The Great Emerging Markets Debate

s instead of Bitcoin, I'm surprised. Yeah, well it's funny. There was a Bitcoin conference the week before, so there were some people who were at both. The world's are merging a little bit. But yeah, it was the e t F conference. So you're in Miami. You did this et F conference and this is gonna be another special episode of Trillion. Yeah. So they had a special room in the conference where they had six different podcasts to

a live episode. UM. Other ones that were in the mix where Animal Spirits, UM, the med favorite Show and Flirting with Models, So you know, good company. These are popular podcasts with smart people. So I was happy to be in the mixed trillions. You weren't there obviously, so Katie Gray felt sort of filled in and you know, played your part. She was great as usual. It was great hanging out with her at the conference as well.

And then we got two guests. We got Jeremy Schwartz and Wisdom treat and Perth Toll from Life and Liberty Indexes who was famously from the Freedom ETF which is doing very well. And Jeremy has China in their funds and Jeremy's Wisdom Tree ets also never got rid of Russia, and so I thought, let's have a little friendly debate about whether you should own China, Russia and some of

these other authority authoritarian countries. Perth, obviously we know where she stands there, not in her fund and that's what we did. We had a kind of friendly debate and there was a point where they both started talking back and forth for maybe a good like I don't know, six minutes, which is what we wanted. Um. But we brow some other stuff too, but mostly that was the discussion. It's time on trillions, the big emerging markets debate. Welcome

to trillions. I'm Eric thought tunis. I'm Katie Kryfeld, filling in for Joel Webber, who couldn't be with us. He's stuck in New York City where the weather is not as good. Um, but we miss him, and uh we will. I think Joel and I might actually have done an intro before you're hearing me here. So Katie, thank you for filling in. Absolutely. I was honored when you asked. Let me just say that, so thrilled to be here. You're a regular on the show anyway, so yeah, you know,

but to put on my jewel Webber hats pretty huge. Um. Well, how do you like the conference so far? What have you learned? Nuts? I've actually I have shaken so many hands over the past I don't know six hours in terms of what I've learned. I'm going to get back to you on that. Well, you've moderated like two panels, nothing, nothing of interest. I'm worried about inflation. Okay, yeah, yeah,

do you hear Gunlock's presentation, I'm worried about everything. After I realize, Um, so I spoke with Michael Sonenshein of Gray Scale. I think our panel ended at nine or maybe it ended at ten. I didn't realize that Gunlock immediately followed us, like immediately like brush past him. So

that was pretty cool. Yeah, when this conference was in Hollywood two and a half years ago, backstage, we ran into Derek Jeter and took one of the most famous photos within our little et F community of Todd Rosenbluth. Looks like he was pitching something to Derek Jeter. Who was You got to see the photo. But anyway, Yeah, sometimes you meet some people backstage. I actually met Sam Hanky backstage. Do you know who that is? I should, and I don't anybody know who Sam Hanky is. Yeah.

You ever heard the phrase trust the process? I certainly have. It's all coming together. He put the Sixers together and created that a concept of just sort of waiting picking high draft picks. Anyway, it was great to meet him, great to be here. Let's get on with the guests

that we have. Um, So, look, I was thinking about who to get on this this program for this episode because it's live, there's I don't know about forty people in the audience which will take questions from after we get some questions to our panel of guests, not panelists, and I thought the WENI people who are interesting, argumentative, and good on stage, and that does narrow the list down a little bit, because you could have somebody who isn't any of those things and on a podcast, but

when you're on stage, you kind of have to bring some firepower. So I have the two very good, perfect people for this Perth Toll of Life and Liberty Indexes. Is that the official name of your company? Okay, I got it all right. I always just say Perth Tolls of Freedom f R D M is the e t F that basically she runs. And Jeremy Schwartz of Wisdom Tree Welcome, guys, very argumentative. What's expected of us? So, Katie, um, we haven't even prepped for this, so you just jump

in when you feel the urge. I'll start with a question. I'm gonna start with just a broad question. I think this year really reminded us of why they're called the emerging markets. Right. They seem pretty mellow for a while and they just went crazy. Let me ask both of you guys this, why even invest in the emerging markets at all? I mean, you guys have different takes on them, but why even allocate to E M? Well, it's it's interesting. I think certainly the inflation is your main narrative, Katie,

