August 17, 2025 • 38 mins
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
So talk me through sort of the awareness campaign
and talk me through how do youget somebody to consider this
over a path of SPY.
Speaker 2 (00:07):
I'm talking to you from Boston, where I live right
now, and I think of the whalewatching boats, right, and you
know, when there's a whale onone side of the boat, everybody
runs to that side of the shipand the ship tilts to that side
right.
That's kind of what large value, large dividend paying
strategies are.
The boat will tip towards thosesectors generating lots of
yield REITs, utilities and soforth.
(00:29):
This whale boat, kvle, isstable in the water, right.
It's generating its yield as anoptimization input.
Right, so it's selecting thetop dividend paying companies.
Speaker 1 (00:51):
So it's selecting the top dividend paying companies,
but it's maintaining diverse,diverse, diverse sector exposure
because it's optimized versusthe S&P 500.
This should be a goodconversation with Kevin, or
about some interestingundiscovered opportunities,
which I think there are plentyof, by the way, especially when
it comes to the value style ofinvesting.
We'll talk about that.
Talk about KVLE, their fund.
(01:11):
If you want to engage duringthis roughly 30, 40-minute
conversation, as we're live,don't hesitate to post whatever
comments or questions you haveon whatever platforms you're on.
I can see it, we'll bring it up.
I've kept on teasing that nextweek is going to be a big week.
I've got a big new hire coming.
She's going to be helping a loton doing these media podcasts,
live streams and hopefullyelevate Lead Lag Media to the
(01:32):
next level as we continue togrow and the team expands.
Not an easy thing to managewhen you're going through a lot
of growth, but certainly a goodproblem to have.
So, with all that said, my nameis Michael Guy, a publisher of
the Lead Lag Report.
Joining me here is Mr Kevin Orrof Craneshares.
Kevin, I think first time youand I are really chatting, so
introduce yourself to theaudience, to me.
(01:54):
Who are you?
What's your background?
Have you done throughout yourcareer.
What do you do now atCraneshares?
Speaker 2 (01:57):
Yeah, thanks.
I've been with the firm aboutalmost four years now.
I head up strategicpartnerships, which is a
function that oversees thesenior most relationships with
the firm, both on thedistribution and business side,
as well as some of thesub-advisors and investments
investors.
We have portfolio managers ofsome of the funds we have.
Prior to that, I was startingmy career at Putnam Investments
(02:21):
where I spent most of my career,cut my teeth on the ETF space
with an ETF strategist, workedfor Thomas H Lee, the private
equity manager, for a few years,built out a quantitative ETF
strategist business for Tom inNew York, got introduced to John
Crane when I was with the ETFstrategist, when I was a
(02:43):
consumer of ETFs and got to knowthe CraneShares story, very
excited about what they werebuilding at CraneShares, the
team they put together.
We bought the business from Toma few years back and when that
happened, after that transaction, I was able to finally join
(03:04):
with CraneShares and it's agreat firm.
We've got some reallyinteresting strategies.
Speaker 1 (03:08):
Yeah, and your product lineup has really
expanded quite a bit.
I think most investors know youfor K-Web, but you've got a
whole suite of things now thatobviously go beyond China.
So maybe just start kind ofjust big picture as far as
CraneShares, some of theofferings, some of the direction
about the company and thenwe're going to get into value
investment.
Speaker 2 (03:27):
Yeah, yeah, yeah, yeah, we've got an interesting
array.
We're known the flagshipproduct, as you mentioned, k-web
, which is one of the largestnot the largest China-focused
ETFs on the internet side of thetechnology side 6.5, actually
it's a $7 billion ETF right now.
So 6.5, actually it's a $7billion ETF right now.
So we kind of have three legsto the stool in terms of our
product suite the China-focusedproducts led by K-Web, other
(03:51):
emerging markets and Chinathematic products.
In that section we also have asuite of very compelling climate
investing products first tomarket with Carbon Futures ETFs
and I think my colleague LukeOliver, you've had on the
program a few times.
And the third leg of the stoolwhich is growing rapidly is our
liquid alts group.
(04:12):
We have managed futures liquidPE supervised by man group.
I'll throw KVLE into thatbucket.
It's US equity but itdifferentiates itself in
numerous ways by providing yieldwith keeping a core S&P 500
construct.
Speaker 1 (04:32):
So yeah, we think of KVLE is the Crane Shares Value
Line Dynamic Dividend Equity ETFticker KVLE, yeah yeah, and I
think I want to focus on theword dynamic, because I always
say it means active, right, solet's talk about what dynamic
means in the context ofdeveloping a product.
Speaker 2 (04:53):
Yeah.
So it's not static, it's notjust buy and hold.
We've partnered with ValueLinein the product.
It'll have a five-year trackcoming up in November.
It scores very highly in allthe Morningstar metrics.
Value line has been around sincethe 1930s.
(05:13):
Was established in 1931,founded by Arnold Bernhardt.
Arnold was at the time was ananalyst at Moody's.
I didn't realize Moody's wasaround back then.
Um and um after the marketcrash of 29, he said look, the
industry is failing us, we needa better way of valuing uh,
(05:35):
these companies.
So he broke off and startedvalue line.
I remember um early in mycareer when I worked at Putnam
investments um back in themid-90s.
You walk around the floor andyou see all the portfolio
managers' offices and you'd seethese huge, huge binders of
value line reports like a footthick.
(05:55):
It's sort of a staple.
It was a staple old line stockresearch firm.
The current stock researchranking systems that we use in
the ETF were established in 1965, the timeliness rankings and
the safety rankings and we'rethe only product in the
(06:15):
marketplace today that leveragesboth these iconic value-aligned
stock ranking systems.
So we incorporate them into thedecision-making process of the
product.
It's a model.
It's quantitative andsystematic.
I'll get into that in a littlebit.
But we're excited.
We're very excited about theproduct.
There's only one other productin the marketplace that carries
(06:36):
the value line name in theproduct and they only use
portions of the value lineresearch.
We get to use the best of allof their content in designing
the strategy.
So that's kind of dynamic.
It's active, it's rebalancedevery month.
So every month the indexconstituents get rebalanced.
(06:59):
Value line provides us with theindex weightings.
We distribute dividends on aquarterly basis and it's
designed to be core-like withamplified yield right.
So we don't want many sort ofhigher-yielding dividend
products in the marketplacequality products in the
marketplace yielding dividendproducts in the marketplace.
(07:22):
Quality products in themarketplace generate their yield
by overweighting or going tothe sectors of the economy where
the yield is coming from.
In those cases you get kind oflopsided portfolios.
You get sort of heavier weightsin the utilities and REITs and
so forth, and that's OK.
But you got to know what you'regetting.
They're more volatile andthat's okay, but you got to know
(07:43):
what you're getting.
They're more volatile.
This product, by design, isgoing to be diversified across
sectors.
In fact it's very muchcore-like.
We kind of sometimes call itthe new core, meaning that it's
providing you with S&P 500-likeexposures at the sector level,
(08:08):
but we're designed to providemuch, much more yield than the
S&P 500-like exposures at thesector level, but we're designed
to provide much, much moreyield than the S&P 500.
