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Luis Berruga

lines on the record: 83
first: 2022-12-02
most recent: 2022-12-02
sittings or episodes: 1
sources: podcast

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“I think it's one of our newer themes, and what we are saying particularly with clean water or think about clean tech, renewable energy producers, there is a significant shift towards a more sustainable world. And I think many of these things are benefiting from that transition. And clean water is definitely one.”
2022-12-02 · Masters in Business · Luis Berruga on ETF Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“What are you guys trying to do? Like a lithium ETF? What is that? Who cares? So because of that, we actually had to pretty much do a lot of that heavy lifting in-house, which back in the day we saw as a challenge, but quite frankly, it was the best thing that ever happened to us because it forced us to develop our own product and research capabilities that right now we're still benefiting from 14 years later.”
2022-12-02 · Masters in Business · Luis Berruga on ETF Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“It depends a little bit on the strategy. So if it's, for example, a strategy tracking a Nasdaq index or an S&P or an MSCI, typically you leverage an index that is already available through the index provider. And maybe you make a couple of little tweaks to make it more relevant to the context of the exposure that you are trying to achieve. But in thematic investing, for the most part, the intellectual property that goes into developing the index, we do internally with our own research and product development team because the reality, I'll tell you like a quick anecdote in 2010 when we wanted to launch the first ETF, the Globalx Lithium and Battery Tech ETF. We actually went through the process of calling all of the index providers to see if they wanted to work with us on the development of this idea. And pretty much they laughed at us.”
2022-12-02 · Masters in Business · Luis Berruga on ETF Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Great question, great question. I mean, there is definitely also interesting companies in the European market, but it is true that a lot of the new trends that we are seeing are coming from some of the largest markets in Asia”
2022-12-02 · Masters in Business · Luis Berruga on ETF Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Located all over the world because, like I mentioned earlier, the world is changing at the fastest pace that we have ever seen. So there are trends coming up constantly, but also keeping mind there is innovation happening everywhere. So in many cases, some of these very disruptive companies are not in the US. They may be in China. They may be in Vietnam. They may be in South Korea. They may be in Japan. So it's important that you have a very robust team of research analysts that cover all of these companies.”
2022-12-02 · Masters in Business · Luis Berruga on ETF Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Great question. It's a combination of both, and I like to think about it in two different ways. One is when the ETF is already in the market and is already trading on an exchange, then you need a fair amount of resources, portfolio management, trading resources, portfolio administration, compliance, risk management, and product management people just to make sure that the product is behaving exactly how it's supposed to behave. And right now we have close to 100 ETFs. Obviously, it takes a fair amount of resources. And then before you actually launch the product to market, that's when the work is more heavy on the product development and research part of the process. And particularly around thematic investing, Berry, I wouldn't underestimate the amount of resources that you need to bring a thematic ETF to market right now. We have over 30 research analysts.”
2022-12-02 · Masters in Business · Luis Berruga on ETF Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I mean, obviously it depends on the economies of scale of the business that you are considering, but when you factor in legal cost, compliance, portfolio management, trading, there is a lot that goes into launching an ETF. So, yeah, I mean, I do think 50 is around the sweet spot in terms of break-even.”
2022-12-02 · Masters in Business · Luis Berruga on ETF Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“It can change quite a bit based on the exposure of the ETF, particularly the geographic exposure. In our case, roughly speaking, the break-even point is anywhere between 50 to $100 million in AMU.”
2022-12-02 · Masters in Business · Luis Berruga on ETF Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“A good question What happens there is the volatility that you see in the market that's why that's another way in which we are seeing clients using this cover call strategies is almost as a risk management tool because in this environment of high levels of volatility the option premium that you get on that when you write the option”
2022-12-02 · Masters in Business · Luis Berruga on ETF Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“When thing is a great solution for clients that are looking for two things either income or like a risk management tool to play the volatile environment that we have seen in the markets our flagship product QILD which is a NASDAQ 100 cover call ETF with 6.6 billion dollars in AUM it's right now roughly offering a dividend yield of around 12% so if you're an income oriented investor particularly very in the context of right now things have changed recently but we have been for an extended period of time going through like a historically low interest rate environment so many of our clients were struggling to find alternative sources income for their portfolios and this product paying over a 12 dividend Dividend yield and monthly distributions was very, very attractive for many of our clients.”
2022-12-02 · Masters in Business · Luis Berruga on ETF Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Which is great, but at the end of the day, you know, the more devices that you have connect to the internet, the more points of vulnerability there are. So the need for cybersecurity is very obvious. You have seen that also in the context of the conflict between Russia and Ukraine, where like the narrative over the first few weeks was all around cybersecurity and those type of things. And the analysis that we've been doing in our research team, we expect global cybersecurity spending over the next five years to be around 1.5 trillion dollars. So we have a high degree of conviction in that theme. And even in the context of a very volatile environment that we have seen over the last four quarters, we continue to see consistent inflows coming into that ETF.”