to your point that that's the big concern. And so you see growth stocks selling off everywhere. That's particularly true in e M uh now China growth in particulars where a lot of the hits came. But I think people view EM for the growth. Like so one of the reasons why e M should be favored is it comes back to valuations and fundamental growth. And so SMP at

twenty times earnings is more expensive market. Broad emerging markets are cheaper called small twelve times earnings maybe for a broad e M index, and they've got populations that are growing faster theoretically earnings and sales that are growing faster. It's that combination of valuations and growth that's interesting. And you could see different ways of looking at you and have very different performances here. So we can get into

all that. But value is working very very well in e M versus growth is what I would say, even like when it came in with heavy Russia. It's working very very well, and so we can we can get into all those things. Yeah, I would add there that in emerging markets right now especially UM in a crisis situation, you want to look at what are the safe havens

right in this type of market? And um, you know, in the emerging markets, we're looking for markets that are coming from a very low low base, that have a high growth potential. And you know, we specifically want countries that have the you know, stronger institutions, rule of law, individual investor protections, and those I think are going to

be the safe havens in them going forward. And actually I've in one of the panels I did this morning, we were talking with Michael Roni of Spider and he brought up small cap e M as a place that he really likes right now. And I don't often think about small cap YEM. I have to say that, but I mean, so an obvious question to follow up with to you, Jeremy is e M. We talked about it as a block U as basically this one singular trade. But within e M, what regions are you bullish on

right now and where are you potentially avoiding? Well? So DGS is a small cap e M E T f R S fifteen year history. It has a dividend orientation to it, so it's very value based. So talk about value around the world. The pe on this basket is below nine times earnings, right, so this is single digit multiples. It's got average dividents of five broad EM is down nine this year or yeah, around nine percent, it's it's up, so it's sort of that's my point on value is

working when growth is not. So that that is a eat example. It doesn't all have to be China tech. I mean, China tack is its own story that we can get into. But the small cap em it's a two billion dollar fund. It's one of our top inflows this year. You're seeing a lot of people embrace that. And I think it's one of the few places where a non cap weighted e t F is the largest et F in the world. Actually, I think I don't think there's a bigger non cap weighted ETF in t gs,

so I think that's an interesting one. Also. Yeah, and um, since you brought up China, I think let's just go right there. I think that's one of the most interesting things to talk about. We'll get to Russia too, But um per um. You know, I think you really showed people with your fund um you know why. You know, governments are different in the emerging markets, and there's definitely been a mental shift. I feel obviously your fund is beating the e M by a lot because of some

of this UM. But there's also when you you e t f s catch fire, they also need a narrative and psychological shift, and I feel like it's happening. UM. I'll let jeremy owner, but explain why you don't want China in your portfolio. Yeah. So we think on the country level, that governance factor, which we measure using personal and economic freedom variables that are from third party think tanks UM is the basis for all other kind of other kind of factors that you can put onto emerging

markets or any other strategy. So in developed markets, you know, these these freedom metrics are all pretty high. Most developed markets are pretty free, the governance is pretty strong UM, and you don't really need to worry about that. But in emerging markets, the universe is so rife with autocracies. It is so there's so many, you know, countries like Russia, China, Saudi Arabia, Turkey, Egypt, um A, u A, so forth.

So there are a lot of these autocracies. And when you market cap weight without regard to country level governance you are looking at and autocracies and your broad emerging markets allocation and that's just a lot of risk and China I think is the biggest risk in that allocation. It's currently about and you're broad emerging markets in disease. But I mean at its height it was about in August.

That's come down since them because of market movement. So um going forward, you know, China has in its governance and policies reversed all of the policies that have made them prosperous and they are going full speed ahead on that reversal. So we think that's going to be a huge drag on emerging markets going forward. It's interesting. I mean, so it comes back to these big decisions and benchmarks.

So M s c I, to your point, is now thirty percent China, and which is so if you're going to go to zero China and listen, there's now a whole category of e M X China al right, so you're seeing flows go to beta solutions. We have a filing for an e M X China without state owned companies, which is something Perthonite agree on. It will be agreeable on the x state owned factor. As a concept. Um. But the China bet to, I think it is a big leap to go all the way to zero UM.