So I just looked before we cameon the podcast, and the current
30-day SEC yield for theproduct, for the ETF, is 2.65.
That's versus a 1.11 yield onthe S&P 500.
So we're giving you coreS&P-like exposure in terms of
exposure to the sectors andindustries, with an emphasis on
(08:31):
yield.
Speaker 1 (08:32):
You mentioned quantitative.
What goes into some of thosemetrics on the quant side?
Speaker 2 (08:36):
Yeah, so a couple of things.
So we use an optimization toolto help us identify the
constituents of the portfolio.
I'll start with the value line.
So I call them iconic, butthey've been around since the
60s ranking systems, stockresearch, ranking systems,
timeliness and safety.
And what Value Line does is itranks the largest 1,600 or 1,650
(09:02):
stocks in North America andeach one of those stock is
ranked from one to five, both onthe timeliness scale and the
safety scale.
What we do is we basically kickout any ADRs.
Any company that's less than abillion in market cap gets
kicked out any Canadian names.
(09:23):
It's truly a larger cap USequity universe of holdings and
each one of these names has atimeliness and safety rank from
one to five, one being the best.
So the timeliness ranksbasically tell you.
It's a ranking system thatattempts to identify, on a
(09:43):
relative basis, which stocks aregoing to outperform each other
on a six to 12 month basis.
It's looking at earningsrevisions, it's looking at price
momentum.
So every one of the 1600 namesin the universe gets ranked and
the top 100 are in the rank ones, and so on and so forth, to the
number five rank andhistorically rank one stocks
(10:07):
have outperformed, rank two andso forth.
On the safety side, safety ismore of a measure of financial
strength of a company.
So those stocks that are rankedone on the safety scale are
those that typically weather thestorms better, right, they've
got strong balance sheets,they've got price stability.
And each one of these rankingsystems have their own detail
(10:27):
factors that generate theseranks and these are proprietary
to value line.
So the product will take these1600 names.
We emphasize the ranks ones andtwos.
Each, each, each rank gets analpha score.
So we're basically everysecurity in the system in the
universe is ranked.
(10:48):
And then what we do is we alsolook at we want to make sure
that we're only focusing on thetop 25th percentile of dividend
yield in the universe.
So, and we do that and that'san input into the optimization
tool.
So all these factors are inputinto the optimization tool.
We target a tracking error oractive risk of around 450 to 500
(11:12):
basis points versus the S&P 500.
No one name will have more than1.5% it's weighting in the S&P
500.
So if we hold a name in theportfolio that's in the S&P 500,
it'll never be more than 1.5%greater than the weight in the
S&P 500.
There are many names in the S&P500 that are not in the
(11:33):
portfolio.
The portfolio is roughly 80names-ish 80 to 90 names and it
basically generates adiversified portfolio, very
similar sector weightings to theS&P 500, with greater yield.
Right now the portfolio hasabout close to 30% in tech.
You typically don't see that ina high yielding quality
(11:57):
portfolio, but one of thebenefits of the strategy is that
it gives you exposure to someof these sectors that aren't
typically included in thetraditional sort of large value,
large yielding portfolios.
Speaker 1 (12:14):
How much does the quantitative aspect of it result
in portfolio changes?
And when you say it's meant tobe core, is it a function of it
having all the stocks in, say,the S&P 500, or is it being
selective or just overweightingand underweighting?
I mean, talk me through thereplication process there.
Speaker 2 (12:30):
Yeah, yeah, yeah, so the turnovers are.
Every month the indexconstituents are reconstituted.
It has about an 80% turnover,so it's not dramatic in terms of
the shifts.
It's more smoother, sort of acalmer allocation shift over
time.
Yeah, so that's basically again, the quantitative aspects are
(12:53):
the factors within the valueline sectors.
Speaker 1 (12:56):
Okay, interesting.
So obviously it's meant to becore.
The challenge, as you know, ishow do you pry people away from
their existing S&P 500 coreholdings, especially when the
gains have been so substantial?
So talk me through sort of theawareness campaign and talk me
through how do you get somebodyto consider this over a path of
SPY.
Speaker 2 (13:16):
Yeah, yeah, no, it's a good question, it's an
important question.
It's a challenging space.
Right, we're fishing in thebiggest pond.
Right, and in terms of, likeK-Web, we're sort of the
flagship leader in the space.
In US equity, large value,large dividend products is a
myriad of offerings.
What we're starting to see,though, is that we're getting
(13:36):
traction amongst model portfolioproviders, etf model providers
Everybody's got exposure to USequity.
Everybody plays the valuegrowth game.
The compelling aspect of thisstrategy is you don't need to
rotate between value and growth.
This product, by design, willbe biased towards higher
(13:56):
dividend paying securities,quality large companies, but not
at the expense of sort of.
I think of a I'm talking to youfrom Boston, where I live right
now of a I'm talking to youfrom Boston, where I live right
now, and I think of the whalewatching boats.
Right, and you know, whenthere's a whale on one side of
the boat, everybody runs to thatside of the ship, and the ship
tilts to that side.
(14:17):
Right, that's kind of whatlarge value, large dividend
paying strategies are right.
The boat will tip towards thosesectors generating lots of
yield REITs, utilities and soforth.
This whale boat, kvle, isstable in the water.
Right, it's generating itsyield as an optimization input,
(14:38):
right, so it's selecting the topdividend-paying companies, but
it's maintaining diverse sectorexposure because it's optimized
versus the S&P 500.
So that's an attractivecharacteristic for model
providers.
Everybody's got S&P 500 exposure.
This is a way to get S&P 500plus yield.
(15:01):
So if you're worried aboutmissing the rallies in some of
the tech names, we have exposureto the tech names.
In fact, the largest positionin the portfolio is NVIDIA,
right, so our top five holdings,four of them are tech names.
So we are going to, we're goingto get you, we're going to keep
you in the game in terms oftech rallies.
(15:23):
But again, we're, we're, we'relower volatility, higher yield,
a diverse portfolio very similarto the core S&P 500.
Speaker 1 (15:31):
Do you get a sense that we're maybe going to get
back to an era of more sort ofthoughtful portfolio
construction, because, let'sface it, it's been a passive
game for a number of years?
I'm sure there's something thatyou talk about and Crane shares
quite a bit.
Speaker 2 (15:46):
Yeah, yeah, they used to call that, you know, back in
when I was working at PutnamInvestments.
These are called a dumb money,right, where you just want to
get exposure, and I think themarket there's a place for that,
right, people just wantexposure.
But I think, more and more,you're seeing the smart, beta,
active strategies.
The key is can you clearly,over time, add value?
(16:11):
Right, people are willing topay for alpha um and if you have
a disciplined, repetitiveprocess, um, that not only is
designed to to, to exploit aphenomenon in the marketplace,
but can consistently do thatover time, um, there's a place
for you.
And I think, more and moreyou're seeing active products
(16:31):
come back.
