Sylvia Jablonski

So before we get started, why don't you share everybody a bit about your background and how you eventually decided to kind of start Defiance and break away?

Yeah, sure. So my background is pretty much, econ finance from the start. I always had an interest in markets and investing, even like pre-high school time and always kind of knew I was going to do something related to markets. ETFs weren't so popular back then. So it wasn't a job that I necessarily thought about, when you're kind of in university, you're thinking about like which banking program are you going to get into? And, so I started working out at the banks and doing Delta One sales trading and learned about swaps, equity derivatives, things like this. And I was covering the different ETF issuers and hedge funds for their different swap trades. And so I think it was like around 2007, 2008-ish, which was like the heat of the financial crash,

That's great. So before we get too much into Defiance, I always like to ask people, what do you like to do when you're not sitting behind the desk? Any hobbies?

Oh, gosh. Well, I have, we were talking about this a little bit offline, but I have a three-year-old and a five-year-old. So there's some like, my hobbies are kind of hiding in the closet, let's just say. But I'm just avid, avid tennis player. I absolutely love playing tennis. I love going to the US Open. I love watching tennis, kind of all things tennis. And then, if you go kind of go down that list, I also like ping pong. I also like pickleball, in general, racket sports. Um, but other stuff too. I kind of have like a knack for foreign languages, always like to travel and, um, big, big reader too. But my kids are kind of the hobby.

That's the US Open is on my, uh, my bucket list of things I want to do. I've had a buddy who went, he said he loved it. Yeah, it looks, it looks amazing.

If you're playing tennis or like, like watch tennis, you'll get so, you'll get so into it. it's, it's just so much fun to watch and it's just become this cool, like, I don't know, it's changed. I've gone every year, like, for as long as I can remember now. Um, and it's also turned into like this cool New York city, like celebrity athletes spotting, fashion event. And, um, and yeah, and the tennis is, tennis is getting really good again. Like after all the grades kind of started to fade off, like now the younger players are, are getting to be, super exciting and competitive to watch and, um, so much fun.

You gotta go. Yeah, I, I, it's, it's definitely on my list and it's, I never was into racket sports. And then for whatever reason, like I started watching all the majors and now I think it might have been to that Netflix series. And then I really started to get into it. And now I watched like as many matches as I can, but definitely on my list and something I want to do. So, um, let's talk about kind of defiance as a whole, you have a pretty diversified lineup of different ideas, right? You have an income suite, you have a thematic suite, um, you have a leverage suite. So can you kind of talk about what goes into the decision of, what are you going

Yeah, sure. So in, in 2018, um, there, the market felt sort of like saturated and a lot of the ETFs that were coming out were similar in style, similar in, theme. And, and I think, around that time there was this kind of evolution of different types of, of thematic ETFs that hit the market and, and kind of, built their, built their spot and investors portfolios and, and, picked up some traction. So we started out with 5g and quantum. So now it's, it's interesting because now there's been this like chat GPT moment, but we're, we're thinking about like in 2018 and 2019, that's, those were the conversations we were having.

Let's, let's stick on the, the single stock levered, um, theme for a moment. Right. Um, you, you mentioned MicroStrategy, that's kind of, uh, also a little bit of a crypto play in and of itself. Um, so you actually recently filed to increase the leverage. I believe it was 1.75. It's now you're, you're filing for two. So like, what's the internal dialogue around like turning up that volume just a little bit and for the increased leverage, is it just to make the product a little bit spicier? Is that what people are asking for? Like what, what's the thought process around that?

Yeah. it came, the, the product is, it's probably one of the most successful ETF launches of the year. it's certainly the most successful ETF launch for us. And, our biggest day was actually, um, just, just the other day on Monday, I think it traded, close to a hundred million. So there's just so much interest in this and there are so many people in it and trading it and, market makers, institutions and whatnot. And they've just said that they'd be interested if we could get it a little bit higher, they'd be interested in seeing that. And so we're going to do that. Ask and you shall receive.

