Andrew Skatoff

Can you talk about the decision to, you have a great family office job to make that jump to start your own company and really take on, that entrepreneurship role? Like, was that a hard decision? Did it just feel right to you?

Yeah, it was an incredibly difficult decision. I think, mainly because I enjoyed working with the family and our CEO so much. I was learning so much having these wonderful opportunities. But at the same time, when I started to come up with the strategy, and we can talk about kind of the data focus around it, and it's all predicated around information theory. I realized that what we were, what I was coming up with was, was so interesting, that I needed to dedicate all of my time to really see it through and dive in and I think, create the expression that we have today through the ETF. So it wasn't an easy decision. But it was something that I felt was super interesting. And I needed to

Dedicate all my time to kind of build it out. Yeah, no, that's great. Before we get into kind of Band Creek and the strategies, the ETFs, and kind of the data set that you're using to kind of build these portfolios, I always like to ask people, what do you like to do when you're not working? I know, as an entrepreneur, it's going to eat up a lot of your life. But do you have any hobbies when you're not sitting behind the desk? I do. So I have two young children,

A 10 year old boy and an eight year old girl. I spent a lot of time with them playing sports. So I've coached both my son and daughter's basketball teams. as a parent, you typically are traveling quite a bit on the weekends, kind of chauffeuring them around to different events, whether it's gymnastics or basketball or tennis. So I spent a lot of time with them. I also like to get out and run when I can. based in California, the weather is pretty great. So I do tend to get out and run as often as I can. And then, spend time with my wife, we'll go out to dinners or just, walk around the neighborhood. So I do try to stay active

When I'm not thinking about investing in data. Yeah. Well, I've tried the running thing. I'm not much of a runner. I try to get my exercise in some other way. I think I just have heavy feet. But good for you for getting out there and getting after it. But let's talk about Bain Creek. I know you have two ETFs out there. So are you providing, other things to clients such as research or SMAs or indexes? Like how else are you working with clients outside of the

Two ETFs? Sure. So once we made the decision to kind of create the ETF platform, we launched our advisor site as well. And, one of the things that we had been doing internally for a long time was kind of developing and looking at data visualization tools, primarily through a software program called Tableau. And one of our partners on the investment team, prior to joining Bain Creek, had spent a lot of time kind of building out and providing transparency for the drug pricing industry. And so this was something that was interesting to us. And, we spent a lot of time kind of building out these tools. Our first tool that we published was around inflation, CPI and PCE.

Yeah, well, the mantra at the firm seems to be driven all around data. So I guess, what kind of data are you taking in? And obviously, more importantly, how are you using it to drive investment decisions?

Sure. So if we kind of look back to my days with the family office, when I was kind of creating the initial strategy, what I was doing was creating a checklist of what I would call fundamental and quantitative factors for, assets, right? So things that I thought led to long-term compounding. And again, this was the initial checklist, more of a crude version of this. And, as I was doing more and more of this, I realized that I needed a lot of help to make it one more efficient and to broaden out the scope of the data that we could look at. And, that led to me leaving, but also bringing in our chief data scientist, Anton Yen, who spent almost two decades working at

Business models. Yeah. Can we dive into this term structurally advantageous, like a little bit more? You gave some examples there, but when you're finding, a company or an avenue that you get really excited about, how would you kind of define the word structurally advantageous and what types of companies or, as part of your data checklist, are you checking off to make sure that you've, identified one that you're excited about and you're ready to invest in?

Yeah. So, again, over the years, the tool that the engine that we've kind of developed is, is purely quantitative now. So, we're very comfortable that when the tool is identifying a business at this point, we know there's something unique about it. And when you think about an edge, obviously a lot of people use terms like moats and, the quality businesses, really, you're looking for, for companies that are very efficient in their own capital allocation decisions, right? So they, they have this edge where they can either get pricing or, they're uniquely positioned where they're, they're really the only game in town, or there is a long runway for, for growth and they can, they can either deploy the capital to grow internally, or they can make

Yeah, no, it makes a ton of sense. I think one of the differentiations, if I'm picking this up, is it like most quantitative systems that are built, they're kind of focused on shorter and medium term opportunities, right? They're, they're trying to build edge around, momentum or certain inefficiencies that might be taking place in the market. This to me, the system that you've built seems to be trying to really mine for and find long-term value. Would that assumption be kind of correct?

Exactly. So we're applying, we're basically applying quant to long-term investing. And again, I think that that is kind of the unique proposition that we're offering that we've, we've figured out, a way to, to really pulse for specific patterns in these assets over long periods of time, looking at a ton of data. And again, there's, there's, there's been, it's pretty highly correlated that when we find these specific patterns that you're, once you dig into the business, it's, it's typically like a terrific business that's been around for a long time.

So let's talk about BCUS, which is your US large cap ETF, at a very high level, can you just kind of talk about what the fund is trying to achieve and accomplish?

