KATIE:
WELCOME TO BLOOMBERG ETF IQ. MATT:
WE HAVE A LOT TO TALK ABOUT IN BONDS TODAY. KATIE:
WE ALSO HAVE CPI ON WEDNESDAY, SO A LOT TO LOOK FORWARD TO.
MATT: FOR THE NEXT HALF, WE WILL BE
SPEAKING WITH SALIM RAMJI OF BLACK ROCK FOR A WIDE-RANGING
INTERVIEW ABOUT THE INDUSTRY. KATIE:
WITH BLACKROCK BEING ONE OF THE MANY FUNDS THREE FILING FOR A
SPOT BITCOIN ETF, WE WILL SPEAK ABOUT THE IMPACT ON THE
INDUSTRY. MATT: AS ACTIVE ETF'S CONTINUE TO
OUTPERFORM, WE WILL SEE WHETHER IT REMAINS AN AREA OF FOCUS FOR
BLACK ROCK OR THEY WILL RAMP IT UP.
ALL THAT AND MORE, COMING UP. KATIE:
ERIC BALCHUNAS IS WITH US, LOOKING AT THE FLOWS.
WHAT HAVE YOU GOT? ERIC: WE TALKED ABOUT ALL THE MONEY
COMING BACK INTO EQUITIES, IT IS STILL HAPPENING.
A LITTLE LIGHTER THAN IT WAS THE PAST FEW WEEKS, BUT THE BIG
STORY THIS SUMMER IS THE END OF THE PHONE MODE DROP.
THAT IS A GOOD SIGN, THOSE ARE THE TWO BIG INDEXES FOR U.S.
EQUITIES. STILL SOME BOND BUYING, THAT IS
INTERESTING. THEN, PEOPLE ARE PICKING
DIFFERENT VERSIONS OF THEIR EQUITY EXPOSURE.
THE OUTFLOWS, WE HAVE A COUPLE OF RISK ON ETF'S. THEN, OUT FLOWS FROM GLD AND A
COUPLE OF BOND ETF'S. NOT AS STRONG AS LAST WEEK IN
TERMS OF BULLISH SENTIMENT, BUT STILL NOT POSITIVE.
BUT HIS CHECK INTO OUR FORMAL -- FOMO DROUGHT INDICATOR.
HERE IS ZERO. IF IT IS ABOVE, IT MEANS
EQUITIES ARE TAKING IN MORE. THIS IS A ROLE IN NUMBER.
DURING THE DROUGHT, PEOPLE BOUGHT FIXED INCOME ETF'S MORE
THAN EQUITIES, THEN EQUITY STARTED PERFORMING AND PEOPLE
COME BACK IN. THIS IS ALL EQUITIES, INCLUDING
INTERNATIONAL. U.S. EQUITIES HAVE JUST PASSED U.S.
BOND ETF'S IN TERMS OF FLOWS. THAT IS BIG, BECAUSE U.S.
EQUITIES ARE TYPICALLY IN THE DRIVERS SEAT AND NOW THEY ARE
BACK. MATT: LET US TALK ABOUT THAT RIGHT
NOW WITH SALIM RAMJI OF BLACKROCK, WE ARE PLEASED TO
HAVE YOU FOR THE NEXT HALF HOUR. WHAT DO YOU THINK ABOUT THIS
RETURN TO U.S. EQUITIES THAT ERIC IS
ILLUSTRATING? DOES IT HAVE LEGS? SALIM: I THINK IT DOES.
WHEN I WAS LAST ON THE SHOW AT THE END OF LAST YEAR, WE TALKED
A LOT ABOUT BONDS AND BOND ETF'S.
IT HAS BEEN A RECORD FIRST HALF IN BOND ETF FLOWS.
A LOT OF THAT WAS INVESTORS GETTING BACK TO REBALANCING
THEIR PORTFOLIOS AND THEY ARE STILL DOING SOME OF THAT IN
THEIR PORTFOLIOS. AROUND EQUITIES, SOME OF IT HAS
BEEN THE RESURGENCE IN THINGS LIKE THE S&P. BUT UNDERNEATH IT, IT IS
INVESTORS REALIZING THE IN A PORTFOLIO, YOU NEED BOTH. IT IS HOW TO GET GOOD BALANCE
IN YOUR PORTFOLIOS, THAT INCLUDES U.S.
