Inside "Inside ETFs"

having to pron out the notes a little more often. Um, yeah, you have to pick up you're a big wig. Okay, well I appreciate that. I'm so excited that it's gonna be great. So I have a new job, but you have the same old job. Yeah, but I'm still tolerable. So uh in this capacity in your old job. You got to go to Florida recently for basically what is the world's biggest trade show for E t f s called Inside e t f S. Yes, this is the one to go to. This is I refer to it as the comic Con of E t f s. You

could argue it's a little Catalina wine mixer. It's the event. It's really big. It's eleven years now. This year there were twenty four hundred people. I've been going for seven years. When it first started, there was only four hundred and thirty eight people there, so huge bump up. There were twenty five sponsors the first year. This year there were a hundred and twenty sponsors and booths, right, so it's just getting bigger. The whole hall is full of of booths.

And I remember when I first went seven years ago. I remember seeing a guy with a fishing shirt and short song like. Advisors would go there and just go to a few panels and then go deep sea fishing in Hollywood, Hollywood, Florida, and it was very casual. It's gotten more corporate and there's bigger companies. You know, there's big Wall Street firms, there's big By Side firms. Not everybody's in a suit and tie. I mean, I went tieless, but I definitely dressed up. But there's no more fishing

shirts and anything like that. But one thing I will say is, you know, it's interesting you look at the E T F industry. All told, ETFs make about seven billion in revenue every year. So you know, when I first went that. I remember my colleague and Data going to the Salt Conference, which is the hedge fun one. They got like Joe Biden, Mike Tyson, Jeb Bush, cigar and vodka parties. This I went there, there was an

ice cream social in a YouTube cover band. Because there's just less money, right, I do think there has been a little more money into the industry and a little more marketing dollars in because this year they had Serena Williams, um they had a general McCrystal. Celebrities like real, real people, really celebrity. When you go there, do people feel like you're a celebrity? D list? Yeah, I'm probably D list

of like, yeah, I'm not sure, all right. This week on Trillions, Eric takes a field trip to the comic Con of E T S. So you read a recorder when you went to inside et F and you ask some questions of people there, which we're gonna get to. But before we get into that, just tell me a little bit more about what this place is. Sure, it's the Diplomat Hotel in Florida. You go down there, it's Sunday morning. They started like noon on Sunday. A lot of people don't. Yeah, and they end on Wednesday, so

it's a it's a couple of days. And like I said, people the majority seem to be issuers, but you have also a lot of advisors, right, So the issuers want to talk to the advisors. Then the service providers want to talk to the issuers. So everybody's sort of trying to do business there at the same time. It's a little incestual. You see the same it is. It's a big cozy hot tub or jacuzzi in my case. Uh,

what was the mood this year? I thought it was happy. Um, there was a four hundred and sixty seven billion dollars that came into et F last year. That's more then they had an assets total when the thing started eleven years ago, so we're talking big boy numbers. Everybody's happy. I think there's some concern that just the market has just been going up too long, but that isn't They still are fired up about the et F structure having the winning end out there. And as this event is

kind of snowballed, how has it changed? Like I said, it's gotten more formal. You see bigger companies, bigger exhibits this year, Oppenheimer had this huge It was really effective. But they did a multi factor equalizer, like a life size stereo equalizer. And if you it turned to the market, you think that's going to be there, like say let's say a down market or an upmarket or raising rates, and then the factor levels would change from value to grow to a momentum to size and it would sort

of tell you where to tell your portfolio. So it was a multi factor equalizer life size. Then Deutsche Bank had an ice cream truck. It's always good to give up fore ice cream. That worked. Everybody was like, I love the ice cream, and the ice cream truck was supposed to symbolize how h y LB a hio bondy TF is plain vanilla. Now back to food. I mean, I'm so easy and I do remember five years ago the big debate and controversial thing was smart beta. People

to turn and piss people off the concept. People were pro and anti and every panel matter what was about somebody to bring up smart beta. Now smart beta is completely accepted. That's just like was in its lane. Bitcoin was the thing and cryptocurrencies that made it into every panel. So I was wondering about the themes totally heard about, right,

