Animal Spirits Podcast - Talk Your Book: Investing in BlackRock's Mega Forces

Episode Date: July 29, 2024

On today's show, we are joined by Jay Jacobs, U.S. Head of Thematic and Active ETFs to discuss BlackRock's favorite Mega Force themes to invest in, investing in the reshoring theme, IBIT trading volume, the Ethereum ETF launch and Ethereum use cases, getting cash off the sidelines, and much more! Find complete show notes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation.   Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com Past performance is not indicative of future results. The material discussed has been provided for informational purposes only and is not intended as legal or investment advice or a recommendation of any particular security or strategy. The investment strategy and themes discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation. Information obtained from third-party sources is believed to be reliable though its accuracy is not guaranteed.   Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Ben Carlson are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits, Talk Your Book, is brought to you by BlackRock. Go to blackrock.com. Ishares.com, learn more about their ETFs. You can check out their thematic investing update, which we talk about on today's show. That's blackrock.com or check outishers.com to learn more. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. All opinions expressed by Michael and Ben are solely their own opinion,

do not reflect the opinion of Ridholt's wealth management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ridholt's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spurts with Michael and Ben. On today's show, we spoke with Jay Jacobs. Jay is the U.S. head of thematic and active ETFs for a little company called BlackRock. 2024 saw the most successful ETF launch thematic ETF launched up all time. Yeah, you can kind of crypt that or Bitcoin as thematic, I guess, right? Absolutely.

Yeah, which credit to you, you were right, that thing blew everything out of the war. So I bet the I shares fund has $20 billion or something in it, which is just an insane amount of money, especially with all the competition that's out there. Ethereum ETF is also coming. I think by the time this show hits, it'll be there. We're recording Monday. Bloomberg is reporting that it's going to start trading on Tuesday. So by the time this comes out, we'll see, we'll see.

Any guesses on ETFs, on the ETHETF will be over under one-tenth as successful as Bitcoin? I would put the over under at 15% of Bitcoin ETFs. Is that fair? Okay. Something like that. I do think that it's a harder sell for people. But what if most of the money that comes in is just people who have it somewhere else and they want to swap out their current ETH position for an ETF? I didn't buy that for Bitcoin.

for ETH. Why would you pay taxes just to get into an ETF? That's fair. I do think what ETH has that Bitcoin, well, Bitcoin had it too, is a tailwind of favorable prices. If this is launching into a nasty bear market, I think it would probably be challenged. But crypto assets have been behaving well at least, at least Bitcoin and ETH. And I could be behind in the news, but how quickly until we have an ETH Bitcoin ETF that just tracks? I did see, I did see somebody speculating on when that gets launched. I'm going to say, I'm going to say within the next six months. But I don't know.

I don't know if that's a regulatory thing. I have no idea. You'd think if both ETFs are available, someone could just package the two ETFs together, right? That would make sense. I do think the idea of thematics being the active investing of today makes a lot of sense to me, as opposed to active stock pickers,

security selection, all that stuff, where you just invest in a theme. I think that makes way more sense to me. I think sectors were the first one, obviously, and all the different technology you can go into. And I think that makes more sense to me as the sort of satellite position for a lot of people. So 23, maybe 24-2 is the year of the option overlay. 24 is the year of crypto.

25 will be the year of, I don't know, stick around, we'll find out. All right. Please enjoy this conversation with Jay Jacobs from BlackRock. Jay, welcome to the show. Thank you for having me. We're going to talk today mostly about thematic and active ETFs. I Shares is a gorilla, one of the biggest players in the room. But before we talk about the thematic side, Eric Beltrude tweeted the year-to-date flows for various ETFs. And IVV is number

two in the list. It's Black Rocks or it's Ishares, S&P 500 ETF. And it's taken in $34 billion in the first half of the year. Looks like it's on pace to break an all-time record of $50 billion. Does the fact that index and strategies that track indexes, does the fact that they are getting so much money make your job easier, more exciting, harder? How does that fit into how you all think about things? Well, what we're seeing is an evolution of portfolio management that increasingly investors are looking to get broad, diversified, tax-efficient, low-cost course in their portfolio, whether that's IVV or ITOT or other types of broad-based kind of benchmark exposure.