I mean, they're certainly a lot of talk about being uninvestable. Right, So for a while energy was uninvestable as a sector. When oil went negative, you're hearing, well, you know, it's it's uninvestable, and that's exactly when you wanted to be investing. I feel like some of that narrative is happening around China now that everybody's saying it's it's quote unquote uninvestable.

Yet the companies are growing like four times. If you look at some of the China tech companies are growing four times the SMP at multiples that are less than the SMP. So it's it becomes that becomes the inherent thing is is they are they actually trying to make these companies completely unprofitable. There they are putting their hands

on these companies, there's no question about it. UM. But often when you hear it's completely on investable, that's when you time to go Okay, So you're looking at this value play, right, it's a well the growth characteristics combined with their valuations make it an interesting combination all right, So I'm gonna I'm gonna counter that if you look at the freer markets, you can do value place in the free markets where you have investor protections, where you

have rule of law. But in a market like China, if you look at the mc h I INDE, that's the ms c I China on shore and offshore, very complete picture of China investing um since inception in the cumulative return is now approaching zero percent. So that's a time of extreme growth in China from now. That was a time when it really opened up from the policies of bysmal policies under MAO where tens of millions of people died and famine. Um. I've seen someone that is

at this conference. Another firm used the term Great Lead Forward for marketing purposes. The Great Lead Forward killed tens of millions of people. So no, please don't use that for marketing. First of all, and second of all, Um, those policies were reversed to you know, not so bad policies, and that is what caused this great growth in China the last thirty and forty years. That was an increase in economic freedom. And now they are reversing all of

those policies. If you got zero per cent during a period of extreme growth, good luck going forward. So back in the nineties, like of it was all state owned companies. Now you could say all of China. There's definitely a bit narrative that all of China is a state owned company. So you could say, can is there anything a private company? Right? So there are people we have that discussion with all

the time. We have c X as c R China state owned, and I get that view, Like I'm not gonna completely argue with that view, um, but they are position as private companies and they do have fact like if you just look at the fundamentals of the companies, they are growing sales a year for the last three years, um. And so there becomes a valuation number where if they don't make these a zero that they are at trapped. You know, they could be good good investments. Is the

point I would come back with. I do agree with the non state owned aspect of what he's saying here for freer markets now in markets like China, yes, I do agree that most companies are all companies actually are state owned. In fact, there's a law an article actually says all company information is considered a state secret and

we can't share. And that's what the audit problem that we're having now with the p C O B. But in a place like China where they can come in overnight and just say okay, you guys are nonprofits now, like they did with the education companies last year, there's no way an investor could recover from that. And it's

very similar to what we see in Russia. In fact, with the freedom metrics that we use from the Cat Institute and the Fraser Institute, a a combination of seventy nine variables encompassing personal and economic freedoms, China ranks worse than Russia. So this is great. I have to say, like I'm already really loving this, and I've asked one question, but Jeremy, listening to you, describe sort of the valuation opportunity that you see here in Perth. Hearing your counter that, Okay,

China isn't a free society. You don't know what's going to happen to you know, your investments, things can change overnight. I'm curious do you at all consider, you know, f R D M a E s G fund from that standpoint? Yeah, So we have two type to investors, and some people are both like myself on both. Um we have one that is wanting to align their values for freedom and human rights UM in emerging markets and and that's one type investor. And we have one type investor that believes

that freer markets will outperform. And we have seen twenty outperformance over e M since inception. Um so, so that is another type of invest Now, we don't always promise that kind of out performance, just very stark right now

because of what has happened in the market. UM So, don't expect that going forward, I would say, but I do expect freer countries to outperform because they have more sustainable growth, they recover faster from draw downs, and they have better allocation of personal and economic capital, so they use their capital more efficiently and have less capital flight and capital destruction. UM So, yeah, I do consider it

kind of an E s G product. We don't sell ourselves that way because we don't use company level s G metrics. But what we found is that on the country level, UM, when that G is in place, that the S and the E on both the country level and the security level level tends to take care of itself and we have an A rating from MSCI on y s G actually far fund. Okay, let's move to Russia. Um. And by the way, I like just go into debate mode that I like that. I would just stand back

