Animal Spirits Podcast - Talk Your Book: The Low Volatility Anomaly

Episode Date: March 18, 2019

On this edition of Talk Your Book we discuss the low volatility anomaly with Invesco's Nicolas Kalivas. Topics include why low vol isn't as well known as some of the other risk factors, why finance theory doesn't always work in practice, why flows follow performance, behavioral reasons for low vol to persist as an anomaly, why rebalancing matters and much more. Find complete shownotes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Like us on Facebook And feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation. Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's Animal Spirits Talk, your book is presented by Invesco. Go to Invesco.com slash ETFs if you want to learn more. Welcome to Animal Spirits, the podcast that takes a completely different look at markets and investing, hosted by Michael Batnik and Ben Carlson, two guys who study the markets as a passion and invest for all the right reasons. Michael Batnick and Ben Carlson work for Ritt Holtz Wealth Management. All opinions expressed by Michael and Ben or any podcast guests are solely their own opinions and do not reflect the opinion of Ritt Holt's wealth management. This podcast is for

informational purposes only and should not be relied upon for investment decisions. Clients of Rithold's wealth management may maintain positions in the securities discussed in this podcast. So today we're going to talk about Investco's S&P 500 low volatility ETF, ticker SPLV. And I was pretty surprised to learn that the two biggest symbols or the two biggest products on this name only have $30 billion. And for some context, IWM, the Russell 2000 ETF has $42 billion. And again, these are large cap names with $30 billion in it as opposed to the Russell 2000 with which 42 in it.

I would love to know what the impetus was for starting these funds because the three biggest funds in the space, two of them from I shares, one of them from Invesco all came out in 2011. I think Invesco moved first. Yeah, I think they were, but and then the other ones followed along, I guess. But it's interesting because doing some research on the low volatility anomaly, some places call it a factor. Others call it an anomaly. I think low volatility is called an anomaly. And the main idea for those who don't understand is the fact that finance theory would tell you that risk and reward are attached to the hip. So therefore, a lot of academics use volatility as their main way to measure risk. And so you would think higher risk, therefore higher volatility would lead to higher return. which is not the case. And that's kind of the cap M model, which a lot of people learn. And I think we

did a lot of learning on that in our CFA textbooks. It basically doesn't work in the real world. And all the studies have shown that low volatility stocks tend to actually outperform high volatility stocks. And we're going to get into some of the reasons for that later. But that's kind of the main idea. Not only doesn't it work. It's literally backwards. Right. High volatility stocks vastly underperform. And we'll talk about that a little bit. I think part of the reason is that some people have posited is that it's not just that low volatility stocks outperform. It's that high volatility stocks massively underperform. And just getting those out of your portfolio actually helps. So the other interesting thing in researching this a little

bit was Fisher Black, who is well known in the academic circles, I think he actually won a Nobel Prize for the Black Skulls model, he actually came out with a paper on low volatility anomaly in 1972. So that was even before we had research papers on. on small caps or value, which is pretty interesting. And that's one of the reasons I'm so surprised it took until 2011 for some of these funds to hit the ETF scene. And I guess it's possible a lot of managers have used low volatility investing and invested in defensive sectors for a long time, but they've just never really tried to translate it into more quantifiable factors. Is that a question? I'm just saying it's interesting that it took so long. I think it's

one of those other things like a lot of actively managed funds have been closet indexers for years charging higher fees. And it's just that it took the investment industry a long time to get to come around to the point where it makes sense to do this for a lower cost. So this was, their timing was really good in launching this. In January 2012, it had under a billion dollars and it ramped up to $5 billion by the middle of 2013. And I think one of the reasons if memory serves is that a lot of the stocks that happen to be in this portfolio, particularly utilities, had an incredible run. Which is kind of interesting because you would assume that these more defensive names would do better just in bare markets. And when we get to our interview's

portion of the show here, we actually asked Nick Kleeves about this. But part of it is not only doing well when things are going poorly, but they can also have their time in the sun when things are going well. And in Loval, for a long time, was the best performing factor for a lot of the years in the bull market, which is surprising to some, I would imagine. And I remember early in 2013 in March when we finally took out new highs, and there were so many articles that this market was being led by quote-unquote defensive names, by consumer staples, by utilities, by real estate, by healthcare. And that was like sort of the canary in the coal mine, which obviously, in hindsight, turns out to have been ridiculous.

