00:00Joining us to talk about this ETF, I'm pleased to say, is Michael Monahan, who manages this fund.
00:05Michael, first off, great to have you on set with us.
00:08And let's talk a little bit about portfolio construction here, because as Eric mentioned,
00:12you have about 100 companies in your portfolio.
00:16I see that Meta is at the top, though.
00:18That's about 6.3% of your portfolio, and then it cascades from there.
00:23So how do you think about waiting here when you're putting this together?
00:27Thanks for the question, Katie, and thanks for having us.
00:30So we run a modified market cap weighting.
00:33So we start with a market cap weighting, and we constrain any one position at 7% to manage risk.
00:39We did a bunch of scenario analysis prior to starting the fund, looked at weights from 3% to 10%,
00:43and found that the best risk reward over very long periods of time, looking at this data set, would be
00:48with a 7% cap.
00:50Okay, 7% cap, SpaceX going public, led by Elon Musk.
00:55How did you incorporate SpaceX into the fund?
00:58So the one place that we have discretion, it's generally a factor model, picking the stocks.
01:04The one place we have discretion is on founder IPOs that meet the mandate, and we bought a 1%
01:09position on the IPO.
01:11It seems like if I'm looking at why it underperformed, Apple, Amazon, Microsoft, looks like there's some companies in there
01:21where they're part of the MAG-7 but not founder run.
01:25And so what do you attribute that to?
01:28Like when you see a company where the new person took over and they have a lot of success, does
01:32it challenge the thesis here?
01:35So if you look at the MAG-7, it's actually the MAG-3.
01:39The strong performance in the MAG-7 has come from Meta, Tesla, and NVIDIA.
01:43So I think it holds.
01:44And the same thing applies to the NASDAQ 100 and the S&P 500.
01:48So the strength in the NASDAQ 100 has come from the 20 founder-led companies and the 37 founder-led
01:53companies in the S&P 500 were driving the outperformance.
01:57And just to zoom out a little bit, I mean, it's interesting.
02:01It's an interesting concept.
02:02And, you know, as Eric said, it makes sense.
02:05But tell us why, you know, this needs to exist.
02:08Why this launched six months ago?
02:10What was your sort of guiding idea and vision when you did come up with this?
02:16Yeah, so the guiding vision was actually a spark of inspiration.
02:18I was at the Smithsonian and saw the Fort McHenry flag and maybe ties into the U.S.'s 250th anniversary.
02:26We looked at the flag and got inspired and said, look, the people that built America are different.
02:30These are iconoclasts.
02:32My partner, Lauren Cassidy, has been running money for 20 years.
02:35And I said to her, what would happen if we built a portfolio of only iconoclasts?
02:39And founders are iconoclasts.
02:41We looked at 11,000 stocks over 30 years.
02:44And the average outperformance by a founder CEO versus a board-hired CEO is 4%.
02:49We saw that it didn't exist.
02:51We saw that the S&P and the NASDAQ are both dramatically underweight founders.
02:55They're about 30% founders.
02:56And we wanted to bring this high-efficacy form of investing to our customers and the people that are investing
03:03with us.
03:04What you have in the end is a company or an ETF that's very heavily tilted to technology, different forms
03:10of technology.
03:10You've got software, you've got internet media, you've got semiconductors, tech hardware.
03:14But I believe in total, you've got 51% weighting in technology.
03:19So it almost feels like a version of the NASDAQ 100.
03:23So I think there's some key differences, the first one being the founder factor.
03:27The second one being we've got a bit more tilt to software versus semis.
03:32The NASDAQ has had a great benefit this year from the run-up in memory stocks.
03:38As we know, those are deep cyclicals.
03:40And deep cyclicals at one point will reverse.
03:43And so we think there's quite a bit of differentiation between the two products.
03:48You know you're not the first, right?
03:50You're what we call an ETF on the Lazarus list.
03:53You resurrected an idea that had come out previously.
03:57Boss was the ticker.
03:58Yep.
03:58Global X had the fund.
03:59It looks like it closed in 2023.
04:03You come along.
04:04Not that that can't work.
04:05The airline ETF was the third one and actually had success.
04:09What makes yours different?
04:10And why do you think you can make it work where they failed?
04:12Yeah.
04:13So I think the first thing we noticed, we looked at Boss.
04:15We looked at a couple others.
04:16All of the rest of them modeled themselves as something called founder-like.
04:21And so they put founder in the name, but they weren't actually focused on only owning founder-led stocks.
04:26We believe we're the first to do that, to own the founder-led stocks and to jump all the way
04:32into the deep end of the pool and commit to it.
04:34So, thank you.
