Episode 20: Cole Feinberg, Partner at BondBloxx ETFs

Transcript

Douglas Yones:

Hello and welcome to ETF Central, the podcast where we bring the latest and greatest ETF industry perspectives directly to you through in-depth conversations with key thought leaders from across the ETF ecosystem. I'm your host, Douglas Yones the head of exchange traded products at the New York Stock Exchange, the home of ETFs. Now today I'm joined by Cole Feinberg, where he's a partner at Bondbloxx. And in this role, he and the broader team at Bondbloxx, by the way, Bondbloxx, B-O-N-D-B-L-O-X-X, because we're going to talk a lot about Bondbloxx.

I want to make sure you're Googling the right place. That team works to deliver fixed income, ETFs and solutions to the broader clients and community. And by the way, prior to joining Bondbloxx Cole served as Global Head of Exchange traded distribution at Goldman Sachs Asset Management. He also served for 12 years at BlackRock, holding a various leadership positions across the iShares ETF business, including head of capital markets. He oversaw institutional trading relationships, ETF business development, all the way back to your career as an equity trader at Morgan Stanley. So we're going to get into a lot today Cole, I just want to say first and foremost, thank you for joining. Thanks for being here.

Cole Feinberg:

Thank you so much, Doug. I'm excited to be here as we roll into the end of the year and happy holidays to you and yours and to everyone listening. I'm excited to join. I've longtime listener, first time caller.

Douglas Yones:

I love it, and okay, we have to start with Bondbloxx. I don't even know where to begin. Let's start with the firm. Help people who maybe don't know about Bondbloxx, they should. Help them understand where this all came from. For me, I look at it's like, I don't know, it's an ETF family. I mean, the whole place is ETF veterans. Everybody's the best at what they do. But give us the history, how did this all come together? Let's start there. The history of bomb blocks. Tell us about where it all began.

Cole Feinberg:

Yeah, I love that question. I appreciate it that you recognize the kind of familial aspect to it because it really does feel like that. The co-founders and some of the partners we've worked together for ages and ages and ages back in the Barclays Global Investors days of iShares. Prior to the BlackRock acquisition, we all spent a bunch of our formative years in the ETF business together. I started there in 2003. Hard to imagine that's been 20 years, and a ton of my peers here at Bondbloxx were at iShares even prior to that. So really grew up there in the ETF industry and learned so, so much. And I think dovetailing into why we exist in the catalyst for putting bomb blocks on the map and creating this organization is actually just kind it 2.0 or even 3.0 of the ETF industry from an issuer standpoint. And I'll put a fine point on that and say, look, I think we recognized as a group and stayed in close touch to your point about the familial aspect. We're friends and often almost think of each other as family.

There's a recognition that there's still room for product development, there's still room for innovation in the ETF industry. I think often people think, geez, what will they come up with next? There's so many ETFs out there, but the reality is, especially in fixed income where we're focused to the point of the firm name being Bondbloxx, look, I would just say simply innovation hasn't kept up. Product development hasn't kept up on the bond side of the ETF market, you name it. And it exists on the equity side. I think sometimes we think, gee, stuff that you would never even dream up probably exists in ETF wrapper, but fixed income... Look, for the most part, there were broad-based indexes, kind of more blunt exposure vehicles to give you access to treasuries or to credit or high yield or whatever it was, but without the ability to get a little deeper.

I want to invest in specific duration targets. I want to invest in fixed income sectors. I want to invest in ratings categories and be able to isolate those asset classes or sub-asset classes. I think short version, there was an opportunity set to create a product suite and kind of be more precise and lower cost with fixed income ETF solutions. And that was really the genesis and the catalyst for Bondbloxx. And I would say one last thought quickly on that is every single thing we've done has been on the back of client demand. None of this is kind of, hey, let's throw the spaghetti at the wall and see if it sticks kind of a thing. This is, if you build it, we will come almost in terms of partnerships with different pension plans, insurance companies, investors of all kinds who have said, hey, this exposure is missing, do you think this is something you guys could bring to market? And that's kind of one of the itches we've tried to scratch, and again, with the hyperfocus on fixed income.