You're seeing an influx ofactive ETFs, right, you know, in
the ETF space the whole gamestarted, as you know, passive,
cheap exposure to sectors, tochunks of the marketplace and an
efficient wrapper the ETF.
And now the next evolution ofthat is active.
So you're seeing more and moremarkets go to active strategies
(16:53):
and I think the way you do thatin ETF land is through
systematic quantitativetechniques, repeatable
algorithms that, over time, willput the odds in your favor.
And now you're beginning to seethe whole blurring of public,
the whole, you know blurring ofpublic and private exposure in
(17:14):
ETFs and in strategies, andthat's sort of the next
evolution.
I view that as active.
But at CraneShares we'relaunching more and more active
strategies and a lot of thestrategies are the activeness is
embedded within the indexdesign right ETFs, track indices
and in the case of KVLE, wetrack the value line index that
(17:36):
we're very involved in designingwith our value line partners.
But the key is sort ofdisciplined and over time, being
able to deliver on what theobjective is.
It's kind of like you know whatmutual funds used to be right
Mutual funds.
You know.
One of the reasons why mutualfund companies have been so
hesitant over time to get intothe ETF space is they worried
(17:59):
about you know their IP gettingout there in the market because
you have to disclose yourpositions frequently you know at
least daily and so that wasalways a challenge for the
active managers and the mutualfund companies.
But more and more you're seeingtechniques and tools that
enable active managers to get inthe game, and at Craneshares
(18:20):
we're clearly a part of thatphenomena.
Speaker 1 (18:23):
I see on the website description you define it as a,
in quotes, smart beta strategy.
That's a term I haven't heardin a while.
It was like all the rage, Ithink, in 2015, 2016, can we,
can we talk about that idea ofsmart beta and maybe sort of the
evolution of how people haveviewed it over time?
Speaker 2 (18:40):
yeah, I think, yeah, smart beta, you know it's an
interesting, it's an interestingname.
Um, we've played with dynamicbeta, active beta, you know.
Smart beta kind of I think it'ssomething that was coined by
the institutional community,which kind of coins themselves
as smart money.
But it's not like beta.
(19:01):
Beta is sort of passiveexposure.
You're exposed to it.
You know the good, the bad andthe ugly.
Right, market goes up, marketgoes down.
The good, the bad and the ugly.
Right, market goes up, marketgoes down.
You're in for the ride.
Smart beta is sort of a termthat sort of encompasses those
strategies that attempt to shapethe return.
(19:23):
Right, you're not just gonna,you're gonna try to manage the
market exposure through factors,through techniques, and that's
what we do with KBLE.
Right, we're not just lookingto find high dividend paying
stocks and then concentrate onthat at the expense of
everything else.
We want to leverage the prowessof these value line ranking
(19:49):
systems, focus on the top rankedsecurities in their system,
take that information, blend itwith other techniques, other
risk factors, targeted trackingerror.
Targeted yield based upon thetop 25% of the universe, as I
mentioned.
Targeted yield based upon thetop 25% of the universe, as I
(20:10):
mentioned.
Making sure that when we haveexposure to a name, we'll never
be extremely overweight thatposition relative to its
weighting in our benchmark, theS&P 500.
So all these techniques areemployed to basically
dynamically adjust and managethe portfolio to maintain the
(20:30):
objective of the fund and inthis case it's basically
designed to give you coreexposure without over-weighting
anyone's sector and generatingyields substantially higher than
that of the S&P 500.
So smart beta is just anotherterm for disciplined, active
(20:52):
management, typically viaquantitative techniques.
It's not Peter Lynch sitting inhis office deciding I like this
name, I don't like this name.
It's not fundamental.
That's very challenging.
There's a place for that.
It's not really.
That doesn't lend itself to ETFspace.
Etfs have to be disciplined andrepeatable and systematic
(21:13):
because you have to have amethodology.
Every index has a methodologydocument and so that's basically
the roadmap for the process ofthe ETF and we publish.
Our methodology is publishedand available online as well.
Speaker 1 (21:31):
You mentioned that.
You know, just given your thetype of work that you do, your
talk through advisors andinvestors and individuals.
I'm curious.
I mean, what's do you get asense of kind of like, what's
the mood and what is it thatpeople are looking for?
I mean, you know we had thistremendous rally.
You're at the forefront of thesort of sales side of things,
right, so talk to me about whatyou're hearing from the advisory
(21:53):
community.
Speaker 2 (21:55):
Yeah, it's mixed.
Obviously there's a, there'sthere's.
You can kind of there.
There is a sort of ananxiousness in the marketplace,
right, the market's been doingphenomenally well throughout all
the noise, I think you know,with the passage of the, of the
spending bill, with the, youknow, the, the tariff situation.
(22:15):
I think the market, I think alot of the advisors that I'm in,
firms that I that I talk to ona frequent basis, have a feeling
that, um, the market isn'tnecessarily um, um, that they're
underestimating the impact oftariffs in the market.
I mean all the, all the newsand the sort of the, the, the,
(22:36):
the sense in the market is that,oh, you know, there's not going
to be tariffs, it's going to bemanaged.
You know we're hearing reallypositive things about the deal
with China, fingers crossed,very hopeful there, good signs
there, um, but in general, um, Ithink some of the more astute
advisors that I talk to and Ilisten to think the impact of
(22:56):
the tariffs are beingunderestimated and we'll see
that flow through coming in thefuture, the not too distant
future.
So people are trying to stealtheir portfolios For that
occurrence.
The markets have been rallyingin a very positive way.
I think there's a bit ofcautiousness, sort of seeping
their way into managed money,which is a good segue to KVLE,
(23:21):
because KVLE is a lower vol S&P500-like portfolio with yield
Great, great product for thiskind of environment.
When you're nervous you don'twant to just load the boat on
NVIDIA and NVIDIA's friends,right?
You want to have a much morediversified sort of back to
basics approach.
(23:42):
So there's a bit of anervousness.
I think clearly there's a trendafoot, for valuations outside
the US seem to be moreattractive than in the US.
We're seeing greater exposureto developing markets, including
China, and we have that.
(24:03):
We have a suite of models thatwe've designed in collaboration
with BlackRock that containCraneShares ETFs and iShares
ETFs and those models are skeweda little bit more towards
non-US exposure.
Still healthy, healthy USexposure and KVLE has a very
(24:23):
nice slug within the US equitypiece, but more non-US exposure
than we've seen in the past andheavy alt content.
You're seeing every day you seea funfire article on liquid
alts product coming to themarketplace and we have a nice
array and a growing array ofliquid alts products in the
(24:43):
marketplace.
So you're seeing at theportfolio level a little more
non-US because there appears tobe more value outside the US on
a valuation basis and moreliquid alts, absolute return
type strategies, managed futuresyou are starting to see more
public-private mixing inportfolios.
(25:03):
Right, the challenge in 40-actfund, land ETFs or 40-act funds
is there's limits on exposure toprivate, but you're seeing more
public-private types ofarrangements.
So those are some of the trends, right, I think.
Heavier alts, more non-US, aspeople think that there are more
opportunities outside the US.
