00:00Let's talk a little bit about overall the demand there for ETFs, because if we broaden things out here, what's
00:05incredible is we talk about buy the dip.
00:07But buy the dip is now more than just expected. It comes back in full force.
00:11And you see that with the equity market performing better than any other asset class since the lows reached right
00:17after the roar in Iran began.
00:20Absolutely. And I'm joking. It's no longer BTD, buy the dip. It's BBB, buy, buy, buy.
00:25Not to be confused with the NSYNC song, but it's really insatiable, right?
00:29And, you know, kind of since 2020, these investors have enjoyed a very positive experience buying into any kind of
00:36market weakness.
00:37And so I think that's very much instilled in their DNA at this point.
00:41And, you know, sometimes the adage is pessimists sound smart, but optimists make the money.
00:46And so they're sticking around and they're continuing to buy ETFs and across the spectrum, too.
00:50So a lot of people say that it's really retail leading the way when it comes to buying the dip.
00:54Is that the case? And if so, how has institutional investors adapted to that?
00:59That's a great question. I think it's mixed. I think it's both retail and institutional demand.
01:04Listen, the amount of calls that we're having with institutional investors now about ETFs, about how to transact in ETFs,
01:11in size,
01:12these conversations are growing and they're kind of coming over to the dark side, the ETF side,
01:17and realizing all the benefits and the accessibility and the liquidity that the ETF wrapper really provides.
01:22So there's definitely been a pickup in institutional demand just as well.
01:25Well, I want to lean a little bit on your market making expertise here because, you know,
01:30as we're seeing all of this demand, all these different types of investors come into the ETF space,
01:34we've also seen an absolute mushroom when it comes to the number of products out there.
01:40You know, and I brought us that quote from Goldman basically saying that if you're going to lead market make,
01:44it can't be a futile exercise. And I basically want to ask you the same question.
01:49I mean, when RBC is thinking about stepping up to not just market make, but be a lead market maker
01:55on a new product,
01:56I mean, what goes into that decision process?
01:59Yes, absolutely. It's definitely more of an art than a science.
02:02And listen, RBC has been in this game for two decades now.
02:05And so we've heard a lot of product pitches and we are selective on where we take on those mandates.
02:10But, you know, sometimes things will take off that you didn't expect and are a bit of a sleeper hit.
02:15And then you'll have ones that you kind of expect will do really well.
02:18And sometimes it does become a futile exercise.
02:21I would say now that the industry has grown so much and we have seen this product proliferation,
02:25a good idea is not enough or a good track record is not enough.
02:28We need to know more about the distribution strategy.
02:31What problem is this ETF investment strategy going to solve?
02:35And how are you going to communicate that with your investor base?
02:37Yeah, it's fascinating to see, you know, which ETFs take off, which are surprising,
02:43then which seem like, you know, surefire ideas, not necessarily be able to get off the ground.
02:47When it comes to lead market making, I wonder, you know, how much turnover you're seeing industry-wide,
02:53not just at RBC, when it comes to, you know, people or lead market makers signing on for that role
02:59or maybe dropping out.
03:01Has there been any noticeable difference versus, you know, last year or the year before?
03:05Yes, it definitely has been more competitive in a way in that we do have kind of finite resources
03:11and those resources are being stretched as more product come on.
03:15And especially as the products that we're seeing launch now are more complex in nature.
03:19This requires a heavier resource lift.
03:21This requires more technology development, more ongoing maintenance of running those strategies
03:26and being able to quote fair two-sided markets.
03:29And so, again, as we're seeing this complexity, this definitely puts more constraints on the market makers.
03:35And then, therefore, we are being more selective in who we're working with.
03:39We really want to work with partners where it's a symbiotic relationship where both of us can get something out
03:43of working together
03:44and making sure it's win-win for both sides of the part of the trade.
03:48You mentioned something about which ETFs take off, and I want to go back to DRAM, that memory chip ETF
03:52that has really taken off.
03:54It's a pretty simple concept as well, right?
03:57It's an active fund and invests in memory chip makers.
03:59There aren't a lot of holdings, fewer than 12.
04:02I thought thematic ETFs had their heyday back in, you know, five years ago, and investors had gone past that
04:08and were seeking complexity.
04:09They want buffers.
04:10They want income generation.
04:12They want derivatives exposure.
04:13This shows that that's not the case.
04:15Yeah, absolutely.
04:16I think it shows that, actually, ETFs are really key right now as building blocks and portfolios.
04:22And kudos to Roundhill for really finding and exposing a gap in the market and realizing that this list of
04:28holdings and underlying securities is not really easily replicable,
04:32either as a DIY investor or in the S&P 500.
04:36And they found this amazing niche, and it's kind of no wonder it's been successful and it's been first mover.
04:42And, yeah, kudos to them for really finding a great theme here and executing on it quickly.
04:47Yeah, it is pretty wild.
04:48And they're also charging 65 basis points, Scarlett, on $1.7 billion.
04:51On a very basic, it feels like vanilla ETF, right?
04:54Beautiful in the simplicity.
04:55There you go.
04:56Something to aspire to, I suppose.
04:58But, Valerie, I also want to get your thoughts on something that we were talking about with Alison Shoup of
05:03GSAM in the previous segment,
05:04that, you know, even in the year of our Lord, 2026, we're still talking about income.
05:09That is still the hot topic.
05:10And it has been for several years now.
05:13And, you know, I wonder how you're seeing that sort of be expressed in your role.
05:17Absolutely.
05:18And I think I was on the show two or three years ago now saying I think we're oversaturated and
05:22here it continues to go.
05:24And I think of Bubba from Forrest Gump, you know, shrimp soup, shrimp stew, shrimp cocktail.
05:29We've got income and we've got a variety of ways to serve it to you.
05:32And then all of those varieties have different variables.
05:35And so it gets exponential really quickly.
05:37I think it's really exciting, though, the innovation that we're seeing.
05:39Different asset managers looking at different ways to kind of back into yield, create that yield, different tradeoffs, different payoff
05:47structures.
05:47And no doubt that this is very much going to be, I think, a continued hallmark of ETF innovation as
05:53the industry overall matures right now.
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