Etf instead. We drill down into homes. Love them or hate them, etfs are here to stay. Flows into etfs signal a broader shift. Eric is here to talk about what he sees. Eric we have been talking about the great summer we have been having. You can forget that. They saw 25 billion in the past week. That is a monster amount. We have seen a couple of bad days. A lot of the money that came in, we said it was trading crowd money. That is very fickle money. 13 billion out of spite. And that will be the second workweek that holds up on record. A lot of this liquid stuff. This is retail. A lot of it is the etfs an institution would use in place of futures. Lets see if anything is doing well. Two things stick out. You have some of the retail money hanging tough. Ivv and vu taking in money. It takes a lot to spook them. You have a little bit of hedging. Usmp, a huge year. Gold has been slowly building up a mass of flows. Lets look at gold with summer. You can see how much money has been coming into gold since the end of may. This would total 5 billion. People who are coming in here are really happy. Gold has had a good run recently. I mean, it is just a week. What a difference this will make. Next week should be interesting. Scarlet we will touch on gold a little later. Lets bring in jay baker. Also with us is justina vasquez. What are you seeing on your end . How does this setback compare to selloffs we saw in may and december . Jay this has been somewhat of a violent setback. I have owned equities for 30 years. I have never gotten out. The market has been going straight up. Usually what happens is there will be some event nobody can predict. Devaluation will occur. That affects the market. It has gone down a fair amount. From my standpoint, probably a buying opportunity here. I am unconcerned about it. Just like with these other issues in the past. Scarlet we do see gold moving higher. I want to bring you into the conversation. Investors buying gold to seek refuge from a number of concerns. Trade wars and flowing yield. Retail investors have been buying gold etfs. Justina they have. The main thing we have seen is it has taken a while for some of these Retail Investors to get in. Last week, Blackrock Gold etf hit a holdings high. That is an example of the retailers starting to trickle into the gold rally that has been going on. Scarlet perhaps set to continue with Goldman Sachs seeing gold adding to 1600 an ounce. Eric your best seller is aaau, a gold etf. This one is a new school. It is cheap. It has some of the bells and whistles. It will deliver gold to your house. It is backed by the Australian Government for the extra paranoid. Do the bells and whistles matter . Jay the low fee is great. It is 18 basis points. You have the Australian Government backing the product. It is backing the gold in the etf. That makes a difference. If you think about it, there are a couple of large commercial banks that are the custodians for all of the rest of the gold product in new york and in london. The gold for perth is underneath the ground in perth. Whether you own enough shares to buy one ounce of gold or you could own 500,000 shares of aaau, you could turn your shares in to the perth mint, and they will send you back the gold. Scarlet you guys launched august 15. How many people have redeemed their shares . Jay it is not a lot. I would say five or six different people have done that. We are getting the word out. People have called about it. They are interested in the ability to be able to do that. It is very unique. Scarlet for a younger generation, a lot of people see bitcoin as an attorney to have. Alternative. That really confuses me. Bitcoin is notoriously volatile. How can that be seen as an alternative in volatile time . Justina from what i have heard, it seems like folks are tracking the performance as the market gets riskier. Folks decide bitcoin is this thing that has safe haven characteristics similar to gold. Younger folks who are more interested in riskier assets decide, for now, bitcoin is a fair choice. I have talked to other folks who have said that despite it being a fair choice, there may be some capitulation with the worth that was used from bitcoin assets to more something safe gold. Eric you guys brought this gigantic gold coin from australia to the exchange. Can you talk about how that helped get attention going . Jay the perth mint in 2012 i cast the gold coin. It weighs a ton. It is 31. 5 inches in diameter. It is five inches wide. It weighs a couple thousand pounds. They brought that to the New York Stock Exchange for a bellringing. People say, why did they do it . They have that on display year round. They have it on display at perth mint year round. It is people have taken tremendous interest in it. It is branding, marketing. A wonderful thing for them to do to bring it to the united states. That was the first time it had been in the united states. Scarlet it is quite a marketing tool. Eric lets go back. Speaking of marketing, you are one of the Founding Fathers of the etf industry. You with met you are with amex in the early 1990s. It started to flop. It traded 17,000 shares a day. You were tasked with marketing. This is the original marketing document. How did you get it going . How did you save it in a way . Jay in 1993, the spider started off a little bit slowly. The floor traders were concerned about this. The management at the amex were concerned. We were pulled into the office and said, i want you guys to work for the next six months on spider. I want 100 million on the spider trust