抢在华尔街之前预判叙事的 ETF 先驱

Space is viewed as strategic high ground for militaries. Without space, your military is basically obsolete compared with the global superpowers that are out there. If you want to compete, and you don’t want to rely on other people, you have to build up your own space industry. That’s not easy.

We’ve got a very special guest today, Andrew Chanin. Andrew is one of the most interesting people I’ve talked to in a very long time. He’s so good at finding narratives before they appear in the mass market, before people figure them out themselves. He’s made a career for himself launching products that take advantage of that special ability of his. So, welcome to the show.

Thanks for having me. I appreciate the intro.

Of course. I kind of want to start by saying that when I was researching you, I realized very quickly that you’re sometimes too early to things, and it takes a while for stuff to play out. You’ve had a great track record figuring out and monetizing narratives, specifically by launching ETFs. I want to start with the first one that you launched. If I have this right, you launched HACK, basically the first cybersecurity ETF, back in 2014. It grew to some pretty great heights pretty quickly, and you were around 30 years old—not even 30 at the time.

I think I was about 29 when we launched that. That was actually not the first one I launched. However—

Sorry, I meant the first cybersecurity ETF.

That was the first cybersecurity ETF I was behind. We were the sponsors of HACK, and we brought it to market on November 14, 2014—almost exactly 2 weeks before the Sony breach happened, allegedly because North Korea was very upset with Sony Pictures over the movie The Interview.

That hack happened, and all of a sudden everyone realized, “Hey, cybersecurity might be something I want exposure to as an investor.” We had the ETF that was already there, and it was the only ETF in town if you wanted pure-play cybersecurity exposure.

1. Confessions Of An ETF Market Maker

Even before that, in November 2012, I created and sponsored the world’s first junior silver ETF. That was maybe even more to your point: one where we were early. I think at its high point, it may have raised up to about $6 billion in assets since way back when. Trying to figure out these early opportunities and give people diversified exposure has been something I’ve been trying to do for a very long time.

I want to hear a little bit about your approach. How do you find spaces in the market that are underserved? Or is that how you would even phrase what you do?

I think that’s definitely a goal. It’s not just about what’s not out there or what’s early. I had the fortune, early in my career, of being on the floor of the American Stock Exchange when ETFs were first taking off. I was there in 2007, right after graduating college, and was quickly promoted and moved upstairs, where I became a lead market maker for global and international equity ETFs.

I saw a lot of the innovations and the new thematic wave of products that were being launched. Even way back in the 2007 to 2010 range, people were saying, “All the ideas have been launched already.” Sure enough, there were still opportunities. We’re still seeing thematic ETFs launched today that are bringing in billions of dollars in assets, sometimes in record time, because they’re hyper-focused on a specific theme that people want exposure to.

Seeing the innovation and the ideas that were coming to market, and figuring out from our position which ones we thought were going to do well and which ones weren’t, gave us a pretty good track record at determining that before products would even launch. It let me know where innovation was coming from and where the puck was moving.

You had a gold ETF, then a gold miners ETF, and then a junior gold ETF. So I said to an ETF company, “Why don’t you launch a silver mining ETF?” People like precious metals, and sometimes they like the miners more because the miners are a beta play on the metal. The junior explorers are an even higher-beta play on that. When you look at gold and silver, silver tends to be the higher-beta play on gold. People want this high-beta exposure to precious metals, so why not a junior silver ETF? That was the reason that fund was developed back in 2012.

Really, it’s about looking at how people invest in themes, industries, and technologies. Being early is difficult because it’s hard to pick who the winners are going to be. Some of these players get gobbled up. Some of their technologies never see the light of day. Some of them lose out because they didn’t take the right path forward.

When I find a theme or industry that I think is in its early stages, and that I think people might want exposure to over the long term, I’m not saying, “I think it’s the MP3 ETF.” If that were the case, you would have launched the cassette tape ETF and then the CD ETF. What’s the theme there? Maybe it’s audio or music.

Figuring out what that longer-term theme is, and giving people diversified—in most cases, globally diversified—exposure to various companies in those themes is how I envision a lot of people who don’t necessarily have the time, energy, or focus to pick individual companies playing those themes.

