00:00This is a new launch for us and it's designed to invest in Nasdaq 100 stocks but have a full
00:07notional hedge. So the entire portfolio is hedged with put options part of it nine months out part
00:12of it three months out. And then we pay for that with a little bit of put spread writing which is
00:17kind of complicated and I won't go into on this show. But the idea is how do you have a position
00:22in Nasdaq 100 names. In other words that allows this decision allows you to to stay invested to
00:28continue to participate to at least some degree if mag seven and tech stocks move higher but have
00:34some kind of a contingency plan built in. And this way you don't put the onus on the investor to kind
00:40of figure out who potential winners and losers are going to be from each earnings report. Exactly.
00:44What we recommend is investors put half of your equities in just conventional stuff. Half of your
00:50passive fund. Exactly. And half of your equities in something that has some kind of a hedge in it.
00:53Why start with the Nasdaq 100? Okay. So we have launched and we currently manage MRSK which is an
00:59S&P 500 hedged equity fund. One of the reasons we're launching this fund is because we're seeding
01:07it through something called a 351 exchange. Should we go there now? Okay. So a 351 exchange is
01:13it's an IRS tax code but it's fascinating. Don't snooze. Okay Scarlett? Fascinating IRS tax code.
01:21Exactly. So what it allows you to do is move in Nasdaq 100 stocks. So you know if you've got let's
01:29say Palantir or some of these other stocks with huge gains in them you're thinking how do I diversify
01:34without paying a 20% capital gains tax? I don't want to sell it necessarily. Exactly. I do want to
01:39diversify. Exactly. So with a 351 exchange you can transfer in stocks or let's say you own the
01:45triple Q's ETF or you own other Nasdaq 100 type things. You can transfer that in on day one only
01:52of the launch of the ETF and it happens tax deferred. So you can take highly concentrated positions move
01:59them into potentially more diversified ETF and then automatically have a hedge associated with that.
02:05So we've been seeing a lot of interest in that from advisors and investors who want to try to
02:10diversify out of some of these concentrated. That's that's where I'm really interested in. Talk a little
02:14bit about the demand from advisors from investors. At what point did this really start to peak because
02:20we've seen different waves of the AI trade wax and wane and each time you think you know really
02:26there's a rotation of a more permanent rotation out of big cap tech into the cyclicals into small caps.
02:32Right. It then goes back in the other direction again. So the interest isn't necessarily in triple
02:37Q's or Nasdaq 100 itself. The interest is in in this case the ability to use a 3d1 exchange to come out
02:44of some of these concentrated positions. Or let's say you did have a fully invested position right
02:48right now and you wanted to say well I do want to hedge half of that. This would allow you to do that
02:53without paying a 20 percent capital gains tax because who wants to basically just lose 20 percent of your
02:59holdings to taxes. If you can come into something like this tax free that is what many people find
03:05quite interesting. Okay so this HQQQ when it launches it's going to be the first launch of a
03:10351 exchange into a hedge product. Right. How much is the SEC involved, regulators involved, is there
03:16you know a process through which everything has to go through? Yeah so the ETF itself, HQQQ, is just
03:23an ETF. So it went through the normal filing period, 75 day quiet period and it's just on a path. It's out
03:30of that quiet period obviously otherwise I wouldn't be here talking to you. But it's on a path to launch.
03:34So that's all standard SEC stuff. The new nuance is just IRS rules. And many many 351 exchanges have
03:42been done historically. We just started seeing them happen into ETFs that are syndicated. In other words
03:49many advisors are funding them. And this is I believe the first one where it's a hedged index that you can
03:55come into via 351 exchange.
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