within six months. We went to all of the brokerdealers. A lot of them shrugged their shoulders. One of them in particular were interested in it. We had several conversations and they ended up creating to loan it out to charts. They hedged it out. The owner the spider. They were short the future. They had it loaned out for several months. That helped jump started. State street took over later. They did a great job. That was one of the things that started putting the snowball down the hill. Scarlet that is a wonderful anecdote of etf history. Thank you so much. Jay baker of Exchange Traded concepts. Thanks to bloombergs justina vasquez. Coming up, ronnee ades is joining us. Her students competed to build a new passive product. Who won what. And one etf that caught our attention. Better known at eem. About a third of its holdings are into chinese equities. That was the largest outflow since june 2018. This is etf iq. Scarlet this is etf iq. Lets get to the etf lifecycle. We run you through the three main stages of etf. Step one is the filing. First trust registers a suite of actively managed sector funds. These will use a quantitative methodology with an active Risk Management overlay. Will be multifactor funds using quality and volatility in constructing their portfolios. Step two is the launch. The iq altra short making its debut ultr will focus on the ultrashort aggregate bond universe. This marks the eighth listed etf focusing on shortterm debt. The final stage is liquidation. Sometimes a funds focus can be too narrow. Investing in asia and equity seeking low volatility names while seeking exposures as the index. Lets get passive aggressive. We track the tensions between active and passive investing. We are looking at how Business School students are actively learning how to build passive product. I want to welcome ronnee ades. She has professor of professorial practice who teaches and indexing class at rutgers Business School. And one of her students, ryan smith. Great to have you guys. Let me start with you. Part of your class requirement is a semester long project where students create an index that can be made into an etf. That is a competition as well. Tell us how it works. Ronnee what it is meant and designed to do is take the students from theory to practice. It takes them through the project requires them to come up with an investment objective. That takes weeks. By the way, they are put on teams. They did not get to pick their teams. They have to come up with an investment objective. They have to get the data, which for most researchers, 80 of their work is to get the data and prepare the data. Then they build the models. They test it and tweak the methodology. Then they have to put together a pitch to industry veterans as if they are selling it to an underlying etf. Scarlet who is determining whether this is a hit or miss idea . Ronnee for the most part, i am the biggest judge. I do bring in a panel of industry veterans i have worked with over the years and understand the rigor of having to create an index first and one that meets the rules and regulations of the sec and all it takes to underlie an etf. They are judging them on all of that. The investment objective, the methodology, the implementation, and their ability to sell it. Understanding that these things are also marketed to a larger extent. Scarlet no wonder it is a semester long project. Let me bring in ryan smith. You are one of four members on a team. Your idea was a millennial fitness lifestyle index. Explain why you came up with this idea. Ryan people are starting to embrace having an active lifestyle. They are starting to improve their quality of life actively instead of passively, waiting later in life to resort to medicinal means to prolong their life. So, with rapidly Rising Health care costs, consumer behaviors changing, we wanted to make an index that is not like Traditional Health care indexes and aim it toward millennials. Scarlet you have called it grit. We see some of the holdings including oxford industries, garmin. Talk about some of the human choices that go into designing the index. Ryan we wanted to make our etf at different sorry, our index different from other indexes. We wanted to make it simple yet robust using a multifactor sequential modeling technique where we would layer in the individual factors. Momentum was used to rank 50 constituents in the index. We would use Something Different for the weighting. We would take the universe of the volatility of the index. We put it into a low volatility factor of the index. Scarlet professor, talk about a little bit of some of the other ideas. What was second and third place . Ronnee they were good. The second place strategy was more of an active strategy. It was a dynamic option strategy where they would write options for generating income. It was designed to underline an etn but not an etf. Accepted it because i liked the quant side. The third place was also very interesting. It was called fund. It was primarily a cannabis play, which is a really big topic. Scarlet getting a little bit crowded. Do have former students in the etf industry . Ronnee the end up at banks. Theyre working on equity market desks. One of the nice comments we got from a student. I got a student working at normal aura. She knew everything about china ashares. A lot of people dont learn that in school. This class teaches every aspect of index creation long before it hits and etf. Those things are used by banks and hedge funds. We have students working at market data vendors. We have students