I want to go back to the start because you said something about being an ETF market maker at the time, and I think that would probably be really interesting to a lot of people. What was that like? What does market making an ETF even look like?

I got to the American Stock Exchange right before there was no American Stock Exchange. The largest growing group at my company at the time was our ETF specialist trading group on the floor of the American Stock Exchange.

If you go back to 2007, when I graduated college and was thrown right onto the floor, I had the benefit and privilege of seeing global markets from the ground floor as the global financial crisis started happening. I remember in October 2017 looking to my much older boss, who had been on the floor in the 1980s when New York almost defaulted on its debt, and saying, “This is crazy. I’ve never seen anything like this.” When he turned back to me and said, “Neither have I,” I realized that this was probably a lot bigger than I was even giving it credit for. Sure enough, the global financial crisis rolled right through just a couple of months later.

For an ETF, there’s an entire arbitrage trade. A market maker is someone who’s willing to be there, buy at a certain price, and sell at a certain price throughout the entire trading day. With an ETF, you have the value of the fund, and then you have what it’s actually trading at.

As a lead market maker, which I was for numerous products for several years, if you could sell shares of the ETF in the marketplace for a higher price than it cost you to buy the actual underlying positions, you could lock in that spread. There was this arbitrage trade. At the end of the day, if you were short the ETF because you were selling shares of the ETF and buying the underlying shares in the basket, you would deliver your underlying shares of that fund, and they would give you shares of the ETF back. Now your position was flat, and that was really the trade.

With international and global equity ETFs, in many cases you’d be trading the ETF during the day while many of the underlying components weren’t trading because they were on foreign markets. The markets in Asia might not have opened yet, or the markets in Europe might have already closed. You tried to figure out where that spread was and where those underlying names might open the next day, when you’d be able to buy them.

2. Stop Picking Up Pennies: Read What Nobody Reads

That was really eye-opening and gave me this geopolitical, global macro perspective on markets. Having been the lead market maker for the first coal-mining ETF, as well as others, I saw that this idea of people wanting to get global exposure to specific themes was something I realized early on could be an opportunity to build a business around.

It’s interesting to hear you say that because I’ve seen this happen quite a few times in finance. People start off in the minutiae, then take a step back and think, “Why am I picking up pennies when I can see the trends?”

That’s a little bit of what I did in crypto as well. I started by quantitatively trading and doing a lot of cross-market arbitrage. Then you take a step back and say, “Wait a second. The entire industry is going up. This is actually changing the world.”

I’ll probably make a lot more money with a lot less effort in many ways if I look at the big picture, as opposed to looking at the minutiae. I’ve seen that some people love it. Some people are quantitative, and they love building these systems and looking at their P&L being 25% a year with a 3 Sharpe ratio. They love doing it that way.

But I think it’s sometimes a little more rewarding to step back and look at the big picture.

I mean, this podcast itself is a lot about both. It's about sitting back and entering into the megatrends when you see them coming, but then also being able to take advantage of all the crazy little inefficiencies in the market. That's kind of fun, that you went that way.

I remember my first internship happened to be at a Smith Barney branch. I remember the branch manager sat me down one day and told me his story of how he worked his way up into becoming a branch manager. He told me that there was all this retirement money for, specifically, hospital staff, and no one had really read through the tax code to take the time to figure out how to better build these accounts and go after this market.

What he did was read through all the documents around this. He took one of the individuals who helped write the code out to lunch and sat him down, and he was happy to go out for lunch and have, I think, a tuna salad or an egg salad sandwich. He was able to talk to him and ask him all these questions, and sure enough, he uncovered this overlooked area. He was able to build a career for himself.

I remember when I got into the ETF industry, no one wants to read a prospectus. However, that's what every single commercial for an ETF says: “Read the fund's prospectus. Talk to your financial advisor.” Unfortunately, many people don't do that. When you read through them, you get a really good understanding of the companies that are involved, the roles, the service providers, and where you might be able to carve out an opportunity.

For me, that was taking this idea of, “Okay, do the stuff that no one wants to do. Read these documents that people don't want to read.” I guess AI is probably synthesizing a lot of that and making it easier for people to extract the real value and information in many cases. But it was really about understanding these products, figuring out the things I liked about how certain companies built theirs, and the things that I didn't like and wouldn't want a fund of mine to have.