EQUITIES AND FIXED INCOME, WHOLE RANGE OF THINGS WILL BE
ON THAT. SOME OF THE THINGS LIKE ACTIVE
ETF'S. KATIE: I AM EXCITED TO GET INTO FIXED
INCOME ETF'S WITH YOU, BUT WE HAVE TO START -- BLACKROCK MADE
WAVES WITH THE MID-JUNE FILING FOR A SPOT BITCOIN ETF.
WE HAVE ALL LEARNED A LOT ABOUT SURVEILLANCE SHARING AGREEMENTS
THE PAST COUPLE OF WEEKS. IT IS A PARTNERSHIP WITH
COINBASE, WHY IS COINBASE THE RIGHT PARTNER HERE? SALIM:
FORGIVE ME, I AM LIMITED IN WHAT I CAN SAY.
LET ME TRY TO ANSWER YOUR QUESTION WITH BROADER ANSWERS. THE UNDERLYING TECHNOLOGY THAT
UNDERPINS BITCOIN AND BLOCKCHAIN TECHNOLOGY IS
SOMETHING WE ARE INCREDIBLY EXCITED ABOUT, WE ARE EXCITED
ABOUT IT BECAUSE IT REMOVES FRICTIONS OR HAS THE PROMISE OF
REMOVING FRICTIONS ACROSS THE ECOSYSTEM. FOR US IN THE ROLE THAT WE PLAY
, I THINK THE UNDERPINNINGS ARE REALLY, REALLY POWERFUL.
THAT SPARKED OUR INTEREST IN THIS WHOLE AREA NUMBER OF YEARS
AGO. THE SECOND THING IS ALL ABOUT
ACCESS. NEARLY 20 YEARS AGO, WE LAUNCHED GOLD ETF'S.
IT IS HELD IN CUSTODY IN A VAULT , WHICH IS REMOTE FROM US.
IT IS NO EASIER TO TRANSACT IN GOLD USING GOLD ETF'S AND WE
ARE APPLYING THE SAME PHILOSOPHY TO OTHER NEW AND
EMERGING ASSET CLASSES LIKE BITCOIN, JUST AS WE DID TO GOLD
20 YEARS AGO IN BONDS 20 YEARS AGO.
I KNOW IT DOES NOT ANSWER YOUR QUESTION, BUT WE JUST SEE IT AS
HOW DO WE EMBRACE NEW TECHNOLOGIES TRYING TO REDUCE
FRICTION AND HOW DO WE HELP INVESTORS GAIN ACCESS TO PARTS
OF THE MARKET THAT HAD OTHERWISE BEEN MORE DIFFICULT
OR REALLY EXPENSIVE OR OPAQUE FOR THEM TO ACCESS OTHERWISE?
ERIC: THIS IS GENERALLY WHAT ETF'S
DO, THEY USUALLY START ON THE PRICIER SIDE.
COMPETITION COMES IN, LIQUIDITY COMES IN.
AND YOU HAVE THIS INVESTOR UTOPIA WITH CHIEF ETF'S --
CHEAP ETF'S. I THINK THE CRYPTO COMMUNITY IS
UNDERESTIMATING HOW POWERFUL ETF'S ARE.
IT IS GOING TO BE A REAL COST PRESSURE MECHANISM FOR THE
EXCHANGES IF IT WILL TRADE AT A BASIS POINT -- LARRY FINK DID
AN INTERVIEW WHERE HE TALKED ABOUT MAKING IT CHEAPER.
WHERE DO YOU THINK WE WILL SEE THE EXPENSE RATIO THE NEXT
COUPLE OF YEARS? WILL WE GET DOWN TO GOLD? SALIM:
LOWER IS THE ANSWER. IF HISTORY IS ANY GUIDE, FOR
US, IT KEEPS GETTING LOWER AS WE SEE MORE AND MORE INVESTOR
DEMAND. IF YOU THINK ABOUT LAST YEAR
WHEN INFLATION WAS FAR HIGHER ALL ACROSS THE WORLD AND IT IS
TODAY, WE REDUCED PRICES ON 50 OF OUR ETF'S.
