Mike Venuto

And we do everything from that boring compliance work to fun active management, as well as creative

We have Dan on the Bitcoin Mining Council. We speak to Saylor all the time, Novogratz's crew, all the miners. So it's very much an understanding of the ecosystem, right? You can talk to all the blockchain companies you want. They're all going to tell you their story. But really, where you get into the weeds and get to know things in that ecosystem is by asking about the supply chain and who they're buying chips from and who they're storing with and all that. So Block is having an extremely good year. Not a surprise, considering the underlying commodity of Bitcoin has had a pretty good year as well. So, we're up north of 25% as of this recording, which is, I would say, a pretty good year.

Nancy and Cruz are very different. We're not meeting with management. We're not making a call on the business. What we're doing is we have a research agreement with Unusual Whales. And the partner in that is this company called Subversive, who set up everything originally, and then they brought us in to actively manage it. When they were managing it in the previous iteration, it was extremely, extremely diversified. One fund had Nancy had 700 stocks plus. And Cruz was like 400 plus. When we took over Dan and I as managers, we decided to work with Oscar over at Unusual Whales, really partial through the data and really hone in on patterns that are true signals.

What I think, if you just take the data and look at everything they own, well, some of these people hire, I don't know, parametrics to do direct indexing for them. They don't really care about those three shares of Estee Lauder. They don't really have any insight, but it gets thrown into the mix. So we've really tried to consolidate down into names where we see a pattern of multiple people buying or somebody on a specific committee that might have some information. But for those who don't know, these two funds basically take the Stock Act, which requires that congressional members disclose what they've purchased. The irony is congressional members are allowed to make investments in things where they would otherwise call inside information, right?

So the whole idea is if you come to us, we can help you launch, grow and operate. And you've been through this, Brad. Pretty much everybody else stops at launch, right? And you kind of have to pull operate out of them and forget about asking them to help with growing, right? So the concept of the ETF Masters is to convey that we've got the experience to help you not make the mistakes that we did in the past.

We have people who will check your ads before they go to your distributor so that you don't get stuck at the distributor for three days. Like everything done here is to make the life of an issuer so simple that their job is to manage their portfolio, unless they've hired me or Dan to do it, and get their message out. Other than that, they shouldn't have to deal with anything. So that's really what makes it different. And you've been through this. A lot of us know how hard the ETF TerraDome, as Eric Paltunas likes to call it. It's hard, right? So removing all the other barriers and headaches and then honing in on the most important part, right?

So I mentioned we've got a lower close ratio than the overall industry, and that's because we don't just launch anything, right? If you come to me and say, I've got an idea to do the 27th, I don't know, cybersecurity ETF. I want to charge twice as much as the others. I want to be passive. And my niche is, well, I don't have one, but I'm willing to write you a check for 200 grand to do it. Sorry, the answer is still no. We want product that's going to succeed. I want to keep that three-year number in that 200 plus. That's success. That's what we look for. So we're a platform that actually has a product development arm where we literally work with our clients to take concepts to the end and make them into things that are actually doable.

That's how YieldMax that I mentioned earlier came about. That's how some of the new things we've been doing with Defiance have come about. Recently, we onboarded Cambria and Meb, and then we brought him a partnership with Jerry Parker to help him launch MFoot, the new Managed Futures Fund. So everything we do is collaborative to get the product right because that's the most important thing to the growth. And then once you got the product right, then we have all these amazing tools. We have Claire and this marketing team that can provide all these ways to help grow the fund. And it's the kind of place where I wake up every day and excited to be here. Yeah.

And not only are they active, they're complex. And complex means, like we said, Jerry Parker or YieldMax or Corey Hofstein with ReturnStack. They're using things like options, derivatives, leverage. Sylvia just had to hit with the leverage micro strategy. And they have leverage Eli Lilly, all these things. All of those things require a program called 18F4. Okay. That's the derivatives rule. You have to have a VAR team. It's complex, requires expensive software. It requires high-end people who can explain it and report it on a daily basis. Do you want to do any product like that in your own trust? Add a whole bunch more expense. Right? Like just pile it on.

Right? Then you got trustees. Right? And you've got to have these meetings and you've got to pay all these lawyers. So, yes. Of course, we'll have to edit that out. That's fine. You got all the expenses there. Right? What we do that takes it an extra notch is we smooth all the bills out. Right? So, the title clients are on accrual accounting, meaning there are surprises every year that we can actually anticipate. Printing or an audit, the annual audits, the fees can go up and down like this every month.