Douglas Yones:

And for those that are out there, you're listening in and you want to sort of Google and learn as you listen. You could go to Bondbloxxetf.com, it's B-O-N-D-B-L-O-X-X eft.com. And I'll put some layman's terms around what you're saying, Cole, for maybe the listeners that hear fixed income and okay, I understand bonds, but what do you mean when you say precision? I mean, you can go in there, you guys have ETFs that focus on six months duration.

One year you could pick a seven-year target duration, or you can start to get into sectors. So historically, someone might say high yield, and it's like, well, what does that mean? I mean, you guys are breaking it down to high yield energy, high yield healthcare, right? So I mean, we're talking really, really precision. But again, high level, I want to spend a moment on the fact that this group, the Bondbloxx team came together. And I mean, when I say industry veterans, I mean ETF veterans. I mean, this is sort of the top of the top across all these different firms that have known each other for years and years. Did everyone call each other up and say, hey, I got a better idea and a better way. Let's let's jump in a single office and make this thing happen. I mean, how did this all come together?

Cole Feinberg:

Yeah, I'll give a lot of credit to our founder and fearless leader, Leland Clements. Leland is an absolute visionary, and he was really the one kind of got the band back together, to use your words. And look, I think what's really cool, also, Doug, and you hit on it, is it's a lot of complimentary skill sets, right? People who have run operations, people who have run sales, people who have run capital markets, product development, portfolio management. So when you look at our... And I'm responding to you, not patting ourselves on the back, but there are legitimate ETF, industry titans. Joanna Galagos is godmother of ETFs. Is that her nickname? There's mother of all ETFs?

Douglas Yones:

I know you've got Joanna, you've got, I mean, geez, Tony Kelly, right? I mean, he probably knows every single person that's ever traded, ETFs, obviously. Leland, I mean an industry titan. I mean, even I look at my days at Vanguard, I mean Dan Goldman to come in as portfolio manager. I mean, this guy was running probably more fixed income than most people in the entire industry. You look at Katie and Kathleen and the names, you just go through this list. It's the who's who of ETFs. And I apologize, someone I'm not naming, Brian Elliot. I know I got to tell everyone this is what I mean. I mean, I go through your lineup, it's not, "oh, I know a couple of people." If you've been in the ETF industry, every single person on this list.

Cole Feinberg:

Yeah, maybe-

Douglas Yones:

It's not a startup. I mean, you're a startup, but you're not a startup.

Cole Feinberg:

Right, exactly. I appreciate that. And I think that's actually the conversation I like to have with clients is exactly to your point about educating folks and trying to kind of spread the gospel of bomb blocks. That's really what I like to talk about a little bit, is yes, we are newer from an issuer standpoint. Our funds, our product suite is relatively new a couple of years now in the marketplace, but the chassis of this organization is built as though we're one of the largest and finest investment managers in the country. And I don't say that jokingly. I mean it. We have built this as though we are going to be as big as any ETF issuer out there, and we're excited about the growth prospects. And just to come back to the thing you said, maybe present company excluded, there is a tremendous amount of expertise on the team and we're super psyched about the team that we've been able to build.

One of our newer hires also, I'll just add in Robert Eaton, just top to bottom, we have a world-class team, and I'm elated and honored every day and pinch myself that these are the folks with whom I get to work. And I mentioned a second ago, I've been in this industry for 20 plus years because of the prowess and the expertise on this team. I'm still learning constantly and learning every day from my peers, from my colleagues, and importantly also the markets change and continue to learn from the markets and continue to learn from clients as well. And it's a really fun place to be. And it's a really fun time to be doing this because I like to say, and we all do, the income is back in fixed income. And so it's a fun time in the markets as well.

Douglas Yones:

Yeah, so let's go a little deeper in you. So if we sort of dig our way backwards, you start out by trading. How did you end up in ETFs? Was there something that drew you in? Was there something that spoke to you so many years ago that you end up in this position?