I started off giving ideas to existing issuers because I thought, “I want to trade these ETFs, and they're not out there. If someone makes these, I could trade them.” Eventually, one of the principals of Global X told me, “Why do you keep giving us your ideas? Try launching your own.” That's how I jumped from being a trader to building products.

I think what's kind of interesting there is also thinking about how most people, including myself sometimes, get very lazy when it comes to the financial markets. We like to take shortcuts. Today, for example, I'll just be honest with you guys: I bought DRAM, and I'm like, “I actually have never read the prospectus. I know nothing about this ETF—literally nothing about it.” From the business side, how would you differentiate a good ETF from a bad ETF if they're covering the same sector?

Yeah, no, it's tough to say. I think a lot of it is personal opinion. Years ago, I was invited to speak at a conference in Vegas, and I did an entire presentation on the things that you might not know about the ETF that you're investing in. We looked at a gold ETF—an actual gold ETF—and went through the various risk disclosures and things like that.

For me, when we wanted to launch the first pure-play space ETF, we could have picked any index. We could have gone active, or we could have gone passive. There were a lot of options. People don't necessarily know me, my brands, or anything like that as being stock pickers, even though I think I might be pretty decent at it. For me, it was about using a passive strategy, finding an index that we believed in, and really understanding and working through the methodology to say, “Hey, if I wanted to invest in the space industry, is this portfolio going to look like something that I would hopefully expect to have if I invest in a space ETF?”

Additionally, if you're looking at existing ETFs that are already out there and you say, “Okay, well, there's already aerospace and defense,” if your space ETF has the same holdings, the same overlap, and the same correlation, are you really providing anything to the marketplace? To me, if the answer to any of those questions is no, I'm going to pass on that idea, or I'm going to wait until I can find a different way of doing it where you're actually providing new exposure. Otherwise, you're not really providing anything for investors that they can already get.

As a smaller, independent firm, having conviction in those methodologies, believing that those methodologies are built to capture what I think that industry is going to look like in the future, and being able to evolve to fit that industry as well is really important to me. That's the credibility that we have. If we're just slapping a fancy name on something that people could already get exposure to, I don't want to have a part in that.

How did you—I'm curious. You started up PureFunds, right? That ended up a little bit messy. You actually got into a fight with NASDAQ, if I got that right.

3. The NASDAQ Lawsuit That Cost Him A $10B Business

No, no, no. NASDAQ and I are friends to this day. NASDAQ was one of my partners, and there is a very lengthy judgment in the Southern District of New York for anyone who's interested in looking at that.

NASDAQ and my first company, PureFunds, were on the same side of the table. NASDAQ had actually acquired my original partner, the International Securities Exchange, which had created this group, ISE ETF Ventures. They were an index company that decided, “Hey, being an index provider, you can only make so many basis points. But if we actually want to take a venture angle, get a little bit more stake, and put some money behind these ideas that we believe in, as opposed to just licensing an index, there could be a bigger opportunity.”

We had first approached them with a couple of ideas, one of them being the Junior Silver ETF, which became the first ETF that we sponsored. We went to a white-label provider—essentially, someone who tells you, “Bring your ideas, bring all the money, bring the indexes, and do the marketing. Maybe we'll do some of the hard stuff for you.” All these platforms are different, but they'll be your middle and back office, and you can promote it, fund it, and whatnot.

You can see in that judgment what the judge believed occurred. Unfortunately, we were never able to get those funds back—not necessarily because of the judgment, but just because of the way things transpired. So, from that experience, I said, “Hey, if I'm going to continue doing this and bringing products and ideas to market, we need to own and operate our own infrastructure.”

That's how Procure was built. We were never going to put ourselves in a position where we created these funds, put all this effort into them, took the financial risk behind them, and let someone just take them away from us. Fortunately, the judge ruled in our favor, but I had to start from scratch.

So, I want to talk a little bit about where you are now with Procure. You've launched this UFO ETF, by the way. Great ticker.

Thank you.

UFO ETF. What the hell is the UFO ETF?

