Standing at the Crossroads of Active and Passive

had been in other areas. There was a trend and it still goes on. A lot of companies that are massive mutual fund companies get into the et F space. They got to hire people who know what they're doing. So they go to Black Rock and State Street and they hire them away and they run. They start to build up their Brandon Matt is one of those guys who's like Fidelity guy. Yeah, he's kind of like the E t F entrepreneur inside this massive company that that

everybody knows. And I think think there I mean a household name to say the least, people use it as their brokerage. Platform or they have funds. And I remember as a as a reporter when I first started out at Institutional Investor, covering mutual fund companies for fund Action, which is one of the news that ares at II. And back then, this is the late nineties mid nineties, Fidelity was the king of the hill. I mean, Vanguard

was something you've covered occasionally. They've since grown big. Fidelity is still big. But now you have this new world where passive has risen up to a huge extent, right a lot of them, Almost all the money is going there, and you have firms like Fidelity making their imprint in

this world. And I think not only they representative from an industry standpoint of it's almost like uh merging into this new technology, but from an investor standpoint, somebody who's worked in the et F industry works in Fidelity, and there's all these structures and a lot of them get used together. It's just an interesting way to look at Uh. He kind of sits at the crossroads of a couple of things happening at the same time. So he's like

the little fish in a big pond making a big difference. Yeah, I was trying to think of another way to throw a big on there, but you gotta go with it. Yeah, you win this episode. Matt Gooley of Fidelity. All right, Matt, we just described you. How would you describe yourself? That that's a pretty lofty description and background you gave on me. Thanks. I remember ten years ago when Eric was the Bloomberg consultant.

I was at spider et S and couldn't figure out how to turn on my computer and he was showing me how to use Bloomberg for the first time. So I guess we've come along. Did he help you turn on your computer? I told you I used to. I was the Walmart manager of the data and sometimes they send me to Aisle four to help Aisle four. Yeah, clean up on Aisle four. So my first job, Matt doesn't know how to log in this before AI, before robotics or anything like. My first job a spider Ets

was aggregating news. We sent out a weekly email called the Chatterbox, and it was this big deal if if a blogger would talk about e t s and now you read about them in the Wall Street Journal. So how did you get that job at spider Luck chance fell into it? How did how did you find the e t F. I think growing up in Boston it was more of who are the major employers and financial services.

Knew I wanted to do financial services. I remember getting a call from a family friend and saying, look, there's this small division within State Free Global Advisors that's working on E t S. Might be something worth it looking into. Got introduced to Dodd Kinsley, who I know, you know Eric and and the rest of history. I guess history already it was like a decade ago. Let me ask you this question because I remember when I covered ETS.

We covered this a couple of weeks ago. There's like a light bulb moment where you're like, damn, this thing is like five evolutionary steps beyond other structures. It's going to be a big deal. Did you have that moment at Spider And how fast did it happened? Totally? It was probably year two or year three. I knew it was into something special and knew there was growth. And I think the big evolution for me in my career anyways, is that at the time we thought about financial advisors,

we thought about institutions. It was it was really cool to think about hedge fund utilization and pension using e T s now in the seat I'm in working at Fidelity. I think the thing that excites me most is mainstream America like and we'll get into this a little bit later in the show, but but it's just very very early in terms of retail households using E T s. Were you at Spider when they launched g L D

uh No, that was before. It was a couple of months before my time, but it was there for j n K and and a lot of the fixed income controversial j n K, what was the launch that made you go WHOA? It was probably some of the fixed income, It was some of the high yield, some of the municipal bond ETFs. There were two issuers at the same time, launching products a week apart, and it was a race to who could get to a hundred million first. But that was that was the time that felt real to me.