Cole Feinberg:

It is an interesting question. I'll start with what I probably overuse and say this in a lot of conversations, trading is literally the middle name of the ETF, right? And so having kind of started out of college, I went to University of Texas, I was fortunate to hook them horns, by the way, we've got a big game coming up, CFP playoffs on New Year's Day, looking forward to that. I was fortunate to secure an internship with Morgan Stanley, actually worked in the World Trade Center in a bunch of years ago, summer of 2000. And I kind of just honestly, a little bit of luck probably.

But when that internship kind of... Where you got allocated, I got allocated to the equity trading desk, and honestly, this sounds cliche, I totally fell in love with it. I thought it was so fun, the fast paced nature of trading. Geez, I mean, especially when I'm talking to you at the New York Stock Exchange, we were trading in 8ths back then. Man, we've come a long way. Not even in pennies, people get upset about 2, 3, 4 penny wide spreads. Can you imagine? We were trading in 8ths and the years before that. Anyways-

Douglas Yones:

I still laugh at even the verbiage that was used, but do you remember then it became teenies and then it became tinies and all this It's all in the past now.

Cole Feinberg:

Exactly. Those days are gone now we talk in mills, not even bits. It's crazy. Anyways, yeah. So look, I just fell in love with it. I loved the atmosphere of the trading desk. I had some really good mentors and peers, and I loved that job. I loved what I was doing. And the opportunity came up to move out to San Francisco and help kind of start what at the time was one or two man and woman team running iShares capital markets, I think globally, that is a several hundred person team now, managing trading relationships, working with authorized participants and market makers and all the broker dealers, and generally just the liquidity ecosystem, not to mention the clients who are buying and selling funds. So I really had the opportunity to help develop that team from scratch and bring I think some thoughtfulness into ETF trading and really help educate clients on how to think about the structure of ETFs and how to think about trading ETFs to get best execution.

So that was really why I was hired, was to bring in, I guess some trading experience and bring that iShares capital markets form to form. And it was just a ton of fun rewinding to the early days of ETF trading. Things have changed for the better for sure but that was kind of how I got into it was just the trading background and the dovetail into the importance of how to think about trading ETFs. And candidly, the other big part of that was the opportunity to move to San Francisco was just something that was really neat to me at the time. Again, rewind 20 plus years and fast-forward to today, and I've been here for a long time and raising a family and married and kids and all the stuff and just love it out here.

Douglas Yones:

For those that are out there, maybe they're younger in their journey or they're thinking about ETFs. I mean, do you look through what's going on in the market or you look backwards and do you have any kind of advice or best practices, somebody who's saying, I want to make a successful journey like you, I want to grow myself through the ETF industry. What should they focus on?

Cole Feinberg:

Yeah, it's a great question. And so now I'm kind of focused on distribution. I focus on sales and that effort and kind of growing assets and working with institutional and retail clients alike and try to take a consultative approach to that and try to learn from clients and try to resolve problems and create solutions. I would say what got me to where I think I'm at least a little bit successful in that seat is the background in kind of capital markets and product. I don't think you can just jump into a sales seat and expect to be successful per se. You really got to dig in, roll up your sleeves, get your hands dirty a little bit, and really understand what I think is critically the nuances in some cases, but also the Gulf that is the differences between mutual funds and ETFs or ETFs and other pooled and investment vehicles of all kinds.

And what I mean by that is partially going back to what I talked about, the trading aspect. There's the ET, the exchange traded, but there's also the fund, and they trade kind of in both ways. It trades like an open-end mutual fund and that you can create and redeem shares at all times, leveraging the underlying securities. But there's also the ET, which is exchange traded and that ETFs trade, like a stock on exchange. Nobody knows that better than you guys at the NYSE. So I think what I would say is digging in and really kind of understanding the product, understanding the ETF wrapper, understanding the structure that the background, at least for me, having grown up in ETF capital markets and the trading background has really been something that has helped me significantly, not only be more successful as a salesperson, but also to just be more thoughtful in who and where and when ETFs can be the right vehicle.

