Dave Mazza, Roundhill

Position you are today? Yeah, thanks. So I started my career at State Street Global Advisors and spent over a decade there. For many years, led their ETF research team in the SPDR ETF business, launched a great number of terrific products. Then I transitioned to Oppenheimer Funds, helped lead their ETF sales and marketing effort before the acquisition by Invesco, then transitioned to Direction, which was more focused on leveraging inverse products and thematics and leading their product development and strategy efforts. And then now I'm at Roundhill as the chief strategy officer, kind of bringing all the elements of my career together and excited to be part of what's a really dynamic team that we have at Roundhill. Yeah. It's funny you say,

Drexon, I was sitting, I was in New York earlier this week. I was sitting, having a glass of wine and lo and behold, the whole team from Drexon was sitting next to me. So I had a funny conversation with them asking for refunds for any accounts I blew up as an early trader, but very nice. So Dave, I'd like to get to learn a little bit about you personally. What do you like to do outside the office other than just talking about ETFs? I've talked to pilots, I've talked to sailboat racers.

What do you like to do? So these days, I have three daughters. So these days spend a lot of time, as I like to joke, as a part-time Uber driver, ferrying them to their various sports and other activities. But in all seriousness, one of the things I love to do is I still get a chance to do a couple of ski trips a year. I grew up skiing, really, really passionate about it, really being outdoors in particular. Also love to travel. So whether that's domestically or I actually have a trip planned to Italy later this summer, to me, it's a great opportunity to just gain different perspectives. And also, I think it helps me in my life and my career to kind of step outside of your day-to-day.

Nature, just in somewhere new. Yeah. I just started skiing again for the first time in 10 years and realized how much I missed it. My kids are now old enough where they can do it. And it's been, even though my back is having a hard time holding up, but they have the leashes now that you could put them on, which has been very helpful. So let's transition to the ETF business. Let's transition to Roundhill. Roundhill has a number of niche products. I think my favorite ticker is NERD, N-E-R-D, which focuses on video game companies. But can you kind of just briefly touch on the lineup as a whole and what you guys have out there? Yeah. So the firm was founded on the premise

Of really creating unique ETFs that are truly differentiated and particularly kind of providing exposure to either emerging themes or existing themes, but done in a different way. And of course, a lot of ETF providers, large and small, talk about differentiation, talk about precision. It's sort of the hallmark of the product. But if you peel back the onion, many, many products may not be that. And so Will Hershey and Tim Maloney founded the firm a few years ago. And some of the first ETFs were primarily in the thematic space. And that is an area where the firm had some great success, whether it's NERD and sports betting is the first sports betting ETF, the first metaverse ETF, MetV, the sports betting ETF ticker is bets. And now most recently, our genitive AI ETF chat. So we are,

But are you driving AUM growth more from retail investors? Or are you out there talking to advisors?

So our core, I think, client segment to date has been direct retail, combined with some advisors. With that being said, we would love to engage with advisors. And it's not a retail only type strategy, I would want to be clear. But direct retail, particularly because of our firm's focus on providing content in social media, that's easy to absorb, understand, and is fun, has led to really direct retail coming our way, which is something which we love and support. And we, we pride ourselves on having smiles on our faces and being fun. I love ETFs. I'm lucky to have found that as my career. And that's a passion that, I'm happy to share with anyone who's willing to talk about it.

So let's pivot back real, real quick to the bigs. Do you think having because I think that's more interesting with precision exposure within large areas? Do you see that maybe is more of an avenue to talk to advisors about? Because I think that that's a very interesting take to be able to get

More direct precision exposure in some of these big areas? Yeah, no, those I would, I think you've hit the nail on the head. Those products, I think, have a different type of appeal, whether that's to advisors who are doing sector rotation strategies, who might, want to complement what they're doing with existing sector and industry ETFs, many of which I know intimately well from my time at State Street. Or, again, for someone who has different types of exposure in their portfolio, let's say that they're a long term buy and hold, and they're focused simply on, low cost passive at the core, there's nothing wrong with that. But if there's an opportunity for them, or they have a tactical sleeve, products like this can really work well. Because because of that, because of that,

It. Right. Right. So staying on the the retail marketing piece, and you briefly touched on this through social media, but how retail is finding you? Is that how you're going out and telling your

Story mainly through social? Yeah, so we have we have kind of a few core channels that we we we market through. And social media is is is a great one for us, whether that's Twitter or LinkedIn or other channels that we're we're looking at. And also just being in the press through traditional media as well. I think the opportunity to spread your wings, the opportunity to get your message out there as wide as possible is paramount. the ETF, the ETF market is great, because there's so much choice now for for whether you're a retail investor, financial advisor, in any way, shape, or form, or a true institution. Any ETF could be looked at by you. But with all that choice, does come the requirement, I think, to do to do more homework, so that you really actually know what

What have you got it. So let's chat about chat, your newest issue. What can you tell me the difference just on the front end? What is the difference between AI and generator generative AI?