and crypto is all over huh yep, cryptocurrencies. Another big thing was this the hedge fund industry and how ETFs are yet to sort of like knock out or give a good punt to the hedge fund world. And people think that liquid aults and hedge funds are the next place where e t s will make cause some damage because hedge funds are have maintained their three trillion as whereas active mutual funds are feeling the pain of et

s more so. Between that that big dial and the ice cream truck, what was the coolest thing you saw? Quincy Jones? Yeah, I know that was fun. I mean, look, I grew up with thriller, so this was a This is a pretty big He's sitting at the booth. It's almost like the booths are getting more and more like

having to have something like really attractive there. You know, you have all these like giveaways, which, by the way, I brought you a something from there that I think, yeah from Quincy, not from Quincy, but something from the event that is swag that I feel like you're ready for it is a pin the e T f nerd oh Man. I'm literally gonna put this on my lapel right now. I feel like I'm part of the tribe. Now, even though if I showed up at this thing, they'd

be like, get this guy out of here. They'd be like, who's eating all the ice cream? Yeah, he's just eating ice cream? Who is this guy? You're not an E. T. F nerd? You're an ice cream eater? No? No, look man, you're This is a it's a big tent. And I think, uh that I like the idea of E. T. F. Nerd. Listen, this conference really has his finger on the pulse of the new investing in Wall Street, which is more nerdish, more data driven, more diverse. This is not the Bud

Fox Wall Street that you see at this conference. This is much more people all working together. You know, there's I guess a little element that when when you have some of the bigger firms involved. But you know, it's very pleasant. That's why I like it. And I think that the nerd word fits well to the tone of some of the people who are in it. I'll take it happily. Welcome to the nerd club. So so you

better with quorder. You've got to talk to a couple of different people who do various different things in the industry. Who's the first one you want to talk about? UM, let's start with West Gray. West was there with the two of his colleagues, and West is a He's interesting because he's not he's a PhD. He's a guy who used to run family office money, like the kind of guy only an institution would hire. But he launches some

ETFs that do his active strategy. But his clients don't like taxes and ets very tax efficient, so he you get access to a guy like West through an e t F. So West is there sort of as a small issuer, but also as a really respected sort of PhD active manager. Listen to that clip everyone in the world and then ETF industries here, so we gotta talk to our service survivors. We have a lot of clients down here where we walk him around and show him what's cooking, UM, and then just yeah, meet and greet,

be part of the scene. It's unlike mutual fund conferences are a lot of the old financial services. This one's actually fun UM. So you can, you know, have a drink with your favorite people and it's a great time. So I think he captures the spirit in a nutshell. It's fun have a drink. It's again a little bit of the Catalina wine mixer angle. And ultimately he doesn't seem like a wine mixer kind of guy. No, I

think he gets down. Actually, uh, he's interesting because he's a guy who is somebody trying to market the fund. And he's got the right attitude, I think, which is, you know, I'm just here to keep the bar low, and you know, good things happen and you never know, like you meet somebody and then three months later it turns into something. But ultimately West is also one of these guys on Twitter, and so that's how I met him. And there's a lot of people there who met on

Twitter or digitally. I met a couple of people this this time who I felt like I know very well, and now I met him in person just because I've been communicating with them on Twitter. And West is big in that scene too, So it's almost like meeting a pen pal or something. Okay, who's the next person you got to talk with? We're gonna hear from Brian Lake of JP Morgan, who used to be at Power Shares and he's a guy who has been in the industry

a long time. He was at the very first inside et s. What's noticeable to me is that how many different organizations are here. I mean when you when you started, or even just a handful of years ago, there was maybe ten twenty booths and in different issues, and now there's over a hundred fifty different new shoes or something crazy like that. And everybody's got their own unique kind

of perspective on it. Um. But what's interesting is, you know, you look at the et F industry compared to like, say, for example, the traditional neutra fund industry, and you know, there's over a thousands of different neutro fund companies with over fifteen thousand different neutrol funds out there. So, uh, you can still see that the ETF industry is just young in the grand scheme of things. So when you were in Florida, that might have been the beginning, the

top of the first inning. What inning are we in now? I don't even know if that was the top of the first I mean that might have been warmups in Little League or something like that, because now we're barely you know, maybe we're playing in the first inning in

uh major leagues. But um, you know, I started orienting myself and I was thinking about on the plane right over here, I think it's time to start talking about thirty trillion and so thirty and thirty um, and I actually think if you start measuring that out, the numbers aren't too far off. I think we could actually get towards that direction. It so about twelve years away for a five. Now you can see a double a double kind of thing. You're you're You're not terribly far off.

