In this episode, Douglas Yones, Head of Exchange Traded Products at the New York Stock Exchange, is joined by Bruce Saltzman, Head of ETF Capital Markets, Americas, State Street Global Advisors on this episode of ETF Central’s The Podcast to take a deep dive into ETF liquidity, the importance of relationships in the industry, and the SPDR ETF lineup.

Douglas and Bruce discuss:

• How Bruce got his start in the ETF industry
• The role of a Capital Markets team
• The importance of liquidity
• Relationships in the ETF ecosystem
• And more!

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.

Today I'm joined by my friend, Bruce Saltzman. Now, if you don't know Bruce, you should. Bruce is the Managing Director at State Street Global Advisors. He serves as the head of ETF Capital Markets for the SPDR business in the Americas. Now in this role, Bruce is responsible for defining and leading the strategic direction of the capital markets business in the US, Canada, Mexico, and if that's not enough, also across Latin America. More specifically, he and the team really seek to create an efficient and robust ETF ecosystem that helps promote and support ETF liquidity. We all love ETF liquidity, especially here at the exchange, and they do that in partnerships with the broker dealer community, market making community, obviously the exchanges, the regulatory community. Of course, in addition, someone like Bruce is going to be a member of the State Street Global Advisors and SPDR Senior leadership teams. Bruce, thank you so much for taking the time to be here with us today.

Bruce Saltzman:

Thank you very much, Doug, for having me. Enthusiastic, open, and a very generous opening there and an introduction, but thanks so much for having me. This is great.

Douglas Yones:

Yeah, listen, I love a good bio. I don't know who doesn't. There's nothing better, by the way, and you do this too, where sometimes you're speaking at an event and somebody just reads off your bio and you're like, one, did I do all those things? Two, please, calm it down just a little, just a little.

Bruce Saltzman:

Yeah, yeah, exactly. When did I write that, if I did? Yeah, exactly.

Douglas Yones:

Yeah, did legal really approve all this?

Bruce Saltzman:

This doesn't sound like exactly what I do, but.

Douglas Yones:

Yeah, yeah. Okay. Well, look, I want to get into it. I want to try and actually cover a whole bunch of topics because sometimes, Bruce, we stay too high up, and I'm hoping you'll take us down a bunch of levels for the ETF nerdlers like me out there that really love to dig deep. So we'll see how we go, but.

I want to start at the beginning. I want to talk about your role at State Street Global Advisors, and I want to talk about where you spend a lot of your time. I know you, because you're going to go quick, I don't want you to go quick here, and here's why I say that there's really important reason. I just looked at it, we launched roughly 60 brand new asset managers in ETF space last year. Out of those 60, I want to say probably 58 out of 60 said to us at some point in the conversation, how do we think about capital markets? How do we think about that role? How important is that role? By the way, we'll probably beat that number this year. I think every single one of those conversations we're back in there.

So for all of the listeners who probably really don't understand when we say the role of running capital markets, what it is people do. So when you talk about your day, if you could expand a little bit and explain all in, what are all the different functions that you and your team focus on each day?

Bruce Saltzman:

Sure. Yeah, no, absolutely. It's a question that we get often and happy to walk through. So I think if you look across the industry at any ETF issuer or asset manager, when you think about this function, it's really at its core, just a couple of things. The first is liquidity, ensuring that ETFs are liquid and active in the marketplace. As you know, Doug, there's a lot that goes into that, ensuring that our end clients, advisors are able to buy and sell those ETF shares throughout the trading day, 9:30 to 4:00 PM in an efficient manner. So that involves a fair amount of engagement with lead market makers. We need to make sure that each one of our products has what's called a lead market maker and an additional secondary as well. That involves a fair amount of engagement with authorized participants. So we need authorized participants that are able to transact in the primary markets on our funds, and that's what allows ETFs really to trade in line with net asset value.