like an old school presidential debate. You guys, just go at it. Um, let's talk about Russia. I mean, obviously everybody's seen what's happened. Russia has gotten dropped from all the major indexes, and it's basically those stocks are worth nothing basically. Um. But you know, Jeremy, talk about what happens if I don't know, there's a resolution, how's all this come back to normal? So they've been dropped from the major indexes besides for Wisdom Trees, UM. So we

have not So you haven't dropped them. We have not dropped them from the indexes, um, partly because you're I think the question some people ask is are they now in the funds? They're being marked zero? Okay, you can't trade these stocks, So even the removal is symbolic. Okay. So it's it's like a statement that we are against Russia and we're not. We're not pro Russia at Wisdom Trede. That's not what I'm saying at all, but I saying

these securities may not be valued at zero. And as CEO, I'm responsible for assuring we get the best value for our funds. And if they're not necessarily valued at zero, should you make that symbolic statement today? And so this comes back to this E S G question. There's no question about it. Um. But so today they're still in the indexes we'll have to We don't have a rebound,

so there's nothing to do today. Our next rebound is in November, which is where I'll get even more interesting, um, if nothing is resolved or they're not worth more than zero. But we haven't made that statement. But we also think about like what are the other Are there other countries like a China that becomes an issue and and and at thirty of the market, it's so much you'd say it's a bigger issue. Um. What's interesting is our fund that had the most Russia coming into this year was

d E M High dividend Value. The PS and these baskets are six times earnings. It's up to on the year when the markets down ten, the S ANDPS down seven. So despite being overweight Russia that's now being valued at zero, it's still up to which is just telling you how strong the value rotation has been UM. But also those things may not be worth zero. So that's one of the reason why we haven't the reason why we haven't kicked it out. Yeah, it's interesting RSX stopped trading van

Neck with the exchange said you can't trade it. I'm have a feeling Vane would would actually prefer to trade. I know if I owned RSX UM, I would rather just hang in there and wait then have it just liquidated it like a dollar or zero um per. Obviously this to pivot to you on this UM you know we're you know Russia has it ever been in your fund? We have never owned Russia, China, Saudi Arabia, Egypt, Turkey, or any of the other autocracies. And that's just a

natural result of the freedom waiting. So our job is to find the best opportunities in emerging markets for our investors, and we believe those opportunities exist in the freer markets. If you have a company that's trying to do good, for example, in a freer market versus an un free market. In a freer market, they're going to be rewarded and incentivized to provide the best value for their clients. That is how they compete by making other people's lives better.

In another free market, you're going to be rewarded by gaining the favor of the government. Your entire job is to curry favor with the government. And that is why a lot of Wall Street firms want to be there right now, because if they get the favor of the government, that's a monopoly, and the government's going to keep all your competitors out, even if they offer a better value.

So we're here to provide investors with access to markets that have the conditions in place to support and encourage companies that are willing to put their own, their stakeholders, and their customers interests first ahead of those of the state. And so we think those are the better opportunities. So we don't want to be in countries like Russia, where the state's interests always come first. Can I do a bad host thing and go back to China? Okay, so, jeremy,

I am curious. I mean it feels like every few months we get worried about potential delisting of Chinese companies of the A D r S. I would just love to know how you approach that at Wisdom Trade, because it feels like, again we're in one of those modes where that's a concern for sure. Um. So I say a few things. One is we have a woman, Leechen Rent, who we had hired away from Vanguard, and she I think produces I think some of the best commentary on

what's happening in China. So I encourage everybody to follow Lee chen Um in that regard. She's been on top of a lot of what she sees as the narrative versus the reality on the ground. One of the things we did in our indexes we did add more A shares, so we now have about a third A shares in our indexes. So we had were migrating away from the US listings where we could. We had been early on going from Ali Baba US to Ali Baba Hong Kong,

so we've been moving towards all of those places. It's one of those questions, should you have the US listings. Recently there were some headlines saying that they were resolving the tensions in the Chinese stocks. Flew Um, I'm not sure they're completely resolving the tensions, UM, and so I think there's more of the to play out. So we'll we're gonna continue to migrate towards the Hong Kong away from the US. There will be sensitive information they don't

want in the US listings. UM. So that that's gonna be one of those When did you start that process, that migration. It's interesting we were ahead of M S C I and having Ali Baba, and then we were ahead and moving. I think over we're trying to stay a little bit ahead on that, but we at each rebalance. We've been taking those type of steps in the last two years. Okay, so look, we just went over the two big problem children and E M. And I think