And I don't pretend that ETFs are for literally every single investor, but boy, howdy, they've grown in popularity, tradability, transparency, tax efficiency, generally low cost. They scratch so many itches that I think often people think, hey, I can go do that. And I think it's important to really have the background and dig in and really want to be an expert at the product and the product structure that can really help differentiate as a salesperson and get to a point where you're successful. And I think more importantly though, is having fun and I love what I do. I really find it fun. And when you get someone to kind of flip that switch and all of a sudden they understand ETF liquidity, ETF trading, ETF products and so forth, I just think that it's so satisfying. And I think having a little bit more of a rich context and background in it can make you that much more successful and again, makes it that much more fun.

Douglas Yones:

Yeah, I think you bring up a couple of really good points. And it's funny, a lot of times when the way things happen, I can't tell you how many times this week someone has brought up this phrase to me, intellectual curiosity, either saying that's what they're looking for out of people or young people who I'm meeting to say, I'm being told I need to be intellectually curious. And how do you demonstrate that? And I think you bring up a really good point, which I hadn't thought of before, and is sort of the ETF veterans, the thing that was happening 10, 15 years ago in ETFs is there wasn't any defined roles. We all were just sort of... You might be told, hey, you're working on ETF capital markets, but it didn't matter. It also meant you were working on index development and you were also working on portfolio construction, and you were also working on ETF marketing and ETF sales.

And as a result, we were all forced to be really curious about how all these different things worked. And then I think of an example, and I'll share it, I don't know if he listens in, there was a sales guy that I worked with, his name Solo Mendoza, he's still out there in the ETF world. He was one of the first guys I met that the whole time we traveled together, he was asking me a million questions about how everything worked, and he caused me to ask him a million questions about how his thing worked. And I feel like there's that sort of blended theme of all these ETF veterans now are the same people who woke up every day with a smile on their face and they asked a million questions, they wanted to learn everything. It never stopped, and like you said, you're still learning and it just feels like that's a commonality across everyone who's sort of top of their game in our industry.

Cole Feinberg:

Yeah, I totally agree. And I'm going to maybe even simplify this. My wife always says this, her favorite people in the world, and I've totally adopted this logic. Your favorite people in the world are those who are interested and interesting, right? They're interested to learn more about you and what you do and are excited to engage and they're interesting and that they've got a story to tell and a neat background or are educated and like to learn and read and all these things. And when you find people that scratch those two itches, you found a good one. And I think whether that's in friends or family or hiring folks or building a team, whatever it might be, when you have those two things, I think you've got a good combo. And back to the previous question, I think I pinched myself that we've got so many folks here at Bondbloxx who are interested and interesting.

Douglas Yones:

So along those lines, somewhere across your journey you said, hey, you know what? I don't like to just drink wine. I'm going to do something else with it. And you've created this fine wines business spelled F-E-I-N. Tell us about fine wines. How did you get into this?

Cole Feinberg:

Yeah, the namesake is a little play on the last name, obviously Feinberg, F-E-I-N, Fein wine. So I've always been kind of keep going back to the same word, interested in wine. It started with probably unfortunately in college, some boxed wine. We graduated quickly from that to maybe a little bit better. It's funny, so again, same thing, having lived in the Bay Area now for 20 plus years, Napa, Sonoma, the central coast of California, are literally in our backyard. It's super close, and I just really gravitated toward it. I like the kind of culture and the vibe. If you've ever been to Italy or have the good fortune to travel, just kicking your feet up and chilling out and having a glass of wine is a good way to unwind.

So I've always just gravitated towards wine a little bit. And somewhere along the way to your point, I kind of realized, and it actually really was really right at the start of the pandemic Doug is kind of realized there was my phone would ring, not off the hook, but buddies would text or call, hey, we're coming out to Napa, or we're going on a trip. What are some wineries that we should check out? I know that you're into it, Cole, or hey, I'm kind of sick and tired of the same two, three wines that I buy all the time when I go to the grocery store or the store. What are some things that you recommend?