OVER THE PAST FIVE OR SIX YEARS, WE HAVE REDUCED PRICES
BY $600 BILLION. SO I THINK WE HAVE A GOOD TRACK
RECORD OF BEING ABLE TO BUILD SCALE IN DIFFERENT PRODUCTS,
THEN PASS ON THE BENEFITS TO CLIENTS WHETHER IT IS IN GOLD,
BONDS OR ANY ASSET CLASS WE OPERATE ON.
THAT IS PART OF THE REASON WHY MORE AND MORE CLIENTS WANT TO
DO BUSINESS WITH US. MATT: WE HAVE A PROGRAM CALLED
BLOOMBERG CRYPTO, WE ARE POSSESSED THIS ISSUE.
WHY WOULD THE SEC BE OPPOSED TO A BITCOIN ETF, SINCE IT IS
CLEAR THE FTC CONSIDERS BITCOIN A COMMODITY, UNLIKE OTHER COINS?
THE ANSWER I GET MOST OFTEN IS CONCERN ABOUT MARKET
MANIPULATION. HOW DO YOU MAKE SURE THAT DOES
NOT HAPPEN, OR HOW DO YOU MONITOR THE POTENTIAL?
ARE YOU MORE WORRIED ABOUT MARKET MANIPULATION IN BITCOIN
THEN YOU WOULD BE IN SILVER OR GOLD? SALIM: WE ARE ALWAYS KEEPING HER EARS
TO THE GROUND IN TERMS OF WHAT CLIENTS ARE LOOKING FOR AND
WHAT REGULATORS ARE LOOKING FOR. REGULATORS PLAY AN IMPORTANT
ROLE IN THE MARKETPLACE IN TERMS OF INVESTOR PROTECTION,
SO WE ARE TRYING TO BALANCE BOTH OF THOSE THINGS.
I WILL NOT ANSWER DIRECTLY BECAUSE I CANNOT AT THIS MOMENT
IN TIME, BUT I THINK IT IS THE DUAL FORCES AROUND HOW YOU ARE
ABLE TO DELIVER SOMETHING OF VALUE TO CLIENTS IN TERMS OF
EFFICIENCY AND ACCESS, AND HOW ARE YOU RESPONSIVE TO
REGULATORS WHO HAVE AN IMPORTANT ROLE TO PLAY IN TERMS
OF INVESTOR PROTECTION? THOSE ARE THE TWO THINGS THAT
ARE TOP OF MIND WHENEVER WE ARE THINKING ABOUT A PRODUCT,
WHETHER IT IS AROUND CRYPTO, GOLD, BONDS, EQUITIES, ANYTHING.
KATIE: WE COULD SPEND THE WHOLE 30
MINUTES ASKING YOU ABOUT BITCOIN ETF'S, BUT LET US
BROADEN OUT. IT HAS BEEN AN INTERESTING FLOW
PICTURE THIS YEAR. IF I LOOK AT BLACKROCK OVERALL
ETF FLOWS, YOU HAVE TAKEN IN SOMETHING LIKE 26 BILLION SO
FAR THIS YEAR INTO U.S. ETF'S, THAT IS DOWN PRETTY
DRAMATICALLY FROM PRIOR YEARS. SPECIFIC TO BLACKROCK -- LOOK
AT 2022, HE TOOK A NEARLY $170 BILLION.
HOW DO YOU EXPLAIN THE DROP OFF INFLOWS?
WHAT DO YOU THINK IS GOING ON? SALIM:
SOME OF IS STRAIGHTFORWARD. WE HAVE A SEASONALLY ORIENTED
BUSINESS. WE TEND TO DO SLOWER BUSINESS
IN THE FIRST QUARTER AND A LOT OF BUSINESS IN THE FOURTH
QUARTER. THAT'S BEEN TRUE OVER LONG
PERIODS OF TIME. WHEN YOU LOOK AT THE
SEASONALITY OF IT, A LOT OF FINANCIAL ADVISORS DO YEAR END
PORTFOLIO REBALANCING, THEN THEY TRADE OUT OF THINGS AT THE
BEGINNING OF THE YEAR. THIS YEAR IS NO DIFFERENT.