But why don't we get into this interview with Nick? And we'll be back after that with some more commentary. Today we're talking to Nick Calivas, Senior Equity ETF Strategist for Investco, and we're going to focus the bulk of our attention on the low volatility factor and specifically the Invesco Fund with ticker SPLV, the low volatility fund. So Nick, real broadly, explain to us and the viewers and the listeners, what is the low volatility premium and why should it offer a premium to investors? Let me kind of start broadly here. The low volatility factor is actually an anomaly. that turns modern finance kind of on its head because it says that there is no linear relationship between risk and reward. And that dynamic is very contrary to kind of what you learn when you're in finance class. So cap M. Cap M doesn't work. It does hold between assets. It does hold between asset classes like stocks, bonds, commodities, real estate. But within an asset class like large cap stocks or small cap stocks, you'll find that lower risk stocks actually outperform.

Which is literally the opposite of what it says. Yes. The return of stock in this theory should be a function of its beta. And higher beta stocks should have higher returns. And we know that to not be the case. And we know that not to be a case. Very flushed out empirically. And so you might ask me like, so why does that happen? Well, it's a combination of behavioral and structural dynamics that are present in the market. So we talk about three, the first one being a lottery effect. And that's, you know, we all know that lotteries, you're going to lose money doing them. But nonetheless, people every day play millions of dollars every week are essentially staked on lottery. And we think that essentially investors treat high risk stocks that way.

They're willing to take a set amount of money, buy a riskier stock, and essentially hope that it pays off. And so by doing that, they overpriced risky stocks and they underpriced or lower risk stocks are actually underpriced in the market. So that's one of the behavioral dynamics. The second one rolls back to academia, and it's this idea that essentially what you want to own is the market portfolio. And so if you want to get a return higher than the market portfolio, you should borrow. You should use leverage and leverage up, and that's how you're going to earn a return above the market. But the reality is not everybody can use leverage. There's restrictions on leverage. So here again, they buy higher risk, higher beta stocks.

Those stocks get bid up relative to lower risk stocks. And essentially what happens is low volatility stocks outperform because of their relative cheapness in the marketplace. So is this like another form of the value factor or is this totally separate? It is another factor altogether. So is it a cousin or you're saying not even really? I would say not, not even. Once removed.

I'm using that to just kind of explain the idea on why it can generate return. but I think that they would be two separate factors, and we can get into that way. And I think one of the interesting things that we see, because we follow the other factors as well, and so you see something like when we have the sell-off we had at the end of 2018, and a lot of the Low-Vall stocks end up being momentum names. So how often does it shift where we have, obviously there's always going to be maybe some overlap between different factors. It's hard to get that out of the way.

But how often does Low-Vall sort of shift in like a chameleon and get into these other factors depending on the environment? Or what other environments will it act like other factors? Or do you think it just always kind of stands alone? Well, I think there's like kind of a correlation causation type of issue that goes on when you're looking at other factors. And so there are time periods where the market may dictate low volatility looking like it has another other factors. So to your point, if you get into a bare market, that's kind of when low vol pays off. And it's going to look like momentum because it's holding the strongest stocks that are present. But in a bull market, if you go the flip side of that, what's going to happen is low vows going to be lagging and you're going to

show a very large negative exposure to momentum. So market conditions can play a role, but I think that the other factors that you see are actually byproducts of the portfolio. So when you're doing the stock selection process, you have the lowest risk stocks that are available in the universe. And then those other factors can be very transient over time. The other example would be the tech, around the tech bubble. If you go to late 90s, early 2000s, value was out of favor, low value was out of favor, dividend was out of favor, but it was momentum growth. That's what was driving the market. And so a lot of people said, well, hey, value and low value are essentially kind of, you know, they look like they're the same right now, but it was a function of market conditions.

If you fast forward to the last 10 years, you can see a pretty strong. strong negative excess return correlation between the two fact. So we'll get into the actual construction of the portfolio in a minute. But before we do, what do you think creates the lack of volatility in these names? And how does that relate to getting back to the behavioral side of things? Well, really, a lot of it has to do with the businesses that they operate and their characteristics. They're very, they're less cyclical in nature. They tend to be companies that have, you know, strong or healthy balance sheets to them. If you dive deep into doing an analysis of the holdings, which you'll find,

is that there's actually like a negative relationship between those stocks in the portfolio and earnings variability. So they just have very stable earnings because of the businesses that they're trafficking in and essentially the structure of the company. So I would suppose that because these companies do have stable earnings, they're probably much more mature companies. And I would guess that the average age of the company in this portfolio is probably three times the average age of a company like SPHB, for instance, the high beta stocks.

