John Davi, Astoria PPI

So for those who haven't had a chance to listen to our prior episodes, we already went over ROE. We went over PPI. Can you talk about your background and talk about what all Astoria does for clients?

Sure. So we are an asset management company. We manage money for three verticals. One is financial advisors. Second is kind of corporations slash small institutions. And then the third vertical is ultra high net worth individuals. So we have about 2 billion total assets under management and advisement. And our investment discipline is macro and quantitative. And it's the intersection of those two verticals that really is kind of the sweet spot from our standpoint. The firm has been operating since 2017. And we have about 10 employees in total.

I've been watching your growth specifically in those two ETFs that you launched first. So congratulations on all your success. And you have recently launched a new ETF, which is why you're here. So can you tell me what really inspired the creation of GQQQ? I'm going to call it GQs. And what gap in the market you're looking to fill there?

All right. Cool. And I would say, for the most part, really, we only launch products when there's a void that we feel like we have in our portfolios. So serving as this kind of outsourced chief investment officer firm, we would lean and rather go with a well-established ETF and fund provider. But, the impetus really for, our first ETF PPI was that we were unhappy with the inflation alternatives out there. And the impetus for ROE, our equally weighted ETF, is that, we just weren't pleased with equally weighted ETFs. And for G, and we're calling it GQQQ, we just think that we're at a point in the growth cycle where it's time for kind of more thoughtful portfolio construction.

So I guess you kind of went over, the core thesis, but really, what is the overall objective here for long-term capital appreciation? Like, what are, what are you trying, how are you trying to construct this portfolio in order to deliver kind of a differentiated, growth, growth ETF than what's just out there that's market cap weighted?

So the goal is to kind of, first we start with a growth universe, large cap and mid cap, growth stocks. And then we really kind of apply our traditional quality on screens of what we do in our two of the other ETFs, EPI and ROE. And then we have SMAs that we run, like quant factor SMAs that we've been running since 2017. So, the goal really is to kind of give downside protection through this quality filter. quality is one of these factors that's, very persistent, pervasive, robust. And it's the intersection of marrying, both quality and growth that we hope to be differentiating.

So you've mentioned a couple of times the quantitative analysis process. So how does that analysis process shape the selection of the different stocks in the CTF?

Yeah. So it's very rules-based. It's systematic in nature. we start with a wide, universe of growth stocks. And then we apply some minimum market cap, liquidity, and then we look at, various quant factors and codes and metrics. And, really what we want to do is kind of get, the ones that have, the strongest ROE, ROA, ROIC. And, have that such that it's higher quality nature within that growth universe compared to, like, the standard pure growth beta instruments that are available.

So you mentioned also that you have some mid-cap exposure in here as well as some large cap exposure. So, why did you kind of choose to include some of this mid-cap exposure? What's the, do you have a preferred, tilt between large cap and mid-cap? I know that the CTF is active in nature. So, you can, it's going to fluctuate. But is there a, do you favor a certain allocation between large cap and mid-cap? And, how do those really align with G-chip or Qs and its investment objective?

No, that's a good question. if I, take a step back, Brad, there's so much outperformance in those large cap, MAG7 stocks. They've had a tremendous run, some of the best businesses in the world. but we just think in the next cycle, there's going to be new market leaders. And we're not suggesting that it won't come from tech. We think tech should be, the cornerstone of your portfolio. AI is going to definitely be a big team. And it's going to help, not only just the tech stocks, but it'll help energy companies, industrial companies. It'll help financial companies, insurance companies.

So, you've mentioned tech a few times. So, does GQQs have other sector diversification in it or is it pretty much just focused on the tech sector or are there other sectors that you're playing in? And do you have any guardrails on that sector exposure or do you just leave it down to the process?

Okay. So, we try and take the midpoint between SPYs and Qs. And we want this thing to kind of, it's the goal. It's not, no guarantees and past performance to get future results. But we are trying to, kind of be in between SPYs and Qs in terms of like sector weights and then hence performance. And, the impetus really for us to launch it is, like I said, is that because we're diversified investors, that generally has meant that you've had to be on the way to tech because, tech has been expensive throughout this cycle. And, we were just, we needed to kind of close our on the way. And so, we wanted to, we just, we could not buy, let's say, the Qs, right, because it's just tough for us to do that because Qs are just this, there's no filter at all.