THE THING THAT MAKES US OPTIMISTIC NOT JUST ABOUT THE
END OF THIS YEAR AT THE YEAR AFTER THAT IS IN EVERY PERIOD
OF VOLATILITY WE HAVE SEEN AND OBSERVED OVER THE LAST 10 OR 15 YEARS, ETF'S DO BETTER BECAUSE
INVESTORS ARE ALWAYS LOOKING TO REBALANCE AND COME OUT OF
THINGS THAT ARE PERHAPS LESS EFFICIENT OR LESS TAX EFFICIENT
AND MOVE INTO THINGS THAT ARE MORE TRANSPARENT, CONVENIENT
AND EFFICIENT TO DO BUSINESS. LAST YEAR, WE SAW $900 BILLION
OF FLOWS GOING IN GLOBALLY TO ETF'S AND ONE OF THE MOST
DIFFICULT MARKET ENVIRONMENTS FOR EQUITIES AND FIXED INCOME.
THIS YEAR AROUND THE WORLD, WE ARE SEEING JUST NORTH OF $70 BILLION OF FLOWS AND WE ARE
SEEING INVESTORS AROUND THE WORLD LOOKING TO US FOR BONDS,
EQUITIES, SOME OF THE MORE NOVEL EXPOSURES THAT WE PUT OUT
IN THE MARKETPLACE OVER THE COURSE OF THE PAST YEAR. MATT:
WE WILL TALK ABOUT THAT WHEN WE COME BACK, YOU THINK BONDS AND
ETF'S COULD BE THE GREAT EQUALIZER IN TERMS OF
GENERATING WEALTH. I ALSO WANT TO TALK ABOUT
BUFFERS. YOU ARE GOING TO STICK WITH US,
WE WILL TALK MORE ABOUT ALL OF THAT, COMING UP.
THIS IS BLOOMBERG. KATIE:
WELCOME BACK TO BLOOMBERG ETF IQ.
TIME FOR THE ETF BRIEF, WHERE I WALK YOU THROUGH THE TRENDS AND
STORIES THAT CAUGHT MY EYE. WE START WITH JUNK BOND
OUTFLOWS. LAST WEEK ON A SINGLE DAY, IT
SAW OVER $1 BILLION IN OUTFLOWS. THAT IS THE BIGGEST ONE-DAY
WITHDRAWAL SINCE THE BANKING CRISIS THAT WE SAW IN MARCH.
CLEARLY SOME OF THE DEMAND STARTING TO EBB, WE WILL SEE IF
THAT CONTINUES. SOME OF IT IS GOING INTO CASH.
HERE IS ANOTHER BLACKROCK PRODUCT, ALMOST LIKE A PLANNED
THIS. ZERO TO THREE MONTH TREASURY
BUILDS, THAT IS WHAT ATTRACTS. TOOK A NEARLY 600 MILLION
DOLLARS OF INFLOWS LAST WEEK. THAT IS THE BIGGEST WEEKLY
INFLOWS SINCE MARCH. WE WILL SEE IF THE DYNAMIC
CONTINUES. ONE OF THE BIGGEST STORIES THIS
YEAR'S ACTIVE ETF'S, THAT IS WHERE I WANT TO END.
WE ARE TALKING ABOUT BLACKROCK VERSUS THE BIGGEST ETF ISSUER,
NOT KNOWN FOR ITS PRESENCE IN ACTIVE ETF'S.
ACTIVE ETF'S HAVE BEEN ALL THE RAGE. YOU ARE LOOKING AT THE
PERCENTAGE OF FLOWS THEY HAVE TAKEN IN, 30%.
THAT IS BY FAR A RECORD. MATT:
ACTIVE HAS BEEN THE HOTSPOT. WE ARE BACK WITH SALIM RAMJI OF
BLACKROCK. WHY DON'T WE START THERE?
ACTIVE IS SOMETHING WE TALK ABOUT EVERY SINGLE WEEK.
TYPICALLY, IT DOES NOT INVOLVE BLACKROCK.
YOU DO NOT HAVE A HUGE POOL OF PRODUCTS IN THIS SPACE, IS THAT
ON PURPOSE? SALIM: WE HAVE ABOUT $13 BILLION IN
BLACKROCK BRANDED ACTIVE ETF'S AND A COUPLE DOZEN PRODUCTS.
I AM A BIG BELIEVER IN THE FUTURE OF ACTIVE ETF'S, IT CAN
DO MORE AND MORE ACROSS ALL KINDS OF PUBLIC INVESTMENTS.