This was one of those ideas where I figured that people were eventually going to want to invest in the space industry. It wasn't until later in my career that I thought this industry was really starting to shape up and hit some inflection points that were making it turn the corner toward its next iterations.

Some of the catalysts we were looking at were things like reusable rockets—the ability to significantly reduce the cost of accessing space. There was also a faster cadence between launches because you're not rebuilding a brand-new spacecraft every time you want to launch a rocket into space. Vertical landing wasn't necessarily as important, but reusability and the significant reduction in the cost of accessing space were.

When you think about it, it's great for SpaceX, right? They're able to bring in customers and help them send things to space. They're able to utilize their own capabilities to launch satellites for their Starlink constellations and other projects. But what does that do for the space economy? It opens it up to significantly more companies that would have never thought to consider what they might be able to do if they could access space.

Making these ideas and innovations potentially economically feasible was happening for the first time in the space industry. All of a sudden, you could be someone who tests and builds things in your own garage, and for a couple hundred thousand dollars or a little over $1 million, you might be able to get a rideshare on a payload to space to test your product and see if it actually works.

That was truly revolutionary. Being able to bridge the gap between the cost and the ability to bring things into outer space was a transformational change for the space industry.

And so, that was occurring.

Okay, can I ask you something before you go on? I need to understand: You were in cybersecurity before, and that was the other big ETF that you launched. Tell me, how do you uncover these things? Are you just reading about space and it struck you, or how are these ideas even popping into your head?

4. What Is The UFO ETF?

So, it’s a mix. Junior silver was one that I was interested in when the global financial crisis happened. I basically went all cash that October I was talking about. I started figuring out where I would feel comfortable putting money. Precious metals was something I really started digging into, and that led to my thinking of this idea of a junior silver ETF.

Cybersecurity was actually something that my colleagues at the International Securities Exchange said, “Hey, we’re thinking about this concept. What do you think?” And I said, “Yeah, let’s go ahead and do this.” I also came up with the concept for the first AI ETF. We brought it out under the ticker; eventually, we changed it to BIGD. It was big data and analytics.

Your ticker is BIGD.

It was, and we had some great T-shirts. People loved it, but they didn’t really understand the theme at that time.

Yeah.

That was 2015, I believe, when we brought this ticker out, and people didn’t care as much about that one as the first digital mobile payments ETF, IPAY, that we brought out at the same time. That one did take off. Later on, that was something that I thought: “Hey, big data and AI—all these things are transformational technologies. Own the companies that have the data and are doing things to better understand and extract value.” That was the idea.

That one, to your point, was maybe before people were ready for the idea, but looking back, I think the index probably did pretty darn well. Someone came to us who was an expert in video games. They covered the video game market as an analyst, and that was one they brought to us because they saw, “Hey, this company’s doing these innovative ideas. Maybe this is something that kind of fits into what they’re offering.” So, we ended up doing the first fintech, health tech, video game, and drone funds, and a whole slew of them.

It wasn’t just cybersecurity. It was really, “Hey, what are these early-stage ideas that I think people want exposure to?” Especially, there might not be a ton of companies here in the U.S., but once you look globally, there might be some more opportunities. I preferred looking at pure-play opportunities that I could bring, because if I called a fund something, I wanted it to have these types of exposures. The drone one was a little bit broader because finding pure-play drone companies was very tough back in 2016, so we had to build out an entire strategy around it, which our partners did.

Space was one of these ideas, and knowing how difficult of an industry it is, and how there are large and small companies from not just the U.S. but around the world, I thought, “Okay, how do you build out the strategy?” For us, when we found the index that we ultimately licensed for UFO, it was co-developed by the former director of research at the Space Foundation. While he was there, he helped build the model they used to calculate the size and growth of the global space economy, which they published in The Space Report every year.

He helped build that model. While he was there, he said, “Hey, let’s build an index. Let’s pick these publicly traded companies, put them in an index, and maybe we can license this to a financial firm.” And they said, “Great. Go ahead.” Then they said, “Wait, we’re supposed to be unbiased and a nonprofit. So, how are we going to have an index that chooses companies that go into it, that we license to the financial industry for people to invest in? You know what? You go take that and do whatever you want with it.”

