The Closest Thing to a Meme ETF

this sort of what I'm calling the a m C eclipse. Uh. This is that movie chain company that a lot of the redditors have, you know, sort of come back that once you put you know, Game stop, you know, to the Moon back in January, and then it went right back down. But they're back and they've really rallied around a m C. It's gone up I don't know, each week for the past way. Yeah. Yeah. And here's the thing with a m C is that they're really united on this one. Um when games Stop happened in January,

then they splintered off. Some people wanted to go into a MC, some said silver. This time they're all into a MC and it's showing. The volume on a m C has been well over a hundred billion over the past seven eight days, and it's traded more than any other stock for seven days straight. Nothing has traded more than Tesla and the Fang stocks for more than a day in decades. It's just crazy. So there's a ton

of activity. And what what I was looking for is Okay, AMC is having a good rally like what E t F s own it and the the E t F that owns the most am C and game Stop together about a twenty allocation as of today is uh so fis fifty E t F, which I hadn't thought about in a while, but now I get it. It tracks the stocks that are used by their retail investors on the discount brokerage. UM. I've been telling people it's like

maybe a slightly classier version of the Robin Hood fifty. UM. You know the stocks that that were tracked by Robin Hood all they stopped letting people track them. But this is the probably the best way to capture that sort of retail yolo kind of audience, I think. And yet it's gone largely unnoticed and it's just been an interesting

case study for me for a variety of reasons. So I thought it'd be interesting to talk to them about this e t F but also some of the other ones and just sort of how it works into their bigger business plan. So joining us from so Far John Gardner, he's the business head of investing at so Far. Can't wait to speak with him this time on trillions. The closest thing to a meme et F you can find, John,

Welcome to Trillians, Thanks for having me. The e t F s F y F is almost the closest thing to bottled lightning you could basically have for what's been happening in the market this year. How does it feel to have bottled lightning? UM? Well, I think we've you know, we think about building products that resonate with our members and help them become better investors and ultimately a chief financial independence over time. UM. And you know we've we've

launched six ets to date. S F y F was born about a year ago, UM and really just replicates the top fifty holdings of our members. And you know, we thought we saw something very interesting because we have as part of a feature of our our retail brokerage platform, UH, something we call social Invested. So it's the ability to actually follow what other members by and you can see sort of buying a percentage basis, but not a dollar basis what people are holding, and then you can comment

and engage with with other members. It's been pretty engaging utility for for our members. So on the back of that, we launched the s F y f UM as a mechanism basically enable our members to very quickly sort of replicate sort of the mind of of the group UM. And you know, it's been interesting that I think it's a sort of bifurcated between some of the meme stocks and then more traditional holdings like Amazon or Apple or Tesla that our members hold. Yeah, Joel, look, let me

give you some numbers on this thing. So it's up thirty three percent this year, probably a little more by the time this airs. UM the Stars of right the Cues is up seven um smps up. That's up more because values having a big comeback this year, and then ARC is down twelve percent. So it's hard to come up with an e t F this year that's sort of able to break out unless you're a value stock et F for commodities, but for something that holds just

general equities that are not value stocks. It's just an anomaly. And as John said, it's interesting. It's also has like a lot of airline companies which obviously aren't you witness associate them so much with um, you know, a growth stock, it's got um what looks like a pot Company's got Berkshire in here. It's got ex On Mobile, which is having a great year, Virgin galactic Um. It's a real interesting mix. I guess John, could you walk through how the stocks are picked and how this et F works

in relation to those investors that are using your brokerage platform. Sure. So, it's the top fifty most widely held US listed stocks

on our sofa in best platform. And mechanically, the way that we look at it is by first the top fifty holdings by number of members that actually hold a stock or a share or a portion of a stock or share in the portfolio, and then we basically wait the portfolio based on the value of the shares that make that top fifty from waiting standpoint, and then we re balanced the portfolio once a month to basically reflect

the mechanics that I just discussed. And now just real quick, Um, your your ideal weight for a stock isn't going to be nine, but a MC has grown to We saw this with game stock UM and the video game et F where it became like a thirty waiting um. Can you talk a little bit about how that works, Like, if the stock like this goes on some crazy run, it's going to have a bigger waiting for a while until there's a the stock goes back down or rebalance.