And then they're complementing that with different types of exposures for satellite positions. Maybe that's getting really granular within a specific theme or subsector to play a transformational event like artificial intelligence or rewiring of supply chains. Maybe that's looking at different income solutions, looking at things like buy-right strategies that can generate more income. Maybe it's about managing risk with what we call our buffer strategies. or maybe it's even just introducing an active manager into an area like high-conviction U.S. stocks where you can add some real kind of stock picking alpha to complement that diversified core.

So really, it's both. We're seeing the rise of index alongside more concentrated and differentiated exposures in the satellites with people's portfolio to try to outperform and adapt their portfolio to a changing world. Do you look at thematics as a new type of active for a lot of people, Or is it at its own bucket where you have indexing and active and then thematics over in another area? Well, so I see thematic as people really trying to look forward and anticipate how the world is changing. And there's a lot of different ways to play those changes. You could use index-based themes that are really kind of trying to provide exposure to an entire value chain of a specific theme.

You can use active managers that are trying to pick winners within a theme. Or you can really be rotating across several themes and trying to play kind of these changes as they evolve. So, you know, really this is about anticipating the changes that are happening around the world today and getting really granular, pure exposure to those themes to make sure it's differentiated from what you're otherwise getting in the core of your portfolio. The one thing that you mentioned in your mid-year outlook on thematics is AI, which, of course, is a big thing people are paying attention to. How hard do you think it is to pick the winners there?

Because my contention is, I don't know, I think the indexes are going to pick up on the winners. And I think trying to pick who the winners are this early in the game is really, really difficult. Shocking, shocking take from Ben. You know, I think it is difficult. And I think it's because this is such an early theme. And so there's a couple of ways to think about it. One is, you know, kind of try to own the entire theme and get, you know, broad, we would call it almost thematic beta. So just as you would get beta, exposure to U.S. equities, you get beta to a specific theme by owning an entire value chain.

That's one way to play it. You would benefit from kind of a rising tide across AI. you could be using an active manager who has an expertise in this area to pick winners as well. Or what we talk about in our thematic outlook is actually looking at specific slivers of the AI tech stack. So AI is this huge concept that's going to change the economy in a lot of different ways. We look at the tech stack as a way to kind of think about the different layers within artificial intelligence and who benefits at what points of this thematic cycle. So right now where you see the market paying a lot of attention is largely in,

in the platforms, you know, the companies that are building chat GPT and Claude and these different kind of generative AI platforms that underpin a lot of AI today. But when we look at the parts of the market that have been underappreciated thus far and under recognized by the broader investor community, what we like is really the infrastructure layer that, you know, maybe we don't know exactly who the winners will be five years from now. Or maybe the theme evolves in some way that we don't totally foresee, but what we know is, as AI grows, there's going to be more demand for data centers and digital infrastructure that really hosts all of this computing power.

There's going to be more demand for semiconductors, which is really the engine behind artificial intelligence. All of this data is being processed to power and train and run these models. And we know there's going to be more demand for energy because AI is quite power hungry and is actually really changing the equation for energy demand in the United States right now. So, you know, if you're really kind of looking at AI as this early stage theme, which we do, we believe the picks and shovels are this really important kind of base layer that is going to benefit kind of no matter which way AI goes from here in terms of how it evolves.

Jay, I was going to give you credit for using picks and shovels because that to me always sounds very intelligent from stock picking perspective, the picks and shovels, right? I always tell Michael that's like the best CNBC line you can use is picks and shovels because it always works. It plays. It always plays. Jay, so I want to talk about like how you all at BlackRock and I shares think about implementing thematic strategy.

So for something like AI, had you known in January of 2022 that chat CBT would drop in the winter, well then, yeah, you would have got an out ahead of it, but you couldn't have. So you had to be reactive to the. the AI super cycle that we're seeing. But for things that you can maybe see coming that you can telegraph like the Bitcoin ETF, which we're going to talk about in the Ethereum ETF, which is coming, I'd love to hear like, what does a process look like inside of the company? Is there a committee? What sort of discussions are you guys having? What sort of thresholds need to be met for consideration? How does that all, what does the sausage making process look like? Well, a few things.

