold. It makes sense for investors,
but again, small allocation it's still volatile. But that's another one of my preconceived notions. I think everyone's got wrong. People think the volatility for bitcoin is over one hundred percent. I was like, okay, yes, ten years ago it was actually one hundred and twenty percent, but now it's forty seven percent. And with natural gas becoming so volatile, I said, most of the time, it's ninety percent now. So think about that, Bitcoin is almost half the volatility of natural gas.
And I think the average investor has no idea about that.
So, yeah, it's it's getting it's calming down a little, Joel. But listen the big takeaway here Fidelity, black Rock Investco. We're talking trillions and assets. He's heard from three of their top people, not to mention all the wholesalers. Again, you got to consider this is an army of sales going on. And again this is I think part of what makes underestimating the ETF largely probably a mistake.
It is just wild to think about how much the conversation has changed. Isn't it before the ETF to after the ETF.
And of course their motive, I mean some it's hard to tell you money on this. Yeah, are they really orange pilled or they just revenue pilled.
It's hard to tell revenue pilled. Man like that. It's bottom line, this is this is how this works. Okay, who's the last bitcoin voice? And then never again?
Okay, now we have yeah we There was a guy who was there, Frank Schaparro, who is director of Special Reports and a host of the Scoop podcast from the Block. So this is a bitcoin native guy. So he is a bitcoiner, kind of crypto guy. I was curious how he felt at the ETF conference and as sort of a stranger in a strange land.
I mean, I've been kind of blown away at the extent to which crypto has actually been taking seriously. Like I've been to other financial conferences, whether it's market structure of trading, and they make the FTX show because they make the jokes about it being a ponzi. But I think that it's carried a bit of bravatas at this event that has surprised me, especially with Brayscale obviously having like that sort of center booth, one of the more
impressive booths, and a very nice event last night. So I think people are taking crypto seriously here. It's it's not like in your face, Like it's not like the most important conversation being you had, but it's definitely a it's definitely something to talk about here.
What would you say the boomer factor is on a scale of one, that's ten, honestly, not that boomer.
I'd put it out like a six and a half.
I mean, this is very other ATF community is very robust.
Yeah, look, because I get called a boomer in a suit constantly on Twitter troll even though I feel like I'm pretty.
Happy kind of are but yeah, I'm gen x.
We fought the boomers first, and now look at you. Uh so six pointy five isn't bad.
But what's also interesting about this is like it just speaks to what what you were kind of the before and after thing. Right before there was so much uh concern, and now it's now that it's gone institutional and you see this. It's like even the folks that were hardcore crypto can see a light.
Okay, next guest, Okay, let's go back to some vanilla. You got ready for the scoop of vanilla? After that? Yeah, like we did the topics for the crazy stuff. We did the m and ms and the chocolate fudge first. Now we're going to the Yeah, let's go for Hollyframs that Capital Group head of Global Product strategy and Development. So hollywoods from black Rock joined Capital Group. I just asked her about when you have an active fund which they're growing, how hard is it to displace index funds
in the core. That is no small task, Torol Capital Group.
ETFs are definitely sitting at the core of client portfolios. We're seeing really two flavors of investment. One, clients who have model allocations appreciate the ETF vehicle, utilizing our funds sitting at the core just as they would an index product. And two we're really seeing clients come back to Capital Group who maybe had moved toward the ETF vehicle, had to move toward index management, and are now recognizing that as they have increased choice, they're going to come back
and they're going to select that active management again. So we're seeing flavors of both, but definitely at the core.
Okay, so active ongoing conversation about how that's sort of been perhaps kind of the next dimension of where ETFs can go and grow.
Yeah, and you know, Capitol Group had a little party DFA had a that James and David went on the active companies are spending more money at the conference. They're making a splash. Definitely a change from several years ago. Again, this all evolves. It was a smart beto, was was a big thing a couple of years. Then it was ESG. Active is one of the bigger themes and one of the bigger sponsors. Next, speaking of active, so active passive.