That's exactly right. So I think that this was someone fortuitous for us. So we saw a massive run up into the end of the month, and then we did the rebalance. So while the stock was you know in the in i think total of holdings for a period of time, when we we balanced that it's back to somewhe somewhere around a six percent waiting right now. So when did you get a sense that AMC was gonna

light up? I think, as probably most people, we watched the NBC all day and you could see that the stocks started trending, and you know, we we look at all the meme boards, the redded boards and things like that, and you can start to see some momentum behind it.

But again, I think we're we're agnostic, you know, I think we're we're we we philosophically, UH as a company want to provide a lot of selection for our members UH and make it easy for them to invest, which is why we do things more broadly on the on the retail broken side, like no commissions and being able

to do fractional share trading. So while it was again fortuitous that we saw a sort of a run up in the stock, I think we you know, we're literally just trying to give our members, you know, the best and easiest way to invest their money and then an easy way for both our members on the platform, but then you know, off platform and other brokerage brokerage platforms the ability to sort of easily with a single purchase be able to you know, get an exposure to the

mind of sort of what our members are doing. So, you know, one of the things that I get asked a lot on Twitter, especially when one of these stocks goes crazy, is how come there isn't a meme TF and trying to explain to people that it is hard to predict a meme stock or a situation before it happens. Potentially a short squeeze et F would make sense because the memurs seem to want to buy stocks that are

heavily shorted. But I guess this brings up labeling because if you look at the c t F, it's taken a little bit of cash over the past week. Um. But relative to this sort of shiny object moment it is having where it's you know, doubling tripling the market, Um,

it's not a lot. And I wonder if there's any temptation to to change it or I don't know, not regret, but like do you do you ever think about, well, if this had a ticker that was more clear that it was tracking retail traders or something or are you just let me let me ask a question from my friend. Why isn't the e t F called meme or you know, a the retail trader something that would allude to the fact that you're capturing young retail traders. That is definitely

missing from the E t F marketplace. That's why it's an interesting situation. So I have a couple of observations. First of all, I do think the ticker name is critically important in creating brand awareness. Um. And you know, one of our other products is called the gig g i G for the gig economy, which we can talk about later. The reason why we didn't call this the meme stock um e F is largely because really what we're trying to do is reflect sort of the mind

of the retail invest there. And what's been interesting is that while we're capturing I think UM some of the early friends for from meme stocks, and you know, and more broadly, we've seen like our investors started buying Tesla before we got into the SP five hundred, and there was a big position in the portfolio. UM. We also see that that our retail investors are holding more traditional names like Apple and Amazon and Microsoft and Disney UH

in big positions. So I think you get a good balance of sort of opportunistic high price movement UM stocks with some of the meme things, but then also more high growth, traditional high growth companies. And you know, I also think that while you might try to chase the meme stocks, and Eric you alluded to this that you know, it's really hard to sort of identify what's going to take off and and those things, those things turn around

just as quickly as they as they scale up. So you know, we're trying to build basically products that haven'tdurt and during value for our members um and are basically

trying to solve for specific needs. So um, you know, the reason we created the s F y F portfolio initially was because we saw, as I alluded to before on our social investing platform, that there's a high degree of interest in following successful investors on the PLA form, and we thought this would be a great way to sort of very easy make it very easy for our members to basically, with one trade, be able to get exposure to the mind of basically the entire member basis

so far okay. So the difference that I guess I see here or or could potentially see, is like you have a membership and a so far investors set that you're clearly targeting, but at the same time, like assets under management in this in this particular et F is what twenty two million like you there seems like there's such a bigger opportunity with a different presence of chicker or sell to the marketplace, because I mean, what you're what you have under the hood here is kind of amazing,

and yet the assets still reflected necessarily and look, can

I jump in on that real quick? Just because we're so used to the opportunism in the e t F market that it might also speak to your main at so far, you're not an e t F fishuer, you're a fintech company that that happens to have E t s. Can you just walk through that balance and is that why that that you can that your aren't maybe thinking in such but the word is like marketplace trends and terminology and maybe you just have no interest in being