I guess I would take a step back and have some contention with the fact that we didn't see this coming. You know, robotics and artificial intelligence has been a theme of ours for several years now since bringing out our first product in 2018. So this is absolutely an area we had an eye on. Now, I will say in the early stages of the robotics and AI theme, I think there was more of a view that the developments would happen in the automation stage, that this would be about kind of replacing the physical with automation. And what we're actually seeing with generative AI is actually it's a replacement of kind of more of the more of the thinking. more of the processing, the creation of content where artificial intelligence is really having

a breakthrough right now. So the theme has evolved, as we would expect, all these nascent themes evolved, sometimes in predictable, sometimes in less predictable ways. But it's certainly an area we've had our eye on for several years. Going to a higher level, what we do when we think about thematic investing is we start with our mega forces framework, which was introduced mid-year of last year. And the idea behind the megaforces framework was we brought together the BlackRock Investment Institute. We brought together investors across the firm and created five different pillars of disruption across the global economy that we believe are going to be real drivers of change over the next decade and beyond. So those five pillars are digital disruption and

AI, a transition to a lower carbon economy, demographic divergence are really the difference between aging populations in the developed world versus youthful populations in the emerging markets, the future of finance, as well as geopolitical fragmentation and rewiring supply chains. And so when we think about themes, they really should map to at least one of these megaloreses. But oftentimes we see they map to several of them, that something like how artificial intelligence is not just a function of innovation and technology, but also a function of how we see investment and policy in the United States around things like semiconductors, and that's more kind of on the supply chain side of things, you start to see that they're really powerful

themes kind of spread across multiple megaphorses at once. When we see that, when we see that multiple, you know, a theme is mapping to multiple megaforses, that gives us a lot of conviction behind the theme. And then that's when we work with either one of our portfolio managers or our indexing product innovation arm to come out with the right solution for how to play the theme. Maybe it's active, maybe it's index. It really depends on how we determine kind of the best way to get exposure to a theme is. On that supply chain theme that you talked about, you had some really cool charts in your piece about manufacturing. So you show the total construction spending and manufacturing the U.S. is up four times since 2014. And this one surprised me. Since 2010's, the number of

U.S. manufacturing jobs has actually been growing quite steadily. There was a drop off in COVID, but back on trend now, basically. And I have to say, this really surprised me. What are like the macro implications here? Is this, does this make prices for inputs for companies higher? Does it actually decrease prices eventually because we're on touring? What does that, what does it mean? Well, what it means is that, you know, in the previous 20 years or so,

there was a major focus on low-cost supply chains. How can we get goods as inexpensively as possible? And what COVID-19 revealed was that it doesn't really matter if costs are low costs or not. Sorry, if goods are low cost or not, if you can't buy anything because supply chains are disruptive, that is a massive risk to the economy. It's a massive risk to individual companies. And now the pendulum has swung away from low cost towards resilience. How do we build supply chains that are more secure, whether that's a pandemic, whether that's

shipping that slowed down for whatever the reason? And we've seen several things, a ship getting stuck in a canal, slowing down shipping lanes, like anything can happen to slow down globally integrated supply chains. More resilience starts set home. How do you have the right infrastructure? How do you have the right factories and manufacturing to build critical components, especially things like semiconductors, which are basically in everything now, including your toaster? So you really need to kind of restart thinking, where do we get our goods?

How do we build more resilient supply chains? And then when we do have global integration, who are those trade partners, working more closely with countries like Mexico, which not only is close to the United States, has low cost of labor, has free trade through USMCA, really makes sense as a key trade partner of the United States. And of course, we're seeing growing trade with Mexico. We have an election coming up in a couple of months. And our inclination is that people should probably separate their view on.

on politics from how they think about investing, but nevertheless, people like to vote with their wallets. One of the Bloomberg ETF reporters has been tweeting charts of how an index of Democratic companies or Republican companies and not even know what's in the input, but ostensibly companies that would do well under one administration versus the other. Has BlackRock ever looked at or thought about, or maybe even have one, a product that is based on politics? No, we don't look at it through that lens.