you've heard, you know from both sides. I want to actually talk about some things you guys have in common and so per, let's let's look at F R D M. Here's an E T F that had forty four million dollars a year ago. It just hit two hundred millions. So congratulations, UM the first I think the first hundred

million is the hardest. I'm sure you can detest that. UM. And I guess I just want to talk about, like what you're experiencing as somebody who because I think a lot of people have ideas for a t F S. So you're one person with one idea and one E t F. How are you getting the word out? And how much is it fish jumping in the boat now versus you having to hustle down every dollar? So this morning, I've learned that I have a reputation for pushing product hard.

So I don't know if that's part of it. What else are you supposed to do? Yeah, so I am the only one, UM pushing the product hard. But you know what, the whole time, I've never been alone UM here at this conference. I mean this is the biggest one of the biggest et F conferences, maybe to replace the other one. UM. You know, it's all everybody that I've seen since I've been here has been a part

of our success. And you guys everybody else that has, you know, given us their platform to to tell the story. And I think that the E t F industry is just very welcoming to new stories like this, UM, and I'm very grateful for that. So, UM, I do kind of want to address what to be a bad guest what Jeremy said on his last answer about China, though, if I could like revert back, I like it. I like it. Go ahead. Humanative, that's what we are, that's here so uh so, so you know, talking about the

China narratives versus actual policy action. UM. You know, right now we're seeing a shut down in Shanghai. Um, it's a very tragic situation, and there's more COVID cases than in there were in Wuhan, and we're seeing zero deaths. Now that's just not that believable to me. So if you don't even have correct data, I don't know how many PhDs you know you you can use to justify um, any of the data that that we use for investing

or impact purposes coming out of China. I mean, they're saying that the stocks jumped the day that the government said that they would support or um support the the you know, listing rules in the US. But PRC National Intelligence Law Article seven, which was in acted in two thousand seventeen, what das seeing BALFA is the Chinese name for that. I mean that that it says all of the company's information are state secrets, and so I just

don't see how they could comply with Chinese law. And also comp I with American law when they are saying these these things to try to boost at the stock market at a time when the capital is fleeing China for this reason. Well, we agree that the listing standards wasn't as rosy as what what they what the headlines were reading. We were telling people that don't go that far as what they're saying. Um, Lee Chen is saying now that the Shankhai situation is actually getting better than

what's being popularly reported. So she's she's on the Shankhai is gonna get unlocked down soon in the next few days, like I don't know the exact time, like, but she's she's saying that when starting to turn the corner. Um, I'm gonna be a good host and bring us out of the depths of the details of China which are fascinating and we see the images and it's it's wild again. Like I said, I think people's psyches have changed a

little in this topic for sure. Um. But I want to go back as to you guys issuers, because a lot of issuers in the room here and at the conference, and and I think at home people are sort of are you curious about what it's like to have a hit product. And Jeremy, Um, I remember four or five, well maybe some times flying maybe six seven years ago, you were like the bell of the ball here because d x J was like on fire. That's the Japan

hedge DTF. It was like one of those perfect moments where it like fit the narrative, the returns were awesome, and it I think it was the biggest inflow et F one year, beating i VV all the vanguards. I mean, that's that never happens, right. Obviously h E d J was another one. That's the Europe hedge. So this currency hedge fad was like the hula hoop for a while.

I mean everybody was in it. I remember being at a conference in Texas and this guy's like, yeah, the boss slacks the d x J, and I was like, man, this thing is sweeping the country. Um now those two aren't even in your top ten by assets now. Obviously it was this huge ride up and down. Talk about that experience and you know what what you're trying to do to get things back on track with those former

rock stars. That's interesting today as a firm, we have about eighty billion globally we're the most diversified we've ever been. We had, you know, acquired a firm in Europe which is very commodities heavy. So like today are a u M is up on the year. When how many asset managers with a large scale presence can say that when the marks are down ten percent, bonds are down even more so where like where the most eperside we've ever been.