I would say it has to do maybe more with the industry than the age, like the maturity of the company. And the other thing I would just say to that is that the anomaly also works very strongly in the small and mid-cap space. So they don't necessarily have to be these kind of big behemoth companies. It's just that they tend to have the characteristics of stable earnings. So consumer staples, utilities, stuff like that. I think that's kind of the average or the go-to sectors that we think about. But you'll actually see a lot of dynamic movement in there. So, for example, REITs had been anywhere from less than 3% in SPLV to up to 20 now.

We've had periods where utilities have been 30%, and there was a period where they were under three for a while. Now they're back up into the 20s. So it just depends kind of what's going on in the economy, what's going on on the companies, and that tends to spill out what's going on. But I think generally speaking, what you're saying is true. You'll see on average more utilities, on average more staples, on average, more staples, on average more reeds. And is that the same up and down the cap spectrum as well? So you talked about

the small and mid-cap as well that it works. Is it pretty similar there in terms of... It's similar, but I mean, it's interesting. You've seen maybe carry a little more financials more recently. So I remember, I think it was either 2013 or 2014 where utilities were as expensive as they'd ever been because of where interest rates were. I think people are using this sort of as a bond proxy. And so you had people hollering that SPLV was so over levered to utilities at a time where evaluations were, but to your point, it's not, that's not static. I mean, that could change. That's true. And I actually, you know, across my desk, the question of valuation factors comes up all the time. And I really try to steer people away from that for a couple reasons. One,

what's in the portfolio today may not be. They're in six months. So valuation is a moving target. And two, SPLV and low volatility, if you want to explain its performance, it's very well explained by the market environment and the conditions that are present. So is that conditions in the stock market or what about conditions more in the bond market? It's got more to do with conditions, I think, in the macro economy and in the capital markets in general. So in other words, the direction of stock prices up and down are the primary determinant of its excess return. So it's going to lag in a bull market. It's going to outperform in a bear market. Can you guarantee that? Can't guarantee anything. But I'm

average, that's what we see happen. Good answer. So in terms of the macro side of things, how related is low-val to something like interest rates? So could you make the case that while interest rates fell for 35 or 40 years, did that have an impact on low-vall? Or do you think that's another correlation-causation thing? That's another correlation-causation thing. And so one of the things that I try to bring out, and this seems to run against a little contrary to the popular sentiment out there is actually when interest rates are rising, stocks are usually rising. You know, the economy's good. And when interest rates are falling, the economy is usually bad and stocks are struggling. And so low volatility tends to pay off like, you know, a bond does or a note does. But it's actually

being driven by the conditions that are present in the market or in the economy in general. So that could be like sort of a double tailwind when interest rates are falling because the economy me struggling and stocks are going down so that it's more competitive than bonds and it's more defensive than the overall market. So I guess it does make sense that SPLV would do better in a defensive market. Yeah, I mean, that's kind of a line of reasoning we try to try to tell people. And so when you have something like the end of 2018 where we see this huge whoosh down in the markets, how correlated to the performance of the fund or the performance of the overall market are the flows into a product like this? Did you guys see a huge spike in flows just because

the market was going down? Unfortunately, I mean, we have clients who kind of own SPLV as a long-term solution and it's a very strategic holding, but we also have a lot of people who are tactical. So yes, indeed. In the fourth quarter, SPLV had north of 800 million inflow. People were kind of chasing the performance. If you roll back to 2016, when the S&P kind of broke out of its trading range from 2015, early 2016. You had that kind of sideways chop. We had outflows for the kind of the ensuing three quarters, about a billion came out. So flows do tend to follow performance. I think it's part of the human nature dynamic that's present in the marketplace. I'm guessing you would say that flows do not affect performance. That's correct. I do not think that they affect performance,

meaning that, you know, the money coming in does not mean that's not going to work. Okay. There's huge capacity, actually. in the underlying stocks and in the ETO. I mean, certainly, especially in the large cap products. So right now, the fund is around 60% utilities, rates, and financials. So is this really just a bet on that? Or are you saying it's not that simple because there is reconstitution and rebalancing in these portfolios?