Obviously, there's a home USbias by far half the portfolio
(25:27):
is US, but in a global constructyou're seeing more and more
non-US and some more creativeliquid alts and you're seeing
many of the big ETF providersthat have big franchises and
model portfolios have beenratcheting up their liquid alts
exposure.
Many of the wirehouses now arerecommending double-digit
(25:49):
exposure to liquid alts.
The challenge, I think, is whatdo you mean by liquid alts?
Liquid alts can be differentthings to different people.
That's a hodgepodge of stuffthat I think over time you'll
see you know a little more senseto that, to that stew.
Right, there'll be, obviously,managed futures is tried and
true Liquid PE.
(26:11):
We have a very compellingliquid PE offering that we work
with the man group on.
It's called Bio ticker.
B-u-y-o replicates theperformance, attempts to
replicate the performance of thebio industry via public equity
exposure.
Very interesting product there.
So you're seeing more and morecreative plays in liquid oil so
that you have sort of whenmarkets do go down, you have
(26:34):
that uncorrelated bucket thatcan provide nice correlation
benefits as well as performancewhen markets go south from time
to time.
It's kind of a long-windedanswer, but I hope there's some
nuggets in there for you andyour viewers.
Speaker 1 (26:49):
Delta is an interesting one, right, a lot of
alts are still inherently, I'dargue, correlated to the SMP, so
they have the liquid ultcategory name, but in reality
it's kind of disguised beta,yeah.
Speaker 2 (27:04):
What do you think, Michael?
What are you seeing?
You're talking to people allthe time.
Speaker 1 (27:08):
I'm talking to too many people.
Yeah, I think it's the sameargument that you made.
There's nervousness, there's adesire to diversify away from
the S&P, but not be totally outof the S&P because, who knows,
it can keep on going the waythat it's been going.
So but I do think it makessense on a go-forward basis,
especially given the startingvaluations of where domestic
(27:30):
markets are right, to have otherdiversifiers.
Now, kble, at least you got thehigher dividend to your point.
It's not exactly the passiveside.
So sure it may be, from a USmarket perspective, still
overvalued because it's stillexposed to the US market, but at
least you're in presumably,from what I'm hearing sort of a.
(27:53):
You have more of a downsidepotential buffer, given the way
things are going.
Speaker 2 (28:00):
Yeah, and one of the compelling aspects of KVLE is
you don't, you won't miss out iftech rallies.
Right, 30% of the portfolio,tech, nvidia the largest
position, albeit underweightversus NVIDIA in the S&P, but
still significant weighting inKVLE.
And you don't typically seetech names NVIDIA, apple,
microsoft as large positions intraditional large value, large
(28:27):
quality, dividend playingportfolio.
So here you kind of have yourcake and can eat it too.
Right, you won't miss out onthat rally, but you still get
the healthy, juicy dividend,distributable dividend.
That's one of the reasons whyKBLE is trying to get more
traction in the marketplace.
Is people understand oh, I'mnot just large value.
(28:47):
That ship has sailed.
I get the dividend with thecore equity exposure, with tech
exposure.
So that's a nice feature that'sgetting recognized in the
marketplace and it's one of thethings that's distinguished us
from other large value.
We're top over the three-yearperiod.
We're top quartile incompetitive universes.
(29:10):
It's been a five-star ratedmorning star fund over time.
Looking forward to seeing thefive-year number in a couple of
months.
Um, so very compelling.
It's funny.
You talk about.
You know, home, home bias andwhat people for a significant
part of my career platinum.
I oversaw putnam's productdesign and product activities
outside the united states andwe're always trying to sort of
(29:31):
export a US centric way ofthinking about things, managing
money to our relationships inJapan and in Europe.
And it's you know the US isunique in the money management
area.
Right, we think of investing aslong-term wealth creation right
, in many marketplaces outsidethe US is is very much akin to
(29:53):
to, to gambling, and, and youknow and it's you know, other
countries don't have thetraditions and the long-term
experience in their marketplaces.
You take that for granted and soyou got it's all a function of,
yeah, u S centric.
I live in the United States.
I my, my last it's my abilitiesare, yeah, us-centric.
(30:13):
I live in the United States, myassets and liabilities are
dollar-based.
I get the US home-centricbiases, but sometimes it's okay
to think outside your homecountry and again, now is the
time, I think, to start to lookat and incorporate other
(30:33):
developed and developingexposures outside the US.
That's what we're doing in ourmodel portfolio.
Speaker 1 (30:38):
Of the entire suite.
I know KBLE obviously doesn'ttrade super active.
You know 30 million in assets,yeah, but not a lot of activity.
Let's talk about sort of themechanics of an ETF when it
comes to volume and liquidityand how to think about maybe
positioning.
Speaker 2 (30:53):
There's a lot to that ETF 101 kind of stuff.
But KBLE is 30 million inassets, great long-term track
record.
It is a portfolio that holdslarge cap names, so it doesn't
hold illiquid things.
(31:14):
It holds the most liquidsecurities on the planet, next
to treasury bonds, large cap USequity exposure.
So the liquidity aspect is notthat much of a concern.
And again we're seeing it's notmeant to be a traded vehicle,
it's meant to be core exposure,right, it's meant to be core
(31:35):
exposure, right.
So our clients that are usingkvle and and again model
providers, uh, use it as coreexposure, as sort of ballast
exposure within a broaderportfolio.
They own it and they let it runand ride and it's, it's a
compliment and an alternative toclassic us core equity smp 500.
So it's, it's, it's.
It trades pretty tight, um andit's about.
You know, turnover is fairlymodest.
So it's a, it's a, it's a, it'sa nice core position in the um.
(31:59):
The the volume aspect of it hasnot been an impediment so far.
And again, it's, it's, it's,it's picking up steam, if I can
say that.
Speaker 1 (32:06):
Anyway, Ms Kevin, do you think it's worth sort of
highlighting for the audience asfar as KVLE or Craneshare's
products in general?
Speaker 2 (32:12):
Yeah, I mean, look, I'll stick with KVLE to start.
I mean, I think you know wethink of KVLE as a hidden gem
within the lineup.
It clearly is significant, asignificant player in terms of
relative performance in itscompetitive universes.
It's at the top of the chartsover three years and since
inception it's a very, verystraightforward product, so
(32:36):
we're very excited about it.
We think the currentenvironment lends itself to a
strategy like KVLE and so again,we're targeting a lot of these
model providers and individualfinancial advisors that are
looking for more creative waysto play the US equity market.
(32:56):
So that's KVLE.
And again, craneshares.
We're about a $10 billion assetmanagement firm and again, the
flagship, what we're known forin the industry is sort of the
first to market China, chinathematic plays, which are, you
(33:17):
know, that's what we're knownfor.
We pump out a ton of educationmaterial, our CIO, brendan Ahern
, who's on CNBC and TV a lot.
We do a lot of handholding withall of our strategies of
handholding, with all of ourstrategies, right.
We believe the best way togenerate confidence and loyalty
(33:39):
in the marketplace is witheducation, both materials and
support for our advisors,particularly in some of the
asset classes that we delve into.