And, I had a fund at another white label one time. Good people, no complaints. But one month, my bill would be $12,000 and the next month it would be $35,000. I don't want my clients living with that. I don't want them even ever paying me a bill. I want them to have funds that are breakeven. Right? That's when we try and get the product right. But if there's small expenses, we smooth them out and accrue for them. So, we want to make this so smooth that the only stress you have is how do I get more people to hear about my fund? Yeah. Oh, you go on Brad's show and tell your story. Yeah. Yeah.

I believe you did you launch like 32 funds last year.

But that trend of I can't not have an ETF if I'm in asset management has now hit the larger level of institutions. Second trend we're seeing is clients that have had a successful single idea with us are now branching it out into a family. So, they're going from product to business. Great examples of that, Corey Hofstein and Resolve with the Return Stack family. Meb expanding, Meb at Cambria expanding the shareholder yield family. Yield Max every day we're launching a new Yield Max fund and, going to different places. My sleeper hit that, I feel like I always have to give them love because it was one of my first clients and everybody.

It's like the greatest success story nobody's ever heard of. So, there's this Sharia compliant RIA that we work with called SP Funds, our Sharia portfolios. When we met them, they had $80 million. They now have four ETFs with us and then they have mutual funds as well and like $750 million in Sukuk bonds and REITs. It's just under four years. It's amazing. But that's the suite. They just keep building on it, making more components so that people who want to build Sharia compliant portfolios have all the pieces. I love that trend of clients going from product to business. And then the third one is conversions.

We're talking to a lot of people who have a good idea. They've been managing it as an SMA, an LP, or a mutual fund. And they want to convert it to the best vehicle out there, right? We don't get guarantees in the world of finance, but I can guarantee, and I can say this, the SEC can come bat me on the head if they want to. But I can guarantee that if you're a taxable investor and you're choosing between the same strategy in a mutual fund versus an ETF, 99% or 94% of the time you're going to be way more tax efficient in the ETF. That's tax alpha. Yeah, of course.

Like it does seem like there's this appetite for even more tax-advantaged strategies than just traditional ETFs. Haven't seen anybody else do anything quite like it yet. I'm sure there'll be iterations. I do think there's some opportunities there that could be a huge megatrend because it certainly seems like taxes are going up. I do think you're going to see way more options, derivative, futures-based. that fund that you talked to Jerry Parker about, that couldn't have been done four years ago. No. The rules change. The regulations have opened the doors. And I think anything that's truly liquid in a mutual fund wrapper today is going to be in an ETF wrapper.

I don't know that private credit is truly liquid. I know everybody just filed for that. We'll see. It's funny what a future proof there was like 25 ETF issuers and like five or 10 mutual fund shops. But every one of those mutual fund shops had a private credit fund, which just smells like bubble to me. Yes.

But, who am I to say? We have done one mutual fund conversion and it was thoughtful, meaning to convert a mutual fund, you want to make sure that the bulk of the clients have not paid loads. Right. Because the platforms, they're counting on those loads. Right. So we converted a no load fund for Gotham. Now, this no load fund happened to be a very active, long, short portfolio with a short bias in 2022 when the market was down. It had a spectacular year. But who's buying a shorting mutual fund because they got to hold it for 30 days. This is more like a trading vehicle. So we converted that with Gotham over into an ETF structure.

And one of the learnings of that is the conversions, not that simple. Right. Like it's easy to do. But if it's leaving somebody else's trust to come to yours, guess what? They can kind of charge whatever they want on the way out. Right. So there's a lot of nuances to getting this right. And we work with our clients on it. I'm a big believer that people should look at their mutual fund families and look through for commonalities. So you go look at the big brand, like guru, like mutual funds. They usually have 20 different mutual funds and they're all different asset classes or market caps and things like that.

But you'll find commonly that there's like seven or eight or 10, maybe 15 stocks that kind of end up at every portfolio. Right. Because it's like they're darlings. So I always go to those shops and I say, no, no, no, no. Let's not convert your mutual funds. Half your assets are at Morgan Stanley or UBS. They're going to get upset and you're going to have to argue and then you're going to restart and all that. My suggestion to them is always, let's start the founder's ETF or your flagship ETF. Right. And you make it a concentrated portfolio of your top picks and then you buy that ETF in your mutual fund. So, your large cap fund might buy 10% in the ETF and your mid cap might only buy five.

