00:00So we're going to get into your lineup, of course, and some new product news that you have today.
00:04But we have to start on the debasement trade, mostly because Eric demanded that we do so.
00:09There was an interesting report out from JP Morgan, analysts describing what we're seeing in IBIT
00:14and some other asset classes as well as basically the debasement trade,
00:19this surge for alternative stores of value.
00:22And I wonder, you know, when you look across the landscape, do you see signs of that going on?
00:27I mean, you just saw it on the chart that Eric was sharing, right?
00:30IBIT as, I think, the second largest in terms of inflows this month.
00:33He's had GLB on the list as well.
00:35I definitely think that there's a bit of that centered around all of the fiscal and monetary policy uncertainty
00:40that we've experienced these last couple of months.
00:43At Lazard Asset Management, we tend to look at more inflation-adjusted traditional means of return.
00:50So one of the products that we launched actually today is our listed infrastructure strategy.
00:55Infrastructure assets have this tied kind of revenue and contract revenue stream directly linked towards inflation adjustment.
01:03And that's how we prefer to access it.
01:05I think the ETF industry, all shapes and sizes of types of products, you can kind of gain that exposure any way you desire.
01:11And one of the products you do have is also IDEQ, which is the Lazard International Dynamic Equity ETF.
01:17I wanted to get your take on some international developments, notably in Japan, with the surprise win by Sunei Takeuchi as potentially the new next prime minister of Japan.
01:27She is seen very much as pro-fiscal stimulus.
01:31And we saw stocks surge in the wake of this news, the yen tumbling as well, and the GGB sinking.
01:36How does this change Japan as an investment destination for you?
01:40You know, I think it's going to play out in the relatively kind of intermediate term.
01:43We have a Japanese equity portfolio in ETF form as well, ticker JPY.
01:48This is where I think active management really pays for itself.
01:52You have all this uncertainty.
01:53You don't know what the policy implications are going to be from the new prime minister.
01:56Is it going to be a retrenchment of kind of abnomics?
01:59Is it going to be something new?
02:00I think as things work their way through, especially because it is so new, it was such a surprise,
02:04you want to give your money to an active manager that has kind of deep roots and research in the local markets,
02:09can make the decisions as those policy decisions are made.
02:14Trivia question, time, Katie.
02:16What is the biggest thematic ETF?
02:18Oh, my God.
02:18You could have told me you were going to ask that.
02:20The answer is PAVE, which is an infrastructure ETF, which is probably why you launched an infrastructure ETF.
02:26Clearly, there's a lot of interest, but PAVE is up 26% annualized over the past five years.
02:31That's a lot.
02:31How much juice is left in the squeeze here, and what's the catalyst going forward when the government shut down
02:37and it seems like jobs are being cut?
02:39Yeah, it's a great question.
02:41Our infrastructure team has been managing assets in this space for over 20 years now.
02:45We believe that investment in infrastructure is likely to continue.
02:49We're seeing somewhere north of $3 trillion invested in new infrastructure,
02:53the modernization of both airlines, toll roads, core infrastructure, real estate, telecoms, so on and so forth,
03:02is all going to continue.
03:03Even with the temporary shutdown, that funding is still going to be mandatory to kind of keep the economy modern.
03:10PAVE's asset base is massive.
03:12As you noted, the largest thematic ETF in the marketplace right now.
03:16Taking an active approach here, we're really concentrated.
03:18We go really deep in these individual names.
03:20We rely on our deep expertise and specialization in this asset class.
03:25Yeah, nearly $10 billion for PAVE.
03:27It's interesting to see you come out with an infrastructure ETF,
03:30because typically when we talk about infrastructure nowadays, digital is before.
03:34Digital infrastructure is sort of the talk of the moment.
03:38And when it comes to potential thematic ETFs, I just wonder what that process looks like,
03:44how you identify a theme, and how you decide you have enough conviction in it that it should be a listed product.
03:50It all starts with our research and our investment capabilities.
03:53The infrastructure strategy, as I mentioned, we've managed it in other forms,
03:57in other investment vehicles for over 20 years now.
03:59As it relates to technology infrastructure, as an example, we brought out Techie back in April,
04:05the last time I was with you all.
04:06And that strategy focused on the full AI stack,
04:08including some of the AI infrastructure names that you would expect to have in there.
04:12When we identify our strategies, like I said, it starts with our investment capabilities,
04:15it starts with our deep heritage in research, fundamental bottom-up analysis.
04:20And identification of those themes occurs across this research apparatus.
04:23So we conduct, I think, close to 5,000 interviews with management of companies in which we invest on an annual basis.
04:30And that's where we really begin to identify themes that are taking place.
04:33Where is CapEx being spent?
04:34Where are there R&D breakthroughs?
04:36That's how we identify themes, and that's how we incorporate it into our product development process.
04:40All right, trivia question number two.
04:41But this time, we planned for it.
04:44Katie, there are a lot of filings, ETF filings on Friday, right?
04:47Mm-hmm.
04:47How many?
04:48Over 100.
04:49Over 100 on Friday.
04:50Help us out.
04:51105, to be exact.
04:52There we go.
04:52Okay, I mean, this is why the government is shut down as well.
04:57How does the shutdown, if it continues more than this week, start to affect ETF launches versus, say, IPOs?
05:03You know, I think it'll have more of an effect on new launches and new entrants into the marketplace.
05:08Those that have been there already that don't have to rely on exemptive relief for a new active trust or a new ETF trust, for that matter,
05:15should not be affected all that much.
05:17Where it actually might have some implications is on the new approval that you mentioned earlier on ETF share classes of existing funds.
05:25We saw the approval in a number of amended applications.
05:28We haven't amended ours yet, but we are in market with the initial application.
05:31That's likely where you might see some delays if the government shutdown were to continue.
05:36Let's talk about the share classes because there's 70 or 80 firms wanting to do this.
05:42So everybody out there, whether you're in the industry or an investor, this is going to affect you.
05:46What's the roadmap here?
05:48You're going to have mutual funds.
05:49You're going to bolt on an ETF share class.
05:52And then is the goal to use the ETF to minimize taxes for the mutual fund?
05:55Or is it a tax-free way to switch to the ETF share class so you don't lose the investors?
06:00We're hoping for the latter.
06:01We're going to have to kind of segregate the asset bases between the different share classes.
06:05But we're hoping that once it's kind of operationally ready, that you will be able to, as a taxable investor,
06:11transfer your holdings in a mutual fund share class into an ETF share class that would be bolted on to the fund structure once it's approved and operationally ready.
06:19Right. I hone in on that operationally ready term because we're not there yet.
06:23Many of the distribution platforms aren't ready for this yet either.
06:26So this is all kind of preamble.
06:28And I think there's a lot of work that needs to be done from a technology and infrastructure perspective before we can kind of get to that end state.
06:33Right. And that's an industry-wide view.
06:35You're not just talking about Lazard specifically.
06:37That's exactly industry-wide.
06:38It's also important to point out, I think Lazard is kind of uniquely positioned here.
06:42We do offer share class ETFs in other markets.
06:46In the U.S., this is unique and novel, especially with respect to kind of Vanguard's earlier patent.
06:52We have a product in Australia that is a share class of a mutual fund.
06:55It's an ETF share class of one of our flagship strategies there.
06:59From Lazard's perspective, we evaluate each investment strategy uniquely and independently.
07:03We can convert mutual funds, which we've done.
07:05We can bring de novo strategies.
07:07And in markets outside of the U.S., we actually have launched share classes of existing funds.
Be the first to comment