That was the iteration of the underlying index that our fund licensed. But for us, beyond just figuring out the universe and the types of companies that are space companies, we wanted there to be a focus on pure-play space. So, if you look at it, at least 80% of the fund at each rebalance is focused on companies that generate at least 50% of their revenues from space. When you look at it, a lot of those pure-play names are closer to 90% to 100% of revenues from space.

So, that’s kind of it. It’s one thing to come up with an idea; it’s another to figure out what index you think captures that idea, or where that puck is moving, that ultimately has long-term staying power and that people might want to be invested in—not just for short-term potential catalysts or things like that, but hopefully for longer-term opportunities as well.

What do you think about the current state of the market post-SpaceX IPO? Is SpaceX really the main game in town now, or are you still seeing that? I mean, you look at, for example, all of the other space stocks. They ran up a lot heading into the SpaceX IPO, and then once SpaceX launched, a ton of these companies were down a lot.

5. The First Cyber ETF — Two Weeks Before The Sony Hack

Yeah, even SpaceX itself. There was a lot of excitement in the first couple of days, and now it’s trading back down to where the first trades were, closer to the IPO price, depending on the day you’re looking at it. But you look at that and say, “Okay, that’s probably healthy,” right? The market had run up significantly.

Really, looking at the end of December, when the rumor came out that SpaceX might IPO, you had all the Reddit traders and thought leaders covering space and other industries saying, “Hey, space is this next hot industry. We need to pile in and find some potential space proxies or something like that.” There were even ETF companies that would put private shares of SpaceX via an SPV—not even directly, but through an SPV—into the fund.

I believe those funds still hold the SPV. It’s a publicly traded name now. Our fund, UFO, owns it; we bought it after the IPO occurred. But we hold it outright: The fund owns shares of SpaceX. We don’t own an illiquid SPV that’s charging high fees just to still have this exposure even after it’s already IPO’d. It’s kind of wild, but SpaceX drew a lot of excitement.

I think the excitement and attention were absolutely deserved. This is a truly transformational company. It’s pushing other companies to do difficult things and try to compete, and it’s also driving down the cost of launch. It’s even prompting foreign companies to compete. I don’t know if you just heard, but just the other day, China announced that it had a successful vertical landing and catch of one of its craft’s stages.

So, this company has done so much to open up access to space that the attention was absolutely deserved. Now, that’s a publicly traded company. Just like other publicly traded companies, people look at earnings and revenues, and they try to look at comps to other companies. Is something overvalued? Is it undervalued? Does the multiple make sense? They play the market-cap game. Does this deserve to be 2 trillion, 1.75 trillion, 1 trillion, or 3 trillion? They look at these earnings reports and make these decisions, and more information has to come out.

6. Is SpaceX The Only Game In Town Now?

So, while I believe that SpaceX is, at this moment in time, probably the biggest, most important player in the space industry, as far as the milestones that they’ve hit and the customers that they serve—it’s governments, militaries, commercial customers, and themselves in many cases as well—they’re not the only show in town. There are other companies fulfilling other parts of the market.

There are some strategies where people are buying SpaceX, and they’re buying the companies that SpaceX works with, partners with, and that supply it. But then you also think, well, SpaceX loves to vertically integrate. Elon loves to vertically integrate. If you’re basing it on SpaceX and the companies that it uses, are they going to look to replace them and build out their own solution set, or maybe acquire them if the price is right?

Yeah. I mean, could he buy them out, although he doesn’t love to do that.

Exactly, unless the price was right or reasonable enough. So, there are all different ways that people are looking at space, but just from looking at the postmortem after the IPO, space seems like it was overheated and has now sold off. But space is still a very real industry.

One of the other factors that we looked at, beyond just the significant reduction in the cost of accessing space being a potential driver, was the militarization of space. That’s been this major wave that we’re seeing. We’re seeing governments…

We're seeing militaries. Across the board, space is viewed as strategic high ground for militaries at this moment and potentially, and likely, moving forward. Without space, your military is basically obsolete compared to the global superpowers that are out there. If you want to compete, if you don't want to be relying on other people, you have to build up your own space industry.