That whole debate that we've had many times, it's like back in the headlines, back in the headlines because David Einhorn, who's a hedge fund manager pretty popular, said something about how it was kind of like screwing up the market. Also two barrier hilts, two barry red holts, although he did say, look, you know it's our job to capitalize
on that inefficiency. But anyway, brought it back up. And one of the people that I debate constantly on this is Mike Green of Simplify, and so I got Mike there. Mike and I had gone back and forth on Twitter a little bit, little little debate going on, but I like Mike and he's we disagree on this, but he's always civil and he's nice. So I caught him and I asked them for his elevator pitch on why this matters to a rural person.
So the problem is unfortunately not an individual problem. It's a societal problem. What we're actually doing is is we're taking liquidity out of the market. You and I have had discussions around how much cash, for example, as being held at active funds versus passive funds. The holding of cash creates option value, It creates the ability to generate liquidity internally. It gives me the flexibility to meet a redemption. It gives me the flexibility to buy something without necessarily
having to sell something. When you change to passive vehicles, you've robbed the market of that flexibility and it creates a much more brittle situation that becomes much more sensitive to the flows in and out of the market.
So he's basically saying index funds don't have any cash on hand right they invest at all because they don't want to have good tracking. So in something they get money, they just buy stocks indiscriminately. And again, I think we should have Mike on down the road and have this debate. Every time I did a spaces with him gets a lot of engagement people are very interested in this debate,
even though it feels a little tired to me. But again, passive keeps growing, so it's going to be a debate and it's going to flare up and then it's funny. I recorded another like ten minutes with him, but I had to cut it because I knew we were gonna go down a rabbit hole and we did.
Okay, running corner, only a couple more.
Yeah, who's next? Okay, next up, Let's go over some classic issuers at the conference, kind of hawking their wares, you know. So here's Garrett Stevens, who we had on the show. He's a white label issuer. When you go to the Fountain Blue, first of all, there's pictures of Frank Sinatra all over the walls, like he's like the King of the Fountain Blue. His spirit hovers over the whole thing, you know. And I read in a book there was like mafia hits in the lobby, like people
have died in that lobby. Not that he was related to the mafia, but you get the idea. So there's a pool area where you have to walk on this little sidewalk in the middle of the water to get to a circle, and the circle is where Garrett Stevens booth was, which was one of the cooler areas. So there, literally their booth is in the middle of a circle
of water. How cool is that? So I just asked him, like what he's doing there and how he's trying to pitch being a white label issu or to some of the people there who are just walking around the conference.
So we have some of our existing clients here who've launched funds with us, so we're helping them get exposure talk to advisors that are here walking around. Then we're talking to other advisors that are here walking around about launching funds and telling them why they ought to have their own et apps. So we spend our time doing that, and we're talking to all the service providers in the industry. So we've got everybody here that you could ever want in one place for two very long days trying to
get a bunch of stuff done. So it's great.
And I asked him because he was about a foot away from water behind him, and I asked him if anybody had slipped in the wall pool yet, and he said no, So I knew you were wondering.
I was just fearing for his laptop.
So while I was talking to him in the circle. Because remember Garrett Stevens is the equivalent of like music producer, He's got artists on his white label stable. One of those people is the Music ETF. Even though I just used that metaphor MUSQ is this new thematic music industry ETF very interested in. Yes, by David Schulholf, who's founder and CEO of this A lawyer from music industry. Used to own the rights to songs from Tupac, Third Eye Blind,
your favorite band. I know, Jumper was your wedding song. So he was really interesting. We got to I think we should have him on for the full Monty show because I just love the idea that these indie issuers, like if blackrock does music ETF. I'm sorry, it's just not as interesting because they're just like put for sure. But this guy's from the industry. He sees what's going on the ground floor, and he's like, this is worth me doing all this for. So here's a little talk with him.