Hopefully you receive, hopefully you receive true, true.

Fair point. Fair point. I, the, the, caveat there and just plain where there is of course we seek regulatory approval to do it.

So. Yeah, that's right. We got it. We have to make the compliance people that will listen to this happen.

Exactly. Exactly. No, no guarantees in life. These are, intentions. Yeah.

That's great. So actually let's stick on, uh, so I think you kind of touched on this, but I'm always curious because I've talked to other issuers that, put out a single stock leverage or inverse. Is it, are you looking for like what's being traded or are you looking for what's being, uh, or a stock that's in, that's popular? Like what, what goes into the decision of saying like, yes, we want Lily or yes, we want micro strategies. Is it. Yeah.

Can you talk about that a little bit? Yeah. I think you hit the nail on the head. It's kind of all of that. So you look at, like you look at like, what are the most popular stocks that are also the most volatile stocks that, also have the highest level of volume. And that's kind of been the secret just in my career. And again, like, Matt and I come from direction. So like, we've been doing this a long time, all of the products that we tried to get really cute with them. We thought were phenomenal ideas. It's just like they, they would close and not trade, but, um, and even thematic leverage products like didn't do that well historically, but, um, all of the products that were just

So let's talk, we're here to actually talk about quantum, uh, Q T U M, which is your quantum computing thematic ETF. So, uh, at a very high level, can you talk about what that fund is really trying to accomplish?

Yeah. So, this was, um, as I mentioned before, like when we thought about launching this fund, it was meant to be. our take on what is machine learning, supercomputing and AI. And so we worked with, um, we worked with blue star on this and created this index is called, essentially like, like quantum computing and machine learning. Um, and within it, you have like all the different sectors that make up everything that goes into AI machine learning and supercomputing. Right. So you'll have everything from all the semiconductor companies. You'll have like micro strategy in there and video in there, but then you have, um, like the Hewlett Packard's in there, the IBM is one of the top holdings because they're

So without us, like trying to figure out what the world's going to look like in, five or 10 years, like what is so exciting about quantum computing? Why should people look at this as a theme that is exciting and investable and ripe for growth?

Yeah. so I think quantum computing can transform all of these, like, things and, and, and evolutions and innovations that we're all talking about right now, right? Like you have cloud computing, you have data mining, you have, um, the chat bots, you have research and data being done for drug companies. So quantum computers, quantum computers essentially, allowed, allows data to process in two different States. And it allows this to happen very quickly, faster than, any other traditional computer can do a computation. So if you just think about things like, biomedical research, like cancer research, all of this data has to be processed and it has to be, um, kind of parsed and it has

And so you touched on this, uh, it had kind of a high level, but the, the fund itself is looking at a, a third party index. Um, it was a blue star. I think you said, so, yeah. Yeah. So what, um, what are some of the things that it's kind of screening for in order to get inclusion in this index? Like what, what kind of states have to be met in order for a company or a company to be included in quantum?

Yeah, sure. So it's basically like the leading global companies in research commercialization of anything related to cloud computing. So that could be like high powered computing data connectivity solutions. It could be cooling systems. Um, it could be, companies that specialize in like perception and collection and management of data used in machine learning. It can be semiconductor companies that invest in supercomputing and high-speed computing. Um, and, and basically, these are, and these all sound like foreign things, I guess, but you'll recognize a lot of the names in there, right? Like I said, you have like a, an HP in there, you have an IBM in there, and then you have these kind of pure play quantum plays like an IonQ or a D-Wave.

And are, is there any, um, does the index do anything in terms of prioritization of those companies or are you equally weighting everything? Yeah. Yeah.

