00:00Welcome to Bloomberg ETF IQ on TV Greifeld and Matt Miller kicking off the New Year together. First show 20 20. Happy New Year. Happy New Year to you and yours. All right. Let's get to the biggest stories. And now more than nine trillion dollar ETF industry globally. We are going to on this program today, ring in the new year with you and dig into the top picks for twenty twenty three from one of the top ETF advisors in the world and crypto. It's still a buzz word. As we enter 2025, we're going to discuss how Valkyrie investment has a plan for one of the crypto industry's largest funds, matched by the twenty. Twenty two was a record year for one J.P. Morgan active ETF. That's a deep tease. We don't tell in the name and they stick here watching and waiting. We're going to bring you the person who's running that fund. Before we get there, though, we're going to take a look at the flows. And of course, we're looking at what was the last trading week of 2022. But there was still some action to talk about. If you look at where money was heading, pretty risk if you ask of at the top there that tracks Treasury bills taking an over a billion dollars over the past week. You also see us f are out there. That's floating rates. You have Bill, you have gee, Bill as well. Again, a lot of money going into short duration bonds. So usually when that happens, it's pretty risk fall again. It was a quiet week. So hard to read too much into it, except if you look at where money was coming out of, it really paints the same picture right up at the top. You have spy losing almost five billion dollars. You had the accused losing money as well. You have NYSE there as well. So again, money coming out of equities, out of the riskier parts of the bond market, pretty risk off. Let's talk about one of the big trends of 2022, which was a real rush into active, actively managed ETF. We're looking at from this chart from Bloomberg Intelligence, which shows that 14 percent of all ETF flows went into active ETF. So as you can see back about a decade ago, that number was pretty much close to zero. So definitely a big trend last year. Matt, we'll see if that's the case this year as well. Absolutely. We'll talk about that right now. Katie, joining our conversation is John Davi, founder of Astoria Advisors. They have about one point three billion dollars in assets. John, thanks so much for coming on. You're our first guest for the New Year. Happy New Year. Honor to you. So what do you think about, you know, Katie's point here are we now see that active investment continue to be a trend in 2023? I think it should be. I mean, so much money went to the passive ETF style, lost decade. You know, I think it distorted valuations. You so much concentration risk and like tech growth and with the S & P. So think now is the time for active management for sure. So I think more money should flow into it. I mean, passive is kind of almost the point, right? ETF s were created to give investors a low cost way to track indexes. This is kind of the, you know, I guess better mousetrap after John Jack Bogle and Vanguard did the whole mutual fund revolution. So are we looking at a sea change, you think? Well, I think, you know, we believe in both. Like I said, our firm, we like to use passive ETF, but we actively manage them. You know, look, I think so much money went at the passive now, you know, in the bear market and recession is when active management should shine. So I think that's why you see jump behind a lot of inflows in the last year or so. And I think that's a really important point, that even though we're talking about a lot of passive vehicles and a lot of cases, you have managers using them for very active purposes. But part of the reason we were so excited to have you on today is because every year you put together a list of the top ten ETF for the year ahead. I know that you've been putting together this report for about a decade or so. When I look at this year's list, I see a lot of dividends. Commodities. I see a lot of fixed income. It seems like that's the theme. Yeah, I think like that is an aggregation of our best ideas and it's also an aggregation of how we actually manage portfolios. So, you know, going into this year, I think we're just less bullish on equities on a relative basis, not because like we're so concerned about a recession, which everyone's calling for. But I just think that when you have the terminal rate pegged at 4 percent and I don't think it's going to go to much lower, I think the game change is right. So if you can get risk free for 4 percent like that changes your view on stocks and other asset classes. So we've got more fixed income ideas in this list than we've had I've had in any other year. If you can get you can get eleven and a quarter percent guaranteed for six years. If you have a spare four billion dollar, you see do that be read investment. Are your ideas more defensive. This year. I mean that's what I think when I see at the top of the list the Bloomberg one year treasury. Yeah. I think like you know, so what we're saying is that like right now, given where we are in the macro economic cycle, like defensives, men, bald dividend, any tips like they are, you know, kind of fair value, let's say, but they get a little bit more expense. As you get into a recession. So we just think like, you know, first, well, you should always be diversified across factors. That's just what we believe in because the research shows you can get high up on the Fisher frontier when you in fact there are so many balls. One factor, we like dividends, we like quality. So we don't repeat tickers, you know, year after year. That's one thing that I've always made clear because I have a lot of people that complain and say, why wasn't this ticker, Ed, that one? We still like inflation. You know, obviously we manage the PPA ETF and that's inflation ETF. I repeat