We spend a lot of time on operational efficiencies. There's a lot that goes into the structure and the mechanics of an ETF at launch and even after launch as well as we look to optimize and improve. So operational enhancements with respect to the primary market, there's all sorts of dealing models. You can do in-kind, you can do cash, you can do actual cost method, there's variable fees, there's just a lot there. So ensuring that there is that liquidity of ETF shares, ensuring that our ETFs are able to trade effectively in the marketplace is a huge priority. That's what you'll find at most ETF issuers. They spend a lot of their time on that.

So the second is on the end client side. So advising end clients on execution. ETFs are exchange traded, and there's a lot of nuance associated with how to buy and sell in the secondary markets. So we spend a lot of time advising end clients on their execution strategies, impact analysis, active brokers, so on and so forth. So those are, I would say the core of what you would find at an ETF issuer, with respect to this function.

Now, I think from our perspective, SSGA is fortunate, in that we have a large business and it's a scaled business, and so that gives us an opportunity to do a little bit more. So we've got, I think our team now is, I believe we've got eight individuals, soon to be nine, and we spent a lot of our time there, but we're also doing a handful of other things.

We're spending a lot of time on new products, so new product innovation. The infrastructure around, how can we fit some of these new asset classes within the ETF wrapper and how is that ETF going to trade effectively in the marketplace, and who's going to be able to support? We spent a lot of time actually selling our ETFs into the broker dealers. So at the broker dealers, as you know, are some of the heaviest users of our products. So they'll use them as a hedging vehicle on their swap desks, they'll use them as a hedge against their central risk books. They use them for inventory management, they use them for as a reference asset, structured notes and structured products. So there's an element of selling as well. I think that lends itself to the product set that we have, which is very actively traded in the marketplace. When you think about spy and sectors and our industry products, etc.

We also do a lot on the distribution front. So we partner with the New York Stock Exchange and with the broker dealers on events, events with clients. We partner on a lot of thought leadership and webinars and podcasts. There's a lot of ETF research and sales and trading commentaries. We want to make sure that SPDR products are in those reports. So there's a fair amount of work there.

Then finally, just very quickly, is ETF advocacy and market structure. This is something that I think is nuanced. You generally find that a few ETF issuers are really spending a lot of time here. As you know, we've got someone at State Street Global Advisors that's really dedicated just to advocating for optimal equity market structure and the impact that that's going to have on ETF liquidity and investors. So we're spending a lot of time with industry groups like ICI and SIFMA. We're spending a lot of time with the exchanges, like the New York Stock Exchange. We spend a lot of time with the broker dealers and the regulators, advocating for some of that sort of change. So that's a little bit about what we do, but the core, again, I always go back to the core. The core is at any asset manager, ETF issuer is liquidity, ensuring that our products are actively traded in the marketplace and have that support for clients. Then the second is advising our clients on those execution strategies.

Douglas Yones:

Yeah, it's such an interesting role because listen, there's a lot of jobs, especially through finance where you classify like, oh, if you want to do this thing, you have to have these attributes. The capital markets role is one where it's very unique. You need to be super in depth, technologically capable from an investments guru where you've got to get all the way down to the nitty-gritty like you said, and really understand the mandate and why, and a lot of times you're helping build those mandates and you've got to understand investing in and out.

Then you have to be able to back up and say, but I also understand the global capital markets and how securities trade everywhere because we've got to build the underlying basket, like you said, primary market and start to think about, well, are there securities from India in there, because India is a different market and they trade their FX differently. Knowing the difference between the FX market in India versus South Korea versus a developed market. So you got to be this technical guru. Oh, and then by the way, like you said, you got to get into sales and distribution. So you have to be able to build relationships and you've got to build really strong foundations across the community. Oh, and then you need to be technically proficient in everything going on with the SEC and everything going on with the government and how these things might change because you want to be an influencer. Then at the end of the day, you also have to keep an eye right now every moment of the day, how are ETFs trading?

It's just a fascinating spot where for those that maybe are younger and coming up through the industry, and maybe this is where I want to take this question for you is, the career progression around this role is unique because you're not a pigeonholed spot and you're just growing and learning every which way. But I mean, you and I know each other a little bit, this isn't... What, you weren't in college going into saying, this is what I want to do. So take me back in time to little baby face Bruce Saltzman, he's rocking up at college the first day. Where did it all start and how did you end up doing this?