And you mentioned g L D. I think those are the funniest phone calls we got in those days. Is is every other phone call you would get from the client was is the gold really in the vault? Is it? Though? I'm going to a vault. We we got to get in. We've been trying to get somebody in a vault uh to interview the gold for a couple of months now. So if anybody out there is listening, who can get us into there's like twenty gold funds at this point. Um, we're coming for you. Yeah, we we really want to

get your goal. Yeah, we want to see the man with the machine gun guarding it. And it just Eric keeps saying that, I just want to see the goal. Yeah, I want to talk to the guard. They might put a mask over your head, you know when they drive. I'll do it. I'll do it. I'll put the bag over my head, drive me around the city. I don't care where I get out. Well, I mean, I want to come home. But I get that question. I'm not even I don't even work at Spider or any of

the goal places. I get that question a lot when I go on on the road to do presentations. People want to know if the gold is really there. It's a top five question. So what are the top five questions that you get today in the current role, which is what, by the way, what's your job? So current job fidelity is is E T F guys Eric put

it or one of you put it? But really it's educating our financial advisors on our platform and in the industry, and then retail investors on how to use e t F s. So in some ways we're running the same playbook we ran five years ago, ten years ago, e t F education, how to use them. That's really the role right now is is et F education and then the role of fidelity products in that right. So in

the last four years, we've launched over twenty products. Every time we launch a new product, we spend a lot of time with our client facing teams educating them on the product, how it works. How many products have you sensed it if you've launched that many zero? Yeah, going back to the two three when we launched one queue, Um, we haven't closed in et F as of yet. So what's the number one question that people ask you number

one question today? I think most of the questions we're still getting our around trading right best practices, and that's not just advisors, that's retail investors. So if you think about the client experience, the customer experience, that's something we're thinking about all the time. Is someone's interacting on fiddli dot com or on their treating portal, what does it look like and and you know this is et s

still sit kind of within the stock framework. So you put up a trade ticket and will say market order versus limit order. For someone who's only ever bought a mutual fund, that can be something that you have to walk through with them. So that's probably the number one question we get in the retail spaces. How do you trade et s? What are best practices for trading et s?

And how do you respond to that? We always encourage people to consider limit orders, right, so if if it needs YEF and you're putting a market order out there, uh, that can lead to to a suboptimal outcome for trading execution. So we encourage folks to look at limit orders, to think about what's trading the overall market, and and just to be thoughtful about their approach for trading ETFs. Let's just break this down, because I think there's some people

who are like, what's a market limit order? Can you talk about? Break it down? Your DJ mix sound sounded your scratching sounded exactly like your squeaky wheel Squeaky Wheel at the supermar very very similar. You gotta work with their cousins. I take that one back to the moment. Okay, right, limit orders you know, as an analyst, were always told to just default to limit order, but you have you have access to some of the data that people are

using on your platform. What's the breakdown between people using market orders and limit orders? And and it just go through what each is. Sure, So market order is the majority of the client orders we see, and I think most people in ETF space that could be alarming, right, and it's close to sevent our orders are market orders. But for the overwhelming majority of e t F to trade millions, if not billions of day a day, that's that's not a big problem. Limit orders are the minority.

Limit order is you're setting a price, but you don't know at what time it will execute. Market orders a little bit of the inverse of that. So you want it executed now, you want it executed the best price available now, and you're willing to sacrifice price for time now in that case, right, let's say it's a big liquid one like I v V or J and K or something like we mentioned or g l D. Is there a case where market order just makes more sense because it's so liquid, it will just digest to order

and you'll get a good deal. Is there a point where if it doesn't trade a certain amount, then you should go limit order because the spreads are wider and if you put a limit order and it's likely you could save a few basis points on that, right, how do you work that out? Yeah? It's kind of like when you're crossing the street of three young kids and you're tell them across the street and look both ways. When do you tell them to look both ways before

they crossed the street. For us in the e t F market, it's probably of volume, right, if your trade order represents of what that e t F trades in a given day, you want to at least stop, look to the flock to the right, think about what you're doing. Uh. That's a general rule of thumb we use for for kind of trade order guidance. But let's say I'm trading one of your lesser liquid products, like the high dividend et F and it trades a five thousand shares a

day or something. Would you tell me to put a limit order in always? Or can you do a market order? Not necessarily? I think if if you're a retail client and time is important to you, and you want that trade downe at ten am versus two pm in the afternoon,

mark orders is your option. So one of the things though, in general about e t f s and the knock is that you know, they really facilitate trading, Right, I can sit there all day and just day trade, day trade, day trade as a retail investor, and maybe that's not the best thing for me, right, So how do you guys talk about that with clients? Yeah, I think that's

that's a little bit of a myth out there. Certainly there's active traders, and out of the nine million households we have on the platform, uh that we have about one million of those nine million households they're using ets in some way, shape or form. Of that one million, it's a relatively small majority of of day trader as an active trade or as many of the people using

ETFs now are buy and hold investors. We ran some analysis I think it was two years ago that looked at holding periods, and the holding periods were up close to two years for the average GTF position. And you think about we're launching new products as in the industry every day, the industry is growing. That holding period was roughly in line with what you see with mutual funds.