But Michael, I would start by agreeing with you and saying the most important thing for investors to achieve their investment goals is to stay invested and to stay the course. So political elections or other events around the world are not a reason to, you know, get away from your financial goals and to not invest. Now, sometimes you can see that people want to prepare for volatility in the markets. So in the core, that means tilting towards quality companies, more profitable and less leverage. That's one way to kind of weather some rockier markets. We've seen some people move to our buffer ETFs, which use options to get protection against the downside in case we see volatility as well. But, you know, I did mention one of our megaforses is around geopolitics and rewiring supply chains. And what gets us excited is just kind of the amount of consensus you actually see in some of these themes in the geopolitical arena.

For example, you know, infrastructure has been something that's been talked about in this country for years. And we had the bipartisan passage of the Infrastructure Investments and Jobs Act, bringing a trillion dollars to the U.S. to rebuild roads, highways, waterways, airports, really kind of rebuilding the backbone of U.S. infrastructure. We see a similar story today in U.S. manufacturing that this is an area with a lot of consensus, both in the private sector and the public sector, across the aisle. And so we're seeing just a lot of investment in the U.S. right now in building factories and in retrospect. fitting factories. In fact, the amount of construction spend on manufacturing has tripled since before the pandemic. So a lot of interest in this area as well. And this is a theme that we have conviction behind generally, but it always helps when public policy can help accelerate that. BlackRock is either the first or second largest asset manager in the world. You can correct

what I'm done speaking. On your recent earnings call, you passed $10 trillion, over $4 trillion, dollars are in ETF. So you have to be very thoughtful. You're not some fly-by-night company where you could throw spaghetti against a wall and hopefully get lucky and one or two make up for the other eight or 10 that fail, whatever it is. What's the track record like a black rock for launching and closing ETFs? Well, we have a very rigorous process for identifying opportunities in ETFs and largely it's driven by client demand. What are our clients asking us for? How does this ETF serve as a solution to client needs, whether that's getting a specific exposure, whether that's wrapping a specific strategy in an ETF. I keep going back to these buffer ATFs, but I think

this is a really good example where clients came to us and said, you know, trading options on my own is a difficult thing to do. You know, you have to roll them every month. Maybe there's some risk in execution. I would prefer to wrap this in an ETF and scale this across my entire book of clients so that if I trade for one, you know, I'm talking about a financial advisor. If I trade on behalf of one of my clients, I can trade for all of them simultaneously with an ETF. And so just wrapping that idea of an option strategy in an ETF can really help create a scalable solution for clients. And so that's just an example of how we listen to a need in the market. We create a product to satisfy that need with the highest quality standards that BlackRock is so laser

focused on. And ultimately, that leads to a very high success rate with our ETFs. So if you at that $4 trillion number, I think a big part of that is really just listening to our clients and bringing out high quality solutions. I think another big part of it is the growth of ETFs just generally as a vehicle, that increasingly ETFs have become the vehicle of choice for so many investors around the world. So we're incredibly excited about that milestone, but there's also a very deep pipeline of innovation at BlackRock that we've already shown with many the launches this year. Jay, you didn't answer if you're number one and number two. Number one. We are number one. Okay, there you go. That's a company man right there.

So obviously one of the, you probably didn't have to put too many groups of consumers together for this to talk about the demand, but the Bitcoin ETF obviously is a resounding success. Michael and I had some back and forth on this and I'll put my hand up. I was wrong. I didn't know what the demand would be for this. And Michael said it's going to be huge. And he was right and I was wrong. Are you surprised at all at the demand for the Bitcoin ETFs or this kind of in line of your expectations? It's been a tremendous launch. There's no doubt about that. And surpassing $20 billion in assets under management within the first six months is an incredible milestone. It's very clear to us there is substantial demand, though. You know, you think about all the

ways people were trying to get exposure to Bitcoin before. People were opening accounts on crypto exchanges to get direct exposure. People you know, largely institutions were trading futures. People were using individual stocks that had kind of high beta to Bitcoin to get exposure as well. And in a lot of these instances, there was real tradeoffs. Maybe it was impurity of exposure. Maybe it was operational challenges, you know, dealing with custody or taxes. Maybe it was high trading costs. But you put that together and, you know, Ibit really solved a lot of challenges for investors, giving them the ease of access that ETS provide. You can just buy it in a brokerage account and they can