By the way, that was a nice third I play signer.
So I've been in the music industry for like thirty years. Yeah, I had a music publishing company called Evergreen Copyrights. I used to own all the rights to Tupac Shakor, to MC hammer, to Jjklee. We won the Grammy with Eric Clapton, Bill Monroe. We had everything from Bill Monroe to death Row. So I owned about one hundred thousand songs. We had offices in Nashville, in la.
In London.
So I've been in the industry for a long time. I was also the president of music at IM Global. I produced Clive Davis's film The Soundtrack of Our Lives, which I sold to Apple, which is a number one music doc today.
You know.
And I started off my career as a vice president at Disney overseeing music for mier Max and Dimension Film. So I really know nothing about anything except music, and I know music really well.
I love this. I love the indies. A lot of them are just so passionate. You know, Perth Toll with her Freedom meetif I remember the whiskey guy, He's straight from Kentucky, lived amongst barrels of whiskey all day. I just think these stories are so interesting. I hope we have them on. He also talked about you know, I use the MP three a lot in a metaphor for
what ETFs have done to finance as a disruptor. But since the MP three cochroal music industry went got cut in half, but now it's double where it was because they figured out new ways to make money with Spotify and that, and that's why he's so excited. I just think it's a good time to go into it. But anyway, I was not even meaning to interview my Scott talking to him like, Okay, I gotta I gotta talk to you. That's why it's handy having that little mic in my bag.
Okay, I think we're almost to the end.
We are last, but not least David Ahbak. He's Cio Hoya Capital. This guy loves reats. He lives it, eats it, walks it, sleeps it. He's walking around. He's got a grateful dead dress shirt on. So again, people are able to show a little more of their personality here. It's not all suits, although since the big companies came in, it's a little more stuffy. But he's kind of a classic ETF Fisher independent and here he is ready on the drop of a dime to give you his pitch
for why reads Now you're out here. You've got a grateful dead shirt on. You're pitching reads, read ETFs. Why reads?
Why not?
There's the fact cutting interest for it's this year probably if they cut interest rates this year. Let me phrase that, when they cut interest rates this year, the reachs are the first sector to respond on that interest rate cut. Ask any of these bitcoin guys, where does bitcoin fit in the portfolio? I don't know where does ESG fit in the portfolio. I don't know where to reach in real estate fit in five to fifteen percent of the portfolio. So as a result, when the Fed cuts rates, it's
the reachs the first sector respond. So now is the time to start positioning that portfolio for the pending rate cut, and reads are the rates are the beneficiary of that.
Like those digs at his piers there, get it grateful that cheer onde and look, look everybody not everybody's into the bitcoin thing. This guy's like, yeah, he's all these big they don't they don't know. Yeah at the portfolio, that's a lot, that's pretty good. Yeah. So yeah, so he took a shot at ESG and bitcoin, which are the two last flavors of the month of these conferences,
which is small. I mean, you're competing against mutual funds, of course, but you're also competing as amongst each other on the ground floor there, so I thought he was kind of alematic of that, and he's also just the good guy was there. I was preparing my crypto panel notes right before the session, having my muffin which I poured into yogurt, and he was just sitting there quietly letting me prepare and good guy.
Best part about this episode you went to a trade show for two days. I listened to about thirty minutes and it was probably all I needed. Well done, Thank you.
Listen one of these years you're going to go. You keep like flirting with it.
Why would I can do it in thirty minutes.
There's way more than this, So much more happened, trol. Come on, Eric, you gotta go next year.
Thank you very much. Thanks for listening to trillions. Until next time. You can find us on the Bloomberg terminal, bloomber dot com, Apple Podcasts, Spotify, or wherever else you'd like to listen. We'd love to hear from you. We're on Twitter. I'm at Joel Webber Show. He's at Eric Baltuno's This episode of Trillions was produced by Magnus Hendrickson Bye