And I don't have the data my fingertips, but the point is that it's not as if because we're giving people trading access into a day that they're trading and all the time. And you look back on a kind of historical basis if you might remember this, but four one ks used to be monthly, they weren't daily. And the question was, well, if you give people daily access to their four and case traded every day and the answer generally is no, people are belong buy and hold investors.

Of that data you just talked about on households, is that regarding just your e t F s or all the e t F they could be. That's all the ETF And that's why it gets me so excited about the space. So when I gave those steps before, there's nine million households on the Fidelic brokerage platform, roughly about one million of them use any t F, not just to Fidelity ETF but any TF, so eleven percent of

the population. But within that and we're going over your history before prior to Bloomberg right where Institutional Investors publication two jobs before that, but my first job out of school was Institutional Investors newsletter Division. So did you have the job up here? Then I did, Yeah, first job, I had my depth going hard. I was like a twenty one year old in New York City living in Manhattan. I mean, I'm still catching up on sleep. So I

didn't mean to go down this path. But my point was, I presumed they paid you at the time, and I presumed you had a four one K and maybe you rolled it over into an I RA, and maybe that money just sat there forever and you didn't really play with it. And now you're making the big bucks at Bloomberg, so you're you're investing in other things. My point there is that if client accounts underneath a hundred thousand dollars,

only eleven percent across the board on ets. But I started to look at client accounts that are over a hundred thousand dollars of people who are probably spending some time looking at their investments. And that's where it gets really interesting, is is on the whole of client accounts that are over a hundred thousand dollars, millennials are really driving us. Of millennial accounts with over hundred thousand dollars own an e t F that's much more than gen X,

that's much more than baby boomers. They're going to be the ones that are driving this and of those millennials that hold ets on our platform. If you hold an ETF, it represents your assets. So I think as you see some of the baby boomers retire and do accumulate assets, millennials driving the growth the industry. That's what I'm really excited about. Are you a millennial? What's the cut off? It's it's kind of like one is sort of which

I am. I am a millennial. Yeah, okay, he's got some gen X in them, though, I can just tell he's not full blown giving him permission. Yeah, look, I look like a gen xer. Do you remember when Nirvana came out? Yes, okay, well he can't's not you can't be full millennial if you have something full millennial. Yeah, so you're like you're like maybe half millennial, like like your millennial if your first rock band was like The Strokes.

That's not me okay, okay, So why why is there so much enthusiasm with millennials From your perspective, I think they're still learning about it, but they view e t S as lower cost as more tax efficient. I think the interesting thing about ETFs, there's not one reason that someone buys an ETF. It's a whole host of reasons. It could be lower costs, could be in day trading,

could be any of that. And I think they're being introduced to it by a lot of the robo advisors, by a lot of the digital platforms that are using ETF. So if an ETF shows up in your managed account, let's say that's going to be the first product that you kind of grow up using. And I think that's what a lot of millennials are using, is they're using different applications and different sources for investing. So you have one million of your nine million people using your platform

that use ETFs in some way. I mean, are where are we looking at this number in say ten years, let's just even go twenty, because you're talking about bay Boomers eventually passing on assets and millennials clearly like this structure. I mean, have you done any projections? Is this going to be like seven out of nine or all nine? I mean one of your podcasts recently, somebody was projecting thirty trillion. I don't think i'd be that bold in the next ten years that might have been. That was

a thirty by thirty, the thirty trillion by thirty. A lot of that is market cap accumulation of the stock markets, but it's still definitely ambitious. I mean, let's go back in time. I mean, I don't have any projections for you, but I think a historical perspective is interesting. Right, that was the time all the sound effects in the studio are great. Here. I just think he watched Police Academy way too much. Remember that sound effects guy. Yeah, he

was highly inspired. Okay, so we went back in time. So we go back in time. We're in the eighties when the millennials are being born. Eric's like sweet spot. Yeah,

cultural references glory. So I see, I looks at what percent of Americans held mutual funds every year, and they go back to the eighties, and you think about that's when mutual funds first start showing up in four one K plans, and the percent of American households that held mutual funds in the late nineteen eighties was about and that's kind of where we're at now, right, So I said, millennials on the moment, but in the masses it's about.