sit alongside stocks and bonds, giving that efficient trading, you know, trading hundreds of millions of dollars a day, and really streamlining that exposure to get really close tracking to the price of Bitcoin. So in a lot of ways, this is a story of ETFs doing what they've always done very well of providing that access and convenience to a specific asset. But again, I mean, of course, the reception has been tremendous and it's been felt across a lot of different groups, whether that's end investors, financial advisors, or institutions. So, Jay, to that point, there's been a lot of debate on Twitter about where the flows are coming from. And $20 billion, you know, it's hard to get there with just retail investors. On the other hand, some people have

looked at the average trade sizes as well, it's not that large. Maybe it is primarily retail investors. You obviously have a better lens into this than we do. Could you talk about the mix without giving specifics of where the flows are coming from? It really is a mix. It's a true mix across those three groups that we generally look at, the institutional groups, the financial advisors, and the end investors. You know, what I can say within the institutional spaces, you know, there's, we're seeing it in a, being adopted in a few different ways. We've seen some of the, we've seen a very large pension, public pension plan adopt

digital assets. We've seen some legislation trade change, how institutions can invest in, in digital assets. We have seen some fund managers. that like trading in different asset classes, allocating to Bitcoin because it's a diversifier and behaves very differently from stocks and bonds. So, you know, if you look within the institutional group, which, you know, often is going to be kind of the, you know, slowest to move into a new asset class. We've seen some great adoption there already, even in these first six months.

Within the financial advisor space, you know, what we're hearing is a lot of advisors are allocating to Bitcoin because they want, their clients are doing it. And they want to be able to manage Bitcoin alongside stocks and bonds, not having their clients have some money with their advisor. And then, you know, then investors kind of trading digital assets on their own. No, the advisor wants to see the whole financial picture of that client. And that can include digital assets alongside stocks and bonds. So this is really about an advisor being able to service that client the best they can.

And in some ways, really, you know, kind of have conversations, particularly with younger clients who maybe are more likely to be digital asset users. And then finally, in the end investor space, you know, I think this is an example of just the, the frictions that end investor, that ETFs take away, that the difficulty of opening an account on a crypto exchange, trading on the exchange, funding it, you know, end investors want things to be easy and efficient and accessible, and that's what ETFs have been providing since day one. So we've seen tremendous adoption there as well. I don't know if you track this, but do you, do you see more volume in the Bitcoin ETF than you see in other ETFs, or is it similar to any other products that you? you see? Ibit has become incredibly heavily traded. I'm not sure exactly where it ranks across kind of all ETFs, but I would venture, I guess, that it's in the single digit top percentile of how much it's trading these days. And in fact, if you look at Ibit during market trading hours, it's one of the most liquid ways to get exposure to Bitcoin, period, across all different

vehicles. So it's become a very liquid way for people to express an opinion on Bitcoin. Jay, Larry Fink was on CNBC last week after your earnings call talking about Bitcoin and I believe he referred to it as digital gold. I'm curious, how do you think the message is going to be given to end investors on, okay, Bitcoin, we understand. Well, what the heck is Ethereum? Yeah. Yeah.

So, you know, when you look at Bitcoin, you know, it's really this, it's really this global alternative to currency. That if you are looking for something that behaves differently, it has different characteristics from fiat currency, the fact that it's decentralized. not run by a central bank, is kind of protected against debasement because we know there's only 21 million Bitcoin that can be issued. It can really serve as a different type of currency than fiat like US dollars or euros or name your fiat currency. Ethereum is a very different story. It's really a bet on technological adoption. In a lot of ways you can look at Ethereum as kind of this decentralized app store, that it allows for you to build new applications but using blockchain technology, which means no one is centrally controlling that application.

The use cases of this are very vast. It can be everything from tokenization of taking real-world assets and turning them into digitally traded assets. It can be for alternative lending platforms, a way to source people who want to both contribute money as a creditor or to take money as a borrower and to do that in a way that doesn't require a centralized entity. You see it being applied to things like stable coins that allow for trading of U.S. dollar assets, that's on a blockchain. So there's a lot of different use cases for Ethereum. And I think it's really important to look at it as a very different type of asset than Bitcoin.