Yep. So, with these tools that we've developed, what we do and what, what the engine does is rank every company in the investable universe that we're looking at. So for BCUS, it's large cap US companies. So we're ranking every company, let's call it roughly 5 billion or more in our investable universe based on the factors that we talked about, some fundamental and then some quantitative that we've developed internally. And we're ranking them. And then the model will tell us, here are the top 30 or so businesses, right now, according to kind of our data. And that's what will be expressed in ETF. And so we're looking to create this basket of structurally advantaged business models for our shareholders.

So my next question was going to be, what's the investable universe? So I've got, I've got that down. I've kind of two questions off of that, just out of curiosity. Have you looked at the, have you looked at trying to apply this to maybe the mid cap space? Have you had any success finding an edge there? We have. So, we're constantly looking at,

Other markets that we can apply this to. Mid cap for sure is, is on our radar and we have been looking at it. honestly the focus initially has just been to get the large cap space covered because obviously it's a really large market. We think there's a lot of opportunity in the US and really in the international. So our focus has been primarily on those two, but we have started to look at other markets. And again, the nice thing about the framework that we've developed over the years is you can apply it to a number of different markets. So it's not unique for just, the US large cap or, or international large cap. We feel like we'll ultimately be able to apply it

Across a number of different universes over time. Yeah, no, that's great. And one more thing about kind of looking at US large cap like that, it's a big universe. It's obviously a big marketplace. Do you ever start to see kind of flows and trends inside of your screens as you're ranking companies that might tilt a little bit more towards value or sometimes could potentially tilt more towards growth? Or are you primarily just seeing value in the portfolio? Does, can you talk about

That at all? Sure. I would say, we're kind of in that, in that sweet spot of you, you want like the quality businesses that grow, right? That's ultimately what we're searching for. So, if all of a sudden a stock gets hammered and it's trading at like 10 times earnings for us that, that our tool is probably not going to love that because there's probably something going on within that business for that asset to trade, to trade off to that extent. We're really looking for the companies that let's say have this historical growth engine. And when I say historical growth engine, it's actually a metric that we've kind of upgraded internally where we're looking at a number of rolling periods over time for a company to

So kind of piggybacking off of that sector exposure, do you allow the screen to kind of take you anywhere in terms of that sector industry exposure? Or do you have any kind of guardrails to say, hey, look, we only want to have, let's a max of, I'm making this up 50% exposure in consumer discretionary or in industrials or whatever it may be? Or do you kind of just let it run?

Yeah. honestly, we kind of let the tool run. Again, we've, we've spent years kind of developing this. And so we're really comfortable with the businesses that it is identifying. They're just sometimes they're just going to have a higher exposure to certain sectors. Industrials is kind of interesting, because it's almost like a hodgepodge of businesses. It's, if you think about industrials, it's like every company that doesn't have like a clearly defined sector kind of gets lumped into industrials. So if you look at ours in particular, like there isn't a ton of overlap, which again, just gives us more comfort that, it's okay to have, some level of concentration across sectors. So I would say

So you've, you've run your screen, you've got your 30 names, 30 or so names. How then are you kind of making decisions around waiting and doing portfolio waiting around those names?

Yep. So that's all determined by our engine. Again, we refresh the portfolio monthly. So there could be changes to, the constituents within the ETF on a monthly basis. But again, we're, we're relying on all of, the longer term data to help us kind of stack rank all of these businesses. But the ETFs are totally reliant on the tool that we've developed in terms of construction of the portfolio and sizing and everything.

Right. Yeah. And what does it end up being, I'm sure you get, a tear down in weights, but does it end up being fairly, I don't want to use the word equal weighted, but are there any massive divergence in terms of significant exposure at those rebalances, like one name getting 40% of the portfolio or 30% of the portfolio or is it, or is it fairly, handed out between all 30 constituents?

Yeah. I would say for the most part, it's, it's going to be fairly equal weight. Cause that's, that's the approach that has yielded the most interesting results through our, our research process. Having, significantly outsized positions while great when it works leads to enhance volatility. And so that's not something that, we're going to have in the portfolio. So, I would, I would, when you think about Mancreek and our, our ETFs, think about the position sizes being, the three B ish to four ish range. And that's, you could have some things that are working well, that get a little bit larger or a little smaller, but that's kind of the range that I would expect to see in the ETFs. I certainly wouldn't

Got it. And so you had mentioned you're, you're rerunning the screen and kind of rerunning the weights on a monthly basis, anything intramonth or just let everything run for the month?

Yeah. So, we're constantly working on the engine. So that's, that's kind of where we spend a decent amount of our time. So we're, we're constantly testing, trying to find new features, things that could improve the portfolio's performance. But the, the cadence of the ETF right now is for a refresh every month, even though we're, we're constantly working on it in the

Background. Got it. So looking at BCUS, you're sitting down with an advisor. He's got, he's got large cap exposure in a diversified model portfolio. Where are you kind of advising or recommending this advisor kind of allocate to BCUS and like, where would you put it?