that this year, but still bullish on inflation. So we pick like agricultural commodities tickers like Moon PDB, a glitter. So what if you have a real rock star that you're just have a super high conviction on? You wouldn't put it again in the list. So so as an active manager, we always think that, like, you should rotate your portfolio. So, you know, everything that we have in the portfolio this year is we believe in and we have very strong opinions on this. OK. Fair enough. I do want to go back to your point about when you look cross asset. You were saying that, you know, maybe fixed income looks better than equity here on a relative basis. And I'm wondering what that means for the likes of JP, which obviously saw a lot of interest when people were really hunting for income last year. When you think about these dividend ETF, which as a category had a great year last year, if you bonds actually working again actually providing a decent yield. Does that take some of the momentum away from some of those equity income products? I think so. I think it definitely will. So like I think on a relative basis, like we like more bonds, let's say, than the dividend. You know, we just populate the list, obviously. So we've got to fill it up. But, you know, I don't know, get 4 percent, you know, risk free, you know, laddered Treasury T bills. You know, they make a lot of sense right now, kind of given all the risks in a marketplace. But one thing you'll see in the list is that we've got like the 20 year Treasury ETF to us, PTL. So what we're saying is, look, again, like the consensus is that like we're going to have a recession. And I'm not necessarily saying that, like, I believe that we're going to have like a recession that leads into like some massive, you know, 20 percent decline in the S & P. But, you know, more modest, let's say. But if there is a recession, what we're saying is, look, let's hedge our rate risk by buying us PTL, which is the 20th Treasury ETF, which typically in a recession, you know, the long end, the bond market typically does well and rallies as it did in 08, as it did in 2001, 2002, as it did during Covid 2020. And there's a historic I mean, you outperformed the S & P last year with your list, right? By nine or 10 percent. And historically, you say, what, seven to eight of your ten ideas are in the money. You like glitter, which I think is interesting. We were talking with Bob Mentor of Aberdeen yesterday. He he only wanted to talk about glitter. Why is that? Does that hedge your rate risk? I mean, it seems strange when we're in a rising rate environment to buy gold. So fair point. And it is a plus holds. Been doing really well. Yeah. Gold's doing well I think, because the recession risks are going up. Also, crypto blowing up I think is good for gold. It's a positive, you know, positive force for the gold market. Look, gold is maybe better than digital gold. You're saying I'm not a big crypto guy. I never really believed that it got into it. I think that gold historically does well in a recession as it is right now, because like every single macro indicated we look at is just getting worse and worse, like the macro environments deteriorate. And, you know, there's all these calls for like an earnings recession. So it just makes sense. Own gold, in my opinion. And then we just are diversified across the precious metals complex bone and glitter because it's got some exposure to other metals. I want to go down to number 10. I see Ben Knight shares 500 ETF Ticker and Spy. This is really interesting that it tracks the night performance of the S & P 500. It launched in June. It really hasn't done super well since then. It's down by about 4 percent. The S & P 500 in that time is up about nine tenths of a percent. That's what buys futures at four o'clock and then sells about nine thirty. Yeah, you're only going to exposure to the day's session. So, so sorry. To the overnight session. You remove the day's session risk. So there's all like so futures trade around the globe. Right. And it makes sense. Like, you know, some macro economic data point comes out at 10:00 or Fed speaks at 2:00. You know, hedge funds, the risk, they sell futures, they sell cash. And, you know, and then the day session is underperforms the ninth session. So I like to see if only because I think you've got to think about other ways to get to manufacturer risk in your portfolio without taking as much, you know, minimizing risk and getting the, you know, maximizing return. So if you look historically like, you know, 20 plus years, you know, the night session historically has had a lot more higher Sharpe ratio, a lot more return per unit of risk. So so has this. Just not that around. It's just been around, you know, six months or so. But, you know, I think over time, like, if that, you know, you know, systematic risk return that we see, of course, that day and night session plays out, I think that the performance will capture. Give it some time. Kate Mason just started. All right, John, great having you in the studio. Thanks so much for joining us as our first guest in the new year. John Darby there, founder of A Story Advisors. Coming up, details on how Valkyrie aims to take on the grayscale Bitcoin trust. One of the RTX that I think Katie is most obsessed with, that's what the crypto industry's largest funds. This is ETF IQ on Bloomberg. Welcome back to Bloomberg ETF IQ. I'm Katie Greifeld. Time now for the ETF Free for IBEX. You see the trends and the stories that caught my eye in the ETF industry. And we start with the ISE shares MSCI Turkey ETF ticker TER. It was the best performing ETF last year. As you can see, it was up over 90 percent over the past year. A lot of those gains coming about midsummer. This isn't even a leveraged ETF. Turkey equities are just on fire, so we'll see if that momentum last through the next year. But let's go from the biggest