THAT INCLUDES ACTIVE RISK-TAKING ETF'S, BUT IT ALSO
INCLUDES ACTIVE ETF'S THEMSELVES.
WHAT FUELS MY OPTIMISM IS JUST ABOUT A MONTH AGO, WE LAUNCHED
TWO ACTIVE ETF'S THAT WERE RUN BY TWO LEADERS OF THE FIXED
INCOME PLATFORM. AND ALSO WHO LEADS THE ACTIVE
EQUITY PLATFORM. WE SEE THIS AS ANOTHER RAPPER
AND ANOTHER WAY FOR INVESTORS TO BE ABLE TO CONSUME INVESTING.
THE ETF HAPPENS TO BE TRANSPARENT, IT HAPPENS TO BE
MORE CONVENIENT. WE ARE SEEING DEMAND FROM
FINANCIAL ADVISORS BUILDING MODELS WITH ETF'S AND WANT TO
BUILD MODELS WITH ACTIVE ETF'S. SO I THINK THE CHARTS WILL
CONTINUE TO GO UP OVER THE COURSE OF THE NEXT SEVERAL
YEARS. ERIC: ACTIVE ETF'S ARE NOT NEW, THEY
JUST STARTED TAKING OFF. MY THESIS IS THE FEES FINALLY
GOT DATA ADJUSTED. IF YOU HAVE A LOW ACTIVE SHARE,
YOU HAVE TO LOWER YOUR FEE. ALL THE STUFF UNDER 40 BASIS
POINTS IS SELLING. ADVISORS ARE OPEN TO IT, BUT
NOW THAT BETA IS FREE, THEY DO NOT WANT TO PAY FOR THE BETA.
THEY WANT TO PAY FOR THE ACTIVE. YOU HAVE TO BE CHEAP, OR TOTAL
HIGH ACTIVE SHARE. WHAT DO YOU SAY? SALIM:
IT IS ALL ABOUT HOW THEY FIT IN THE PORTFOLIO.
THINK ABOUT THE BLACKROCK INCOME FUND.
YOU LOOK AT IT THROUGH THE LENS YOU TALKED ABOUT, THE WAY WE
LOOK AT IT WITHIN BLACKROCK IS YOU CAN PAIR THESE EXPOSURES
REALLY WELL WITH BROAD-BASED EXPOSURES BECAUSE WHERE
BLACKROCK INCOME IS TRYING TO FIND UNDERLYING ALPHA IS IN
PLACES LIKE EMERGING MARKETS OR HIGH YIELD, WHERE SECURITY
SELECTION MATTERS. BOTH OF THEM WORK WELL IN A
PORTFOLIO. IT IS THROUGH THAT LENS THAT WE
ARE LOOKING AT WHAT ARE THE RIGHT PAIRINGS, WHAT ARE THE
RIGHT COMPLIMENTS TO UNDERLYING EXPOSURES? WHILE ADVISORS IN THE UNITED
STATES ARE TELLING US THEY WANT BOTH, THEY HAVE A BIAS TOWARD
THE CONVENIENCE OF AN ETF RAPPER BECAUSE IT IS
TRANSPARENT, BECAUSE IT SETTLES WELL.
THEY WANTED FOR A WHOLE RANGE OF EXPOSURES. KATIE: YOU BROUGHT UP MODEL
PORTFOLIOS, I'M GOING TO TRY TO CONNECT THOUGHTS HERE.
THE CONVERSATION ON ACTIVE WE ARE HAVING, IT IS WORTH
POINTING OUT A LOT OF THE PASSIVE PRODUCTS YOU HAVE ARE
USED FOR A ACTIVE PURPOSES. WHEN WE THINK ABOUT MODEL
PORTFOLIOS, IT IS FRUSTRATING AS A JOURNALIST BECAUSE IT IS
HARD TO GET GOOD NUMBERS ON THE GROWTH.
HOW BIG OF A BUSINESS IS IT FOR YOU AT THIS POINT? SALIM:
MASSIVE. JUST ABOUT TWO YEARS AGO, IT
WAS SOMETHING LIKE ONE THIRD OF OUR FLOWS.
LAST YEAR, IT WAS MORE THAN HALF OF FLOWS FOR U.S. SHARES.