So a lot of the core business has been like a forty five degree line trendline, but then you have that blip, as you said, like the blip higher, blip back down. They're now about four billion combined from their peaks of like forty billion combined. So it's amazing to have witness the rocket ship in the we call the hangover. I mean, what's interesting is the the end today is back to the all time low levels that when dctually was at its peak and people just haven't been caring,

which is which is a very interesting dynamic. So on our team we call that the second play at the Apple. And it just seems like it doesn't happen if you look at funds from the nineties and the eighties, and these trends usually when the when the trade comes back. People just they just are in at the second time. But you're right, you do have what four or five billion and you had you know, if you just erase the up and down, it looks like a nice little growth.

Any more questions for open up to the artist. I have a question, UM, I do want to ask about f R d M. This is a question that I'm going to steal from Todd Rosenbluth. Actually, I'm curious what countries are on the cusp of getting added to your e t F because I mean, we've talked a lot about what isn't in there. I love to know what could make it into their Yeah, So I'm gonna start

with what countries are in there currently. So the top four countries, which are always typically the top four, these don't change very much, is Taiwan, South Korea, Turkey, and Poland and Chili and Poland. UM, I don't know if you with tydes of notice. Chili is benefited from UM the commodities trade since the beginning of the Ukraine crisis, and UM, Poland has been on the forefront of fighting for freedom, helping Ukraine. UM in that in that sense

that we're very proud of that Um. Now the country is on the CUSP. There are several India was in in two thousand twenty left in two thousand twenty one. Got dropped because of several things. They increased the repression of their cashmere peoples, they had more media repression from the government, and they blacked out internet in places that had protests. So due to those human rights issues, their score dropped in two thousand twenty and they were dropped

from the index. Now they're very much on the CUSP and could come in at any point. Brazil is on the CUSP currently in could go out at any point. Um. Malaysia, Thailand, and Columbia are some other countries that are on the CUSP. On the CUSP. These countries, Uh, it's interesting the e M and they get graduate to the bigger indices. In your case, it's a whole different kind of graduation. Um.

All right, um, look, let's let's have some fun here. Everybody. Somebody, if you have a question, raise your hand and there's a mic that you can use. But if you we can't get the mic, I'll just repeat the question. So somebody out there help me and break the ice. Is Todd Rosen blues In the room nature racy. Come on, somebody, come on, come on. You can even ask them like their favorite movie, uh or maybe their favorite stocks. Oh, here we go. Thank you? All right? Hold on, yes,

hold on, let me repeat it. Because what percentage of the value trade in the emerging markets is directly related to commodities. So I mentioned two different funds, So d e M was high dividend e M And to the point on how different markets are today, I mean, there was a point when in two thousand and eight commodities energy materials are like a third of MSc E margin marketing. Today it's it's small double digits in D E M. It's it's close to between energy and material so it's

it's it's a high number UM. So it's a big part of that. D G asked this small cap which is a value part that was also positive on the year when the end is downten UM is not so commodity centric. It's more it has some of the Taiwan that Perth was mentioning Korea, it's got India. It's sort of a broader than commodities. Industrial is local manufacturing, but so not as much in the commodity sectors. It's a little bit of both, but in d em in particular

very high. Yes, sir, Okay, what do you think that will happen? I picked the wrong were my I should have won more T shirt today, Um, Jeremy talking about yes. So here's the question is who and when? Well, I guess when will the spot bit koiny TF be approved and who will be the big winner? Whoever's out first is basically an instant billionaire. They can just go retire. UM. I know you guys want to be first, but we take that. We're trying hard. UM. We've added some features

to our filings that Gensler is looking for. UM. The question is is there's any filing going to be in his in his mind with the exchanges, is to get a regulatory exchange where it could be traded, I think is one of the big question. But we were adding the forty Act features that he likes, trying to use a a bank custodian. That's different than some of the other filings. UM, but you know it's it's an open question. We're not waiting on him. We've been working on an

indexing business, a direct indexing business. You're a lot about direct indexing. Equities and bonds, and there's number of platforms uh some here UM with former colleagues that Eric Dave Abner from Gemini in particular, that are can make it make it access to these products through a direct s m A uh. And so we're working on indexes for that type of application and and going beyond just the spot bitcoining. And you have products in Europe right where