Bruce Saltzman:

Yeah, it's a great question because when I was in college, ETFs were barely an industry. I think when I was graduating from college in '06, ETFs had maybe 300 billion or 400 billion of assets under management and it was a relatively small market. This was not on my radar, and I was actually hoping to be a psychiatrist. That's what I really wanted to do. I was a psychology major and I was doing all the pre-med courses and I ended up obviously shifting gears, it was not for me.

I attended an information session. I don't know if those are still a thing nowadays, but back 18 years ago, 19 years ago, that was a way to get involved and understand what was out there in the marketplace. I attended an information session with an individual that was working at an offshoot of the old Spear, Leeds & Kellogg. You remember Spear Leads in Kellogg, I know you do, a very successful market making firm in the '80s and '90s. They ended up actually selling themselves to Goldman Sachs, I think in 1999, 1998, somewhere around there. The Kellogg family started their own business. So the information session was with an individual, an individual from that firm. That was my introduction into understanding the market making business and equities and options and a little bit about ETFs, and so that was the start.

I ended up, long story short, I ended up accepting an offer and I started in the industry in '06. I joined this firm, Kellogg Group, and I was a part of the rotation program. It was equities, equities on the New York Stock Exchange and the AMEX, the American Stock Exchange at the time. Options, there was merger arb, and then there was this little team with two people, and it was ETF trading.

Again, this was a very small industry, but I remember a conversation with an individual who at the time was responsible for running the ETF business, Dan Madden, who is an absolute legend in our industry. I remember he said to me, listen, this is going to be, in his opinion, this is the opportunity for me to get into an industry that's new and it's a little bit different and it's exciting. In his opinion, he thought this would be around for a long time. So I ended up, I joined the ETF team after the rotation and I started working on the floor, the American Stock Exchange. So, not what I was expecting at all. This was in the summer of '06, and obviously '07, '08, '09, it was just an incredible time in the marketplace. It really afforded me an opportunity to learn a lot in a very short period of time. The ETF industry was exploding.

I became an ETF specialist in '07 on the floor and ended up being a seed partner and a lead market maker and a specialist for a lot of ETFs that are still around, are still active in the marketplace from State Street Global Advisors, and from Invesco, and a lot of smaller firms like Advisor Shares, and EG shares, and Index IQ and so on and so forth. So certainly not what I was looking for originally, but landed in this industry and I'm very grateful for that opportunity

Douglas Yones:

Great advice from Mr. Dan Madden, still out there, still an ETF legend. He's head of global cap markets at Northern Trust, and I saw him yesterday. So Dan, if you're listening in, this is your invite to join the podcast, please send me an email and you're in.

So Bruce, I mean, you're there at the beginning because that really is the beginning. I mean, that's really when ETFs started to take off, so you watched that happen. I don't know, was there ever a moment where you said to yourself like, hey, maybe ETFs aren't where I'm headed, or, hey, maybe everything I'm seeing is like, I'm all in on ETFs? Was there any light bulb moment where you're like, this is it, I'm going to become Mr. ETF?

Bruce Saltzman:

Yeah, it's a good question, Doug. I think after '07, '08, when it was very clear that the ETF wrapper was used as a product to gain exposure and liquidity. I mean, we've seen these instances over the last handful of years and ETFs have been used as that exposure vehicle for transparency in the market. That was interesting. I don't think I recognized it at the time, but I would say right after the financial crisis, it felt like ETFs were solidified in some way in their use case. It felt like from there, that was a big turning point in the industry.