that thing to the market. Yeah, I think that it's I think it would be helpful just to step back and sort of introduced so far for those um that aren't familiar with it. So we're an online personal finance company that enables people to invest, borrow, save, spend and protect their money. UM. We were recently listed on the nasdac UH. We went public vs back through social with Social Capital H and SAM and you know, broadly, our goal is to help people achieve their financial independence, to

realize their ambition. And we'll be able to do that for for millions or millions of our members. And you know, as I think about the invest leave and specifically for for so far, you know, we we want to be the one stop shop for our members to help them achieve that financial independence. So we started out with auto investing and then migrated into also offering a Brokeren solution, which we call active investing. And there, you know, we

were very early on and going commission free. We were we were one of the first firms to offer fractional share trading that we did UM initially on about a hundred fifty names and now we do on about names in a real time basis. And then UH in two thousand and nineteen, we also launched a crypto platform so that basically members that had brokerage accounts could very easily open a crypto account UH and get access to something

more traditional UH cryptocurrencies. And I think as we think about why we entered the marketplace for ETFs, you know, we want to continue to provide selection for our members that help them become better investors. And UM we found, you know, we found that there were some interesting request the needs that we could we thought we could we

could support. So we we came to market in two thousand and nineteen with our first E t F first two E t F s, s F Y and s F y X, and we were first to market with no fee E t F s. They were basically passively managed accounts that were replicating the SMP five and then sort of the next five. From there, we've launched a handful of other UH E t F s that we

think meet specific needs for our members. So we came to market with a product called t g i F which was a week fixed income weekly UH weekly dividend payment UM fund, which recently won UH the UH Best Best Named E t F for two thousand and twenty, and then more recently launched w K o I which is basically the equity component of weekly dividend e t F. Sea can I jump here on these two? T G I F Remember when it came out? So this is

a it pays the dividend out weekly. Now what's the point of this, Like normally an e t F that holds equities and whether it's divid or not, will pay out monthly. UM Is this is because the younger investor wants that payment on a quicker basis or is there another reason like what's behind the need for weekly payout? Yeah?

I think I think broadly, we you know, as we think about so FI RIT large, you know, we help we try to help people think about their cash flow management UM and We have a tool called Relay as well, which is basically our advice platform that you can aggregate all your data and we provide helpful tips around how to sort of optimize your finances. Uh, And we thought that, you know, I think a couple of things. One is it's just a more predictive income on a weekly basis.

And then too, to the extent that you're going to sell out of out of the port the out of the the e t f UM, you're basically not missing any of the fun distributions, which is probably more wele than on the w k l Y, which is the which is the equity etf But I think it was

a combination of those two things. So when you think about overall strategy and you walk through a lot of the products that you you currently have brought to market, like what do you what do you feel like the endgame looks like I think, you know, we're trying to build and they can go back to go back to

answer your original question. You know, while obviously it's important for us to grow assets on these platforms, you know, I think ultimately we want to create a suite of enduring financial products and ETFs UM that specifically support that sort of things that our members are most interested in. So, UH, while you know, it's it's uh, it's it's interesting to potentially chase UM revenue opportunities and try to scale assets, you know, really really quickly, and you never know when

you're gonna catch lightning in a bottle UM. You know, I think we've had this product in market for less than two years. I think all of our funds, like we literally have been in market for about two years, just over two years for all of them. I think what we're starting to see is we're starting starting to reach at inflection point UM, both from performance and track record that we're starting to get more attention. So, you know, I look at this as building and enduring platform of funds.

We've got six today, we plan on launching another three by the end of a year. UM. There'll be more thematic in nature. They'll touch on different aspects of what we think our members are interested in. UM. You know in our view that this this will be a significant and profitable stand a little business for for so far over time. UM, but it's always going to be in the service of really thinking about what our core members that are investors on the SOFI active invest platform are

looking for and building around those needs. Can you put yourself in your own portfolio, in your own e t F When you say ourselves, you mean SOFI? Yeah, Um, yeah, that's a that's a great question. So no, So for the UH, it would be significantly heavily weighted on s F y F if we could know we purposely excluded so far as a as a constituent member in the portfolio. Eric, does anybody do that? Do they have themselves in their own portfolio? Well, this is what aren't got in trouble