anything goes over there. You can launch a mid Were you the ones who undercut UM I forget who it was? Twenty one shares maybe on a Huolka dot etf So we launched a few. So yeah, we were early bitcoin ether baskets. We have a fifty fifty, We have an add coins large cap. We did Polka Dot, Salana and Cardano three of them. So yeah, you're doing a lot of the katie. You probably have e tp s for tokens. I haven't even heard about yet. So I have heard about Polka dot well, I think there's a fee war

already on Polka dot ETPs in the Europe. In Europe, and we don't have a spot e t F. Hence my my shirt that I made specifically, I'm surprised aren't carrying it. Around here. It's dirty. I sweat a lot yesterday. It's hot here. Um, okay, anyone else question? Yeah, sure, in the back. Yeah, I'll be a bad audience number

and take the conversation back to a previous topic. I like it you raised currency hedging and developed markets, but actually curious about how both of you think about emerging markets. And when you are bullish about an emerging market, is it more the currency, is that the actual equities? Is it both? How they interacting? What do you think about that? All it? So the question is currency hedging typically used in international developed like Japan in Europe? What about em

do you guys like to apply currency hedging there? Um? Given the cost? So I've been big on saying in developed markets a it's a better than free option to hedge. And I say it's a better than free option because in general you're paid to hedge as a US investor, particularly now, is the FEDS raising rates in the Bank of Japan's negative, the CBS negative, Swiss is very negative,

and so you have this huge positive carry. And I wrote a piece on on Monday talking about how the dollar is like the most negatively correlated asset to the sp five hundred more negatively than BOX. So like why people like to bet on these currencies going up forever, which I call on compensated US I don't understand that, So that goes back to that question. UM. In e M, though,

it's not better than free option. You have to pay the carry, and the carry is high on average, and the very high um like Brazil height to double digit rates, so then you've gotta be breaking even. You got the currencies go down by more than that ten percent and carry on average, which is a tougher proposition. So I'd say EM has been different. If you're gonna do it, be very tactical, dynamic on time in terms of timing

those things. We did launch a family of dynamic hedging type things to try to help with that, to manage to cost better and also to try to use factors in developed world to do that as well. Um, but it's not the same in e M as in developed I mean, EM currencies are up this year with the carry when the dollar is up. So it's another fascinating proposition. Yeah, we don't specifically hedge currencies in our product, but what

we do have is a metric for sound money. So we're gonna be in the markets that have more sound monetary policies that have had less inflation historically. UM. And we actually have investors who have told me they're investing because the freer markets have less currency risk, and so that's one of the main risks in EM that we do address through that sound money metric. Good question one or two more? I think you had one up here? No, oh you, I couldn't. I did, I did that? That?

That must have been their question. Oh yeah, is that you Jeremy? Okay, alright, Hi, I haven't. I haven't seen Hi yet. I just saw you just now for the first time. Okay, Hey, I have a question for Perth UM. How is how much interest has your product been garnering from E S G allocators and UM and UM and E S G seeking institutions because it seems like your product is the most based on the most fundamental G of all. Yeah, question is how much is Perth's product

f R d M been creating interest from institutions? UM And that's a great question because I would also add on to that, do you fear an institution liking your idea and then just doing it on their own. We're using someone else or having someone else make the product for them. Yeah. So we actually most of the product right now, I would say the entire a U S is retail and retail advisors. UM. I would say of that most of them are in it for the potential

outperformance in emerging markets that are more free. UM. But we do have a lot more interest from institutions now that we're big enough to to get institutional attention and money and UM we have seen a lot of that. We were you know, started and starting to get invited to respond to our piece, which I'm very loath to do just because it's a massive, massive process and we're still pretty small. UM. But you know, maybe as we

grow will do more of that. UM. We have had some institutions that have asked us for our proprietary methodologies and things like that. UM. And so so yeah, I think there is always the concern, hey, are you just trying to do this for yourself? UM, But I think for the most part they've seen our kind of track record. We have that almost three year as of next month's track record UM. And as institutions adapt more to I think ETS they will be more open to it. We

do also license our in us to institutions. Um, some that are y s G doing additional y s G overlays. So like the religious organizations, for example, will license the index and put their own overlays on top of our country weights. Um, so there is that option for them as well. Yes, alright over here, I want to take this up a level higher. So if you're talking to clients, I would love person Jeremy I for you guys to