There was a point in my career where I felt that I wanted to be in ETFs but I wasn't exactly sure where. That was the transition that I made, which is now over 10 years ago, my 10-year anniversary at State Street Global Advisors was this week, but that was the transition and it just so happens that at the time I was working for Knight Capital Group, so Knight had acquired our ETF business from Kellogg, and I was on the institutional sales and trading desk at the time working for Reggie Brown and Eric Lichtenstein and Darren Taube. Unfortunately, I'm sure you remember Doug, the trading error, the software update error that occurred, and that led to some challenges for the firm. That was an opportunity to me to just reassess and what I wanted to... I realized that I thought ETFs were going to be around for a very long time, and a lot of the conversations we were having at the time with advisors and institutions, institutions were just getting started using ETFs. I just felt like I wanted to do something a little bit different, I wanted to broaden my knowledge base a little bit, and that was when I started to talk to some other firms and ETF issuers and eventually ended up landing at State Street Global Advise, and it's been a good run.

Douglas Yones:

When you look at an ETF, so here you are, you are the master of ETF liquidity, if you will. How important is that liquidity? I mean, obviously everybody wants a liquid vehicle, something that can trade in and out, but is the liquidity profile of an ETF, is that make or break? Is that the only way? Can a product idea be successful even if it's so liquid?

Bruce Saltzman:

Yeah, it's a great question and we get this all the time from advisors, especially. I think the short answer is no, and it does depend on the end client, it depends on how they want to use the product. As you know, there's various use cases for ETFs. So if you're an advisor, advisors, generally they care about expense ratios, they care about average daily volumes, they care about spread quality, amongst other things. So in that instance, liquidity is very important, especially when as an ETF issuer, we're looking to get our products added onto certain platforms so advisors are able to invest.

When you think about institutions, it depends. An institution may want to use the product as a way to equitize their cash, they may want to use it as a liquidity sleeve. In those instances, again, it is very important. I think we're fortunate at SSGA, in that we do have a very liquid suite of ETFs and the most liquid in the industry. That said, as you know, ETFs are as liquid, if not more so, than their individual securities. So even if an ETF is not actively traded in the secondary market, you can still access that liquidity by tapping into the liquidity of the individual securities through the primary market. So we spend a lot of time educating advisors on the various execution strategies they can use that allows them to achieve that execution quality that they're looking for.

Douglas Yones:

Yeah, it's so interesting because easy now, easy, it's easier in 2024 to look at some of the ETFs that have been out for the better part of two decades and say they're so liquid, but there was many, many years that a lot of those ETFs weren't actively traded every day with high ADV. Yet, as you mentioned, the underlying liquidity is there and there are steps that can be taken, sometimes it just involves a phone call, but there's plenty of liquidity underneath. It feels like that's a constant battle for our industry to say, hey, you can trade just about every single ETF, like you said, depends on your use case. Now, some use cases, people will need to move in and out very, very quickly on screen. They don't... Okay, that's one use case, but buy and hold investor, and we're seeing it I guess this year with actively managed ETFs, actively managed ETFs tend to trade a lot less daily volume, tends to be much more buy and hold or sell a position, chunky volume, if you will. Those ETFs trade just fine, they just trade a lot less and require a little bit of handholding and you're there. So it's such an interesting part of our industry, but you're focused on it in and out all day long.

Do you and the team have, I don't know, a set of best practices? When you get on the phone with an advisor and an institution, do you walk through, hey, here's some top tips on how you should think about trading ETFs?

Bruce Saltzman:

Yeah, absolutely. Again, it goes back to your point around it, it just depends on the end client, it depends on their objectives. When we think about ETFs that are more actively traded, there's a lot of options. You can execute using algos on screen, you can do a VWAP, a TWAP, you can use limit orders, you can execute on risk in nav markets. You can do almost anything that you need, but that said, as you know, many ETFs are not actively traded. I think 80% of the products listed in the US, they trade less than a few million dollars a day. So I go back to that point, ETFs are as liquid, if not more so, than their individual securities, you just need to figure out the best execution strategy.

So for lower ADV names, you just need to think about alternative execution strategies. You can execute on risk, a risk market. You can execute nav trades, you want to use a nav trade if you're looking to benchmark against the close. There's various options, but at the end of the day, if you're an advisor, generally speaking at a national broker dealer or wire house, an independent, you have an execution desk that's there to execute those orders and advise on that process. They're excellent, they know exactly what they're doing, and that's always a great resource for advisors and for institutions. So that's the first thing.