We're equally weighting. There's a, they're subject to a liquidity overlay, but they're, yes, they're equally weighted. And, um, like the reconstitution is on a semi-annual basis. And so, um, what's good about this too, is that you have access to these small cabinets, I'm just thinking about like the rate cut yesterday. Right. So this, this ETF is great. Cause you have all the large caps in there, like the, the NVIDIAs and the Googles and all that, like, they're kind of like a, a ballast for the fund, right? They're, they're kind of the companies that have the largest amount of money, well capitalized and they're investing in quantum competing, but then you have like the actual pure plays that are, they're more along the lines of like a small cap company and are

So you had mentioned right now, the fund has about 70 names in it. Um, is that a target you want to be around that 70 or could you see as more companies are coming out, um, kind of that number edging up as there's more people in the space?

Yeah, I think it could edge up if, I think it could edge up if there are more names in the space that, that meet, the different liquidity requirements and things like that. So I think if you get new quantum players and there's a couple of them out there that definitely like D wave is a recent inclusion that that's not a name that was in there, um, between 2018 and 2023, really that actually just popped into the index now. Right. And that's a pure play quantum computing company that's been around for a while, but just kind of wasn't liquid enough. Right now they're growing and, um, advancing and things like that. And so that gets picked up in there. And then, we were always looking at the IPOs in the space and, just seeing

Are there any, are you finding within the index, any country tilts or is it a lot of it domestic here? U S?

Uh, no, there are definitely there. Yeah, there are definitely tilts. Um, it's, it's kind of, it's, it's a global basket. And so, um, you kind of have, yeah, you definitely have some Japanese exposure, China exposure, U S exposure. Um, those are probably the top three right now in terms of international exposure, but yeah, it's definitely a global fund. Sure.

So the million dollar question is, um, you're sitting across, from an advisor, they've got an already diversified model portfolio. Where are you recommending that they use quantum inside the portfolio? Where would you sleeve it?

Yeah. so the way that we see advisors use it is, some of them use it as like a satellite allocation, right? For most advisors have like five to 10% of their portfolio where they're, they're either, picking, um, picking like a, a, a flavor or a spice or, or thematic ETFs or lover ETFs or things like this and, or alternative products and, and things like that. And so we see them either putting it there or as a compliment to their tech portfolio. So, wherever they've kind of got broad based tech allocation, um, slash semiconductor allocation, that's where the CTF goes.

So let's go back to defiance. I'd love to pick your brain. You guys are four people were five. Um, you started in 2018. So you're, you're fairly new, um, and you're still small and scrappy. So, um, kind of, there's a lot of new issuers hitting the market that kind of fit this bill and you guys have had a lot of success. So can you talk about, your experience over the years and, maybe any advice you'd give to those like small scrappy new issuers to help them get to scale?

Yeah. I think we, we've learned that we have to be relentless. Like we would have a good idea and we would, kind of sit and think on it and, and really kind of, suss it out and, and, and, debate back and forth, whether, whether or not it's a good idea. And then some, some issuer would launch it, it would have a million dollars and we missed the boat, you know? So I think, um, like speed is your weapon, um, for, for sure. So I think, I think speed and being relentless about scouring the market, what's missing, what isn't out there, what is out there. I think really giving up on like egos or, or anything that has to do with like, I thought

And, and how do you guys think about, distribution and marketing? Because again, being small, um, and being balance sheet conscious marketing and distribution is expensive. So, uh, how have you gotten creative or how have you, cause the defiance name, when I got an email about having you on the show, like I knew the defiance name, right. And so can you talk about how you guys, um, really focused on brand and how you worked on kind of marketing and distribution early on to get that brand recognition? Yeah.

So I don't know if a lot of people know this, but we actually, we consider ourselves, experts in marketing and, and the way that the company is structured is you have defiance holdings, which owns defiance ETFs and defiance analytics. So we built our own marketing SaaS company, digital marketing, our, our, in-house advertising, in-house distribution, um, AI distribution. We've really built it in-house. And so around COVID when, you're a startup and don't have any salespeople that can go out and see anybody. And to your point, we don't have budget. We can't spend money on ads and, and marketing companies and PR companies and things like that.