winner to the biggest loser. We're going to talk about PIMCO out of all the U.S. ETF issuers. PIMCO had the biggest outflows. About four billion dollars came out of PIMCO funds. That was the worst year on record for PIMCO. A lot of those funds coming out of just mint alone. That is their short duration ETF, one to keep an eye on. But now let's talk about a fund that's not an ETF. I talk about it all the time. I'm going to talk about it now to the grayscale Bitcoin trust. The reason we're talking about it again, of course, is that discount to its net asset value. Shareholders are getting upset. And you actually have Valkyrie last week in what was a very slow Newsweek announced that it's launching the Valkyrie Opportunistic Fund. Its proposal is basically that it should overthrow cray skills. The manager of BTC. If it did that, it would lower that the disk, the fee rather, and it would try to start a redemption program. It's a super longshot in that, but it's very interesting. Yeah, it is very interesting. It's quite a conundrum that they've got over there at grayscale. Let's talk a little bit more about it with Bloomberg Surveillance. Hi, Rick, who covers the business and the ETF for us. So they'll don up. What are grayscale scales options here? Katie has been kind of obsessed with this for a few months now, but they're still trading at a massive discount to their net asset value. Yeah, they are trading at a massive, massive discount. BTC is trading at a 50 percent discount to its underlying holdings. And hence you see Volker coming out with this proposal where they're saying that they're looking to be the new manager or the new sponsor of BTC. They say that they and other shareholders are very upset about BTC trading at this discount. They're looking to lower the fee right now. Gee, BTC charges a 2 percent fee. Volcker is looking to lower to something like sixty seven excuse me, 75 basis points. And so it really depends on what's going to happen going forward because grayscale says it's not really for sale. And let's talk about I mean why we haven't seen something like this from shareholders sooner, because when you think about tech, perhaps a proxy vote, we see that with closed end funds somewhat often. This isn't a closed end fund, but it's kind of close. Why did it take so long for something like this to come about? And what are the actual chances that this works? I think we can say that the chances of this working are somewhat a long shot. So if you think about the AGM for Walk Me, they manage something like one hundred and eighty million dollars compared to BTC. That's a 10 billion dollar trust. So looking at the 10 K for grayscale, it also shows us that shareholders actually have very limited voting rights. So we can say that this really might be a longshot. But the reason that maybe this took so long for something like this to come out is, is that grayscale has been over the past year and a half past two years or so, saying that it's looking to convert BTC into an ETF. It actually has been actively trying to do that. It's something that the S.E.C. has prevented them from doing. The FTC has a lot of issues with crypto currencies, with the fraud and manipulation and all of the things that we know crypto currencies to be infamous for. And it did squash that last year. We have grayscale suing the S.E.C. in looking to convert BTC into an ETF. I think we're supposed to get new developments in the coming months. So let's see what happened. Yeah. I mean, there could be a lot more lawsuits to come as well. Well done. Right. Because one of the Winkle VI wrote a pretty angry letter to Barry Silbert, who runs D.C., the owner of BTC. So how is that going to work itself out? Is there any question as to whether DTC has been commingling the funds of some of its assets? I think we'll really have to wait and see what actually ends up happening, because TCG is the digital currency group is the parent company of grayscale. It's also the parent company of Genesis. So that's a separate matter in that Gemini has some issues with Genesis where they lent a bunch of customer funds from one of their earned programs over to Genesis. And they're looking to obviously recoup a lot of that money. Something like nine hundred million dollars for the clients. We really I think we have to wait and see what happens. The entire crypto industry sort of watching this space. They're watching DC. They're watching what happens with grayscale. They're watching what happens with Genesis. It really is the big question now that we've had all the different fallouts in 2022 with RTX, the Taro implosion, et cetera, et cetera. Now, DC and what happens there is really the big question. It's a sprawling empire. All these different functions are very interconnected when you think about what the fallout could be. Hopefully not too connected. I don't know. We'll find out. Watch this space, will Don. Hi, Rick. Bloomberg News, thank you so much for your time. Still ahead, we're gonna talk to Hilton Raynor. He is head of U.S. equity derivatives at JP Morgan Asset Management. He's going to join us to discuss his fund that took in record flows in 2022. That's next. This is ETF IQ on Bloomberg. This is Bloomberg ETF IQ I Matt Miller, along with Katie Greifeld, just wanna bring you quickly some breaking news on Kevin McCarthy. The Republican majority leader in Congress has lost his fourth round of voting for House speaker. Again, this is, as you heard, probably a million times over the last 24 hours, the first time in a hundred years that the majority leader failed to win the first vote for House speaker. Now, he's lost the fourth in a row and apparently hasn't managed to turn any of the dissenters. So in the first two votes, 19 Republicans did not vote for Kevin McCarthy in the third. And now the fourth vote, 20 Republicans did not vote for Kevin McCarthy. And they've just got to