Bitcoin, again, is going to be kind of that global monetary alternative, more like a currency that stands in contrast to fiat currencies, whereas Ethereum is really about this technological platform and it's about adoption of decentralized applications. I think one of the really cool things about the wars that we had to get these ETFs out, And there's so many providers that threw their name in the hat for these things is that the fee war happened before these products were even released. And so these products come out. And obviously, it's probably because these products should have been released a long time ago.

We don't have to go into the SEC stuff here. But the fact that the fees are so low, did that surprise you at all? Because I think that's a huge win for consumers. It is. I think at the end of the day, people expect to get great value out of ETS. And value comes in a lot of different ways. that can be fees, that can be the cost of trading, and that can be the quality of an ETF as well. And so, you know, I think for investors who want Bitcoin exposure or Ethereum exposure,

they want to get great value out of their ETFs. And so I think part of that has been, you know, the really accessible fee levels that we've launched out. If you're not competing on fees and fees are obviously very competitively priced across the board, what messaging do you all convey to clients as to why they should pick your product versus of competitors. Well, there's a tremendous emphasis on quality when you're building any ETF. And I think, you know, a lot of that happens in the infrastructure and technology that is used to manage an ETF. And without, you know, getting too into the weeds in the details here, you know, we manage 1,300 ETFs globally, including over 400 in the United States. And so it was

very important for us when we brought out digital asset-based ETFs for those ETFs to look and feel in a lot of ways like all the other 1,300 ETFs on our platform. how we think about trading, how we think about monitoring, the integration we have into our Aladdin technology platform, which is this really powerful tool that's not just used by BlackRock, but different financial firms around the world to be able to effectively manage their portfolios. And so for us, there's a big technology buildout, big integration with Coinbase, which is one of our key partners as well as BMIMellon, to really make a robust operating model for this ETF. And so it really is about quality, especially when it comes to more nascent assets.

You want to make sure that you have the right infrastructure in place to get that exposure and to get it very effectively and securely. So crypto markets trade 24-7, but the ETF's only trade when market hours are open. How do you think about that? Do you think clients are going to want to be able to trade these ETF 24-7 someday? I think the ETF is providing a lot of quick liquidity during market hours. And so I think that's great for market participants that are really market. hour-based, right? A lot of people are managing their portfolios from 930 to 4. That's a great

time for them to manage portfolios and to do analysis and research and client service, you know, outside of those. So, you know, I think the liquidity profile of Ibit in particular is just a tremendous way to be able to trade within market hours. When movies are released, there's like, you know, the summer blockbusters, there's like horror for October. There's, there's seasonality to movie releases. Is there anything similar in the ETF space where you, know that a customer is more likely to be interested in this product at this time? Or is it just like, listen, we have the idea. We do diligence. We structure it. Whatever we have to do. And then it's rolled out when it's ready to be rolled out. I love that question. You know, it's for a lot of

our strategies and ETFs, you know, we really are looking for kind of evergreen interest in those products. With that being said, there can be catalyst that really kind of spark an interest in something in a given period of time. And so I think sometimes the most successful product launches are when you're seeing the intersection of that excitement and a product coming to market. You know, I think we, to some extent, we saw that with Bitcoin, right? You had the big halving event that was happening, you know, shortly after launch, that brought out a lot of focus on what is Bitcoin and how does it behave differently

from fiat currency, the fact that it does have this cap on the number of Bitcoin that's ever going to be produced. I think the ETFs themselves were, you know, kind of an event of bringing more access to Bitcoin and that got people kind of reinvigorated by the asset. So I think, yes, we take a long-term view when we bring out our ETFs and are not necessarily trying to time them with something specific in the market. But it is great when there's that catalyst in the market as well. Ibit is the Glenn Powell. If I had a nickel for every time I've heard that one. Anything else that you're keeping your eye in terms of the ETF space, of themes, of anything else