with or not trouble. I don't have a problem with it. But in a r k X the space ETF, the second or third biggest holding is a r k uh PR and T the three D printing e t f UM black Rock. They have target date type funds that hold black Rock ETFs UM, and black Rock probably has a couple of atfs that own black rock stock. It's not unheard of. Um, it depends on what it is. In this case though, if you're tracking the holdings and they outright hold so far way more than a normal

person would, that you wouldn't want it in there. That's like a distortion, but I wouldn't I wouldn't like ding them on that if it were like a reasonable waiting John. One of the things we talked about a lot is how it really does seem like the marketplace for E t f s has been polarized, for lack of a better term, between really cheap stuff, you know, cheap beta as Eric will call it, and like on the other side,

shiny objects. And so I'm wondering how you you kind of attempt to thread that needle, because in a way you can effectively kind of do both. Yeah, So I I think if you look at the funds that we have, obviously we came with the no fee UM e t f s and we we decided just to extend the no fees for for a third year, which I think we're doing the filing for UH this week. UM. I think obviously you want to provide value and differentiated value

from return standpoint that you can charge for UM. We currently charge twenty nine basis points for the s F y F product because it is basically a mechanical nature in the way that we UM construct and manage it. And then we charge fifteen nine basis points for the gig product because it's an actively managed product. I think my view is broadly, you know, we don't want to it's gonna it's very hard to compete with the eye shares of the world at vant guards of the world

in low costs. So I think where our opportunity is is to find uh unique investment opportunities or themes that we want to play and and bring those uh to our members and you know, be able to charge what we think is a reasonable fee of something you know, somewhere between twenty nine and fifty nine basis points UH, and that's potentially a little bit more if we find something that's actively managed, it's a little bit more heavy

lifting to manufacture and manage. So um. You know, I'm looking at your product lineup and there's a couple other issuers that we have seen where you could tell there it's like maybe they have beta and then they tilt urse of growth growth area. I would assume maybe you are you looking at other areas that have started to come back this year that have been sort of lagging for the past decade. That would be value, small caps, um, international,

emerging markets, commodities. Good question. Yeah, I mean I think we're spending a lot of time this year UM is our retail investor business grows and we we think about the types of things that they're investing in UH and where we see some thematic trends in the marketplace that we might take advantage of, where we want to introduce

the next funds UM. I think that they're probably less focused around sort of style UM and asset class and more around thematic investing, where I think it's just a way to easily express view UM for our for our members.

So I want to bring it back to s F y F because we started there and I'm curious, like, say, say, your members got really keen on on something and you know, maybe as keen as they've gone on AMC, and we you know, you all have to, you know, give it a spot, a special spot in in the portfolio and in the e t F. Well, what happens if it's a done right? AMC definitely went up and and everyone looks like geniuses for it. But but what happens if

it goes the other way? So a couple of things. So, so one, we have a security max weight of ten percent on the rebalancing, so there's some constraint even if you see an outsized position in the portfolio and a sector sector max weight of thirty UM with buffer to sort of the limit UM turnover around those numbers, and

then we'll rebalance on on a monthly basis. So I think it would naturally wash out, uh, you know, on the rebalancing both the upside, and then if things underperformed that we would reweight them down UM to sort of manage against that. All right, John, I've got my closing question for you, which is what's your favorite e t F ticker that is not your own? Um. I really like what Kathy Wood's doing at ARC obviously. I think it's a line to the types of things that uh,

you know, big, big thematic trends in the marketplace. You know. I think she's a good thinker and taking relatively concentrated positions and being early on things. And UM, I like the brand because I think they're so transparent in the way they think about uh, their investment ccs, how they're doing research, and what's in the portfolio. Okay, so that's a vote for a r K K. Okay, there we go, John Gardener, thanks for joining us on trillions. Nice out

with you. Guys, Thanks, thanks for listening to Trillions. Until next time. You can find us on the Bloomberg Terminal, Bloomberg dot com, Apple podcast Spot, Defy, and wherever else you like to listen to, but we'd love to hear from you. We're on Twitter, I'm at Joel Webber Show, He's at Eric Paul Junas, and you can find more about so Fie at Sofi. This episode of Trillions was produced by Magnus and Rixon Manjessica Levy is the head of Conberg Podcast. Bye m