find another way, because no business can be done in Congress until a speaker of the House is elected. It's a historic story with big implications, one that we're going to continue to follow. But first, it's time for today's Drill Down, where we focus on one ETF. Today, we're going to look at the JP Morgan Equity Premium Income ETF ticker JP. This one is really interesting. So it seeks to provide low volatility equity exposure. It also employs a call writing strategy to sort of deliver monthly income. It charges 35 basis points to do that. And if you look at how it stacks up against the S & P 500 over the past year or so. JP It's down about 3 percent on a total return basis, two point seven percent. You look at the S & P 500, for example, again on a total return basis. The big benchmark is down 18 percent. So not a bad place to be. And investors have just been throwing money at this product and actually broke the record for active ETF inflows last year, took in over 12 billion dollars. That really shattered the previous record that was sent by the ARC Innovation ETF, which again, another ETF. We talk about a lot that clocked in with almost ten billion dollars in 2022. So just a lot of money coming into JP. And actually, Matt, it hasn't seen an outflow since October. All right. So active, I guess a lot of people saying is the way to go right now. Joining us now is the person tied to this fund, Hamilton Reiner, head of US equity derivatives at J.P. Morgan Asset Management. Helton, thanks so much for coming in. Yeah, I mean, at the end of 2022 now in the first couple of days, everybody who comes in here says this is a year you really have to be actively managed to be fair. I feel like they say that at the end of every year and it makes sense. But this ETF has really taken the industry by storm. What do you think about active management 2023? So I think when people are expecting expecting muted equity market returns and if you can generate incremental alpha, it's important to be active. Now, I think unfortunately, people bucket active as one giant universe. The fact is you have talented, active and may not have as talented active. So not everyone is created equal. And I think the idea here is you have to find the people with the right process, the right philosophy from an active perspective to allocate your money to in 2023. And Hamilton, I'm going to ask you a question I asked to John Davey just 15 minutes ago or so, which is when you think about 20, 22, it seemed like everyone was just hunting for income, any place they could get it, especially in the equity market. Obviously, Jaffe was a big beneficiary of that. But now you have bonds working again. You have bonds that actually yields something. Do you expect that to take some of the wind out of the sails of Jaffe? So it's exciting to say that there's now income in fixed income. So there is now an alternative for when you think about J.P.. It has a multipronged approach to total return. It'll give you some dividend, some options premium. That's some of the upside. And you're doing it with about a third less volatility in in the market. So I do think that is still fits in people's portfolios because when thinking about 20, 20, 23 marks could be more volatile. And anything you can do to help dampen the volatility of investors portfolio will add value. So I think people are going to continue to use from an income perspective, but we're to see even more people use as a more defensive equity allocation as we approach 2023. And let's talk about some of the equities that you actually hold, because I was trying to find the common denominator here. But if I look at your industry groups, you don't have a single weighting that's above 8 percent. I see pharmaceuticals, retail, electric in their insurance as well. I mean, when you're picking stocks actually hold in this ETF, what does that process look like? What is the common denominator? So I am lucky enough to work with KPMG Rafsanjani, who managed the loan portfolio on my behalf in our investors behalf and it starts bottoms up fundamental. We have a very large, well financed, you know, fundamental analyst team that are incredible and we look for those stocks that over the medium to long term are very attractively priced. But on top of that, to make it into a Jeopardy portfolio, it needs to have a more predictable earnings stream. So if you actually look at the commonality among all the stocks, it's probably be higher in quality. We're looking for those stocks that are more steady, 80 stocks, their stocks that if you inherited somebody, that you're just never gonna sell them. All right. I see Apple there at the very top with. A lot of sense in that respect. Thanks so much for joining us, HAMILTON Great having on the program Hamilton Rider there of J.P. Morgan Asset Management. That does it for the first show of the new year. And we missed Eric. He didn't miss her, but we'll have him back next week if he comes back from Florida. I think he will be in studio next week. So fingers crossed. All right. We'll see you a little bit more action. Until then, that does it for Bloomberg ETF IQ. I'm Matt Miller along with Katie Greifeld. This is Bloomberg.

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ETF IQ Full Show (01/04/2023)

"Bloomberg ETF IQ" focuses on the opportunities, risks and current trends tied to the trillions of dollars in the global exchange traded funds industry. Bloomberg's Katie Greifeld and Matt Miller talk with John Davi, founder of Astoria Advisors, and Hamilton Reiner, managing director and head of US equity derivatives at JPMorgan Asset Management. They discuss Davi's top ETF picks for 2023, the record inflows for the JPMorgan Equity Premium Income ETF (ticker: JEPI) and Valkyrie Investments plan to become the new sponsor and manager of the crypto industry’s largest fund, the Grayscale Bitcoin trust. (Source: Bloomberg)