That's not easy, so you have to be super selective in who you ally with. If you're Europe, Europe is kind of going in on it based on the European Space Agency, the ESA. In the US, space has been collaborative, but we also don't necessarily want to rely on certain stuff out of Russia. We saw the buildup of the Russia-Ukraine conflict. Space was really front and center, whether you noticed it or not.

I mean, the first talks before the invasion happened were about Maxar satellite imagery showing the buildup of troops and supplies on the Russia-Ukraine border. Then it was jamming of satellites. Then it was Elon providing Starlink satellites for communications. It was Russia banning engine-part exports. It was Russia taking hostage, at the Baikonur launch base in Kazakhstan, OneWeb satellites, which were significantly owned by the British government.

All of a sudden, these major decisions—these long-term decisions, because space is a long-term industry—had to be made. How are we as a country, how are we as a military, how am I as a company, going to figure out how to move forward? We're seeing all these things now being laid out, and we have this new space race 2.0.

We have 2 Space Race 2.0s. One is a race for low Earth orbit, because the more things we send into low Earth orbit, the more crowded it's going to be. The ability to get approvals in the future to send things into low Earth orbit might become more difficult, which could drive demand forward for launch.

Are there current international rules for that?

The main thing that we look at here in the US is the FCC giving approvals for satellite constellations and things like that. One of the important things that's probably pulling this demand forward is that they'll essentially approve your satellites, but you have to launch about half of them within the first couple of years of that approval, or else potentially forego all your future satellites. Right now, that's something that Project Kuiper and Amazon are significantly battling with.

7. The Militarization Of Space & The New Space Race

For them, they need to get these satellites up or potentially lose their ability to launch the full constellation that they have envisioned. The FCC might say, “Hey, it is important, and we want to have competition here. We don't want Starlink to win the whole game or a couple of companies to win it all. Maybe we'll provide some flexibility,” but there's no guarantee that they'll do it for them. There's no guarantee that they'll do it for the next player.

Getting things into space now is really important because it might be more difficult in the future to get that FCC approval to get stuff into low Earth orbit. The other is the race among nations. Everyone wants to be the global space superpower.

Getting to the moon is important. Having orbiting space stations is important. Having your own launch capabilities is important. If you're not there, there's a good chance that you could get elbowed out. There's this race to put your infrastructure in space, to build it out, to have a presence with legitimate technology that actually works—not just throwing things into space just to have something in space.

There is this new space race 2.0, which isn't like the early days of the space race. That was more of a vanity project to say, “Oh, yeah, we got someone to the moon. Oh, yeah, we launched a satellite.” These will have real ramifications, and the winners of these next couple of decades could potentially put themselves in a place where they are leaders for multiple decades to come because of that.

I see, by the way, you've got a lot of space paraphernalia behind you, which is kind of cool. You've got a little astronaut. If you're watching this on video, it's pretty fun stuff.

That makes a ton of sense. It's funny—you go back to why we cared about space before, and everyone's reaction to it is, “Why is the government wasting money on this?” You'd always point out, “Well, we invented so much, and there were byproducts that impacted the civilian sector,” but the actual action itself wasn't impacting the world. It was sort of the byproducts that were.

Today, what you're getting is genuine change because of what we're operating in space. I quite literally just bought a Starlink. It's helping my life, and the reason it's helping my life is because I record. I'm now a media creator, and if I'm traveling for a conference, for fun, or whatever else, I still have to get on my computer and record.

I'll tell you this: If you're in Europe, the internet is terrible, no matter where you are. It doesn't matter if you're staying in a 5-star hotel. So I needed to get a Starlink. It's changing my life. I'm spending money on it. It's going to be interesting to see how things impact our world—how space actually impacts our world.

I'm also a happy Starlink customer. I've seen these benefits firsthand. When our power got knocked out, our internet got knocked out for longer during the July 4th storms in the Tri-State Area, having Starlink allowed me to stay connected.

Your internet got knocked out during the July 4th storms? Seriously?

From July 4th until, I think, Tuesday or Wednesday. I was operating—that's third-world—and thanks to space, Starlink, and SpaceX, I was able to stay connected and not have it affect my job.

