00:00It is interesting, this conversation, right, that we continue to have like public versus private markets.
00:06Make the case, because we were talking to Lynn about this, Lynn Martin,
00:10about how a lot of money out there enabling companies to stay private longer
00:16kind of makes those companies stronger by the time they hit the public markets.
00:20But take it away from your perspective.
00:22Well, I think Lynn and I both agree, and we did on the panel,
00:24that it's actually more useful from an investor's perspective to assess a public-private continuum
00:30as opposed to kind of looking at it as a public versus private markets.
00:34And I think she makes this very excellent point that strong public markets are better with robust private markets and
00:42vice versa.
00:43But really from an investor's perspective, the moment that we're in right now is investors are seeking
00:48and actually now have better technology tools and capabilities to evaluate the underlying risk
00:56and risk metrics of their portfolios and not be as kind of asset class siloed and wrapper siloed
01:03as this kind of public versus private paradigm sets out.
01:07And so I think the moment that we're in the markets is figuring out what are the best ways,
01:13the risk-managed appropriate ways to allow more investors to tap into the economic growth
01:20that's being financed privately versus through public listings.
01:25I feel like you would say it would be ETFs.
01:30Actually, it's a really interesting question.
01:33Now, ETFs, and Lynn said this, and I was so happy that Lynn said this on the panel,
01:37and it came from her and not from me.
01:39Okay.
01:39What did she say?
01:40I will quote Lynn on the panel.
01:41Because we were over here.
01:42We couldn't watch.
01:43Yeah.
01:43Yeah.
01:43She said that ETFs have been the single most important innovation in financial markets in the past 25 years.
01:52And what she means by that, and I agree, but what she means by that is ETFs have enabled investors
01:58to use public market rails to participate in lots of underlying asset classes.
02:04So, of course, like more stratified equity exposures.
02:07But also, you know, Lynn and I are both kind of deep down, or maybe not so deep down, like
02:12bond market nerds.
02:13So we love the story of the modernization effect that ETFs have had on the bond market.
02:20And, of course, we see the ETF wrapper being used for active strategies, for commodities, and for crypto.
02:25But I think this question as to whether the ETFs are the kind of magic bullet for private markets
02:33is one that really remains unresolved right now.
02:36Because private markets are because of the kind of questions around what the most useful wrapper is
02:50based on what the underlying market characteristics are.
02:54So, of course, like when we build an ETF, and I think this is probably true for most issuers,
03:00number one, you evaluate the investment thesis, and we all agree there's an investment thesis with private markets.
03:06Number two, you figure out, like, what are the, you know, what's the appropriate wrapper?
03:10What are the wrapper considerations?
03:11And number three, what are the underlying market structure requirements to support delivery in that wrapper?
03:18And an ETF, especially a daily liquidity ETF, needs to be able to support, you know, creation, redemption,
03:26creation, redemption at scale on a daily basis.
03:28What would be the alternative to an ETF to wrap private assets?
03:33I think that there are other types of mutual fund structures, you know, new types of product innovation.
03:42She said mutual fund, Carol.
03:43Hey, listen, I started my career in business news.
03:46I thought all the mutual funds were going to become ETFs.
03:49Doing a mutual fund show, which wasn't so long ago.
03:52It kind of blows my mind to see how things have moved along.
03:55Well, the idea of coming up with a wrapper that lets lots of smaller investors participate in an asset class,
04:03like, that's not a novel idea.
04:05Correct, yeah.
04:05But the question as to whether it should be an ETF, a daily liquidity type wrapper, I think is a
04:12really important type question.
04:13And, of course, private assets are not a monolith.
04:17So I see what you see happening right now is slowly parts of the market.
04:22And what's very interesting is to kind of look at that gray area of the market where there is more
04:26transparency, there's some data standards,
04:29there's secondary liquidity being provided, where maybe there's more opportunity to provide ETFs.
04:37But I think, ultimately, where more investors are coming out right now is they prefer to see private markets as
04:44an allocation to a broader diversified portfolio, like part of a target date fund.
04:50Now, of course, there are target date fund ETFs.
04:54But I think this question as to whether there will be a huge demand for private credit ETFs as a
05:03building block in a portfolio is really the unresolved one.
05:06And, hmm, where does Carol come out on this?
05:10Well, now I need to know.
05:11Well, I don't know.
05:14I don't know.
05:14I don't know how to speak for you.
05:15But I think, well, like you said, these instruments are not monoliths.
05:20It's not a monolith.
05:21And we spent a good portion of our program today talking about the different areas of private assets that, you
05:27know, where some investors and some asset managers are seeing strength versus where some are seeing a little bit of
05:33concern.
05:33So, you know, we talk about this stuff being in retirement accounts, for example, potentially.
05:40And we look at them, I think a lot of people look at them as monolithic.
05:44And the scary thing for some people perhaps is, well, maybe it's not such a transparent asset class because you
05:50don't necessarily know what is under the hood.
05:52Yeah, I guess what I would say is I don't think that, I mean, defaults are part of a credit
05:57investing cycle.
05:59And there are plenty of high yield, highly functioning public bond market ETFs that work well.
06:08They go down, but they function well in the ETF market.
06:12So I think the real question as to whether something gets delivered in an ETF is really is there secondary
06:18liquidity such that it can trade in an orderly way when there are kind of outsized redemptions.
06:23And that's not really a question of up or down.
06:25It's a question of is the market structure supportive of daily liquidity and the sort of transparency that is needed
06:33to ensure that.
06:34And I do think with private markets, if you're going to reach a broader audience, especially retail audience, like I
06:40think that liquidity aspect is going to be really, really important for them and to have that.
06:45What can't go in an ETF?
06:47Like I am curious the conversations that you guys have around that or can everything almost.
06:53Well, I think there's two different questions here.
06:55What can't go in an ETF and what, you know, we might not, you know, put in an ETF that,
07:01you know, met, you know, what we want the iShares investor to experience.
07:06And that's a pretty important question right now.
07:08I mean, if you look and it's actually a really important question in 26.
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