WHILE I OFTEN GET QUESTIONS ABOUT THIS PRODUCT OR THAT
PRODUCT OR THE STICKER OR THAT TICKER, THE REALITY IS IN THE
UNITED STATES, THE WAY WE ARE REPRESENTING AND THE WAY WE ARE
TALKING ABOUT ETF'S IS THROUGH THE LENS OF A CLIENTS PORTFOLIO.
WE THINK THAT IS IMPORTANT BECAUSE THAT IS WHAT THEY ARE
TRYING TO SOLVE FOUR. THEY ARE NOT TRYING TO SOLVE
FOR THIS VERSUS THAT, THEY ARE TRYING TO SOLVE FOR THE RIGHT
MIXES OF THIS AND THAT. THE SECOND PIECE IN TERMS OF
SCALE EFFECTS, WE CAN DO A LOT MORE BY LOOKING AT THIS THROUGH
THE LENS OF A PORTFOLIO, WE CAN GAIN MORE INFLOWS AND ASSETS AS
A RESULT. JUST TWO WEEKS AGO, WE HOSTED A
CONFERENCE AT BLACKROCK FOR ALL OF THE MODEL PROVIDERS.
170 PEOPLE. MANY OF THEM WERE BLACKROCK'S
DIRECT COMPETITORS. SO WE DO A LOT OF BUSINESS WITH
PEOPLE WHO ARE BUILDING MODELS, THEY COULD BE OTHER ASSET
MANAGERS, WEALTH MANAGERS, CLIENT CIOS.
SO THIS IS A FOUR POINT $2 TRILLION SYSTEM THAT WE THINK
IS GOING TO BE A $10 TRILLION SYSTEM.
IT IS THE WAY IN WHICH MORE AND MORE ADVISORS ARE DOING
BUSINESS AND THAT IS THE RESULT WE ARE DOING BUSINESS. KATIE:
WHAT IS THE TIMELINE ON THE $10 TRILLION? SALIM:
OVER THE NEXT FIVE YEARS. MATT: KIND OF BULLISH. SALIM: WE ARE SEEING GET EVERY SINGLE
DAY. WE STARTED TO SEE IT 2, 3, 4
YEARS AGO. SIX YEARS AGO WHEN WE HAD THE
FIRST MODELS CONFERENCE, WE COULD NOT FILL A SMALL
CONFERENCE ROOM. TWO WEEKS AGO, WE FILLED AN
ENTIRE AUDITORIUM. IT IS CHANGING INTO SOMETHING
THAT IS A REAL FORCE FOR EVERY WEALTH ADVISOR IN THE UNITED
STATES. WE THINK ADVISORS IN EUROPE AND
JAPAN AND MARKETS ACROSS THE WORLD. KATIE: COMING UP, WE ARE TALKING MORE
ABOUT BLACKROCK CTF BUSINESS. MATT: THIS IS BLOOMBERG ETF IQ.
KATIE: BACK WITH US NOW, ERIC, HIT IT.
ERIC: THE TOTAL BOND MARKET ETF, THIS
IS A BIGGER, BETTER VERSION OF THE AG, THIS IS THE UNIVERSAL
INDEX. IT CAME ABOUT 10 YEARS AGO, SIX
BASIS POINTS. YOU GET A LOT FOR THIS.
22 BILLION UP FROM 6 BILLION. ONE OF THE FASTEST GROWING BOND
ETF'S. THE AG IS MOSTLY GOVERNMENT
BONDS, EASY TO BEAT IF YOU ARE A BOND MANAGER.
HERE, YOU GET LESS GOVERNMENT, MORE CORPORATE, MORE HIGH-YIELD
AND INTERNATIONAL, AND YOU GET MORE BONDS. IT IS A LITTLE EXTRA RISK, YOU
BROADEN OUT YOUR PORTFOLIO. LET US LOOK AT THIS AS AG
VERSUS THE RETURN FUND. THEY DO NOT BEAT UP ON IU SB
BECAUSE THEY USE CREDIT HIGH-YIELD WHICH THIS ALREADY
HAS. I THINK THIS IS A BIGGER, BETTER BENCHMARK FOR BOND
MANAGERS AND A GOOD CORE FOR THE PORTFOLIO FOR PEOPLE
LOOKING FOR BROADER EXPOSURE. KATIE:
BACK WITH US IS SALIM RAMJI OF BLACKROCK.