It kind of grew to where it felt like that was happening a lot. So fast-forward, I had a conversation with some friends and got some input from some entrepreneurial spiritual type folks and said, hey, there might be a way to monetize this and put a business around this. So it started with what was basically a silly kind of blog, graduated to an Instagram handle, which is @feinwines. And I don't know for the life of me why we have as many followers as we do, but there's a good amount of followers on fine wines. I guess other people are interested in learning about it too. And in the end, what I like to do is I like to help people find good deals. Hey, you're used to drinking X brand of wine that's on the top shelf at Safeway or Specs or whatever grocery store where you shop or wherever it may be, where you buy wine.

If you just go a bottom and maybe you recognize the name or whatever it is, there are really good wines out there, Boutique wineries, Mom and Pop Stuff. Places that you might not have ever heard of that I think are making wines that are on par with the best of the best and you just don't know about them. And so I gravitate towards them, work with them almost in a third party marketing standpoint and say, hey, I loved your wine. I think others would too. They just don't know about it. Let me help you grow your business.

And so it kind of allows me to scratch a creative itch in a thing that I'm super passionate about, which is wine. But it's funny, there is some overlap in what I do with kind of ETF distribution as well, which is listening to the customer, listening to the client, finding out something that they're excited about or looking for and help to create a solution or find something that fits that.

Obviously low cost, high precision, fixed income, ETFs are very different than Napa Cab or Sonoma Pinos or Bordeauxs or whatever it might be. But I've found there are some synergies and I just really, really enjoy it. And the fun part is I get to drink wine and everything in moderation, but I get to call it part of my side hustle as the kids call it. It gets to be part of my job is drinking a little bit of wine. So it's been really fun. It's grown. I'll button it up, but we do a lot of holiday gift giving. So this is actually kind of a busy time of year people come to us and say, hey, we want to send wines to our clients, help me find something fun. We do some stuff. We do out a weekly newsletter, wine of the week, kind of thing and then finally, also, because of some really good partnerships and friends in the business and so forth, we've also got some pretty cool capability to get really rare, hard-to-find wines, first growth Bordeeuxs and all kinds of things.

So the wine business that started as a very silly blog for me to do something a little bit fun and different during the pandemic when we were no longer in Ubers and Lifts and hotels and flights all of a sudden became a real business. And fast-forward to today, and we actually do some real revenue and importantly, like I said with the other stuff, it's just really fun and I love it.

Douglas Yones:

Sop this'll air beginning of 2024, someone who's out there listening in and they're like, hey, maybe I want to pick up something neat for Valentine's Day this year. Any top picks that you like that you would send them to or?

Cole Feinberg:

Yeah, I would. There's some really cool ones. One of my favorites, and it's on our website now, is a Paso Robles kind of San Luis Obispo, central coast of California Cabernet. It's called Harvey and Harriet, which I think is actually perfect for your point on Valentine's Day. It's actually the gentleman who started this winery. The winery is called My Favorite Neighbor, but the wine specifically is Harvey and Harriet. It's a wine that he dedicated to his parents who were Harvey and Harriet and the legacy they left him and the love that they showed him. So first of all, the story is really neat and touching and sweet, but the wine is off the charts and it's like a $35 cab that... That's not inexpensive, but I would tell you that it competes with stuff that sells for well over a hundred. Even some of the top ranked stuff, it's a 95, 96.1, it's off the charts.

Definitely encourage folks to give that a look. For what it's worth on my site, if you're looking for something specific, there's a kind of reach out to us and let us know what you're looking for. But we also have a whole bunch of our favorites and current obsessions and all kinds of stuff on the site. So I appreciate you asking. And we also are launching a club, a wine club in the beginning of Q1 here in the start of 2024, where we kind of custom curate on your behalf our favorites, and you can kind of create some modifications. Do you want reds only, red and whites, price points and things like that. But really excited to get that launched and out the door and continue to grow and see what we can do with the side hustle.

Douglas Yones:

Give us the website one more time just because we're going to move on to the next topic.

