ETF Central: Looking Back on the Conversations Shaping ETFs

Bilal Little (0:13)

Welcome to another edition of ETF Central. I'm your host, Bilal Little. And we just eclipsed 30 episodes. And this is important because over the last year and a half, I've had some of the most meaningful conversations when it comes to covering ETFs. And what I wanted to do was just take a quick pause and look back at some of the most influential conversations with some of the most credible people in the industry that have really been pushing the business forward and trying to provide value for the entire ecosystem. So I'm excited about this particular episode because we're gonna look back at some of these conversations and we're gonna review some of the key salient points that you should be paying attention to as you continue your ETF journey. So first up, Reggie Brown. There seems to be a lot of education that still needs to be had up front, to your point about some of the nuances of the products that they want to launch.

What are some of the surprises that you see with these conversations?

Reggie Brown (1:04)

Well, I can tell you, I am always taken aback by asking managers to absolutely just nail it out of the gate. I mean, boom, here's a billion dollars of new assets within two weeks.

Bilal Little (1:18)

Yeah.

Reggie Brown (1:19)

I mean, there are prime examples of that, that you have a star manager with a strong following, putting their best ideas inside of an ETF and a way to engage. I mean, Cathy was a friend of mine.

And early on when she left Alliance Bernstein, she came to my office and it's very helpful to her. And I tell her, I was like, you are, and I'm dating myself, I use it now as you are the new Farrah Fawcett where 13 year old boys have your poster on the side of their bedroom, idolizing you because they're following your stock advice. And so a lot of people are following these managers down ETF format. So what I would say is having a plan, having idea to the marketplace, I just want to hear it. I want to believe it. You got to sell it to me.

Bilal Little (2:17)

Yeah, absolutely. Because you guys are going in the business together.

Reggie Brown (2:20)

We're partners.

Bilal Little (2:21)

Yeah.

Reggie Brown (2:22)

We're going to give you C capital, give you initial capital for markets. And your success is my success.

And then ultimately, I want to make sure the investors who are using your products are successful too.

So we're looking for products to generate Alpha.

Bilal Little (2:40)

Yeah.

Reggie Brown (2:41)

That are safe from a product standpoint, nothing too crazy. And we want to make sure there's no reputation risk. So like, if you want to launch an ETF on Mexican marijuana dealers, I probably will not put my name next to that. I mean, you'll be surprised of some of the naming conventions that are out there.

But more importantly, some of the banks won't approve you, because they have business risk, and they have banking rules, and reputation risk. And so it's not just the market makers, it's the trust banks behind the ETF community. It's the whole ecosystem that you have to give best practices to and understand.

Bilal Little (3:25)

Okay. So you just heard from Reggie Brown. We covered the market maker's perspective, as well as what he continues to see from a growth perspective in the ETF landscape. Now, next up, we have Dave Laval. Dave is the president of Coindesk Index Business. And why this matters so much is because Coindesk works with many other ETF issuers to actually build indices for them, so they can launch ETFs for the crypto side of the business. Now, this is the most transformative technology outside of AI, so it's worth a listen. But he talks specifically about two different indices. The Coindesk 5 and the Coindesk 20 And he actually articulates what you should be thinking about if you're going to decide to allocate to a crypto ETF.

Dave Laval (4:08)

Innovation takes a couple of things. Innovation takes technology, but also takes regulatory clarity. And so at this moment in time, when we obviously have a piece of technology in crypto broadly, that is changing the way we think about things and changing the way that we do things.

But we also have some more regulatory clarity as the new administration has taken over. That regulatory clarity exists coming out of the White House, the regulatory clarity exists coming out the SEC, and that's fostering an opportunity for us to invest feverishly, and also having a strong receipt from our clients and our prospects. And so I break this down into two pieces. As an indexer, what do you need? As an indexer, you really need high-quality data, which we have and we own, and we need a high-quality index engine, which we have and we own. And it's FCA regulated, and it's the same type of index infrastructure that you would see from large-scale traditional finance indexer. But then we also have the opportunity to enhance the distribution of our indices and advance the distribution of our clients' products in the form of really high-quality distribution channels, coindesk.com, our consensus events businesses. So this is incredibly exciting to be able to walk into an asset manager and say, hey, we're gonna build you a high-quality index, and then we're gonna help you distribute it as well, which you and I have talked about many times in the past about how important distribution is when you're bringing products to market. It's like the key differentiator.