But some of those ideas are in every one of your strategies. Now you also get to pass that tax efficiency onto your mutual fund investors. Right. Because if the ETF is not distributing gains, then you don't have to distribute gains from that mutual fund. So I love that idea. I think there's many different ways to go from mutual fund to ETF that aren't let's pay lawyers 400 grand and see what happens.

They're not going to be like, hey, let's just do this real quick and let this go since it worked for Vanguard. No, like this is if all the people applying for this were identical to Vanguard, maybe it would get through quickly. But you're talking about active mutual funds that have gains built up in them that could be 20 years old with $10 cost basis on Amazon. And they're all of a sudden going to get the share class thing. Are they going to just immediately do a heartbeat trade and boom, all this is gone? So they've made some good regulation lately, right? The ETF rule, 6011, great. 18F4, it's not easy. It's the derivatives rule, but it definitely broke up the monopoly of only two companies being allowed to do leverage.

And it put a real strong cap on how far you can go, right? The odds that we ever see another 3x product right now under current law is pretty much zero. So they make good decisions. I think they were forced also to finally capitulate on crypto, although that process was the most ass backwards thing I've ever seen in my life. But I just don't think they're going to rush into the share class thing because there's a lot of unknowns, right? And they've just got to be careful. And I worry that if they did rush and the story – I know it's going to come out. There's always that one reporter that likes to beat up on ETFs.

I think they're in London. They'll be like, oh, SEC did this and there's a new tax loophole for mutual funds and it's going to be just messy. I don't want to messy. There's no loophole in an ETF. It's taxed the way it should be. You buy something, you should be taxed on what you buy, not what the cost basis is of somebody else. And investors should be incentivized by our government for good investment behavior. Buy and hold and sit down. If you want to go speculate, if you want to go use a leveraged micro strategy, go be it. But you're going to pay taxes and you've got to understand the risk. Yeah. No, that makes sense.

Are people having those discussions?

Right. And they want a partner to go to the next level. Like one thing that title does that we didn't talk about earlier is we do finance a lot of our clients. About 40% of our clients, 30 to 40, have elected for us to be a partner with them. And it's pretty straightforward and simple. We cover X percent of the expenses, including marketing and any expenses they have with the business. And we get that same percentage in profits. Right. So it's the simplest pair of pursuit deal you can. So we get a lot of people who get to those levels that you described and say, I want to take a little risk off the table, but I also want to be on a platform where I can leverage other things.

I think that works better than fully buying it. There's going to be, well, let's just call it what it is. AXS tried exactly what you just described. I don't like to speak ill of anyone, but it doesn't look like it's succeeded very well. Right. Because they've just recently completely pivoted away from that. Right. And there hasn't been the economies of scale. ETFs are sold by their champion. We always want to keep the champion with it. Right. So I like our little, hey, you want to come join the title family? Great. But it's still your fund.

Cause it's usually three years is enough to hit one of your cycles and get to the break even and things like that. Um, I see a lot of people get excited. They go, I hit my three year number. Now Morningstar is going to rate me. Uh, man, that, yeah, there's some value there. It depends on the product you have. Um, there are a lot of platforms that really don't want to talk to you till you're three years old. So there's some value there as well. Um, I don't think there's like a major change in what you should be doing. I think it's do what you would, what's been working and keep trying new things. Right. Like it just continue to iterate. Like, um, man, at, at future proof, I met a bunch of these social platforms, blossom wolf.

Uh, we're doing some things with Weeble, like being able to meet the investors where they are and not necessarily wasting all your time at Schwab impact, talking to the 20 guys who are never going to do anything other than VTI. that's, that's the definition of insanity, right? It's funny. The, it seems to me like many of the advisors have adopted this VTI and chill. Um, I don't want to fight that battle. I want to keep getting my content out there. Keep getting our stories out there. Um, keep finding things that people are excited about. And then eventually the advisors get 10 calls from their clients saying, Hey, over in my Schwab account or my public account or my SoFi account, I'm buying this.

Why don't you have it? Oh, that's not approved on our platform. Oh, why? We, we haven't done the due diligence. Oh, okay. Sure. Right. And they're looking at it going, but it's a billion dollar fund. Right. So, so, uh, yeah, I'm not making any fun friends at the wires with this discussion. No, that's fine. They probably won't. Shoshana guys. I love you guys. I know there's institutional product that you support. Jabbar, I love you. So good.

Uh, I don't quite go that far, but, uh, I'm not as militant. Right. That's a good word. Yeah. Titles easy to find and we'd love to help you launch, grow and operate an ETF.