Cole Feinberg:

Yeah, you bet. Feinwines.com, www.feinwines.com. Fine wines with an EI.

Douglas Yones:

Okay, all right, perfect. I want to slide back into ETFs again. Hopefully everyone will get their top picks on wines, but let's start talking a little bit about top picks with ETFs. So over your career, you're spending a lot of time with advisors, we're starting to look okay, what do we think 2024 might look at? What are some of the things that advisors are asking you about now? What are you spending most of your time in those conversations?

Cole Feinberg:

Yeah, great question. I'll start with a really easy two word answer, fixed income. I joked anecdotally a few minutes ago, fixed income is back in fixed income. Obviously it's a little bit of a selfish answer because all we focus on is fixed income, but as a result, we get to really be thoughtful. We're not fighting for US large cap, US small cap, international equity, any of that. We really exclusively focus on fixed income and that's where we're focused with clients obviously as a result. A couple of things I would say stand out, right? Obviously the Fed's policy, I'll start there over the course of the last, at this point, call it 18 to 24 months with all the rate increases, the ultra short treasury ETFs in our case X-hlf, X-H-L-F, X-one, X-O-N-E, the really short duration US Treasury ETFs are extremely compelling. They're darn near their highest yields of all time in this rate environment.

You're basically getting north of 5% currently without any real risk, right? These are AAA rated US treasuries that are paying out over 5% yield. We've seen a tremendous amount of growth, no surprise given Fed policy. I'd add in, we are the lowest cost game in town with those offerings. So both X-hlf and X-one cost, three basis points a year, and the targeted duration, a lot of the other offerings that are out there are kind of maturity ranges.

We offer a target duration so that you always know exactly what you're getting. So X-hlf six months, you're always right at six months of duration, X-one, one year, you're always right at one year. So those have been, I think where I know we've seen a tremendous amount of assets coming in and for the reasons that we talked about, I would say two things.

Two kind of trends maybe Doug, that we're starting to see unfold as 2023 winds down and 2024 kicks off. Adding duration, it feels like based on what Chairman Powell has said over the course of the last few of his press conferences and so forth, it feels like they're pausing. The FOMC is going to pause and maybe the market is certainly pricing it in, and futures markets are looking like beyond pause. There's going to be a potential pivot and that we may start to see rate cuts into maybe as soon as Q1, but certainly the market is anticipating Q2 and the back half of 2024. As a result, adding duration may make sense. And so we've got eight different US Treasury, ETFs already talked about six month in one year. We also offer a 2 year, a 3 year, a 5, a 7, a 10 and a 20.

So kind of pick your spot on the curve. We've got a vehicle to give you exposure to that spot. And I would say, look, we're not here to tell you you should be in the tens or twenties or the hlfs or the ones. What I like to think is we are a toolbox. I don't know if you need a hammer or a screwdriver or a wrench or a drill. You know what you need. What I would like is that when you open up the toolbox, that is Bondbloxx suite of offerings, you've got the opportunity to pick which one of those, right? We offer all of those. So that's my second point, I guess would be the ability to, and maybe as fed policy changes, the need for adding duration, that would be my second bucket. And then my final one is credit. I think, look, in this environment right now, you are not yet really being rewarded for taking on duration risk, right?

Perfect example, the 20s are actually yielding less than the one year. Will that change? Is that day today? Probably not. And so you can get a little more bang for your buck. And actually what I would say, a little more reward for your risk, when you look at credit. So you talked about at the onset, we have a suite of high yield sector offerings, we have a suite of high yield ratings categories. So you can take high yield and say, I just want the double Bs, the highest rated of that credit category of high yield, or I just want the triple Cs, give me the highest yielding high yield bonds.

The yield on the Triple Cs currently is about 900 basis points more than the front end of the treasury curve. So even if you're wrong or early to the trade, you've got a tremendous cushion given what those yields look like and what those credit spreads look like. And so look, again, we're not here to say you got to add credit, you got to add duration. The investment decision makers out there are probably a lot smarter than I. Whatever the decision you want to make, looks like we've got solutions. And that's really my role here is to try to spread that gospel and make sure that people are aware that lower costs, higher precision fixed income offerings exist. And that's why, again, back to the onset, that's why Bondbloxx is here and that's what we're focused on.