WHEN YOU THINK ABOUT IUSB VERSUS THE AG IS IUSB THE
BETTER BENCHMARK? SALIM: IT IS THE BROADER BASE
BENCHMARK. FOR INVESTORS LOOKING FOR CORE
PLUS HOLDINGS, IT ADDS THE PLUS. SO I CERTAINLY THINK IT IS MORE
REPRESENTATIVE OF THE BROADER BASED BOND MARKET THAN THINGS
LIKE THE AG WOULD BE. BOTH HAVE AN INTERESTING ROLE
IN PORTFOLIOS, IT IS BACK TO WHAT THE CLIENT IS LOOKING FOR.
WE ARE LOOKING FOR HOW YOU SLICE DIFFERENT PARTS OF THE
BOND MARKET IN WAYS THAT CAN BENEFIT INVESTORS.
WE ARE ALWAYS LOOKING TO MAKE IMPROVEMENTS IN THE UNDERLYING
INDICES AND GIVE INVESTORS DIFFERENT PARTS OF THE YIELD
CURVE, DIFFERENT PARTS OF CREDIT. SO PEOPLE CAN BUILD THE
PORTFOLIO THEY WANT. WE HAVE 500 BOND ETF
SELECTIONS, THREE TIMES AS MANY AS WE DID A FEW YEARS AGO.
HOW DO YOU PIECE THESE THINGS TOGETHER?
IUSB PLAYS A BROAD ROLE FOR INVESTORS WHO WANT IT.
HE SUMMARIZED IT GREAT, IN TERMS OF THE BENEFITS. ERIC:
LET'S TALK ABOUT BOND MANAGERS. IF YOU COMPARE IT VERSUS BOND
MANAGERS, THE RATE GOES FROM 67% TO 40, THEY LOOK MORE LIKE
EQUITY MANAGERS. I HAVE A THEORY THE REASON BOND
MANAGERS HAVE NOT SEEN OUTFLOWS THAT HAVE GONE PASSIVE ON THE
EQUITY SIDE IS BECAUSE THEY HAVE AN EASIER BENCHMARK TO
BEAT. THE AG IS LIKE THE WASHINGTON
GENERALS, EASY TO BEAT. DO YOU THINK THAT BENCHMARK
SHOULD BE MOVED OVER A SOMETHING TO COMPARE ACTIVE?
SALIM: IN THE CORE PLUS UNIVERSE, IT
ALREADY IS OR IT CAN HAVE THE POTENTIAL FOR A NUMBER OF
ACTIVE BOND MANAGERS. THE INTERESTING THING FROM MY
PERSPECTIVE IS SOME OF OUR BIGGEST CLIENTS ARE ACTIVE BOND
MANAGERS. NINE OF THE 10 BIGGEST ACTIVE
BOND MANAGERS OUR CLIENTS AND USE OUR ETF'S.
IT IS A MOMENT OF JOY WHEN I WAS WATCHING YOUR SHOW THE
OTHER DAY, YOU HAD THE FOUNDER OF PIMCO TALKING ABOUT HOW HE
USES BOND ETF'S. AS PART OF THE INVESTMENT
PROCESS HE OPERATES UNDER, WHICH IS REVOLUTIONARY.
WHAT MIGHT HAVE BEEN THE CASE 10 OR 15 YEARS AGO -- WHEN YOU
SPEAK TO RICK, WHEN IT WAS JUST ONE OUT OF 10 BOND MANAGERS, IT
WAS RICK. THAT HAS BECOME A MAINSTREAM
PRACTICE. I THINK YOU HAVE TWO EFFECTS
GOING ON. THE POWER OF DATA IS ALWAYS
IMPROVING THE INDICES, WE ARE ALWAYS MAKING IT BETTER FOR
INVESTORS TO BE ABLE TO INVEST IN NEW AND BETTER CRAFTED
INDICES. THAT IS SOMETHING WE HAVE BEEN
DOING SINCE THE INCEPTION AND WILL CONTINUE TO DO. SECOND IS ACTIVE BOND MANAGERS
THEMSELVES ARE USING ETF'S IS PART OF THE PROCESS.