So think about the growth of ets. We're kind of in the year seven in terms of the growth trajectory, and then think about how quickly mutual funds grew in the nineties, and that's what's ahead of us for e t S. Okay, So, Matt, one of the things I'm really interested about is how Fidelity, which really created its name through actively managed mutual funds, has in recent decades adopted ETFs. So what's that like culturally inside Fidelity? I

think it's a really exciting time. If you think about the masses of investment professionals and analysts and portfolio managers we have, they're excited about the et F initiative. For us, it's just a different delivery mechanism. It's a different structure to do what we're already doing on a daily basis in a mutual fund or in a managed to counter or in a c I T And I'll give you an example. You know this, but two years ago we launched factory tfs. These are Fidelity ETFs that track of

Fidelity index. That index was built by our product team and our quantitative team. That quant team sits with active portfolio managers on a daily basis, managing risk and helping pick stocks. So active is very much in our DNA. We believe in active management. It's just being built in a different structure and in a different every mechanism for consumers. So we talk a lot about these E t F and how to make a portfolio because ultimately that's what

you're trying to do. These are the raw materials you put into a portfolio. Is the portfolio changing? Is it?

Is it becoming more of like instead of having your core equity be a large cap growth funder or value fund or large cap blend, it's now like a cheap smp FI et F and then you keep your core real passive and cheap, and then you kind of go on the outside with your active Do you see a shift that the active manager will be much more on the outside, used, as we like to say, like hot sauce or spice on top to try to get some alpha, which would allow the investor more patients to hang in

there with some underperformance. It would allow them to get more active share. Do you see a shift in what active is used for and how it's used in a portfolio? Maybe, I mean, certainly you've seen a number of factor products come into the marketplace, and that's a little bit of active but I don't necessarily see that. And I think a good example is is FBNDR Total Bond e t F that portfolio management team led by Ford O'Neil. They've

been running a mutual fund version of that. It's not exactly a clone, but it's it's similar for years, and we're just delivering that in the ETF structure. But we're running it very similar to what we run in the mutual funds. We're not changing our fundamental investment process or bottoms up research. We're just delivering it in a different structure. So I don't know if I you know, that could be the case in certain areas, but it's not fundamentally

changing the way we manage money. And what about how people are managing their own money, because I mean, we were just talking about the mutual fund growth from the eighties nineties, Like the one of the reasons that it took off was that, you know, you guys have a platform that is my four oh one K, and my four oh one K auto fills every pay period into that account, right, But yet e t f s are barely in that device yet right in the four So

how do you guys see that evolving? Yeah, so specifically ets within four OW one case, you do see them from time to time. You see them in self directed brokerage accounts, which many four own K plans offer. Um, what's kind of interesting is you actually see e t F show up in I ra A s, which are non taxable for for most people. So it's not as if people are only using them for their tax efficiency. The four O on K questions been out there for

a while. I think it's operational, and I think it's just that clients probably don't need the intraday liquidity like they do with maybe their taxable account. But the way we're interacting with investors on the platform a fuel and that was kind of your original question is we're giving them choice and we're giving them value. Right, So, on our platform, most e t F F whatever right today are available for trading. We offer ninety three of those

e t F commission free. So we're offering the clients commission free trading and some I shares ets and some fidelity tfs. And also if they want passive, it's not all about an e t F. And you know this, but there's passive mutual funds. So we offer low cost passive mutual funds to investors and we give choice between the actual structure, which leads me to something I saw recently.

There was an advertisement that someone tweeted out that I can't remember the makeup, but it basically was Fidelities sing, Hey, forget Vanguard, We're really the low cost provider in the index mutual fund space. I think yours are like point oh one or point two percent for an index mutual fund. So they've they've sort of vanguarded Vanguard if you will um and that works right. You see flows when you go cheaper. And I don't think it's about a specific competitor.