The second is, and I know we hear this a lot, but avoid the open and the close. Generally speaking, liquidity at the open and the close is just inferior to the middle part of the day, especially around the open. You have the open 9:30 to, I don't know, 9:45, when many of the individual securities within these ETFs are still opening sometimes. So as a liquidity provider, it's easier for them to make those markets and ETF shares when they know the actual value of the individual securities within the portfolio, and they're able to hedge as well. So avoiding the open and the close is always important.

The other thing is we talk a lot about, if at all possible, it's not always the case, but executing when the underlying securities are open. So you think about an international equity, ETF, let's say European underlying securities. Those European underlying securities are going to be open until 11 or 11:30, New York time. So ideally speaking, you're going to be trading that ETF in the morning as again, those securities are open. That liquidity provider is able to make a market and understand exactly what the value of those securities is at that time, able to hedge their risk. If not, if you're trading in the afternoon, it just means that that liquidity provider is going to have to manage that risk for an additional day. They're going to have to hedge themselves with, as opposed to the individual securities, maybe they hedge with an index future or another ETF or AVRs that are highly correlated. So if at all possible, we like to guide our end clients on executing again when those individual securities are going to be open.

Then finally, I mentioned this earlier, but using advisor execution desks, they do an outstanding job and then if not, leveraging the ETF issuer. ETF capital markets teams, we have a fair amount of resourcing. We generally offer an analytics package that does a nice job just outlining the various execution strategies and impact analysis, so pre-trade tools, so on and so forth. So, certainly leverage us as a capital markets team and others around the street for those things as well.

Douglas Yones:

Yeah. I want to pull a bit of an aside here because you bring up such a great point, Bruce, which is, traditionally with ETFs, roughly speaking, there's a little over 3,430 ETFs right now as we're recording this in the US. The majority of those, all except 22 of those ETFs are listed in trade in the electronic markets. So the New York Stock Exchange, that's NYSE Arca, and then our counterparts have electronic markets. The thing that's interesting is that historically for all ETFs that have been in the electronic markets, we've all done the same thing. In fact, I personally wrote articles in previous roles, exactly what Bruce said, don't trade the open, stay away from the auction. You need to worry about these things. It stems from market structure, right? We're asking market makers and liquidity providers to basically put quotes up on over 3,400 ETFs at 9:30:00 eastern time, and they have to trade with as much liquidity as they possibly can across all those securities, and they're doing it a little bit blind. So they're going into an electronic auction that's a computer talking to a computer, and they have to try and establish what their fair value, their price for that ETF is. They have to somewhat guess about how much volume might be there. It's why my team a few years ago really pushed and ultimately got approval from the SEC to list ETFs directly on the NYSE floor. The NYSE floor goes back in time to your days of the American Stock Exchange, where you have people and you have the designated market maker model, DMM, it's effectively like the specialist was like you were on the American Stock Exchange. What's different there is they can see the order book and they can control the auction and they can do it visually with a lot less risk.

So it's been fascinating for us when you get digging into the details here, we measure the impact of an ETF leaving the electronic market and going to a human market, the floor, and we can see it spreads cut roughly in half, size of the insight goes up, but more importantly, the auctions, the auction slippage, the measurement of where an ETF trades versus this NAV, goes down about 80%. It's just fascinating how when we slow things down and add a person, look, it's old school, it's taken it back in time, but it's not for all ETFs, it isn't, but the reality is, it's been amazing in the last 12 months that this program's been out, the impact we can have on ETFs. It's why if you're listening in and you're like, why does Doug keep talking about the floor? That's why, because it can solve a problem for some, not all, but for some ETFs, it can solve a problem. For some advisors, not all it can solve a problem. It just gets me excited. It's super nerdy, it's super geeky about market structure, but it's fascinating.

Bruce Saltzman:

Yeah, but it's a great idea, Doug. I mean, this is something that, I know we talked about this. We're exploring. Even us as a larger ETF issuer, where we generally feel like we've got the liquidity and the support that we need from the street. There's still so many of our products that could certainly benefit from these sort of programs. So this is something we're definitely looking at on our end, either for ETFs that are less actively traded or new products that we're going to be launching over the course of the year.