So that guy is optimistic, yeah, I mean, And the thing is, this is a guy at JP Morgan. Jpen Worgan had a huge booth there. You have a lot of these big firms being optimistic. That to me really is big because they've joined the sort of grassroots thing. And also what I found interesting was this comparison to the mutual fun world. You know, when you have people thinking that this is the future and it's cool, and

these are even big firms saying this. I mean, I can't imagine going to the I C I conference that which is the big mutual fun one, and I've been there. It's fine, it's just not it doesn't have that same vibe and it's gotta be tough. But a lot of these firms also go there. They have mutual fund so they're sort of you know how they're doing both sides sidebar or maybe footnote. The conference business. I've been to consumer electronic shows ce YES, which is like the world's

biggest trade show multiple times. The business of the booths I think is like a great story because everybody's got like this booth that you know, has to be on brand, and and it's so big, and they like break them down and put them in storage or ship them and it's I mean, it's a it's a huge business. No

I had. I was there on Sunday and there was these crates and they had like that stamp like at a rock show instead of iron made, and it said like wisdom Tree and it was like the loading you know what I mean, And you're right, it's like a big show and the boost You're right. There was thematically linked swag, which I love. There's pens and stuff, but well like one guy had like a robot and it's and it's appendages were usp ports. You could plug in

four iPhones charging from this. Yeah. By the way, I saw a photo I think you tweeted it right. The robo et F didn't they have a robot there? They had an actual robot working on like a chip that was moving its arms around and should be that again it was doing the robot. It was like, yeah, I'm from the eighties, I know how to do the robot. Okay, don't know, we don't, don't ask me, okay. So we talked to the issuer and then we talked to uh

JP Morgan on the custody side. Who else? So next up we're gonna hear from Mike Costa of The Daily Show, Daily Show. Yeah, I mean this is like for real, We actually like real people there. Yeah. He's a writer and he's a stand up comedian and I gotta tell you he did a set during lunch. It was knockout man. You gotta look this guy up. It was like it was like a machine gun of comedy. It was. It was remarkable. What advice do you have for et investors? Well,

I don't even know what et F stands for. I mean, Roy Wood Jr. Made the joke that it was electric funds transfer. But that's the F two, you know, isn't it Isn't it like put money in when the stock markets going up? Take money on when the stock markets going down? Is that I'm a comic. I don't know this ship. That music was amazing. We guys in like a like a jazz club after lunch. I guess they have, you know, tracks they play when people are shuffling out

of the hall, and they played jazz. Yeah, I look a lot of I had to interview people right on the spot before they you know, went home or whatever. So yeah, I don't know if it went with that scenario, but it was funny. It was It was interesting when he said put the money in when the stocks go up, and take it out when they go down, And he really put his finger on the biggest problem with investors.

You know, when the chart goes up, they start investing, and when the chart goes down, they take the money out. And that's the exact opposite of what you should do. So he should probably attend and uh go to the some of the panel sessions. Okay, Uh, a lot of duds here at this place. You'd get detected any women. There were a lot of dudes, but no women were there. There's a big organization called Women and Ets. They had

a big breakfast. They're a huge organization with branches, and I gotta think at this point in fifty or sixty cities it's major. There's a lot of women the industry. It's still prominantly men though. But yeah, we got Elizabeth Kashner from fact Set who's sort of like me. He's like a Todd rosen Bluther's. There's about six or seven of us that are have been analysts for about a

decade and she's one of them. Women in E T S is a tremendous force for good in this industry in terms of partnering women men and are major organizations to achieve a goal that we all believe in, which is the advancement of women in the financial services field. There is a tremendous movement of foot which has already been mentioned from the stage at least twice that I've seen, and that is the rise of social activism in terms of the major asset managers taking a stand in terms

of how they vote their shares. There's a lot of buzz about E s G investing. Frankly, there's not a lot of assets in E s G investing, nor is there any demonstrated risk adjusted return. However, the move to be active and take a stand with trillions of dollar is and something like five tent of assets in US companies, that moves the needle. I'm starting to see that openly discussed and claimed. Bravo. Women in e TF is maybe five or six years old, and it's going stronger than ever.