explain your kind of case at that most basic level. So, if you've decided to pull out of questionable countries and go full on, you know, freedom, how do you explain that decision to clients who might be worried about missing out on potential upsides? And if, on the other hand, you make the decision to stay in China or Russia or those countries, and you have clients who are concerned about that, how do you defend that decision or explain

that position to clients. So kind of at the highest level, how do you justify those things outside of the nerds in this room? Yeah, So the question is if you went with Perth and you didn't have China, Russia and those countries started coming back and you underperformed, how do you deal with clients saying, oh, you know, I'm bummed

we didn't we're under performing now. And then on Jeremy's side, what about now where you are underperforming because you have those countries and people might you know, I guess, how do you deal with the complainers? Jeremy's letting me go first on this because I have an unfair advantage. Right now we are seeing only people that are coming to be saying, wow, I thank you for making me look so smart. Thank you. You know my clients that the joy and relief of my clients when I tell them

how we invested for them. Um So I am seeing the opposite of that right now. But in the past I have heard those um kind of objections to this type of strategy. How can you have no China? It's you know, second biggest market in the world, and you know it's freedom waiting, and that's that's what we do. This is the for people who believe in the benefits of freedom and want to capture that in their emerging markets. Allocations, you know, are returns are up. We're up since inception

three years ago. Um e M is up in that same time period. So we don't have to defend the performance right now. Their time may come a time and I expect that when we will have to defend that performance. And it still comes down to that kind of freedom waiting that we we just can't de gate from that. That That is our strategy in our theme and so with

some Tree, you know, we've been a factory investor. Our first funds launched in June of two thousand and six, all very value dividend base and then you had this huge growth market. So you know it was you were going into the headwind for a long time. I means finally,

in a way you got a changing dynamic today. So we started where we launched high dividends and value and oh seven for e m UM, we didn't have the growthy option and as we started to about how do you get a core with a growth told that's when we started looking at state owned companies and we saw like an Ali Baba and these other China tech companies

were the predominant of what e m growth was. And so we had launched these core products with a growth tilt being broad em with the the day don't tilt and when the China specific one and so a lot of it is the factor exposures you're trying to get so you know, eat broad em, that's core more growth oorent did you go X stay down value? You go for dividends, and you know they have different cases. One is if you think China is being discounted today, that

being this uninvestable narrative, which is very true. I mean, that's that's the what you hear all the time. You say, you know, do you think there's actual value that and people are overly discounting that and that when becomes turned into an opportunity, or if you just think this inflation coming back to how Katie started that inflation is a key issue. Growth is going to be continued under pressure.

That's where value dividends are really shining around the world, US E M broader national Uh, that factor has been the key factor and I think that's true in EM as well. All right, Katie, are you doing over there? Doing pretty good? It's fascinating. I will say I have learned a lot and it's great to I mean, this

has been such a great panel. I'm glad that you I'm sorry podcast this is specifically not a panel, but it's great to get both perspectives on this topic, and we have a fun closing question that we ask all our guests. UM and I will start with Jeremy and then Perth. What is your favorite e t F ticker that is not your own favorite ticker? Not my own? Um, do I have any favorites? Are you are? You're that locked into wisdom for you don't even know what else exists.

I'll give perth is sh out here. I mean, I like freedom. It's a good concept. I'll give a shout. Okay, Perth, you can't pick a wisdom tree ticker. It's just too it's too much. Yeah, okay, uh is moves still around. It is moves the most popular answer. By the way, what about meme is pretty good? Yeah, it's good. I'm just saying moves moves like the Mona Lisa of tickers. They just it's hard to beat that. Um. I also

like verbs, so who is right? And there's also is Romo Romo And by the way, Romo is in the crowd, not Tony Tony. But by the way, as an Eagles fan, when I saw that you launched that it, I had to deal with that for a while. But now he's a good announcer. So is it's okay, but anyway, um, all right, well, I want to thank you guys for coming on. I want to thank you guys for attending and uh, great job. Thank you, thank you. Thanks for

listening to Trillions. Until next time. You can find us on the Bloomberg Terminal, Bloomberg dot com, Apple Podcast, Spotify, and 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 Faltunas. This episode of Trillions was produced by Magnus Hendrickson. Francesca Levie is the head of Bloomberg podcast Spipe to the Theater and to