working at exchanges. They really get to participate in the whole spectrum of the ecosystem of etfs and indexes. Scarlet a lot of application. Thank you so much. Both of rutgers Business School. Coming up, we dig into one etf seeking to give shelter. This is bloomberg. Scarlet im scarlet fu. This is bloombergs etf iq. For every etf that offers exposure to a theme, it is not long before others follow suit. You have funds that target homebuilders and investment trust. But joya Capital Real Estate recognized there was nothing i that combined them all into one fun. Alex pettee is here. Before we talk to him, eric is going to give us a drill down into the housing etf. Eric it combines two things that are not normally combined. It looks to capture the u. S. Residential housing industry. Assuming most etfs are tracking homebuilders or reads. This one puts them together. It is a very small 5 million. Although very new. Kind of a niche play. Lets look at the holdings. You will see it has a little of all three of the element. Home depot, homebuilders in here as well as some reits. Now lets look at it compared to vnq. Vnq is the big dog at 34 billion. Look at the big difference reits, 35 . That is going to give bnq more yield and more rate risk. It is going to affect the returns. It is going to move a lot more with other sectors. This one is just real estate. They are trying to solve a problem in the market. It will probably depend on performance whether this starts to get some looks. Scarlet as it always does. Still with us is alex pettee from joya at does this fit into someones portfolio . Alex there are currently read to etfs, which are exclusively on the renter side. Then there are the builder on the ownership, singlefamily side. It is the first true housing etf that combines the housing side and the ownership side. It is important when you consider the fact that the Housing Market is the largest asset class in the world. It is especially relevant when were talking that the economic themes of the housing shortage. We have not been building enough homes in this country over the last decade. Meanwhile, this is coming in front of the biggest graphic biggest demographic wave entering the u. S. Housing market during the 2020s. You are seeing this persistent housing inflation showing up in higher rents and higher home values. The typical investor in the S P Index Fund is only about 5 in real estate. The average american is spending about 30 to 40 of their incomes toward housing. This is a huge asset liability mismatch. Renters especially are getting crushed on the liability side with higher rents and higher home values. This was designed to be that hedge to give them the offsetting exposure so you are at least in on the asset side the rental operators. The companies that are benefiting from these overall housing shortage trends. Scarlet perhaps where people cannot afford to buy a home, this is their way of having the exposure to the asset class not having to lay out the money. Eric i think it is xhb, the spider one, which adds in whirlpool and home depot. How do you square those two . How much is this adding beta into something that is more unique . Alex from a macro housing perspective, it is designed to be agnostic to owner versus renter. It is designed to capture total spending on housing and housing related services. In a homebuilder etf, youre making this levered that on the singlefamily market. On the rental side, you are doing the inverse exposure. What is missed is that the Housing Market is way more than the singlefamily builders. What is missed in the whole discussion is that last year was the best year for total household or nation growth since the 1980s. We are already at the highest levels in individuals living with parents, individuals living with a roommate. There is this huge deferred household formation. If there was just enough housing, there is all this built up demand that could enter the Housing Market during the 20 20s. Scarlet it is certainly an etf for our times. Take you so much. When you look at the overall market, Health Care May be a laggard, but one etf is bucking the trend by focusing on companies that will shape the future. Check out this weeks there is an etf for that. The revolution etf targets companies in the genomics industry. The intersection of health care and technology. That is why bio firms make up a majority of the fund. Ark g, produce or hold advancements. Among the roughly 40 holdings, names for alumina and bristolmyers squibb. The Global Industry is estimated to be worth more than 15 billion. It is forecast to grow more than a. 5 annually between now and 2025. That potential is reflected in the performance. It has been a standout since wanting five years ago. Easily outpacing the s p 500. With 430 million in assets, it has an Expense Ratio of 75 basis points. It gets a green light the Bloomberg Intelligence traffic light system. With a notice for its actively managed status. This is one of kathy woods funds. She has really helped lead the way in new ideas. Eric this is one of many now. She led the way and it has attracted some of the big dogs. Blackrock and goldberg are into some of the same team. Scarlet be sure to catch us next wednesday. This is bloomberg. Alix commodities crushed. Iron ore takes. Tanks. Farmers hurt by trade again. China stops buying u. S. Soybeans. President trump promises more federal aid. Diamonds are forever, now trade them. We speak about blockchain to gems. Precious i am alix steel and welcome to bloomberg commodities edge, 30 minutes