that you can see because, I mean, you mentioned the AI theme of something that you guys were kind of ground swell for a while and thinking about, but it just, it does seem to get sort of shot out of a cannon. So anything else that you're thinking of in terms of potentially ear to ground for the future? Well, we continue to focus on supply chains. I think, you know, technology can move really quickly when it's just software based. But when things require the physical world to change, you know, new infrastructure has to be built for ports, for highways, for rail, companies have to build new factories. You need new energy facilities to, you know, build enough, to distribute enough energy in a place like the United States where energy demand

has been flat for a long time. That takes time. And that means these are not going to be flashing a pan the themes. This can take years to fully play out. You know, just look at something like the Infrastructure Investments and Jobs Act, which is a 10-year bill to fully put that money to work. So, you know, I think, well, sometimes the market is kind of like, what's your next big theme? we still have a lot of runway. We have a lot of runway in artificial intelligence around the infrastructure for AI and digital. We have a lot of runway for infrastructure in the physical world around supply chains. It has to be rebuilt and retooled.

So our focus is largely on those two themes for the foreseeable future. Jay, I know this is a bit outside your purview, so feel free to punt. But the oldest thematic theme, I don't know where I'm going with this, money market funds, still sucking up tons and tons, tens, hundreds of billions of dollars. Do you think that is, what's the House view? Is that going to come into when that, if and when that eventually finds its way out of money market funds? Is that coming into fixed income?

Is it going to the market? Is it going back into their bank accounts? What's the House view there? It'll go into a lot of different things. You know, I think in 2023, investors looked at the market landscape and there was still economic uncertainty. There was still inflation and the idea of, hey, I can get 5% in a money market. market fund and not take really any risk at all. That's a pretty appealing idea. But then we saw

what happened, which was the S&P rallied, what, 18% last year, the NASDAQ was up even more than that. And it turns out the opportunity cost of sitting in cash was quite high. And we're seeing that again this year too. So I think investors across the landscape are, you know, realizing again that you really shouldn't be trying to time the markets. It's about time in market and staying invested and staying to your financial plan. We do see that money coming back into the market and I think it will go a lot of different ways. Some people are going to try to lock in today's yields because we'll probably be entering into a rate-cutting cycle and maybe won't see 5% for a while. We'll see people getting into equities who are trying to capture this growth

moment because there really is a lot of growth in the market right now and equities are delivering a very strong return thus far this year. So it's so it's taking a lot of different forms. Um, you know, again, one of the ways that we're seeing people put money to work is through risk management strategies like these option based buffer ETS in a lot of ways they're, they are. And I think part of it is that people who have sat on the sidelines and watched the markets rally want to have it both ways. They want to be invested, but they don't want to see the market sell off the second they put that money to work. No one just wants to feel like they miss time the market, right? And so if you can enter into a strategy that gives you some upside participation and

protects against a sell-off, that's, in a lot of ways, a great way to get someone off the sidelines. And so we're seeing people use those ETFs as a way to almost in some ways kind of replace dollar cost averaging. It's a way to move dollars into the market and to be invested, but in a way that isn't so market timing dependent. The way that I describe those products is it's one of the only things that I've seen where you can narrow your range of a potential outcome. So of course, by definition, you're not going to get all the upside, but you're not going to get all the downside. And for people that want that sort of exposure, I think these are a very decent option.

Yeah, I mean, we've heard it investing with guardrails. I like to call it bumper bowling sometimes. Like, it's harder to get a strike, but you're less likely to have a gutter ball. Like, it's just a way to kind of really, I love how you said, that really narrow the range of outcomes. Michael calls it chicken equity. No, no, no, no. No.

A wholesaler in 2013 came into our office, maybe 2012, and called junk bonds chicken equity. And I was saying that I much prefer, if you're going to call anything chicken equity or or get exposure to equity without taking off the smoke, this is a much better path than junk bonds. That's fair. Jay, where can we send people to get more of your research and a little more about all the funds? People should feel free to visit ishairs.com slash insights, which is where our thematic meteor update lives. It is where our active ETF paper lives, where we put out some cool projections for the growth

of the active ETF space. Spoiler alert, we see $4 trillion globally by 2030. and all the updates they're in of all these different topics we've discussed today. Perfect. Thanks so much. Okay, thank you to Jay. As he said, check out iciers.com to learn more about his research. We'll conclude a link in the show notes. Email us, Animal Spirits at the compound news.com.

We'll see you next time.