Douglas Yones:

And as a reminder, I mean if you're listening to Cole, you want to look more at some of these ETFs, of course you can just go to ETF Central in that search bar, type in Bondbloxx, B-L-O-X-X, or of course you can go to Bondbloxxetf.com, the whole lineups there, you can read their research. They're putting out a lot of content, a lot of education, and you can look through all the different ETFs. Cole, when you sit back and look at the team, and I mean, geez, Bondbloxx in general, you've been super successful in terms of ETF growth cashflow, and across the year, I mean, geez, this year people think about the equity markets closing out 2023, but about 40% of all cashflow and ETFs this year was fixed income. Do you feel like there are best practices for launching an ETF business?

Cole Feinberg:

Yes, and I actually alluded to it earlier, and I'll double down here, Doug, which is listening to clients, and I joked previously that we're not just throwing spaghetti at the wall. Boy, I hope pension plan A or RIAB or this wirehouse, boy, I hope they think this is cool or compelling. It's actually that should be part of the process prior to even thinking about launching a product. It doesn't matter if you're crazy smart and you think it's going to be a great solution. If clients don't think so, it doesn't much matter. And so I would just say the first input, and by far in my view, the most important input is understanding that there's some demand from clients, right? Clients are clamoring for a specific exposure or a specific offering that doesn't exist or that exists but could be improved upon.

I think that's the first input, is making sure that you're actually listening to clients because in the end, they're the ones that are going to put money to work and make your product suite successful or not. And by the way, that's good practice anyways because then once you bring that product to market on the heel of some client demand, they're probably not the only ones, right? What's good for the goose is good for the gander, as they say.

And I think, not to say that every client is totally like-minded, but if there's one out there that thinks something would have some utility, there's probably others. And so I think it's getting things right from product development and capital markets and making sure you have the right partners in trading and indexes and all that stuff is key and absolutely critical. And I don't mean to play that down, but I think the very first step is, hey, our client's going to care, who gives a hoot? And if the answer to that is the client, then it's probably a worthwhile... Let's start kicking the tires. And then from there, you start to put in the pieces of putting together the team and making sure you have expert portfolio management, expert capital markets and trading capabilities, expert product development. And then you bring that to market. And I think that's the key towards real success. But it all starts with the client.

Douglas Yones:

So let's take out the crystal ball. It's 2024, do you have a favorite ETF in the lineup or a top pick right now for the year?

Cole Feinberg:

I do, can I have two?

Douglas Yones:

Sure, give us two.

Cole Feinberg:

Okay, I'm going to pick two. I'm going to throw a little bit of a curve ball first and go with emerging markets debt. Candidly, I think it's been a little out of favor for a while. Emerging market debt has not done extraordinarily well, really at all since kind of the global financial crisis 0809, that is starting to change pretty significantly. Our offering specifically Doug, is XEMD, like Emerging Market Debt with an X in front of it. XEMD is a lower duration version of some of the other emerging market debt offerings that are out there. We have a capped duration. Currently, we're at three and a half or four years, if I'm not mistaken, relative to some of the others that are eight, nine years. That's important for two reasons. One, you get a little less interest rate sensitivity, you get a little less risk.

But two, what the Fed has done in the US and we talked about the rising rates and the front end of the curve, actually paying you a little bit more from a coupon and yield and distribution standpoint, that persists overseas. That idea is not unique to within the US border, that money monetary policy permeates outside of our borders. And so you actually get rewarded pretty noteworthy to a pretty noteworthy extent for that lower duration exposure. The yield on XEMD 30-day SEC yield last I looked, was well over 10%. But you've got about triple B rated bonds as your average rating. So to put it simply, you kind of get what looks and feels a lot like investment grade ratings, but with something that looks and feels more akin to what kind of yield you get distributed from high yield. So I think it's time to get out of US borders exclusively and kick the tires a little bit overseas on emerging market debt.