It's not that simple because we could come here, you know, in two quarters and that could be completely different. You know, if you go back and look at the low volatility quintile in 2007, it was north of 30 percent financials, and then in two quarters later, it was less than two percent. So they can be very dynamic and moved depending on what volatility is doing in the market. So because it can do that, where does this fit into a portfolio? So it actually fits in a couple spots. I think one, a lot of times it can be used as a substitute for bonds in terms of trying to provide risk mitigation in a portfolio. I think another way is to use it as part of the building blocks to provide

risk mitigation against other riskier factors like value or like momentum or small cap. And then the third thing, if you're kind of looking at retirement or you're looking for a smoother, more stable type of return stream, it fits in that way. So obviously, you're not targeting a specific volatility of these funds. You're just taking the lowest volatility stocks out of the universe. So I'm interested to hear how that works with. So you have your large cap on one end and then mid cap and small caps on the other. Mid caps and small gaps tend to be more volatile. Is that the same relationship in low volley? Those mid and small ones are even more volatile than the large cap low ball? Yeah. So what will happen is they will have less volatility than let's say the S&P 400 or the S&P 600, but they'll still carry more volatility than what you see in SPLV. Yeah, that's correct. So can we talk about the actual construction of this portfolio? So just walk us through how this works.

So it's pretty straightforward. I mean, what happens every quarter is that. that the constituents in the S&P 500 are ranked by their trailing one-year volatility. And so you get a list, you get a stack rank. You pick the 100 with the lowest volatility. Is that simply standard deviation? Standard deviation returns, yes. Pick the 100. You then weight them by the inverse of volatility.

So the stock with the lowest file has the highest weight. And you do that every quarter. And it's on kind of the Feb, May, what am I, August, Nove calendar. Any sector constraints to that list? No, there are no sector constraints. The whole premise is trying to essentially grab that low volatility anomaly and hold those lowest risk stocks. And what would be the average turnover in a quarter? Obviously, it's going to change depending on market dynamics, but on an average year, how often are the names shifting? So if you look at it on a quarterly basis, I would say on average, you're looking around 15. So some quarters, we might be down 12, you know,

in a quarter where there's a lot of churn and excitement in the market, you might get up to 20. But I'd say on average about 15 names a quarter, so like 60 percent or so is what the prospectus turnover number would be. So a turnover is fairly high. But what are the benefits of getting this low volatility exposure inside of an ETF wrapper? That's really it. You're shielding yourself from the capital gains potential that would happen if you did this by yourself. It's really the fact that the ETF wrapper is giving you a real efficient way to trade. The in-kind redemption creation process shelters you from capital gains. So there's a lot of factors and a lot of competition. How do you think about it? How do you explain to your clients why they should be

an SPLV versus a competitor product? The biggest competitor out there is actually minimum variance or minimum volatility. And we think low volatility is better for really two reasons. One, you are capturing the anomaly. Minimum volatility or minimum variance is a portfolio construction methodology. It's using an optimizer to kind of pick those stocks and combine them together. It's looking at kind of covariance, matrixes, and that type of thing. So you'll actually see a lot of risky stocks in a minimum variance portfolio, but they're combined in a way which lowers the portfolio. So you don't have the anomaly. The second dynamic is really related to the fact to run the optimization and have a commercial result, you have to have constraints. And if you have

constraints, what happens is if a sector gets in trouble, minimum variance or minimum volatility can't get out of the way. So if you think back to the tech bubble, where tech was north of 30% of the S&P, it can only go 5% less than the parent index. And so you're riding it down. Same situation in the financial crisis. And so what really happens is you have better risk mitigation in low volatility. So the down capture is less. The one thing to think about or to be fair about is that when the sectors bounce back or when the market bounces back, min variance or min volatility tends to bounce back faster. So it has greater down capture and greater upcapture relative to low volatility. So obviously this type of product is probably

going to do much better than most other factors when markets going down. But over the long haul, markets tend to go up. So what is the best case scenario other than a bare market for the low volatility anomaly, assuming that maybe the worst case is, like you said, towards the late 90s where you just have these huge tech growth stocks taking off? So what is like the sweet spot that's not a bear market? Well, what's interesting is I think it really pays off when you hold it across the cycle. So for example, if you look at it since it's in, you know, the last five years, it's actually outperforming the S&P 500. And so you might not think that because we've generally been in a bull market over the last five years. The way it wins is it doesn't have as

much to make up for after the markets are down. So if you think about return math, if the market's down 50%, it's 100% to get back to where you were. So if you only fall, you know, 75% of that or 50% of that, you have less of a hole to climb up on. And that's really how it tends to win over time. It's just, it's taking the edges off and that's equating to excess return. So yeah, we always say that volatility is a tax on your portfolio. So if you're up 10 and down 10, you're not flat. You're down 1%. Yeah. So that's how this works. That's exactly what's going on there behind the scenes. All right, Nick, thank you so much. Any final thoughts? No, this has been great. I've really enjoyed it. I think we got a lot across. All right, great. Thank you so much for coming on.