There's a number of competitors out there that offer low cost index products. But get not about Vanguard. Dude, he's nice Dodge, but he's told not to talk about that. A lot of these issuers can't say the V word. It's like Voldemort. You saw the advertisement, the name was in the advertisement and said it. Yet he won't. He won't do it, like the competitor you just mentioned, Eric,

the Valley Forge based competitor. In out of twenty nine chances where we have index funds, an ets that go ahead to head roughly finally has a lower cost product. Think about this what the world has turned. Yeah, you also talked about commission free trading. Now this drives a lot of flows. Yes, you get your your trade commission free, but if you trade an ETF that has a commission,

not that much. Go over the differences in cost. And the second thing is are the commission free ones sometimes the one the issuers are looking to promote and they might not be the most liquid or uh ones that people want and talk about that and how that draws flows and trading. Absolutely, it's a great question and something I wish investors and advisors were looking at more closely. There's a number of different custodians and brokerage sites out there.

We've been deliberate in the way we've manicured our commission free list to make products that are best and breed, or what we feel are best and breed, and that means low cost, that means good secondary market volume. We don't see that across the board. There's a number of commission free products on other platforms that might actually have higher expense ratios. Wide or bit of spreads things like that.

So that's definitely something to watch out for. Is is I would never advocate for somebody that you buy an ETF strictly because it's commission free and you save five dollars. There's a whole boatload of costs that go went to that, and depending on the trade sides, right, the more you're trading dollars, the less that five dollars matters, and the smaller the universe. And that's a one time cost that dilutes over time, whereas the expense ratio is coming rain

or shine every day, coming. Then yeah, they're like my metaphor is the expense ratio is like termites living in your returns. They're not going away, they just live there where. Well, that that's sort of like a round trip ticket, like you know, you buy it and you and then you sell it. It's a one time it's almost like a tiny, tiny load if you think of the mutual fund model or a you know, like I said, a round trip ticket. I was looking for another termite analogy. That's what I

was getting. Yeah, sorry, that's my one. That the termite one is. Uh, it kind of works though, because if the expense ratio is small it just limits the amount that nibbles away at the return. Not that you can't outperform if you're active, but that expense is truly uh something that comes. And some people don't realize that the expense ratio is taken out in tiny little bits every day. It's not like once a year. And that is why the termite metaphor, it's just nibbling a little bit each day,

pro rated at the at the annual cost. I think you're right, there's parallels to mutual fund Land, right, and mutual fund Land. We talked about the search charges or transaction fees in et f land because it's a brokerage product and trades in the stock exchange. It's a commission. And but you're right, some of these costs are analogous and and it just begs for more tools and more research and screener tools. So there's some really great comparison

tools out there. I know Bloomberg has some, Fidelity has some, but these are the costs need to be looking at to create this total cost framework of the bidst spread, the commission, the expense ratio, and the tax cost. If that matters to you, so talk to me about being an issuer, that seems like a really big deal. And specifically though, where's the white space that you guys see right now? So as an issuer, so we've talked about fidelity as a platform, and now we're talking about fidelitis

an issue. As an issuer. Five years ago, I think we were maybe outside the top twenty. Now we're number fifteen or number sixteen, and I think you were sharing with me yesterday. I just looked at the numbers that their number six they're the sixteenth biggest issue. Where um, they came out of nowhere. They have five years old most they had that one from the two thousand three, but let's just not count that. Mostly their big effort

was five years old. They have ten billion. How our sixteenth place and E T f LAN only gives you a point three percent market share because it's a lot of concentration at the top. But look, they're but they're they're passing the quiet march. Yeah, I don't know if it's a quiet march. But I think the point is we're growing, we're taking market share. We're top ten in flows here to day, So continue to move up the ladder and the white space they get to your question

is the retail investor. I'm convinced of that. I'm I'm convinced that there are still advisors out there who don't use et s, But there's masses of retail investors that have not been introduced to ets yet. And that is the white space I think in in E t F land, when I look at your E t f s, you kind of have three main components. There's sector E t S where you came out and you basically again you van guarded the sector category. They charge point eight percent,

