00:00 Speaker A
I know you guys have seen big growth in fixed income ETFs as well, but there’s more than one way to skin a cat so to speak and with yields going lower, is that really what’s driving this interest in some of those income producing vehicles?
00:15 Speaker B
Absolutely. Investors are looking to diversify their sources of yield, especially if rates start to come down. You can’t necessarily get as much yield from just, you know, being in very safe short-term treasuries. Investors are looking at things like covered call or what we call premium income strategies where you can give up some of the upside in your stocks in exchange for a higher yield. An example of this is Bali. It’s our, you know, our our Ishare’s premium income strategy and it still has a lot of upside opportunity in US stocks, but it’s also delivering a yield that’s about twice that of the average dividend paying ETF. So you get a little bit of your cake and eat it too, growth with income.
00:54 Speaker A
And have you seen a lot of increasing demand for that as you as um interest rates have been coming down?
01:02 Speaker B
We have. This has been one of our faster growing active ETFs this year and we’ve also seen across the ETF industry, this has been a very fast growing category. So certainly there’s investor interest in this to complement things like a fixed income portfolio, traditional dividend ETFs, etc.
01:21 Speaker A
And is it also serving a a bit of a um purpose now as well? Like for example, I think of the increased in prices we’ve seen in gold. Yes, it’s paused the last couple of days, but just this idea of yes, I’m going to ride my growth stocks up, but maybe I’m going to buy a little protection over here. Is it viewed that way also?
01:46 Speaker B
A little bit, but that’s where we see things like buffer ETFs really coming into uh you know, more more portfolios. Um for example, a lot of these strategies buy protective puts to be able to to defend against certain downward moves in the S&P 500. We just launched one STEN. It protects against the first 10% in a sell off in the S&P 500 and to fund some of that protection you give up some of your upside potential. But for investors who have been sitting on the sidelines for years watching markets reach all-time highs, this can be a great strategy to kind of leg into the market, but with a measure of protection in case we see a near-term sell off.
02:26 Speaker A
I always wonder who these people are who have been sitting on the sidelines for years watching stocks go up. I
02:30 Speaker B
Well, it’s $7 trillion. They’re they’re certainly out there, but I I I think it’s been it’s been painful, right? I mean when you when you when you watch the news, when you read the newspapers, when you look at, you know, a lot of the fears that are out there, it doesn’t paint the best picture for why you should be invested. But for many investors staying the course, staying invested over the long term is a great bet. So for people who’ve been watching on the sidelines, I think there’s a lot of foMO if you will, that they haven’t been able to participate in these markets.
03:00 Speaker A
Yeah. Um, so one of the biggest areas that people have been participating is in AI. and I know that’s another ETF that you guys are focusing on is an actively managed AIETF. BAI, I believe is the ticker on that. What is the argument to be actively versus passively involved uh in AI stocks?
03:26 Speaker B
Well, you could look at it from either approach. I think the advantage of an active ETF like BAI is that our portfolio manager Tony Kim can really look under the hood at these companies and understand which companies are leading in the development of revolutionary technologies that play into the full AI value chain. A lot of people know the Mag 7 stocks. Obviously they’re famous, obviously they’ve been driving a lot of returns, but there’s a long tail of companies in semiconductors, in data owners, in digital real estate, in power that play a really important function in the AI ecosystem that an active manager can just better identify and look under the hood to add to an ETF like BAI.
04:14 Speaker A
And incidentally, I was I was asking myself this question about active versus passive and I was looking at BAI versus the QQQs, which some people view as a proxy, you know, it’s the Nasdaq 100 or even the Mag 7 ETF that’s out there. and I think BA BAI has done better year to date than those guys. So is it just a matter of trying to capture as much upside as you can?
04:44 Speaker B
It is. I mean, this is a long-term growth play, but again, it can look much more broadly than just the Mag 7. So this ETF has done tremendously well. It’s raised almost $7 billion dollars in its first year. its birthday was actually yesterday. And so clearly it’s resonating with the market where a lot of investors, they have Mag 7, they have the tech sector, they want to get more laser focused on the AI value chain because this is really a generational technology that we think is going to continue to carry markets for the long term.
05:14 Speaker A
Jay, good to see you. Thanks for coming in.