00:00I think the word systems in transform systems is the key word here.
00:04So we are migrating from a fossil fuel system to something that is close to a 100% renewable system.
00:09And that's not just energy. It's transportation. It's agriculture. It's industrial processes and equipment.
00:16It's very broad-based. So we see this as a multi-decade trend.
00:21Today, 20% of power is truly renewable in the U.S., a very small fraction.
00:26It's going to take us decades to get to 100%.
00:28So we think it's a very long-dated team.
00:31And, candidly, we think that the best investment opportunity is in the scaled old economy companies.
00:36And I think that's somewhat of a contrarian view.
00:38And a lot of the green businesses with unit economics that require federal support, we don't think that's the way to invest in this team.
00:46Interesting. So really, you mentioned sort of the old economy companies.
00:50A lot of people would say that's dirty energy.
00:54You could say that. You could also say that it's critical to migrating this transition.
00:58Take power in the grid right now, I think, is a perfect example.
01:01Natural gas was left for dead.
01:02Yeah.
01:03That's no longer the case, and for good reason.
01:05Same for nuclear, by the way.
01:06Both areas that we're actively invested in.
01:09So electricity demand in the U.S., flat for 20 years.
01:12It's now growing 3% a year, which doesn't sound like a lot.
01:16You do that for 30 years, and electricity demand doubles.
01:18The problem with that is you take off a megawatt of fossil fuels of power, you need 2 to 3 megawatts of renewables.
01:27Wind and solar are intermittent.
01:28So for power demand to double, you need to triple as much for grid supply to meet that demand.
01:35You can't do that with solar and wind.
01:37It takes too long.
01:38So you need transition technologies like natural gas and certainly nuclear, which is a really interesting area right now.
01:44Yeah, absolutely, and I want to talk a little bit about that because when it comes to the conversation around this fund,
01:49I have to imagine for a while you would call up financial advisors and their eyes would glaze over.
01:55But now nuclear is really hot, and some of the issues that you're trying to address and invest around in your fund,
02:01how have those conversations changed?
02:04It's interesting you bring that up.
02:06I think this is emblematic of something bigger.
02:08So the past couple of decades, the markets have been driven by technology businesses, asset light, digital high growth.
02:16I believe that we're entering a new class of leadership, and many of these old economy businesses have new structural drivers,
02:23whether it's rebuilding our energy system, whether it's adding more manufacturing to North America.
02:29There's structural growth drivers at play here instead of headwinds that many of these companies faced.
02:34And so the fundamentals of these old economy companies look very compelling.
02:38They're also not present in a lot of investors' portfolios, which creates an interesting capital flow opportunity as well.
02:45Absolutely, and underinvestment there in some of the sectors that we're talking about.
02:49I do want to talk a little bit about one of the other ETFs that's in your stable, the TCW Transform Supply Chain ETF.
02:56The ticker there is SUPP, and you're basically trying to capture supply chain reshoring.
03:02That's been a conversation for a long time, really during the pandemic and coming out of the pandemic.
03:07It was definitely a hot theme in investors' portfolios.
03:10And now with the Trump administration, round two, it seems like it's just taken on more urgency.
03:16So where are we in that narrative, given that we have been having this conversation for several years now?
03:21Urgency is an interesting word.
03:22This has been happening for quite a while.
03:24Like you mentioned, we used to import over 20% of our imports from China.
03:28That's now my 13%, 14% import partner.
03:32This has been taking place, I'd say, since 2018.
03:34With that said, we built a global manufacturing supply chain over the course of decades.
03:40It was labor arbitrage.
03:41That labor arbitrage cost is really compressed.
03:47And the cost of having a supply chain that's not resilient, where you can't meet demand, and you have issues like COVID, or a boat that gets stuck in the Suez Canal, companies can't have that.
03:56So they are making their own decisions based on economics and value to move manufacturing back to North America.
04:03Now, certainly the Trump administration, but I'd argue it's bipartisan.
04:06If you look back since 2021, there's been $2 trillion of new manufacturing announcements in the U.S.
04:14Most of that was pre-Trump, and we continue to see the progress.
04:17So similar to the energy transition, this is a very significant, long-dated theme with a lot of structural capital behind it.
04:25And it's really interesting, when I take a look at what you actually hold in SUP, the transformed supply chain ETF, you might think of a lot of picks and shovels types companies, but I see NVIDIA is your second largest holding.
04:39Yeah, I mean, look, the factory of the future is far more intelligent.
04:42And so automation is certainly semiconductors enabling robotics and vision and making these factories more cost-efficient and productive is key.
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