meaning they came in and they undercut everybody. Those are a five percent of your assets. Talk about those those track tech, the general sectors. What's the play there? Why why would somebody use those? So those fidelity sector et F they track M s c I benchmarks the big not just the cost, they're the lowest cost sector et F on the mark it. But they also are all cap and I think that's the key differentiator is having

small cap within your portfolio. You look at some of the bigger We're talking about technology earlier, and technology is a great example where some of the biggest quote unquote technology ETFs have a T and T and veries and a lot of telecom names in them. They're missing out on some of the MidCap and smaller cap names like

Twitter and Square and some of these other names. So that's the biggest differentiator for me, is that the mid cap the small cap exposure and delivering that all commission free on the fidel A platform at a basis points to anyone. That's the key differentiator, and I think what's led to the growth of the FIDELI sector series over the last few years. And you guys have sector mutual

funds though, we do, and how does that work? I mean, when you're out there trying to sell the sector et F, does it step on the toes of the mutual fund sales people? Not at all from a client facing perspective of the same people in most cases, right, it's not like we have some rogue organization. And but but if

you're working with maybe maybe, but absolutely not. They're both growing, right And I think a great example in Bloomberg featured our portfolio manager Charlie Chai is the PM of our active technolo G sector fund and and he had one of the better performing mutual funds last year for seen over the last twelve months through Q one that mutual fund is brought in almost a billion dollars. The technology et F a basis points is brought in almost a

billion dollars. So they're both growing when active is doing well and doing what it should. The stat I look at, which is kind of the crossover stat, right, So take the people who hold our technology et F F tech ft e C. There's about forty eight households there that hold FTECK on the fail A platform, only about of them on any active sector mutual fund at Fidelity whatsoever. My point in giving you that stat is that the majority of our et F clients are new clients. They're

they're using ets for whatever reason. I don't see a lot of people selling the active mutual fund to buy the passive ETF directly. One for one, I think, in fact, the people who are buying the sector e t F s are more likely to buy an index mutual fund than they are to buy one of our active mutual funds. Is just a different client set completely from what I've seen in the data. So let's talk about the factory tfs. We just spent last episode talking about factory tfs and

smart beta and the conversion. Like you said of active into an index your factory tfs. They cover the main areas quality, value, momentum. These are these areas. Here's what I really want to ask you, which is that if you look at factory t f s from the different brand, there's a lot of brands out there that have factory t F lns. Here's an example. The SMP five hundred indexes their value et F does not hold Apple. In fact, Apple is not in any of their factory e t

f s in fidelity, Apple makes all of them. But let's just stick to value. Why would Apple be in your value e t F and not in the SMP five hundreds, which is tracked by Investco. So you bring up a great point is that when you buy two large cap passive ETF, whether their benchmark to Russell one thousand or S and P five hundred, they move in line with each other very close. There's very little dispersion between the outcomes in factory land. It's all over the place.

You can buy two different value e t F two different low vol ETFs, they're gonna have very different performance based on the underlying methodology. So you ask the question about Apple, and let's dig a little bit to the methodology for fit all these factors serious and this applies to all of the single factor e t F you just mentioned. Our e t F s are sector neutral, their size neutral, meaning we don't drift down into small cap as many factor products do. And all the individual

security bets are are capped. It's called equal active waiting. It's a long way of saying it's relatively constrained to what the eligible universe is, which is the top thousand names. So when you go through that approach, it's no surprise that a name like Apple might show up in a value or given an et F, Apple today yields one

point five percent, it's not like it yields nothing. And we're looking at it within the technology sector, right, so all of our metrics are applied within the technology sector. That's why you might not see it. And I think that might be a rare case where it shows up in all of the ETFs. Some of the other names I was looking at the other day, where Amazon, So Amazon can only be found in our momentum ETF General Electric, that's not value. That would be kind of messed up,

But that's my point. I think that would be messed up it could be messed up, but I mean Amazon still is concerned discretionary. But my point there was that at the individual stock name, they tell you a story about the individual methodology of each product, and I think Apple's example, but there are other examples of individual names that show up where you think they whether they should be the other products that you mentioned, just a quick bullet.