Oh, that's amazing. I haven't actually opened mine yet because I just got it 2 days ago, but I'm excited to get it set up and get going. It's pretty fun.

I want to talk a little bit about a big problem that people have been talking about, including myself on this podcast: How are passive funds, public funds, being impacted by the fact that companies are staying private so much longer? SpaceX goes public at $1.5 trillion. If you go back 10 or 15 years, ETFs would probably have had more access to more companies that are working on world-changing technologies. Now so many companies are staying private. What do you make of that? Is that going to hurt the ETF business?

I don't necessarily think it hurts so much. Does it hurt potential returns that investors might get if they're accessing companies after their market caps are higher and maybe there's not as much percentage room for growth? It depends on the theme. It depends on the strategy.

By no means do I think that these companies staying private is an ETF killer. I think it's good that there are more avenues for companies, that they don't have to go public, that staying private longer could be an option, and that staying private forever can be an option. You still have some very large private, family-owned companies throughout the world as well, and they're still very successful. People can't get access to them, and I don't think that everyone necessarily needs access to private companies.

By the time that you're able to get that access, maybe you've already missed a lot of that value creation as well. ETFs weren't necessarily initially created to get access to earlier-stage companies. The advent came out of the financial crisis in the '80s, and there were a lot of issues with mutual funds. People said, “How do we create a different type of vehicle that might not have the same issue where everyone is banging the close across an entire index or entire industry?”

Mutual funds give you the closing price, so this was intraday liquidity. Ultimately, one of the great things in my mind is that ETFs have been able to provide new access and exposure for investors that haven't previously been able to. Because of that, we've seen numerous iterations upon iterations of ETFs providing different exposures.

This was even almost a decade ago, or maybe even more at this point, but currency-hedged ETFs became a thing, and that was really novel. Then there were all the leveraged ETFs and the leveraged-up and leveraged-down products. Now you've got single-stock leveraged ETFs, buffered strategies, and so many different types of vehicles—some that were previously set up as structured products, where that was the only way you'd get those exposures.

8. Why Private Markets Are Breaking The ETF Model

Now that's not the case. ETFs are providing so many exposures. It's not shocking to see that they're starting to provide exposure to private companies as well. Is that good or bad? Tough to say. Should everyone own private companies? Probably not. Do people want to? Yeah, that's why these ETFs are being created.

People need to understand the fees that come along with owning an SPV, the liquidity, and the fact that they could still be illiquid after the company that you're trying to get exposure to goes public, because the fund can't get out of that SPV until a lockup window is over.

It is moving in that direction. We're seeing the tokenization of financial markets and potentially ETFs in other areas as well. That's how ETFs have always been an innovative product, and we're continuing to see more and more layers.

At a certain point, might that go too far? Possibly. But are we there yet? Hopefully not.

Actually, are you looking at that? Are you looking at tokenization?

We've been approached by companies that potentially may want to tokenize different things that we're doing. But we're looking not necessarily at what we have now. We're working on a bunch of things in stealth mode that we're really excited about and that we think could be transformational to all different areas of markets and whatnot.

I think you have to look at tokenization because there are people who want it. Certainly, AML and KYC and those things are still very important.

Those words give me so much agita, man.

They're ridiculously important. Coming from the traditional world, that was your entire life, for better or for worse. All the LPs that used to come into our funds—it was a whole thing. But that's good.

I want to talk about what you view as next because you've been good at getting into things early. Outside of space, are there any themes coming up that really interest you?

My problem is that if I say something, people like to take my ideas. There's been a long list of people who have seen products that I've launched that have been successful, and they create the copycats. Even when we were first filing for our first products, people were looking at our filings and saying, “Hey, can we leapfrog them and get approval before them?” They would look at taking these ideas, too.

One of the downsides of being in the ETF industry is that it's hypercompetitive. It wouldn't be a multitrillion-dollar global industry if it weren't competitive. I believe there is still white space. I believe that my company has the ability to participate in that white space and hopefully launch one of the most transformational products that might hit the ETF market in years.

Everything takes a lot of work, time, parties, and we'll see. But we're absolutely cooking up some stuff that I'm obsessed with, and I'm looking forward to seeing if we can get it to see the light of day.