Yeah. certainly kind of in that, that large cap bucket, almost straddling kind of like the growth and value plays. we, we kind of think of ourselves as a more efficient version of the market. Right. And so we certainly could, could be pretty flexible in terms of where, where we're placed in, in any portfolio. So let's, let's make a switch. Let's

Pivot. Let's go over to BCIL, which is your international large cap ETF. I'm going to make an assumption that it's a very similar fund to BCUS, but it's just using an international universe. Is that correct? Yeah. So the framework is exactly the same,

Right? We're collecting all of this data that's available to us and we're using our tools to determine, what's the right model or, weightings for all of the features that we've developed for the international markets as opposed to the U S markets, but same, same sort of framework involves, looking for, let's call it 30 or so terrific, structurally advantaged businesses internationally. And, I feel like the international markets kind of gets, they get a bad rap and have for, the last decade plus really because, the U S markets have, have outperformed significantly, right. As a whole, but when you actually start digging in, the, the top echelon of companies internationally are right up

So I would assume, again, I keep making assumptions on you that most of, uh, the international exposure, given the type of screen that you're running or coming out of those international developed type markets, are there any kind of country restrictions? Are you not looking at emerging markets at all?

So is, would that be correct? Yeah. So we're in the 22 developed, uh, economies. So, there's 23, we're obviously, we're not in the U S but we're in every, everywhere else. So Canada, Western Europe, uh, Japan, New Zealand, Australia, those markets would be the markets that we're focused on. Um, we wouldn't have an exposure to markets such as China or India or

Brazil at this point. So just thinking about like the international marketplace as a whole, do you think that there are certain situations or because of a certain company or country, rules or laws that might make some international companies in some cases, giving you an opportunity to find even more structurally advantageous opportunities?

Oh, for sure. that's the exciting part, right? So there are, there are certain markets where, uh, just being in that market from, from a geography perspective is a, is a strategic advantage. And so you'll have, you'll see that for sure where, they might have, 25, 30, 40% market share in that country, just because, that's where they're based. And that's the advantage that maybe the government has put in place for them or, or just because there's a language barrier, whatever, whatever the case may be. Um, these companies have, have developed this advantage, no different than kind of the U S companies that have developed their advantage, um, domestically, um, you see the same thing internationally. Um, I would say

We're finding in DC us. Yeah. So, you touched on it for briefly, but we're not making any predictions here, recommendations, but like given the disparity between how international markets have performed and how the U S has performed and how many standard deviations away from like the historical norm in terms of, the performance upkeep, do you think it's time for advisors to start thinking about international exposures to them? Because it's been a really tough go. A lot of them don't want to invest in it at all. I'm on the camp that now's probably the time to start looking international. Would you kind of agree

With that sentiment? Yeah. we love, we love our BCIL ETF. Like we think that's a really interesting place to look for these types of businesses. And again, um, you're right. They, they, they haven't received the attention, um, that their U S counterparts have for a number of years. Um, but they're still there. They're still, they're still growing. Uh, they still have their own modes and strategic and competitive advantages. And they continue to compound those edges over time. And if you're looking for the right types of businesses and assets that can generate and grow at, low to, uh, mid, teens over a long period of time, uh, regardless of the multiple. And you could argue that the multiples have compressed internationally. Um, you know,

Yeah, no, I would, I would agree with that. So both of your ETFs are rather new. You guys are, an entrepreneur driven, um, small business kind of two questions, like really what was the decision and how, how hard was the decision to kind of jump into the ETF space? There's a lot of funds. There's a lot of competition. And how are you thinking about, growing and marketing your funds over the next, 18 and 24 months?

Sure. So the, the main decision to, to make that jump into the ETF marketplace was really, um, the fact that what we feel what we're doing is unique and is not something that we saw in the marketplace. So, we also saw a marketplace that was growing, especially actively managed ETFs. So we looked at that as a compelling opportunity, um, just given that there's so much growth going on in the space, we thought we were bringing a unique concept to the marketplace and we found really good partners in exchange traded concepts who are our partner for our platform, right? So we, we work with ETC, um, to, to kind of launch, we work with ETC to launch BCUS and BCIL.

Well, speaking about taking a look, where can people learn more about you, the company and find information on BCUS and BCIL?

Sure. So if they want to start, um, just learning a little bit more about Bank Creek in general, they can go to our advisor site, bankreek.com. Um, you can learn a little bit more about our history. You can play with some of the data visualization tools that I mentioned earlier. Um, and if you want to learn more about our ETFs, you can go to bankreek.ets.com and learn more about BCUS, BCIL. You can see the holdings that we have. Um, and so you can, and read a little bit

More about our process online. Well, Andrew, thank you so much for spending some time with us. I hope to see you out on the conference circuit, I'm sure. But again, thanks for spending some time and appreciate you being with us. Really appreciate it, Brad. Thank you so much. Thank you.