Douglas Yones:

Let's talk Bruce, about some of the partnerships. You brought it up a few times, the broker dealer community. How important is it that your team's spending time there? Do you need strong relationships there? How do you start to think about those partnerships across the industry?

Bruce Saltzman:

Yeah, it's a good question. We spend a lot of our time managing the relationships that we have and ensuring that they're strong partnerships, not just with the exchanges like the New York Stock Exchange, also the broker dealers and the market makers. I mentioned this earlier, the broker dealers are just, they're so critical. We use them in so many different ways and they support the ETF ecosystem in so many different ways.

We start with just market making. So liquidity of ETF shares in the marketplace, on exchange, off exchange. Then the ecosystem around it, there's securities lending, there's options, there's a lot. There's a lot there and it's not just an ETF market making desk or an equity trade anymore, it's on fixed income as well. These broker dealers are also authorized participants. Either they're an AP acting on their own behalf or they're an authorized participant acting on behalf of other very active ETF market making firms, some of the biggest in the world, and they're incredibly important. They're extending balance sheet. They're able to access the markets that some of the liquidity providers are not able to access, international markets especially. So the function that they serve is just incredibly important.

I always go back to balance sheet, the extension of that balance sheet. Now, seeing the growth in our industry every week it feels like there's a new itch issuer, a new product, that balance sheet and that resourcing and just the capabilities of the broker dealers around the street, it is finite. So we need to be very thoughtful about how we approach the brokers, the things that we need, the things that we ask for. How can we manage it on the backend? So liquidity provision, APs, new product innovation, they're supporting on new product, whether it's seed capital or just making sure that there's liquidity in a new market.

I mentioned this earlier, sales and distribution, they're doing a lot there, whether it's ETF research or events and conferences, to get the word out on ETFs and educate end clients. They're also some of the biggest users of these. Then the rebalancing. A day like today, so triple witching, expiration, there's rebalancing. The broker dealers are the counterparty here to asset managers that are rebalancing our portfolios. We're talking about significant size, not just in SSGA products, but across the industry. So they just play such an important role.

On the State Street side, we've got now three, soon to be four members of our team just dedicated here to managing these relationships in a holistic way, making sure we're aligning on our priorities, the needs of our business, the needs of theirs, and it's a great partnership, but it's just incredibly important.

Douglas Yones:

Bruce, when you look across the state street lineup, so I liken this to, it's the weekend, you rock up at your friend's barbecue, you start chatting with someone, oh, what do you do? Over, I'm at State Street Global Advisors and oh, I invest in ETFs, because most people do at this point. They're like, well, I know the big guys. Everyone knows SPY, not that I don't want to talk about SPY, we all love SPY. They know the sectors, I mean, they're the most heavily traded sectors, I'm pretty sure, and have been since the beginning, but you guys have a lot more ETFs than that. When you end up in a conversation like that, how do you describe the lineup of SSGA ETFs?

Bruce Saltzman:

Yeah, so I generally stick with, we, just like other ETF issuers as well, not all but many, or a few subset or a subset of a larger ones, we've got a little bit of everything and that's what our clients need. We want to go into an advisor or an institution and depending on their need, we want to make sure that we have it. So as you said, we've got our flagship ETFs, like SPY and Sectors and GLD and MDY and DIA, our industry products, JNK, so on and so forth. We lead there with liquidity. So whether you're an institution looking to use these products daily, in and out, exposure, hedging, whether you're looking for ETF options, whether you're an advisor that's just looking for liquidity and it just depends on your execution strategy, we've got that offering and that's the flagship.

Then we have the, so what we call, and this is something that we launched a handful of years ago, our low cost offering. You've seen this, Doug, flows into lower cost ETFs. I think over the last few years, over 50% or even higher are really going into these low cost ETFs. So we've got, now, I think we have 23 low cost ETFs that with an average expense ratio of in the single digits, anywhere from two basis points, which is our S&P 500 SPLG, upwards to nine or 10 basis points, so in the signal digits. That's really used by end clients as a buy and hold, a core investment. Then we've got-

Douglas Yones:

Am I allowed to interrupt you? I know it's inappropriate.