I'm excited. I guess we'll have to get you back on the podcast at some point.

I cannot wait.

Well, you heard it here first. The ProcureAM guys are cooking up something awesome. Andrew, this was great.

I appreciate it. We've expanded way beyond just ETFs as a company. We also do consulting and financial IP, and it's been eye-opening. We get to work with early-stage private space and defense-tech companies.

I think that's one of the most important areas of our economy right now. I would love to see something like the Jumpstart Our Business Startups Act and Opportunity Zones. I don't need to be the one who leads it; I'd be happy to if any politicians want to reach out to us after the show. But if we could create something similar to Opportunity Zones to encourage U.S. investors and companies to invest in early-stage defense tech, deep tech, space, national defense, and national security—things that have a real, lasting impact on safety and American life today—I think that would be one of the greatest policies our government could put forward.

There are a lot of opportunities to help America put itself in an even better place than it is right now. Some of these policies could be implemented very easily. We're happy not just to be an ETF issuer. We have these other affiliate companies that are doing some really exciting things, and I'm proud of them.

That's actually really interesting. Policies that are similar to Opportunity Zones, designed to encourage investment in burgeoning U.S. industries, make a lot of sense. You see Trump now carving out different industries that he really wants investment in, but he's not cluing in your average investor, nor are these opportunities available to everyone in the way that Opportunity Zones are.

He's funding nuclear reactors now. He's saying, “We need to invest more in drone tech.” He basically went to the hyperscalers and said, “If you're going to build data centers, you also have to build the power supply for those data centers.”

These are great developments. The government is getting more involved in the markets almost every day, and we're seeing this. I don't want to say it's picking winners, but it's definitely helping certain companies out. For example, Intel is a huge beneficiary of Trump's policies.

It makes sense, right? These aren't necessarily bad things. I think people hear “the government meddling in the markets,” and if you lean toward the more conservative side of the spectrum, you might think that's bad. But sometimes, for national security reasons, it's also very important.

I think we learned that with the offshoring of manufacturing. If you just let the free market go, then it's economically good, but it could actually be poor socially in the long term—and not just socially. It could also end up being economically poor if your competitors get choke points on you, which is what China did. That's something I've never heard before.

Exactly. We don't need another Solyndra, where the government is picking companies and throwing money at them, and sometimes it's not necessarily going to the right companies for all the wrong reasons.

But if you're incentivizing investors to say, “Put your money up, and you might get some more upside if your company's successful because you've been creating things that will better protect our civilization, our economy, our country, and our safety and security,” then to me, those things need to be celebrated more.

Being a defense company doesn't mean that you're doing bad things. You might be helping save lives. These areas should have a priority, and there are definitely levers that could be pulled that might get people to say, “I might not create this better nuclear plant, but I'm willing to take that risk. I'm willing to do some of these harder things that would benefit our company because they're going to provide these incentives, and we all win if they're successful.”

There are tremendous opportunities for things like that. We also get to see some really cool things in the early stages that are being developed in small labs across the country, like propellantless propulsion. If you could successfully do that, how far could that leapfrog the space economy?

If all of a sudden you have all these different technologies that people aren't even really aware of—technologies that people are working on, sometimes even in garages and small operations—then, if any of them become successful, you need to expand your imagination of what the space industry can become and what other industries can become.

I think that's even more exciting than the work we do bringing out ETFs. Some of these projects that we work on with entrepreneurs and innovators are among the cooler things that having a successful career in ETFs has opened up opportunities for us to get involved in as well.

That's awesome. So if somebody's building something in their garage, they can call you.

Yeah.

All right. Let's get it done. If any of the listeners out there are building something interesting, reach out to Andrew. Andrew, this was a pleasure. Thank you so much for coming on the 1000x podcast. I think this is going to be a banger.

I really appreciate it. This was a blast. We could spend hours on this. I had a lot of fun. I love the format, and hopefully we can do this again soon.

Nothing said on the ThousandX podcast is a recommendation to buy or sell any investments or products. This podcast is for informational purposes only, and the views expressed by anyone on the show are solely their opinions, not financial advice or necessarily the views of 1KX Media. Our hosts, guests, and the 1KX team may hold positions in the company's funds or projects discussed.