I think it's a really compelling story. XEMD is a lower duration offering that gives that exposure and it's lower cost as well. So it definitely encouraged folks to take a look at XEMD. My other one, Who's met me or seen me or that I've had the opportunity to high five or see over the course of the last year or two, I'm screaming from the rooftops every single time about XCCC. CCCs are kind of lower rated, high yield bonds, to be perfectly blunt, but I mentioned a minute ago on a preview portion here, the SEC yield on that is north of 14% as of today.

That's 800, 900 bips over the risk-free rate of five ish percent from the front end of the treasury curve. Again, you've just got a massive cushion. If you're too early on the trade or if the market moves against you a little bit, you've got a 13,14% yield to really cushion that fall. And oh, by the way, it's, I believe one of the top, if not the top performing fixed income ETF in 2023. So you haven't even needed that cushion. It's up something in the neighborhood of like 20% year to date total return. It's a really compelling story.

I don't think people often look at high yield closely enough. High yield bonds operate with actually less volatility than the S&P 500. I think there's this notion that high yield means risky. There's this perception that high yield equals scary. We're trying to dispel that, XCCC is giving you a really nice headstart with that 13, 14% yield. It's a really compelling story. And by the way, the single Bs and the Double Bs have great yields as well. I just think that the Triple C is a really compelling story in that yield search. And again, low cost, less ball than the US equity market. So it's not scary, and I think it's good. It's a good product for people to take a peak at.

Douglas Yones:

Paul, before we wrap up for investors, advisors, some of the platforms, they might be out there and saying, wow, I didn't really realize this. Precision based fixed income investing is here. It's available, it's available in ETFs at the New York Stock Exchange. How should they be engaging with you, with the broader Bondbloxx team?

Cole Feinberg:

Yeah, I appreciate that. I think, look, I'll share my email address right now. Anybody under the sun can email me. I'm happy to help. It's Cole.feinberg@bondbloxxetf.com. To your point, Doug, you can go to Bondbloxxetf.com and information at bondbloxxetf.com. There's all different ways to find us. But the best place, as you've alluded to a few times now, Doug, and appreciate it, is visit bomb bondbloxxetf.com. There's opportunity there to kind of reach out to our team inbox, our group inbox, and we're here to help, right? We want to see the entire ETF pie grow. We want to see the entire fixed income ETF pie grow. And all we ask is we get our fair share. We think what we're doing is pretty compelling, and I think it's important to clients to understand that, look, fixed income is in a different place than it was 5, 10, and 15 years ago.

And again, the Fed's monetary policy has been a big part of why things have changed. And I said it earlier, I'll say it again, income is back in fixed income. And we think here at Bondbloxx, we're on the cutting edge of bringing, again, fixed income solutions to the market that can be really additive for investors, risk managers, duration managers, portfolio managers of all kinds. So head on over bondbloxxetf.com ETFs or just Google bondbloxx. As you said, Doug, the ETF Central and the NYSE, you can obviously search us up there, and we're super excited to engage with anyone and everyone who wants to. We've got a really robust team. I think we have the largest dedicated fixed income ETF sales team in the world. And so we're here to help and we're excited to, don't hesitate to reach out.

Douglas Yones:

And by the way, folks, he means it. I mean, you go to Bondbloxxetf.com, there's even an 800 number listed right there for you to give a call and talk to the team. That is a wrap on this edition of ETF Centrals, the podcast. As a reminder, you can find this episode as well as many other episodes, you can see all of the thought leadership, ETF educational content that we're building here at the New York Stock Exchange. You can find it all free at etfcentral.com. You can use that free ETF screener that we talked about at etfcentral.com. And again, thank you to Cole for being here to share his insights. Stay tuned for upcoming episodes featuring thought leaders from across the ETF ecosystem. I'm Douglas Yones, head of exchange traded funds at the New York Stock Exchange, the home of ETFs.