Yeah, so this is a, I think, a good question. And, and it's something that we've been we've been hearing. So we think about AI, right, that is, at the highest level, artificial intelligence, and, and that ranges from from, really, it's become ubiquitous, right? So it's almost, well, a few years ago, it might have been a hot dot, but it's, it's increasingly important. And it has been for a few decades. So, so simply put, the earliest ideas about AI, which is crazy to think about, go back to ancient Greece and China. But it really wasn't until, the 20th century, where that term sort of came into the forefront. And the idea is creating machines, or as we would think of them now, computers, to think, and perhaps act like humans. And so over, you know,

Some way, shape or form. Yeah, no, it's crazy actually how fast, as you said, how fast adoption has been. I leverage it for this show. Nothing generative wise, for, putting together the transcripts or putting together captions. And so I can see, and it's made it a lot simpler and it's faster. So, it's a space in which is very exciting. As you mentioned, NVIDIA, obviously very, very good for their business. I see it is definitely a holding in the portfolio. So we're going to talk about how companies get selected. But before we do that, is the index for chat passive or is it an active index? It's actually, so chat is an active ETF,

Fully transparent, active. There's, to geek out on ETFs, we know some are not fully transparent, nothing wrong with that. But this is fully transparent, like an index ETF, if you will.

Got it. So how do companies get selected then to be in this portfolio? Is there a screen that you're

Running? Yeah. So it's, the way I think about it is sort of a, it's a two part, kind of a two, a two part screen. And what we're doing is we're looking at two things. One is a transcript score. And so we're going out and we are, we are looking at company transcripts from publicly available documents, whether they're filings, presentations, press releases, to identify our companies talking about various generative AI and AI related terms. And we're going to, and we give that a score. So the more, the more it's mentioned, the higher it is relatively simple. Now that's not just it, right? Because what we don't want is just companies who are loading up. And we saw this with blockchain, right? Who are changing their name, right? Or just throwing in AI and they have nothing to do with it. So the real

Score is beneficial to build the best portfolio. Yeah, that's really interesting. And I believe you're going out the right direction, which leads me into my next question, which I think you answered it. So would chat invest in a company that is not only a direct contributor to generative AI, but a company that is heavily using it in order to gain efficiencies? So we know a company like NVIDIA, they're contributing to the adoption of AI, but maybe a company out there that's positioning or pivoting a large portion of their company to using AI rather than a traditional use. Would that be a

Company you would look at as well? I'd say perhaps, but primarily, we're looking at companies that are developing the generative AI technology or systems or services. Now, as I noted a moment ago, all this is is rapidly evolving and changing in good ways. So I'm not saying we're changing the investment process when I say that, but there's companies that could lead to be higher in the transcript score or the sector score may change. So we're looking, for example, to provide a little bit more detail, our companies involved with machine learning, right? So that's required for generative AI. Right. There's also deep learning. So that's learning by example, natural language processing, computer vision, expert systems, which help humans make decisions. And so because it's so wide ranging,

Understood. That was my assumption. I was just curious as the space evolves, and you guys definitely have flexibility with being active. So how are the weighting decisions used when you're putting this portfolio together? Is everything going equal weight? Is it market weight? Is it active? You guys actively making a decision how you want to weight this portfolio? Yeah. So the way to think about,

Yeah, the weightings are, there is, has an element of proprietariness to it, but it really is simple. Let's think of a company, and NVIDIA is the top holding. I think we can talk about valuation in NVIDIA for a minute, but let's simply talk about why it's in a generative AI ETF. Well, it has, they mentioned AI a significant amount, particularly generative AI. So its transcript score is through the roof. And we know through the research, the quantitative research that we do looking at fundamentals, their revenue is actually coming and they said it on their call in so much, is going to come from chipset power generative AI. So lo and behold, it has a high rank on the transcript score, high rank on the sector score, high rank in the portfolio, and so on.