2022-12-02 · Masters in Business · Luis Berruga on ETF Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“I mean, cybersecurity is one of our highest conviction things right now for a number of reasons. First of all, there are 14.4 billion devices connected to the internet right now.”
2022-12-02 · Masters in Business · Luis Berruga on ETF Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, in this particular case, we are doing that through OTC derivatives. It's a fairly complex product. We try it for the most part. We try to follow a passively managed approach to all of our ETFs. In this particular case, it was very difficult to provide that structure through like a passively managed strategy. So we take a more tactical and active managed approach to that particular product. And we were very lucky because we were able to secure the sticker rate, which is definitely a very young product. We just launched a few months ago, but we have a high degree of confidence that it will be very successful over the long run.”
2022-12-02 · Masters in Business · Luis Berruga on ETF Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“I mean, I want an analysis was that companies that are run by their founders tend to make long-term investment decisions in the business versus having the pressure of having to report quarterly earnings and the earnings targets that research analysts tend to assign to every single company. So we do think these companies over the long run could perform better than the broader market. And also it's an interesting play in the sense that founder rank companies tend to take a more cautious approach to business than maybe other type of companies. So that was the main value proposition behind the founder and companies. And to your point that it was a very interesting ticket we spent our product team spent literally weeks to come up with that one.”
2022-12-02 · Masters in Business · Luis Berruga on ETF Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“I mean, I would say I think I partially agree with it. I think obviously the ticket is very important, particularly for the self-directed retail client base, a catchy ticker can definitely increase the chances of a product to be successful. But I couldn't discount how much work goes into the product development part of an EPF. It has to be a good product. It has to be properly designed. And there are lots of decisions that go into creating an ETF barrier. You have to define the theme, then you have to define the different buckets within the theme, look at liquidity, you know, market cap weighting versus equal weight, rebalancing frequency. So the pro has to be very well designed to be successful. But yes, if you on top of that have an attractive ticker, it can definitely increase the chances of being successful.”
2022-12-02 · Masters in Business · Luis Berruga on ETF Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, from a diversification standpoint, I think that's the recommended minimum amount of companies. And then finally, we look at time horizon to your earlier point, Barry. We are not interested in trends that will be popular for a couple of years. We are literally looking at disruptive and structural shifts in the economy that in some cases can take decades to play out. That's how we think about thematic investing.”
2022-12-02 · Masters in Business · Luis Berruga on ETF Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Two or three decades. We are not interested in any that is kind of like popular for a couple of years, and I'll get to that in just one second. We're literally looking for structural shifts in the economy. Think of robotics and artificial intelligence, cybersecurity, cloud computing. So that's the first step that we as a group try to assess our level of conviction about a given theme. Then the second step, which is very important, is investability. We need at least 25 to 30 companies to be able to launch an ETF.”
2022-12-02 · Masters in Business · Luis Berruga on ETF Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“A little bit conviction. So we look at whether or not a specific theme is something that we have a high degree of conviction that will be a trend that will definitely have an impact in the economy over the next two or three decades. We look at”
2022-12-02 · Masters in Business · Luis Berruga on ETF Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Great question, and I mean, I guess it comes down to our product development and our research team. Right now, we have a team very of over 30 research analysts located all over the world. And basically, all they do is looking at these trends, talking to industry consultants, industry participants and CEOs to really try to get a sense of where the most relevant emerging trends are. And once we have, I mean, at any point in time, we can have anywhere between 20 to 30 things that we are looking at. And then in terms of how we decide what themes we eventually bring to market, we apply like a very simple but still robust framework that we have developed over the last 14 years. We look at three things. We look at conviction, we look at investability, and we look at time horizon. Let me explain that”
2022-12-02 · Masters in Business · Luis Berruga on ETF Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“You are taking an investment approach that is looking into the future because those business models, those products, those services simply didn't exist. And I think from our standpoint, thematic investing is the approach that allows investors to do just that.”
2022-12-02 · Masters in Business · Luis Berruga on ETF Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I mean, quite frankly, we have institutional investors, we have financial advisors, we have retail clients, but I think the main reason behind the success and the growth of thematic investing is, I think it's pretty straightforward. The world is changing at the fastest pace that we have seen at any point in history. And what I see from more investors is that they don't think the traditional investment approach of looking at historical data to predict future returns is no longer enough. Many financial advisors and clients are telling us that an investment approach that looks into the future is needed. And that's where thematic investing comes into play. And I always use the exact same example. How do you invest in Google in 1998 or in Facebook in 2003? You only invest in those companies”
2022-12-02 · Masters in Business · Luis Berruga on ETF Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I mean, 12 years later, it wasn't like that at the beginning, but 12 years later it's now grown to be at roughly speaking around $4 billion in assets and a very successful strategy.”