So, I was actually, I had the pleasure of being on Schwab Network this morning, actually, after, while I'm waiting to get on, they did 30 minutes on how, they're super excited this bull market is going to continue. And then they had me on to come in as the volatility guy. So, it was hard for me to follow that. But anyways, the reason I say that is, you had mentioned earlier as well, you have some risk management kind of baked into this ETF. So, what strategies is this fund using to mitigate volatility and maybe protect investors when things do get a little wonky?

So, annual rebalance, which I think is good because, if you like a stock, you should be able to hold it for like a long period of time. But the quant code is reviewed quarterly. So, if a stock, significantly deranks, we do have the ability to kind of replace it. And then, there's been instances, where big set AI stocks have gone up a lot and then kind of fell down from grace. I think, we have the ability to kind of tweak things if we see the quant factor rankings have fallen. Whereas, it may just stay in a normal passive index for like a long period of time.

So, we'll talk about, I want to kind of talk about this in terms of the difference between GQs and triple Qs and, just passive ETFs. So, you're obviously an active manager. Sometimes active management gets, put in good light. Sometimes it gets put in bad light. How does, the active component of G triple Qs enhance like the potential performance over just, passively buying growth, buying the Nasdaq?

Good question. what I would say is that, if you look at our core business, which is, kind of dynamic asset allocation, past performance, indicative future results. But, our stated goal in our multi-asset portfolios is to get like 150 basis points to 200 above bench. And, we've had good returns and historically in our SMAs. And even if you look at like PPI, the first ETF we launched, it's in the second percentile over the last three years at like 330 funds in that category. Even our other ETF ROE last year was its first full count of the year.

So, as you mentioned, your other funds are also fairly new and you guys have done a great job at, getting them out there, getting some assets in them. G triple Qs is also a new fund. So just from your past experience and then the type of strategy that G triple Qs is running right now, like what challenges and opportunities do you anticipate here kind of in the early stages? in the first, call it year that this thing is alive, what challenges do you expect to face and overcome and what opportunities you think are out there for you to go out there and raise assets like you've done in your first two?

So, it's tough if you're going to kind of compete with like three basis points, Schwab, Vanguard ETFs. So, we don't even try and like if an advisor is just hell bent on owning three basis points ETFs, that that's just an uphill battle. That's just too difficult. what I would say is that, we have an existing franchise that, we run model portfolios and asset allocation and it's a captive, client base. financial advisors are very receptive to how we do portfolio management. So they're generally pretty comfortable with our investment approach. the key is really getting above, 50 million.

So the million dollar question I always ask, and I know you guys do your own SMAs and in your OCIO work. So let's just, you're sitting with an advisor that's not using you for that. They have an existing model portfolio that they run. They don't want you to be a CIO, but you're selling them on G triple Qs. How would you advise that person to use this product in their already diversified model portfolio?

Good question. we would say, it could be used as a complement to your existing, SPY, Q, your Vanguard growth DTF, your Schwab growth DTF. maybe, if taxes is something that you're able to kind of do, take some profits. this fund is like priced at 35 basis points. So it's fairly low for like a small indie issuer like us. So, I would say, like nobody pushes back when we say to them, like, look, the Mag 7. Goldman Sachs has a chart that shows like the top 10 stocks in S&P and how it's changed over time.

So, John, I really appreciate your time. I hope you keep launching funds because I'll just keep having you on. And, I get calls from Frank. He's like, hey, we got a new fund we need to get on. So whatever, Frank. Shout out to Frank. But before I let you guys go, where can you find all the information about Astoria? Where can you find, all the information you have out there on GQQs?

Great. So thanks, Brad. And I'll relay that to Frank. Frank is in a meeting right now, so he wasn't able to join this one. But I know you and I did one with Frank, which I think we are. We the first. Repeat. Probably. Yeah. Okay. You're the.

Yeah. You're the first three, Pete. And I got to get you like a T-shirt or something like a regular on behind the ticker T-shirt. Maybe I'll give you one at exchange.

That would be fun. So AstoriaAdvisorsETFs.com. That's the website for our ETFs. AstoriaAdvisorsETFs.com. And then our SMA website, let's say, is just AstoriaAdvisors.com. So two different websites. One is plugged into the other. If you just went to AstoriaAdvisors.com, you'll see the relevant ETF info.

All right. Great. Well, again, John, thanks so much. I'm sure I'll be running into you here soon. Thanks, Brad. Really appreciate it.