Bruce Saltzman:

Yeah, please, do, please.

Douglas Yones:

I want to interrupt you for a second because this is like, I'm going to get onto my little soapbox here about how ETFs can change the world. We all know that everyone's under-invested, everyone is under-invested. We look at the average American and how much money they have saved, and this is where I preach to my kids. I'm just going ti, I wanted to pause because you brought up SPLG and the fact that I don't know if it's the absolute lowest, it's got to be, if not the lowest, one of the lowest. It's two basis points, two basis points, and you can own all the securities in the S&P 500. If you take a step back, roughly trading right now around $60 a share. This is where even with my teenagers, I have the conversation at home where I say it is now, we live in a world, they live in a world, we can open up a brokerage account for free. We can trade without paying any commissions.

When my daughter started babysitting and she would come home and say, "Look how much money I made," we could turn around and say, "Okay, you give me the cash, I'll Venmo to your brokerage account," and she can invest if she chose, SPLG for $60 a share back when she started investing, it was even less because obviously the S&P has done very well, maybe it's time to split the stock, split the ETF

But for two basis points at $60 a clip, somebody can literally change their life, change their future. I bumped into the Bob Pisani at the Exchange the other day, and he started talking to me about people need to get rich slow, and they get rich slow by doing these little investments. The work you and team are doing, and you brought it up to mind because you brought up SPLG, but the work that's going on at SSGA, I mean, if people take that opportunity in front of them, they can, they can change their lives, their kids' lives, because you don't need tens of thousands of dollars to invest. You can literally be investing in this case for $60 a time right into the S&P 500 and being charged almost zero. I mean, you're talking about two basis points. It's effectively almost paying nothing to have all your investments managed in the S&P 500.

Bruce Saltzman:

Yeah, and this spans across all asset classes too. I mean, SPLG is S&P 500, which is plain vanilla, but you can do the same, slightly higher, but not much in emerging markets. You can do the same in high yield, high yield bonds, investment grade bonds, treasuries. I mean, this spans across all asset classes. So, you're absolutely right. When I look at my kids and their 529s and our own investment accounts, these are the types of products that we're holding because you're absolutely right, it's very cheap and you can get the exposure that you want.

Douglas Yones:

Yeah, and it doesn't have to be hard. I mean, you've got an instant diversification in a single trade. I truly believe if we can get the word out together, all of us, the community, we really can change lives and a multitude of lives because that's what it comes down to is just investing. I think when I came out of college when I was growing up, you couldn't get into ETFs, weren't really there. Brokerage account commissions were really expensive. You needed minimums 3,000, 5,000, 10,000 and the ETFs just don't have any of that. When you look at your lineup though, so we mentioned a couple of ETFs in there, but Bruce, do you have any favorites? Do you have, I don't know, certain ones right now that you look at and you're like, these are really cool ETFs?

Bruce Saltzman:

So I'm supposed to shy away from specific ETF tickers according to my compliance, and I'm going to try to. I'm doing my best here, but maybe I'll just say, and I think these should speak for themselves because there's only a few, but our active suite. We have a handful of actively managed ETFs, some of which are managed in-house at SSGA, but many are managed externally. So the philosophy we have is, if we don't have the expertise in-house, then let's look externally for partners. So we've got a suite of ETFs with sub-advisors like Blackstone and Nuveen and DoubleLine and Loomis. Some of these products are really, really cool, they're innovative. Most of the time when you're thinking about advisors, they don't have access to these strategies in another wrapper. So it's always exciting for us as we're launching new products with a manager that many of these firms might not have access to, certainly not in an ETF wrapper, and it makes the sale that much more fun and that much more interesting as well, for advisors and for clients.

Douglas Yones:

Yeah, I mean, it is. For example, you've got this SPDR double line, short duration, total return, tactical ETF for those that are looking at it, the symbols. I hope it's okay I'm saying it, but I'm telling people what it is.