So we want to make peopleunderstand the risks and the
rewards with a lot of ourproducts right China, emerging
markets.
And the rewards with a lot ofour products right China,
emerging markets.
Carbon and climate liquid alts.
Right, a lot of these productsare high vol type strategies.
(34:00):
Kvle is a bit of an outlier,right, kvle is a US equity large
dividend product.
How does that fit in?
Right, again, the history ofKVLE was again, we have a suite
of strategies that we sort ofbest in class products that are
sub advised by other managers.
Right, we have, you know, mangroup, the largest hedge fund,
publicly traded hedge fund outof London runs our liquid PE
(34:21):
fund.
Mount Lucas, legendary managedfutures firm runs KMLM.
Our managed futures productValue line runs the index that
KVLE is based on.
So we do have select what wecall best in class strategies
and what we think to be veryimportant parts of the market
that we leverage other firmsexpertise, and KVLE is is one of
(34:42):
those, one of those places.
Again, it's, it's a hidden gemin the in the universe and it's
it's it's picking up steam.
It's recently, a significantportfolio manager on the West
Coast is now including it as acomplement to its core S&P
exposure and we're seeing itmore and more, as I mentioned
(35:02):
earlier, being utilized in modelportfolios.
Speaker 1 (35:05):
Kevin, for those who want to learn more about
CraneShares and the full suiteof funds, where would you point
them to?
Speaker 2 (35:09):
Our website, cranesharescom, all this
information we've talked aboutis outlined in details and
material.
Yeah, we welcome.
We appreciate the time today,we appreciate your attention and
thank you so much, michael.
Speaker 1 (35:23):
Thank you, mark, for watching this live stream.
This will be an edited podcastunder Lead, Like Live, sponsored
by Crane Chairs, and I'll seeyou all on the next episode.
Stay tuned, tuned.
Some big, big stuff's happeningthe coming weeks here.
Cheers everybody.
So talk me through sort of the awareness campaign
and talk me through how do youget somebody to consider this
over a path of SPY.
Speaker 2 (00:07):
I'm talking to you from Boston, where I live right
now, and I think of the whalewatching boats, right, and you
know, when there's a whale onone side of the boat, everybody
runs to that side of the shipand the ship tilts to that side
right.
That's kind of what large value, large dividend paying
strategies are.
The boat will tip towards thosesectors generating lots of
yield REITs, utilities and soforth.
(00:29):
This whale boat, kvle, isstable in the water, right.
It's generating its yield as anoptimization input.
Right, so it's selecting thetop dividend paying companies.
Speaker 1 (00:51):
So it's selecting the top dividend paying companies,
but it's maintaining diverse,diverse, diverse sector exposure
because it's optimized versusthe S&P 500.
This should be a goodconversation with Kevin, or
about some interestingundiscovered opportunities,
which I think there are plentyof, by the way, especially when
it comes to the value style ofinvesting.
We'll talk about that.
Talk about KVLE, their fund.
(01:11):
If you want to engage duringthis roughly 30, 40-minute
conversation, as we're live,don't hesitate to post whatever
comments or questions you haveon whatever platforms you're on.
I can see it, we'll bring it up.
I've kept on teasing that nextweek is going to be a big week.
I've got a big new hire coming.
She's going to be helping a loton doing these media podcasts,
live streams and hopefullyelevate Lead Lag Media to the
(01:32):
next level as we continue togrow and the team expands.
Not an easy thing to managewhen you're going through a lot
of growth, but certainly a goodproblem to have.
So, with all that said, my nameis Michael Guy, a publisher of
the Lead Lag Report.
Joining me here is Mr Kevin Orrof Craneshares.
Kevin, I think first time youand I are really chatting, so
introduce yourself to theaudience, to me.
(01:54):
Who are you?
What's your background?
Have you done throughout yourcareer.
What do you do now atCraneshares?
Speaker 2 (01:57):
Yeah, thanks.
I've been with the firm aboutalmost four years now.
I head up strategicpartnerships, which is a
function that oversees thesenior most relationships with
the firm, both on thedistribution and business side,
as well as some of thesub-advisors and investments
investors.
We have portfolio managers ofsome of the funds we have.
Prior to that, I was startingmy career at Putnam Investments
(02:21):
where I spent most of my career,cut my teeth on the ETF space
with an ETF strategist, workedfor Thomas H Lee, the private
equity manager, for a few years,built out a quantitative ETF
strategist business for Tom inNew York, got introduced to John
Crane when I was with the ETFstrategist, when I was a
(02:43):
consumer of ETFs and got to knowthe CraneShares story, very
excited about what they werebuilding at CraneShares, the
team they put together.
We bought the business from Toma few years back and when that
happened, after that transaction, I was able to finally join
(03:04):
with CraneShares and it's agreat firm.
We've got some reallyinteresting strategies.
Speaker 1 (03:08):
Yeah, and your product lineup has really
expanded quite a bit.
I think most investors know youfor K-Web, but you've got a
whole suite of things now thatobviously go beyond China.
So maybe just start kind ofjust big picture as far as
CraneShares, some of theofferings, some of the direction
about the company and thenwe're going to get into value
investment.
Speaker 2 (03:27):
Yeah, yeah, yeah, yeah, we've got an interesting
array.
We're known the flagshipproduct, as you mentioned, k-web
, which is one of the largestnot the largest China-focused
ETFs on the internet side of thetechnology side 6.5, actually
it's a $7 billion ETF right now.
So 6.5, actually it's a $7billion ETF right now.
So we kind of have three legsto the stool in terms of our
product suite the China-focusedproducts led by K-Web, other
(03:51):
emerging markets and Chinathematic products.
In that section we also have asuite of very compelling climate
investing products first tomarket with Carbon Futures ETFs
and I think my colleague LukeOliver, you've had on the
program a few times.
And the third leg of the stoolwhich is growing rapidly is our
liquid alts group.
(04:12):
We have managed futures liquidPE supervised by man group.
I'll throw KVLE into thatbucket.
It's US equity but itdifferentiates itself in
numerous ways by providing yieldwith keeping a core S&P 500
construct.
Speaker 1 (04:32):
So yeah, we think of KVLE is the Crane Shares Value
Line Dynamic Dividend Equity ETFticker KVLE, yeah yeah, and I
think I want to focus on theword dynamic, because I always
say it means active, right, solet's talk about what dynamic
means in the context ofdeveloping a product.
Speaker 2 (04:53):
Yeah.
So it's not static, it's notjust buy and hold.
We've partnered with ValueLinein the product.
It'll have a five-year trackcoming up in November.
It scores very highly in allthe Morningstar metrics.
Value line has been around sincethe 1930s.
(05:13):
Was established in 1931,founded by Arnold Bernhardt.
Arnold was at the time was ananalyst at Moody's.
I didn't realize Moody's wasaround back then.
Um and um after the marketcrash of 29, he said look, the
industry is failing us, we needa better way of valuing uh,
(05:35):
these companies.
So he broke off and startedvalue line.