Yeah. So let's talk about some of the companies that are ranking high on that score. So who are the key companies that you're currently invested in? NVIDIA is, everybody's talking about NVIDIA. The run it's been on has been unbelievable. I'm sure, with the last earnings call, we all saw what it did. And so, which would have been very good for your ETF. But who are some of the key companies that are ranking high on the score that you guys are heavily invested in?

Yeah. So we chatted a bit about NVIDIA. And I think that is probably obvious to folks. But let's also talk about another large holding, Microsoft, right? We know that they have, an investment in ChatGBT through OpenAI. They also are now having Bing Chat co-pilot with its AI for Microsoft Office. And in fact, actually, Bing search engine, which, had been a bit of a second fiddle, of course, to Google, Alphabet's Google, has surpassed now 100 million daily active users after it implemented, more AI powered chat feature. And, and so that's, that's a name that's in the portfolio, because directly they're, they, they're involved with it. Another name is, which is a, which is a large cap name is Baidu.

Got it. So how often are you re-scanning for opportunities and running a rebalance, running your transcript scores and your other fundamental looks? So how often is this portfolio being re-weighted and names added or deleted? So, at a minimum,

We would be looking at this on a quarterly basis, but I'd say it's more frequently than that. This is not a portfolio that's going to be turning over daily. We want to have some stability in there. And I think with companies that are more pure play, generative AI, you can do that, which is great at this point. But we are, because the space is dynamic and there's particularly around earnings season, we will be, we're looking at this on a frequent basis, weekly. Does that mean we're turning it over? No. But it's something that we want to be cognizant of and aware of as new names perhaps become relevant. Or, if there are particular names simply because of performance, that may need to be re-weighted. Doesn't mean we don't like NVIDIA or AMD,

Names, for example, if that were to happen. Yeah, that makes a ton of sense. So is there anything else on chat that I need to be aware of or that we haven't brought up so far in the discussion? Because I want to pivot to a couple other final questions.

No, I think we touched on a lot of important topics. I think what I would recommend folks do is, check out our holdings on our website. Again, there's going to be some obvious names in there that even though some people would say, man, another ETF with the FAANG names, the mega cap names. Sure, we are, again, it's not 50% of them. The idea there that we're not going to have exposure to NVIDIA and a generative AI ETF is also hard for me to recognize. But there's going to be names that folks may not be as familiar with. And I'll just give a couple. SenseTime is a company, it's a Chinese company. It's one of Chinese leading AI software companies. They have a large language model

Workflow. Yeah, I actually, I would encourage people as well to go to the website because you put together a nice presentation about the fund as well as about AI and generative AI that was very easy to consume. And I think there's a lot of good information there. But let's kind of lastly, let's talk about, I saw on your website, there's some things there that say coming soon. So you have a few funds there. What are they? When do you expect them to launch?

So primarily the coming soon funds are related to our big ETFs. So what's great about that strategy is you can apply it to a variety of sectors and industries. For many years, we've heard from investors saying, hey, I'd love some precision in home builders, or I'd love some precision in airlines or defense. Not that they can't get that exposure, but they don't want anything else. They just want the big caps or the real pure place there. And so we have a handful that don't necessarily have launch dates, but have the potential to come into the market. And the beauty at Roundhill and what I've loved is the energy that we have. And the idea generation comes from everywhere. So there's not a day we don't put our lab coats on and start thinking about new ideas because we hear and we

Reaching out to us directly, keep the ideas coming. Yeah. Well, I see Roundhill as a source for when, and I again could be making assumption, but when something new and innovative comes out, or there's a certain theme in the market, or even a lifestyle like bets, you mentioned, right? Sports betting became very popular, that you guys will be a first mover in that area to get something thematic out in that space. Is that? Yeah, we try to be. So thank you for that. So Dave, I want to just say thank you so much. This was very informative. I think you guys are going to have a lot of success with this. And so where can people go to learn more about your

Company and your funds? Well, a couple of places. So roundhillinvestments.com, there, that's our, our homepage. You're going to find information about all of our ETFs, whether you're looking, looking at chat or bets or nerd or what have you. But then also blog.roundhillinvestments.com. That's our research page. And that's, again, free for everybody. A lot of ETF providers have great research. Some of it's, it can range from hard to understand, easy to understand. We try to be on that easier to understand, but not dumbed down, right? So you can go right now and click on our AI section and learn a lot, not just about AI and generative AI, but the companies that are exposed to it, our forecast for the total addressable market for it, what the impact that

Well, again, Dave, thank you so much. I really appreciate your time and good luck with the ongoing launch of chat. Thank you so much. Bye.