for being so kind on our interview and explaining sort of the low volatility anomaly and in some of the ways that they do that in their product. So some of the stuff we didn't touch on in terms of the academic stuff, I think. We might have hit on the interview, but just wanted to kind of drive home the point. So Larry Svedro actually wrote a piece for Alpha Architect, and it was called deconstructing the low volatility, low beta anomaly. And he went through three reasons why this is the case. Why would this happen again in when the textbooks would say, this doesn't make any sense. He said one of them is kind of investors just are constrained against the use of leverage or shorting stocks. And that's kind of just the fact that there are frictions in the real world and

there's limits to arbitrage. The other one is just that investors have a taste for lottery-like investments, which makes sense. So a lot of people, that's why there's so much money that pours into highly volatile stocks because people want to pick the Amazon's and the Netflix's of the world, even though those are much in the minority. And so they pay a premium to gamble. And then the other one is that just mutual fund managers are judged against benchmarks. And a lot of those benchmarks like the S&P typically is weighted in higher beta stocks at the top, especially I guess in the last 10 to 20 years, I guess, which would make sense. And so those are some of the reasons people give for why this anomaly would persist. Well, do you know that the single best performing U.S.

stock, take a guess, by the way? Over what period? Ever. Ever. The, what's the Ultria? Nailed it. The cigarette one, is that it? That's right. So this is from a paper from Hendrik Bessimbender, which we'll link to in the show notes. And we'll put all these links in the show notes. Altria returned 203 million percent. And, well, I can prove this, but I haven't done this prior to this. But I would just venture to guess that this is probably one that would fall in the low volatility bucket for a long time.

And I think that's the idea here is that a lot of times it's these overlooked stocks that they, because they're overlooked, they become underpriced and underfollowed, and they end up doing much better, and it's all an expectations game. So the stocks that have those high growth prospects, a lot of times investors just put too high of expectations on it and they can't possibly live up to them. And these other stocks that have low expectations, and a lot of times it may be a sector focused as well, these sectors have low expectations. And all they need to do is beat those expectations by a little bit to perform much better. Also, I think that high beta is not necessarily synonymous with high growth, although I'm sure that there's a lot of overlap. And that is where typically the biggest

winners are found, the Netflix and Amazon's of the world. But as a group, they struggle because I think it's an expectations thing. So I looked at a research paper by AQR called the low volatility anomaly, market evidence on systemic risk versus mispricing. And so the nerds have, and I say that with I say that with respect. No, if you read the name of that paper, it's a pretty apt description. Okay. And so they debate whether this is a mispricing or a risk factor. And so what they've done is they created a longshore portfolio.

And we'll link to this in the show notes, this particular chart that I'm talking about. And they say the IVOL factor is negatively contemporaneously related. Wait, was contemporaneously really necessary related to the market return that when low VAL stocks outperform high VAL stocks, market returns are relatively low. Conversely, high VAL stocks outperform when market returns are relatively high. And this analysis suggests that the return predictive power of VAL is best explained by a market mispricing rather than by some pervasive risk factor. So what they did was they did a regression, if I read this paper correctly, against the

well-known factors, size, momentum, profitability, and value. And they said that it is not necessarily overlap because I think a lot of people assume that Lovol is sort of value and drag, but that's really not the case. So that's kind of the other side of this. AQR is on the side of Lovall. There was a book put out by Larry Swegeron, Andrew Berkin, called Your Complete Guide to Factor-Based investing, and they show that over the last 50 years or whatever, the most defensive stocks, so low-vall, low-risk, have delivered higher returns and higher-risk-adjusted returns,