I've moderated a few panels at their event. There's also some pretty awesome tickers that are specifically sort of built around this premise. Yes, so State Street has an e t F that's called Gender Diversity, which is the ticker sheet, and this gets the exactly her both our points. State Streets offering you an e t F that allows you to sort of funnel money to companies that have women leading it or high percentage on boards. That's the ticker sheet.

There's a one called her in Canada. At the same time, State Street, the company has been very active as a rising shareholder of corporations, not just than that, but actually as just spy you know, owns a lot of stock to push more for gender gender diversity. So what she's saying is that E s G. E t F and investing has kind of been a little bit of a dud. They don't have a four billions five billion in assets.

It's not much given the hype, but E s G as a mantra from the passive fund companies is a big deal, and they have moved the needle they're trying to. Larry Fink just wrote this big letter. There's some critique that a letter isn't enough, but ultimately, these passive funds are are going to be the biggest shareholders of America's companies, and so what they're doing in terms of E s G is important to a lot of people. And of course the Street had probably the most viral marketing campaign

that financial services has ever seen last year. Right, Yeah, that statue downtown across from the bull, I think what's called Fearless Girl. Yeah, people forget that was literally a statue to market sheet, but it it just took a life. It's on that definitely went viral. It was interesting. It was really worked well with the bull. The whole thing just worked as a piece of art. Did you get to see any more frenemies while you're there? I did?

In fact. The next clip we have is Ben Johnson, a morning star who is definitely a competitor again one of the panels or I guess presentations was they had eight analysts on stage to argue for the best new et F. I was up there, Ben was up there. Uh. And in Elizabeth, do you guys prank each other before you go up? Do you like give him something like bad data or something. No, but there was some stuff going on on stage that I thought was like one guy used slides and he won. Matt Hogan, I gotta

use slides next year. I Uh, I did not win. And Tom, Yeah, the audience votes based on noise and you didn't win. I didn't win. I I was a little flat that morning. I didn't get a good night's sleep. I also picked a corporate BONDYTF. Note to self, if you're trying to win over a crowd, stay away from fixed income at you slides, Tom, your audience. Tom lydon even read a poem. So it really I think it was more of a contest of who had the best show next year. I'm gonna bring it though, I get it.

I can't believe you didn't win. Such a letdown. I'm sorry, man, I'm sorry. I've fallen in your eyes. So here's Ben Johnson, a Morning Star. My biggest takeaway is that most of the band. With that, this conference has been dedicated to what are largely you look at the data distractions as far as investors are concerned, cryptocurrencies, block chains, multi factor funds,

you name it. All of these new fangled and increasingly complex and costly contraptions that are being rolled out to the marketplace are not earning their fair share of investors money relative to the amount of time and attention and ink that's spilt on them. Blockchain, blockchain, block chain, Yeah, pot, pot pot, I mean party, party, party, Listen. He's right, And I've had this new formula I'm working out where of the media coverage is on stuff that would be

five percent of your portfolio. It's true if if that, yeah, maybe point five percent. You know why, because the media and media is growing more and more prevalent. They're going after readership and clicks. And if you're wade about Quincy Jones Potter blockchain, you're gonna get double triple the clicks as if as if you compared the Vanguard Value with the I Shares Value Fund, even though those two suckers

have like forty billion dollars. And this is just any industry, the fringe stuff that just sort of sticks out gets a lot of the attentions. Yeah, but arguably, as we saw last year, almost all the money goes to boring cheap Beta, so cheap Beta. But then you also saw a great T shirt while you're there too, huh. I did Advisor Shares, which is a active, actively managed et F shop, had a vote for Alpha T shirt that was like vote for Pedro, which it's close to my heart.