2022-12-02 · Masters in Business · Luis Berruga on ETF Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“The midst of that mess for sure, right? ETF business, they didn't have much capital and enter the ETF industry to compete with the largest asset managers in the world, but I think they did something very well from the very beginning. They realized that the most effective way to compete was through innovation. And that's why very early on they focused on thematic investing and they launched, which I believe is the first thematic ETF in the US, which was our global X lithium and battery technology.”
2022-12-02 · Masters in Business · Luis Berruga on ETF Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“I mean, that's a great point. And I give you a little bit of the history of Global X because I think it's very relevant. Think about the two founders of GlobalX, Bruno and Jose. They set up GlobalX in 2008. And from my standpoint, you have to be a little bit crazy to start.”
2022-12-02 · Masters in Business · Luis Berruga on ETF Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, no, I mean, it's been a beautiful ride, to be honest. I joined GlobalX in 2014 and we had, if I remember correctly, approximately $1.5 billion in AUM. I was employee number 10. And for all intents and purposes, Barry, we were a startup. I mean, when I joined, I didn't have a computer for 10 days. So you had a little bit of that feeling. So fast forward to where we are today, we have over $40 billion in assets under management. We have 200 employees and we have a local presence in all of the major markets around the world. And to your point, I think there are two main drivers of that growth. One is our leadership in thematic investing. It's an area that we've been very focused on. And the second aspect of our strategy that has been very, very helpful is our global expansion. We do believe that growth of the ETF industry is not just a US phenomenon.”
2022-12-02 · Masters in Business · Luis Berruga on ETF Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“100%. And I think that trend, quite frankly, Barry is. Accelerating, and my view is that it's going to continue to increase even faster. I think there are many catalysts, lots of mutual funds to ETS that we are seeing in the market. I think 401k plans are starting to use ETFs more broadly. And then some other new changes around how you can do actively manage strategies in the context of an ETF. I think that's going to accelerate the adoption of ETF significantly.”
2022-12-02 · Masters in Business · Luis Berruga on ETF Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Assets in mutual funds, and I was pretty convinced that that number was increased significantly. So I saw the opportunity, and that's when GlobalX came along”
2022-12-02 · Masters in Business · Luis Berruga on ETF Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“My biggest frustrations with working at a big company is that they tend to be very bureaucratic. It takes a lot to get things done. So I was definitely looking for something more entrepreneurial when I could see more of an impact of my contributions in the actual output of the business. So that was definitely one of the key drivers. And then the other driver Barry was that I saw the potential of the ETF industry, quite frankly. I was already an investor in ETFs at that point in time. I remember telling myself why would anyone invest in mutual funds when you can buy an ETF instead? You have the liquidity, the tax efficiency, the transparency. And I did the math and I think at that point in time roughly speaking assets in ETS were roughly just 10-12% of”
2022-12-02 · Masters in Business · Luis Berruga on ETF Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Great questions. So, I guess a couple of things. Up until that point, Barry, I had work only for really big companies, Morgan Stanley and Jeffrey. So I was definitely looking for something more entrepreneurial.”
2022-12-02 · Masters in Business · Luis Berruga on ETF Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“People in Spain when I was growing up in the 80s and 90s, they expect to just retire and have the government give them like a paycheck every month. And I think people are realizing that that's becoming more and more challenging over time. So that's incentivizing more and more investors in Spain to participate in the financial markets, which I think is really positive.”
2022-12-02 · Masters in Business · Luis Berruga on ETF Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Is fundamentally different. First of all, I think the amount of investors that participate in the financial markets is much smaller than it is in the US I think the financial advisors are used, but not as widely used as they are in the US. And definitely the retail market participation is significantly lower than you can see in the US. But I think it's definitely changing very because you see more and more fintech platforms and robot advisors and in a way are making access in financial markets easier for more and more investors in Spain and also think there are a few dynamics specifically in Spain where people are really concerned about the sustainability of the traditional pension plans.”
2022-12-02 · Masters in Business · Luis Berruga on ETF Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“Great company, great group of people. I will be forever thankful to the guys at Morgan Stanley because they gave me the first opportunity to work to get a full-time job in the US when I first moved from Spain and I learned a lot because I spent a lot of time with financial advisors, which as you know is a key segment of our client base today. So a phenomenal learning experience with both Jeffries and Morgan Stanley.”
2022-12-02 · Masters in Business · Luis Berruga on ETF Investments · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, great question. So, yeah, I had a career in investment banking with Jeffreys, and it was a really good professional experience because I did have the opportunity to work in M&A, equity and debt financing. I had a chance to be part of some very interesting transactions in the banking space. I did in 2013 have the largest banking transaction that the market had seen since the financial crisis. It was a 2.4 billion dollar deal. And that was a very interesting experience because it really allowed me, Barry, to understand the psychology behind M&A, which came in very, very handy later on in the context of GlobalX. And from the standpoint of Morgan Stanley was the earlier part of my career.”
2022-12-02 · Masters in Business · Luis Berruga on ETF Investments · IDENTIFIED FROM THE TRANSCRIPT · source