Not Every Mutual Fund Should Be An ETF: Brittany Christensen

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00:00So let's talk a little bit about that chart, because it's a story we know well, right? You

00:04have mutual fund industry-wide outflows. You have a ton of money pouring into ETFs. That's

00:09been the story of the past decade. The story might get a little bit more interesting or

00:13supercharged, depending on where you fall, when it comes to 2026 with the introduction of multi-share

00:19classes, the ability for asset managers to launch ETF share classes of their existing mutual funds.

00:25This has been talked about as sort of a big bang moment, a Y2K moment, whatever you want to call

00:31it. I wonder how you're thinking about it over at Tidal. Yeah, absolutely. So I think a lot of

00:37angst has been built up around this. In fact, we started to see mutual fund conversions pretty

00:42much dry up. All of the conversations we were having about that sort of evaporated as everybody

00:47was waiting for share class. I think share class had a lot of ambitions to solve a lot of problems,

00:52and I think it solves some of them, but maybe not all of them. So I think there's still a long way

00:57to go. I think there's still some key challenges facing most mutual fund managers. But look,

01:02Tidal has filed for the exemptive relief both ways. So we also see opportunity in ETFs launching a

01:07retirement class, for example. Well, Brittany, to that point, we had Holly Framstead of Capital Group

01:12on the show last week. Let's listen to a little bit of what she had to say.

01:17We just think that the existence of the ETF share class isn't necessarily going to be the

01:21panacea that clients expect or are looking for when they're looking to transition to a more tax

01:26efficient solution. So I think that pairs up well with what you're saying, not necessarily

01:32a panacea. Sort of give us the reality versus the expectations. Right. So the reality is there's

01:39still a lot of hurdles around distribution and how different distributors get paid, and that still

01:44hasn't been solved. I think part of the impetus of the regulatory approval will force conversations

01:50that have always been challenging. And look, there's things that ETF issuers want as well that

01:54mutual fund managers have, like access to information about who their investors' bases are.

01:59So maybe this is an opportunity for the industry to kind of come closer together on certain things

02:03that have been different, like distributors and how they're getting paid distribution platforms.

02:07But there's a lot still to figure out. I think even as far as where the controls are coming from

02:13for cross-share class subsidization, those are the types of things that I'd be paying very close

02:17attention to out of forums like the ICI and other industry channels.

02:22How in denial are these mutual fund managers? Because the ETF industry is brutal. I mean,

02:28to me, it's the future of the whole enchilada. If you could make it here, you're set for a while.

02:32But a lot of it's hard. You've seen, you know, the Fidelity Magellan Fund famously came in and

02:36nobody cared. Like, it's not until they got cheap that they started to care. So whether it's the

02:40mutual fund share class adding an ETF share class, how much do they understand that you can't really

02:47charge 90 basis points for beta anymore? Look, I think that's a great question. And it's

02:51interesting, even in my seat in business development, I say to a lot of people, not every

02:55mutual fund should be an ETF. If it's not a successful mutual fund, why would you just turn

03:00it into an ETF? That's going to be harder to be competitive in. It's going to be harder to charge

03:04the fees that you might be getting today in mutual fund land. But I think the ETF does the right thing

03:09by the investor. It takes a look at the competitive pool, what other types of funds are out there and what

03:13are they charging? And I think that's the right approach to coming up with a public fund product.

03:18Let me ask you about one of your white label issuer. One of your biggest hits this year

03:22is granny. That's the Tom Lee ETF, which honestly just holds some stocks. I didn't think it would

03:28be such a big hit, but obviously his name brand is pretty powerful. 2.7 billion in flows this year.

03:33That's a lot. Is that sort of a guiding light for some of these managers? Do they see a Tom Lee

03:38making it, Dan Ives, and they're like, hey, I need to be over there? Or is it purely just the

03:43structural issue with, hey, we're losing money. We've got to be where the fish are biting. How

03:48much is that? Is it that sort of Hollywood factor that we're seeing here? I think it's both. And I

03:53think that's what's so interesting. In our seat, we help everybody from an entrepreneur with a great

03:57idea that hasn't been brought to market to legacy mutual fund managers who are looking at a big

04:02expensive suite of mutual funds trying to figure out the best place to start. So we help everything in

04:07between. I think with Tom Lee and Dan Ives, what you're seeing there is there's big appetite to

04:12follow their investment advice already. That's an embedded marketplace for an ETF audience. And I

04:18think that's what you're seeing really drive the success in those funds. And it's going to be

04:21interesting, Eric. Ron Baron, his shop has filed for ETFs as well. One of the tickers, I believe,

04:26is Ron B on one of the proposed ETFs. So we'll see if, again, that translates from the mutual fund

04:32wrapper into the ETF, Brittany. But going back to this share class conversation, spinning it forward

04:38to 2026, we spoke to Nasdaq on this show as well. And Nasdaq is very much staffing up, trying to get

04:46ready for that moment. And I wonder what that preparation looks like at Tidal because folks in

04:52the industry are talking about potentially hundreds of new ETFs coming into the industry. And given that

04:58you work with so many different issuers, what does that preparation look like on your side?

05:03So we have been staffing up as well. I mean, we've been growing very rapidly. I think we're launching

05:08almost 140 ETF products as of the end of this week. So in this calendar year alone, that's up 68% from

05:15last year. So a lot of new launches that we've done. I think, look, I think the industry overall

05:22is ready to take on more. I think that the ETF mutual fund conversation will be a lot more about

05:28trying to unpick what existing mutual fund infrastructure any given manager wants to

05:34maintain or use. So that's what we've been focused on. You know, historically, as a white label that

05:39kind of comes with sort of a predefined, you know, ETF in a box architecture. What we realize is that we

05:45have, you know, the capabilities to support ETFs in many different ways on many different trusts. So we

05:51started to break out our services out of cart. I just look, you guys are responsible for 100 plus

05:57100 ish ETF sitting in the market this year. That's a lot considering it's 940. So you're almost

06:02over 10% of all the funds. Now, you're almost like a book publisher. People come to you with pitches

06:07and you only accept some of them. What percent do you accept and how bad are the pitches that you

06:15don't accept? Because there's so many launches, it almost seems like every idea is hitting market.

06:18Look, I think that there's a lot of factors that go into deciding whether someone should

06:23bring an ETF to market or not. And we try to consider a lot of them. When someone comes to

06:28me and says, I've got this great idea, large cap, AI focused thematic fund, you know, that's the

06:34most crowded space. I usually turn around and say, do you have, you know, somewhere in the ballpark

06:38of 100 to 200 million in seed capital to start this product? Because that's probably what you're going

06:42to need to give this thing real legs. So, you know, I think the overall, the industry has come a long

06:46way in the last couple of years. When I first started in this space, you would tell people

06:49five to 10 million is a good seed number. I think now it really depends on how competitive

06:53the space is that you're getting into and what your brand is known for.

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