I remember um early in mycareer when I worked at Putnam
investments um back in themid-90s.
You walk around the floor andyou see all the portfolio
managers' offices and you'd seethese huge, huge binders of
value line reports like a footthick.
(05:55):
It's sort of a staple.
It was a staple old line stockresearch firm.
The current stock researchranking systems that we use in
the ETF were established in 1965, the timeliness rankings and
the safety rankings and we'rethe only product in the
(06:15):
marketplace today that leveragesboth these iconic value-aligned
stock ranking systems.
So we incorporate them into thedecision-making process of the
product.
It's a model.
It's quantitative andsystematic.
I'll get into that in a littlebit.
But we're excited.
We're very excited about theproduct.
There's only one other productin the marketplace that carries
(06:36):
the value line name in theproduct and they only use
portions of the value lineresearch.
We get to use the best of allof their content in designing
the strategy.
So that's kind of dynamic.
It's active, it's rebalancedevery month.
So every month the indexconstituents get rebalanced.
(06:59):
Value line provides us with theindex weightings.
We distribute dividends on aquarterly basis and it's
designed to be core-like withamplified yield right.
So we don't want many sort ofhigher-yielding dividend
products in the marketplacequality products in the
marketplace yielding dividendproducts in the marketplace.
(07:22):
Quality products in themarketplace generate their yield
by overweighting or going tothe sectors of the economy where
the yield is coming from.
In those cases you get kind oflopsided portfolios.
You get sort of heavier weightsin the utilities and REITs and
so forth, and that's OK.
But you got to know what you'regetting.
They're more volatile andthat's okay, but you got to know
(07:43):
what you're getting.
They're more volatile.
This product, by design, isgoing to be diversified across
sectors.
In fact it's very muchcore-like.
We kind of sometimes call itthe new core, meaning that it's
providing you with S&P 500-likeexposures at the sector level,
(08:08):
but we're designed to providemuch, much more yield than the
S&P 500-like exposures at thesector level, but we're designed
to provide much, much moreyield than the S&P 500.
So I just looked before we cameon the podcast, and the current
30-day SEC yield for theproduct, for the ETF, is 2.65.
That's versus a 1.11 yield onthe S&P 500.
So we're giving you coreS&P-like exposure in terms of
exposure to the sectors andindustries, with an emphasis on
(08:31):
yield.
Speaker 1 (08:32):
You mentioned quantitative.
What goes into some of thosemetrics on the quant side?
Speaker 2 (08:36):
Yeah, so a couple of things.
So we use an optimization toolto help us identify the
constituents of the portfolio.
I'll start with the value line.
So I call them iconic, butthey've been around since the
60s ranking systems, stockresearch, ranking systems,
timeliness and safety.
And what Value Line does is itranks the largest 1,600 or 1,650
(09:02):
stocks in North America andeach one of those stock is
ranked from one to five, both onthe timeliness scale and the
safety scale.
What we do is we basically kickout any ADRs.
Any company that's less than abillion in market cap gets
kicked out any Canadian names.
(09:23):
It's truly a larger cap USequity universe of holdings and
each one of these names has atimeliness and safety rank from
one to five, one being the best.
So the timeliness ranksbasically tell you.
It's a ranking system thatattempts to identify, on a
(09:43):
relative basis, which stocks aregoing to outperform each other
on a six to 12 month basis.
It's looking at earningsrevisions, it's looking at price
momentum.
So every one of the 1600 namesin the universe gets ranked and
the top 100 are in the rank ones, and so on and so forth, to the
number five rank andhistorically rank one stocks
(10:07):
have outperformed, rank two andso forth.
On the safety side, safety ismore of a measure of financial
strength of a company.
So those stocks that are rankedone on the safety scale are
those that typically weather thestorms better, right, they've
got strong balance sheets,they've got price stability.
And each one of these rankingsystems have their own detail
(10:27):
factors that generate theseranks and these are proprietary
to value line.
So the product will take these1600 names.
We emphasize the ranks ones andtwos.
Each, each, each rank gets analpha score.
So we're basically everysecurity in the system in the
universe is ranked.
(10:48):
And then what we do is we alsolook at we want to make sure
that we're only focusing on thetop 25th percentile of dividend
yield in the universe.
So, and we do that and that'san input into the optimization
tool.
So all these factors are inputinto the optimization tool.
We target a tracking error oractive risk of around 450 to 500
(11:12):
basis points versus the S&P 500.
No one name will have more than1.5% it's weighting in the S&P
500.
So if we hold a name in theportfolio that's in the S&P 500,
it'll never be more than 1.5%greater than the weight in the
S&P 500.
There are many names in the S&P500 that are not in the
(11:33):
portfolio.
The portfolio is roughly 80names-ish 80 to 90 names and it
basically generates adiversified portfolio, very
similar sector weightings to theS&P 500, with greater yield.
Right now the portfolio hasabout close to 30% in tech.
You typically don't see that ina high yielding quality
(11:57):
portfolio, but one of thebenefits of the strategy is that
it gives you exposure to someof these sectors that aren't
typically included in thetraditional sort of large value,
large yielding portfolios.
Speaker 1 (12:14):
How much does the quantitative aspect of it result
in portfolio changes?
And when you say it's meant tobe core, is it a function of it
having all the stocks in, say,the S&P 500, or is it being
selective or just overweightingand underweighting?
I mean, talk me through thereplication process there.
Speaker 2 (12:30):
Yeah, yeah, yeah, so the turnovers are.
Every month the indexconstituents are reconstituted.
It has about an 80% turnover,so it's not dramatic in terms of
the shifts.
It's more smoother, sort of acalmer allocation shift over
time.
Yeah, so that's basically again, the quantitative aspects are
(12:53):
the factors within the valueline sectors.
Speaker 1 (12:56):
Okay, interesting.
So obviously it's meant to becore.
The challenge, as you know, ishow do you pry people away from
their existing S&P 500 coreholdings, especially when the
gains have been so substantial?
So talk me through sort of theawareness campaign and talk me
through how do you get somebodyto consider this over a path of
SPY.
Speaker 2 (13:16):
Yeah, yeah, no, it's a good question, it's an
important question.
It's a challenging space.
Right, we're fishing in thebiggest pond.
Right, and in terms of, likeK-Web, we're sort of the
flagship leader in the space.
In US equity, large value,large dividend products is a
myriad of offerings.
What we're starting to see,though, is that we're getting
(13:36):
traction amongst model portfolioproviders, etf model providers
Everybody's got exposure to USequity.
Everybody plays the valuegrowth game.
The compelling aspect of thisstrategy is you don't need to
rotate between value and growth.
This product, by design, willbe biased towards higher
(13:56):
dividend paying securities,quality large companies, but not
at the expense of sort of.
I think of a I'm talking to youfrom Boston, where I live right
now of a I'm talking to youfrom Boston, where I live right
now, and I think of the whalewatching boats.
Right, and you know, whenthere's a whale on one side of
the boat, everybody runs to thatside of the ship, and the ship
tilts to that side.
(14:17):
Right, that's kind of whatlarge value, large dividend
paying strategies are right.