but they actually were kind of on the fence and thought maybe the money pouring into the factor or the anomaly and the fact that there, it's much higher valuation now than it was in the past, they kind of are still questioning whether it deserves to be in the same discussion. And maybe that's one of the reasons, A, that it's worked and B, that it took so long to get there because some of the people don't agree with it. And I think from our talk with Nick, that makes sense is that because of the rebalancing mechanism in the space, you get these different factors at different time. So the one of the reasons, low vault, so the SPLV was down, I think, less than 1% last year versus the market being down. I think it was on 18 basis points actually in 2018. The market was down 4.4% the S&P. It actually ends up going into momentum names when the market's growing down. And those defensive stocks turn into momentum stocks. And so people say, well, they're becoming more highly valued. But then it can kind of change its stripes like a chameleon when the market's doing better and kind of go back to maybe those higher quality, lower valuation names.

So I think that's actually one of the benefits of this strategy. And so I think trying to take the valuation and compare it to the past doesn't take into account the fact that it's going to eventually rebalance and recycle and change some those names and the valuation can change over time. Yeah, getting back to 2013 and I think maybe even leading to 2014, I think that Campbell's soup was like the poster child for low volatility, historically expensive names. And people were railing against the low volatility ETFs because one day, when this low volatility bubble burst and the market realizes that utilities and consumer packaged goods should be training at whatever.

Anyhow, to your point, that turns out not to be the case because it's not as if it's not like they're buying and holding utilities. Right. Yeah, the entire time. It's not static. It can change. And obviously, as we talked about in our discussion, those sectors definitely have historically been the ones they've gone to, but I think it changes. And that's not to say it's the perfect factor that's always going to work because obviously these things are cyclical. And the fact that it's done so well in the past few years, just, For me in a version alone, I would probably say maybe it won't do so well going forward. But even looking out over the past year or so, it's actually outperforming the S&P by like almost 10%, which is pretty crazy. Obviously, that period and three-month period in December, landing in December helps. But I think it works as a good offset. Anytime you're thinking about diversifying your portfolio, when you can sort of add a lot of these factors together and they perform differently. I think that's actually a net positive in terms of your overall portfolio.

volatility. Getting back to AQR, they concluded that our results indicate that the abnormal returns on low-I-VOL stocks most likely arise from market mispricings associated with certain characteristics of low-volatility companies. That is, investors appear to prefer high-volatility stocks to low-volatility stocks. So do you see a world where this ever changes beyond during a bare market? Well... Or is this one of those behavioral mispricings that will always be there? Well, getting back to what I just said, that investors appear to prefer high volatility. volatility stocks to low volatility stocks. I think that's a permanent future of the market. And maybe this is just one silly anecdote, but I think this is fairly representative of how people

invest when they're picking stocks. When I was trading, I never went to like AT&T or Verizon or Colgate or Procter & Gamble ever. It was always Netflix, Tesla, Amazon, Chipotle, whatever, names like that where you can make money quickly. So I think that investors preference is probably not going to change anytime soon. And in conclusion, or AICOR's conclusion, they said, contrary to fundamental expectations, researchers have found that a strategy of buying previously low volatility stocks and selling previously high volatility stocks has historically generated substantial abnormal returns in U.S. and international markets. It is kind of interesting that you've talked in the past about trading three times leveraged bank ETFs or whatever. Like, they don't have any

ETFs that are 0.5, right? Where it's, I guess you could do that on your own by having half in cash. Wait, did we just have a, did we just, did you just come up? That's brilliant. So we're going to give you like one third the beta of Duke Energy. How exciting would that be? Yeah. And it would, no one would ever invest in it. But that's kind of the point here is that maybe lowering that risk is actually a good thing for people instead of going the high octane route of tripling it and just going for the quick profit. I guess that's the point is that it's more about having patience and allowing the things to work out over time. I think we just cracked this code. We solved the puzzle. People prefer excitement to boredom.

And so I think maybe that's why this anomaly can persist in the future. Obviously, I think we haven't even spoken about timing the factors, which is probably something that we are strongly anti, but maybe the anomaly persists, you know, for the rest of our lives. Obviously, with periods of underperformance. Yeah, just like all the rest. So again, thanks to Invesco and Nick for coming on to talk about this. Again, we think this is kind of an underfollowed, underrepresented factor or anomaly in the quant space that's finally getting some love, it seems like, and maybe that love will lead to underperformance, but it's definitely something to look into, and we think it's definitely interesting and something people should check out. All right, thanks for listening.

Thank you.