It's STOT, but that's a perfect example of, it's trading around $47 a share right now. When in history could my 19-year-old wake up in the morning and say, hey, I'd love access to the double line asset management team to manage my money and use all their capabilities and research in short duration bonds, and I have pure access free, no commissions, and it's costing 47. I can buy one share of ETF and I get the total fund. This is what, when people are like, why do you love ETFs so much? This is the exact example.

Bruce Saltzman:

Yeah, no, agreed, agreed. It really is neat, and we're excited to launch some more of these products hopefully in the near future.

Douglas Yones:

Okay, so let's stay on the advisor level because obviously you're not just building ETFs for my children, I recognize that, even though I appreciate it. You work a lot with the advisor community, you talk to institutions. I'm curious because we spend a lot of time on education and we focus a lot on that on my team trying to build ETF education. What do you look at out there and say, hey, these are some real opportunities? Are there like focus spots for you in the team and SSGA? Where do you lean in on with education with advisors?

Bruce Saltzman:

Yeah, it feels like there's a few things here. I won't spend any more time on the first one just because I think we already hit on this, but active ETFs, everybody wants to talk about it. I think somebody sent me a stat the other day that 75% of new launches over the last couple of years were active, something like that.

Douglas Yones:

Yeah, and this year, 77% right now. I'll give you another one, which is over a third of all cash flow, the net cashflow going into ETFs this year is all going into active ETFs.

Bruce Saltzman:

It's exciting, it's exciting. Advisors want to talk about it, and the education around those products is very different than it is for others. So we still feel that education, actively managed ETFs is really, really important, so we're spending time there. We still spend a lot of time with advisors on just portfolio construction and where do our ETFs fit into their broader asset allocation? It all depends on the outcomes that advisors are looking to achieve. Are they're looking for income, diversification? Whatever it may be.

Model portfolios, this is a huge growth area of our industry, of course, stating the obvious, but educating on the offering and how, again, these models may even fit into broader asset allocation portfolios. Now more than ever, the customization of those models is really important, so we spend a fair amount of time there.

Then finally, just the various nuances to our ETFs and our competitors. There are, as you mentioned, there's 3,300 and what was it, 30 ETFs?

Douglas Yones:

Let's just keep going. Yeah, we launched some today.

Bruce Saltzman:

There are so many. You could look at a list of say, high dividend ETFs or dividend ETFs. They are all incredibly different. Their benchmarks are different, their waiting methodologies, the rebalancing schedules, whatever it may be. So we still spend a lot of time educating on the nuances of our products in the marketplace.

Douglas Yones:

By the way, if you haven't been to the State Street's website, it's phenomenal. You can go to ssga.com, there's actually a number of different tabs, but you can look under the insights tab in particular, a lot of education there. There's some investment capabilities tab you can go through. For free, they offer you ETF model portfolios. I mean, the website is extensive. You could spend days on here, but really educate yourself. I mean, I bring it up all the time, it's all about education. If you're an investor, an advisor, you're an institution, all information about ETFs is there. It's there for the taking, and it's there for free. If you want, you can become certified. You can get a FINRA designation, the CETF, it's available at etfcentral.com.

Bruce, aside from the website, which I think is really important, so again, ssga.com. Are there certain ways that like institutions, that large advisors when they're talking to you and your team, how should they be engaging?

Bruce Saltzman:

Yeah, I mean, outside of the website, and as you said, the website has a landing page with resourcing, and there's all sorts of contact information on that. Ideally speaking, you probably have a sales representative, and so that's probably the best way to go about it, is engaging with your sales representative. If you don't have one, ssga.com is the right place.

Douglas Yones:

Got it. Bruce, thank you so much for taking the time. That is a wrap on this edition of ETF Central's podcast. As a reminder, you can find this episode, as well as many other episodes. You can find all of the educational content we talked about and use that free ETF screener at our website, etfcentral.com. I want to thank Bruce again to be here for so much time, sharing his insights, getting a little nerdy with me, but I think it was well worth it. Please 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.