I love the Napoleon Dynamite's so good. So some of their tops, and they also had one a couple of years ago they had pac Man eating up like dollars I supposed like Alpha Man. So they're kind of clever trying to keep the Alpha dream alive. So even active managers have a role here, and a lot of them like to be an et F structure because as an active manager, if you trade a lot in the portfolio, if you're in a mutual fund, you're gonna get your

investors capital gains distributions. Mostly you can avoid that in the ETF structure. Okay, main event Quincy Jones does Quincy is anything about ETFs? If he does, it's not a lot. He's not there for that, you know, he's he's part of I think what you're seeing with the marketing. But if you talk to Quincy Jones, the reason he's there is because there's a new firm launching called Iconic Beta. Now, this is a firm that's wants to sort of like open up investing to people who aren't invested to make

it more fun. And one of the ways they're doing that is you're going to take experts or celebrities in different fields and attach them sort of to the name. Work with those people to pick out the companies and the trends in that industry, and then that way you can invest sort of alongside somebody who's an expert. And so this e t F that is going to be launched soon, I'm pretty sure probably the next couple of weeks is called q J and it's gonna awesome, I

know right. It's gonna tract streaming music companies, companies all across the world. It's going to be equal weighted, and it's a classic theme ETF and it wouldn't be Nobody would have blinked if it was called the Streaming Music ETF. We've seen a lot of those, but the Quincy Jones was what made it so new and it made. But wonder if there'll be a string of these and according to Iconic Beta, yeah, they have about a dozen lined up if and when this one gets approved. Did Quincy perform,

He didn't. He just talked. He was very social. I mean, you just go up and talk to him. He's a big fan of Mike Bloomberg. Apparently didn't he didn't event with him with Whoopi Goldberg and he goes, oh, I love that guy. The bottom the bottom line is we have songwriters and singers and musicians that what they brought up to learn what they're doing, you know, and they should do taking care or you know, it's not right to take their music and virus. It's it's a simral right.

Has that hurt the industry and like developing artists is okay? So you think to meet the take and take whatever they want. Um, and what do you think of this conference so far? What do you think of the conference? A good time? Yeah, nice people. I love that guy's voice. It's so good. It's good. Right, Yeah, you know he was. He was exactly the legend you thought he would be.

One thing he said it was interesting to read and I picked that clip from our interview was that I have gone along in my presentations and I compare the e t F to the MP three in that the MP three really disrupted the whole record business. It made music cheaper, and it brought the revenue of the record business and cut it in half. And the E t F is kind of like that. It's flexible, it's cheap,

it's sort of the technology like that. But he made me rethink this a little bit because he's right, the MP three and the piracy definitely hurt nurturing new artists. And you know, there is some truth to everything's free. Will there be anyone who could rise who has skills as an active manager? And I think that's a concern with some going forward, because you do need active managers who are educated and well paid to invest actively so that passive can ride their coat tails. That's the whole

reason passive works. Also like that he opened with bottom line, which is like one of my favorite places to just use again and again bottom line. Bottom line. It's probably because he's you know, talking to artists. Bottom line, we need more bay in this bottom Line is actually a thing that we used throughout Business Week at the bottom of some of our articles. To say, bottom line, just cut to the chase here it is. Do you like how I made it about me? Again? That was great?

Right in business, it's just like it's great. Back, Yeah, I can't tell you got a promotion. We also want to say thank you to Jordan's Bell, who has been our producer from the beginning and she's moving on. She got us here. And remember all those pre recording things we did before we went live. It was like torture, but we got here because of Jordan. Yet, Jordan had to listen to our sort of six week rehearsal, sort

of like a band finding their sound. She had to go through all that and it was it was tough. And just one note on that first episode when I explained diversification of Jordan, a few people thought that was a little goodle condescending, and if you know Jordan and know how it worked together, it was not like that at all. I didn't. You know. Joel kind of forced me into that. He's like, explain it to Jordan, who knows nothing, and so I kind of got into that role. Back,

I love her. She was great and yeah, totally thanks for listening to trillions. Until next time, you can find us on the Bloomberg terminal, Bloomberg dot com, Apple Podcasts, and a bunch of other places I probably haven't heard about yet. We'd love to hear from you. We're on Twitter. I'm at Joel Webber Show. He's at Eric Baltunas. Trillions is produced by Magnus Henrickson. Francesca Levie is the head of Bloomberg podcast Bye.