I don't know the SMP series too well, but I think when you get unconstrained, you can get some funky things happening. Right, So the book value of financial services companies, from accounting reasons is can be kind of goofy. You could load up on financials and a value e t F just based if you're just looking at price the book value. So we try to constrain these products. When you say constrain yours, make sure the sectors are somewhat aligned to the sector weightings of the SMPT, whereas the

SMP they don't care. They're just going after it and their sector. They have no sector bands. Yeah, I don't. I don't know that the SMP series as well as I should. But for the Fidelity series it's and it's not to the SMP, it's to a universe of a thousand names. But yes, you're on You're on the right track. It's sector neutral to the overall eligible universe. So when you look at a fidelity factor ETF single factory t f IF technology on the market, you're gonna see likely

in technology. Um. So I got a big meta question, which is what are people not talking enough about in the ETS space that you think they should be considering. So I think the common response from et F issuers there is active, and I certainly believe in active. We've talked about this a little bit already, but the flows have gone from a billion a year to seven billion and fifteen billion, and I really feel excited about active management. But one of the trends I'm starting to follow is

what I call multipurpose ETFs. And you think backed years ago, and you might remember this is we always position ets is precise. They were precise instruments. You've got SPI, nothing else, no small cap, no emerging markets, no surprises. And what I'm seeing now is that investors don't necessarily want that precision in all circumstances. Sometimes they want a multi purpose ETF. So one example of that that we brought to the market was the Fideli DIVN and et F four rising rates.

It does two things. It's a divn and e t F, but it protects rising rates relative to they're diven in et f s right. So it's not probably the best vehicle if you're just trying to make a play on rising rates. But it's a divn and ETF that has the rising rate birds one stone exactly, and I think

that's a trend you're going to see more of. This is e t F to do two things that do three things that maybe aren't precisest people are used to going back five and ten years, but it's what the marketplaces is asking for, and it's what our customers are asking us for. How dangerous is that? Not necessarily dangerous from my perspective. I mean, these products are still well

diversified across a hundred or more names. But if you get three or four things that these things are doing, like maybe you don't know what what you're going to get, Like the currency hedged low volatility income rising rate factory with the side of fries we have that's coming down the plate. I'm sure it could be. It could be. I I don't know. I think it's all about the name and how it's positioned the marketplace, right, So this would be a good day write that down bringing that

back to our products. Uh. But in the case of FDRR, it's just it's up to us as the issue or to educate people that this is first and foremost a divin an ETF with built in added methodology features. And it just goes back to the to the long march for education that we were talking about earlier. So I think one of the things that's in our thing with what's basically happening in the ETS space is it used to be that, you know, like you could have a great idea enter the space, maybe blow up in both

good ways and bad. But like as institutions like Fidelity enter and take over more and more of the market, it does become more institutional. And I'm wondering how you guys see the overall space as all this white space gets kind of gobbled up, what is the space gonna look like going forward? My perspective would be that over the next five or ten years, you'll probably see it won't be as black and white between e t F and mutual fund, between active and passive and all these

nomenclature things we used to describe the space. But I think there'll be a grain and that five ten years from now, it could be structures that come together. It could be how indexes are put together. But people won't be spending as much time thinking about active versus passive. The be talking about how to use them both together

in a portfolio, how to incorporate factor based investing. And I don't know if that answers your question, but I think from my perspective ten years ago, it was a little bit of ets versus mutual funds, passive versus active. You're starting to see that a road as as as active has come back and favor a little bit, and active managers have entered the space, and I just think that will lead to an overall conversation about portfolio construction.

I think that's just good for advisor, is good for retail, big gray portfolio oatmeal, oatmeal. Yeah, that's good for you. Yeah, Matcool, Thanks so much for joining, Thanks for having me, Thanks for listening to trillions Until next time. You can find us on the Bloomberg terminal, Bloomberg dot com, Apple podcasts, and whatever else you listen to podcasts we'd love to hear from you. We're on Twitter. I'm at Joel Webber Show. He's at Eric Balcunos. Trillions is produced by Magnus Hendrickson.

Francesca Levy is the head of Bloomberg podcast from Paco