The boat will tip towards thosesectors generating lots of
yield REITs, utilities and soforth.
This whale boat, kvle, isstable in the water.
Right, it's generating itsyield as an optimization input,
(14:38):
right, so it's selecting the topdividend-paying companies, but
it's maintaining diverse sectorexposure because it's optimized
versus the S&P 500.
So that's an attractivecharacteristic for model
providers.
Everybody's got S&P 500 exposure.
This is a way to get S&P 500plus yield.
(15:01):
So if you're worried aboutmissing the rallies in some of
the tech names, we have exposureto the tech names.
In fact, the largest positionin the portfolio is NVIDIA,
right, so our top five holdings,four of them are tech names.
So we are going to, we're goingto get you, we're going to keep
you in the game in terms oftech rallies.
(15:23):
But again, we're, we're, we'relower volatility, higher yield,
a diverse portfolio very similarto the core S&P 500.
Speaker 1 (15:31):
Do you get a sense that we're maybe going to get
back to an era of more sort ofthoughtful portfolio
construction, because, let'sface it, it's been a passive
game for a number of years?
I'm sure there's something thatyou talk about and Crane shares
quite a bit.
Speaker 2 (15:46):
Yeah, yeah, they used to call that, you know, back in
when I was working at PutnamInvestments.
These are called a dumb money,right, where you just want to
get exposure, and I think themarket there's a place for that,
right, people just wantexposure.
But I think, more and more,you're seeing the smart, beta,
active strategies.
The key is can you clearly,over time, add value?
(16:11):
Right, people are willing topay for alpha um and if you have
a disciplined, repetitiveprocess, um, that not only is
designed to to, to exploit aphenomenon in the marketplace,
but can consistently do thatover time, um, there's a place
for you.
And I think, more and moreyou're seeing active products
(16:31):
come back.
You're seeing an influx ofactive ETFs, right, you know, in
the ETF space the whole gamestarted, as you know, passive,
cheap exposure to sectors, tochunks of the marketplace and an
efficient wrapper the ETF.
And now the next evolution ofthat is active.
So you're seeing more and moremarkets go to active strategies
(16:53):
and I think the way you do thatin ETF land is through
systematic quantitativetechniques, repeatable
algorithms that, over time, willput the odds in your favor.
And now you're beginning to seethe whole blurring of public,
the whole, you know blurring ofpublic and private exposure in
(17:14):
ETFs and in strategies, andthat's sort of the next
evolution.
I view that as active.
But at CraneShares we'relaunching more and more active
strategies and a lot of thestrategies are the activeness is
embedded within the indexdesign right ETFs, track indices
and in the case of KVLE, wetrack the value line index that
(17:36):
we're very involved in designingwith our value line partners.
But the key is sort ofdisciplined and over time, being
able to deliver on what theobjective is.
It's kind of like you know whatmutual funds used to be right
Mutual funds.
You know.
One of the reasons why mutualfund companies have been so
hesitant over time to get intothe ETF space is they worried
(17:59):
about you know their IP gettingout there in the market because
you have to disclose yourpositions frequently you know at
least daily and so that wasalways a challenge for the
active managers and the mutualfund companies.
But more and more you're seeingtechniques and tools that
enable active managers to get inthe game, and at Craneshares
(18:20):
we're clearly a part of thatphenomena.
Speaker 1 (18:23):
I see on the website description you define it as a,
in quotes, smart beta strategy.
That's a term I haven't heardin a while.
It was like all the rage, Ithink, in 2015, 2016, can we,
can we talk about that idea ofsmart beta and maybe sort of the
evolution of how people haveviewed it over time?
Speaker 2 (18:40):
yeah, I think, yeah, smart beta, you know it's an
interesting, it's an interestingname.
Um, we've played with dynamicbeta, active beta, you know.
Smart beta kind of I think it'ssomething that was coined by
the institutional community,which kind of coins themselves
as smart money.
But it's not like beta.
(19:01):
Beta is sort of passiveexposure.
You're exposed to it.
You know the good, the bad andthe ugly.
Right, market goes up, marketgoes down.
The good, the bad and the ugly.
Right, market goes up, marketgoes down.
You're in for the ride.
Smart beta is sort of a termthat sort of encompasses those
strategies that attempt to shapethe return.
(19:23):
Right, you're not just gonna,you're gonna try to manage the
market exposure through factors,through techniques, and that's
what we do with KBLE.
Right, we're not just lookingto find high dividend paying
stocks and then concentrate onthat at the expense of
everything else.
We want to leverage the prowessof these value line ranking
(19:49):
systems, focus on the top rankedsecurities in their system,
take that information, blend itwith other techniques, other
risk factors, targeted trackingerror.
Targeted yield based upon thetop 25% of the universe, as I
mentioned.
Targeted yield based upon thetop 25% of the universe, as I
(20:10):
mentioned.
Making sure that when we haveexposure to a name, we'll never
be extremely overweight thatposition relative to its
weighting in our benchmark, theS&P 500.
So all these techniques areemployed to basically
dynamically adjust and managethe portfolio to maintain the
(20:30):
objective of the fund and inthis case it's basically
designed to give you coreexposure without over-weighting
anyone's sector and generatingyields substantially higher than
that of the S&P 500.
So smart beta is just anotherterm for disciplined, active
(20:52):
management, typically viaquantitative techniques.
It's not Peter Lynch sitting inhis office deciding I like this
name, I don't like this name.
It's not fundamental.
That's very challenging.
There's a place for that.
It's not really.
That doesn't lend itself to ETFspace.
Etfs have to be disciplined andrepeatable and systematic
(21:13):
because you have to have amethodology.
Every index has a methodologydocument and so that's basically
the roadmap for the process ofthe ETF and we publish.
Our methodology is publishedand available online as well.
Speaker 1 (21:31):
You mentioned that.
You know, just given your thetype of work that you do, your
talk through advisors andinvestors and individuals.
I'm curious.
I mean, what's do you get asense of kind of like, what's
the mood and what is it thatpeople are looking for?
I mean, you know we had thistremendous rally.
You're at the forefront of thesort of sales side of things,
right, so talk to me about whatyou're hearing from the advisory
(21:53):
community.
Speaker 2 (21:55):
Yeah, it's mixed.
Obviously there's a, there'sthere's.
You can kind of there.
There is a sort of ananxiousness in the marketplace,
right, the market's been doingphenomenally well throughout all
the noise, I think you know,with the passage of the, of the
spending bill, with the, youknow, the, the tariff situation.
(22:15):
I think the market, I think alot of the advisors that I'm in,
firms that I that I talk to ona frequent basis, have a feeling
that, um, the market isn'tnecessarily um, um, that they're
underestimating the impact oftariffs in the market.
I mean all the, all the newsand the sort of the, the, the,
(22:36):
the sense in the market is that,oh, you know, there's not going
to be tariffs, it's going to bemanaged.
You know we're hearing reallypositive things about the deal
with China, fingers crossed,very hopeful there, good signs
there, um, but in general, um, Ithink some of the more astute
advisors that I talk to and Ilisten to think the impact of
(22:56):
the tariffs are beingunderestimated and we'll see
that flow through coming in thefuture, the not too distant
future.
So people are trying to stealtheir portfolios For that
occurrence.
The markets have been rallyingin a very positive way.
I think there's a bit ofcautiousness, sort of seeping
their way into managed money,which is a good segue to KVLE,
(23:21):
because KVLE is a lower vol S&P500-like portfolio with yield
Great, great product for thiskind of environment.
When you're nervous you don'twant to just load the boat on
NVIDIA and NVIDIA's friends,right?
You want to have a much morediversified sort of back to
basics approach.
(23:42):
So there's a bit of anervousness.
I think clearly there's a trendafoot, for valuations outside
the US seem to be moreattractive than in the US.
We're seeing greater exposureto developing markets, including
China, and we have that.
(24:03):
We have a suite of models thatwe've designed in collaboration
with BlackRock that containCraneShares ETFs and iShares
ETFs and those models are skeweda little bit more towards
non-US exposure.
Still healthy, healthy USexposure and KVLE has a very
(24:23):
nice slug within the US equitypiece, but more non-US exposure
than we've seen in the past andheavy alt content.
You're seeing every day you seea funfire article on liquid
alts product coming to themarketplace and we have a nice
array and a growing array ofliquid alts products in the
(24:43):
marketplace.
So you're seeing at theportfolio level a little more
non-US because there appears tobe more value outside the US on
a valuation basis and moreliquid alts, absolute return
type strategies, managed futuresyou are starting to see more
public-private mixing inportfolios.
(25:03):
Right, the challenge in 40-actfund, land ETFs or 40-act funds
is there's limits on exposure toprivate, but you're seeing more
public-private types ofarrangements.
So those are some of the trends, right, I think.
Heavier alts, more non-US, aspeople think that there are more
opportunities outside the US.
Obviously, there's a home USbias by far half the portfolio
(25:27):
is US, but in a global constructyou're seeing more and more
non-US and some more creativeliquid alts and you're seeing
many of the big ETF providersthat have big franchises and
model portfolios have beenratcheting up their liquid alts
exposure.
Many of the wirehouses now arerecommending double-digit
(25:49):
exposure to liquid alts.
The challenge, I think, is whatdo you mean by liquid alts?
Liquid alts can be differentthings to different people.
That's a hodgepodge of stuffthat I think over time you'll
see you know a little more senseto that, to that stew.
Right, there'll be, obviously,managed futures is tried and
true Liquid PE.
(26:11):
We have a very compellingliquid PE offering that we work
with the man group on.
It's called Bio ticker.
B-u-y-o replicates theperformance, attempts to
replicate the performance of thebio industry via public equity
exposure.
Very interesting product there.
So you're seeing more and morecreative plays in liquid oil so
that you have sort of whenmarkets do go down, you have
(26:34):
that uncorrelated bucket thatcan provide nice correlation
benefits as well as performancewhen markets go south from time
to time.
It's kind of a long-windedanswer, but I hope there's some
nuggets in there for you andyour viewers.
Speaker 1 (26:49):
Delta is an interesting one, right, a lot of
alts are still inherently, I'dargue, correlated to the SMP, so
they have the liquid ultcategory name, but in reality
it's kind of disguised beta,yeah.
Speaker 2 (27:04):
What do you think, Michael?
What are you seeing?
You're talking to people allthe time.
Speaker 1 (27:08):
I'm talking to too many people.
Yeah, I think it's the sameargument that you made.
There's nervousness, there's adesire to diversify away from
the S&P, but not be totally outof the S&P because, who knows,
it can keep on going the waythat it's been going.
So but I do think it makessense on a go-forward basis,
especially given the startingvaluations of where domestic
(27:30):
markets are right, to have otherdiversifiers.
Now, kble, at least you got thehigher dividend to your point.
It's not exactly the passiveside.
So sure it may be, from a USmarket perspective, still
overvalued because it's stillexposed to the US market, but at
least you're in presumably,from what I'm hearing sort of a.
(27:53):
You have more of a downsidepotential buffer, given the way
things are going.
Speaker 2 (28:00):
Yeah, and one of the compelling aspects of KVLE is
you don't, you won't miss out iftech rallies.
Right, 30% of the portfolio,tech, nvidia the largest
position, albeit underweightversus NVIDIA in the S&P, but
still significant weighting inKVLE.
And you don't typically seetech names NVIDIA, apple,
microsoft as large positions intraditional large value, large
(28:27):
quality, dividend playingportfolio.
So here you kind of have yourcake and can eat it too.
Right, you won't miss out onthat rally, but you still get
the healthy, juicy dividend,distributable dividend.
That's one of the reasons whyKBLE is trying to get more
traction in the marketplace.
Is people understand oh, I'mnot just large value.
(28:47):
That ship has sailed.
I get the dividend with thecore equity exposure, with tech
exposure.
So that's a nice feature that'sgetting recognized in the
marketplace and it's one of thethings that's distinguished us
from other large value.
We're top over the three-yearperiod.
We're top quartile incompetitive universes.
(29:10):
It's been a five-star ratedmorning star fund over time.
Looking forward to seeing thefive-year number in a couple of
months.
Um, so very compelling.
It's funny.
You talk about.
You know, home, home bias andwhat people for a significant
part of my career platinum.
I oversaw putnam's productdesign and product activities
outside the united states andwe're always trying to sort of
(29:31):
export a US centric way ofthinking about things, managing
money to our relationships inJapan and in Europe.
And it's you know the US isunique in the money management
area.
Right, we think of investing aslong-term wealth creation right
, in many marketplaces outsidethe US is is very much akin to
(29:53):
to, to gambling, and, and youknow and it's you know, other
countries don't have thetraditions and the long-term
experience in their marketplaces.
You take that for granted and soyou got it's all a function of,
yeah, u S centric.
I live in the United States.
I my, my last it's my abilitiesare, yeah, us-centric.
(30:13):
I live in the United States, myassets and liabilities are
dollar-based.
I get the US home-centricbiases, but sometimes it's okay
to think outside your homecountry and again, now is the
time, I think, to start to lookat and incorporate other
(30:33):
developed and developingexposures outside the US.
That's what we're doing in ourmodel portfolio.
Speaker 1 (30:38):
Of the entire suite.
I know KBLE obviously doesn'ttrade super active.
You know 30 million in assets,yeah, but not a lot of activity.
Let's talk about sort of themechanics of an ETF when it
comes to volume and liquidityand how to think about maybe
positioning.
Speaker 2 (30:53):
There's a lot to that ETF 101 kind of stuff.
But KBLE is 30 million inassets, great long-term track
record.
It is a portfolio that holdslarge cap names, so it doesn't
hold illiquid things.
(31:14):
It holds the most liquidsecurities on the planet, next
to treasury bonds, large cap USequity exposure.
So the liquidity aspect is notthat much of a concern.
And again we're seeing it's notmeant to be a traded vehicle,
it's meant to be core exposure,right, it's meant to be core
(31:35):
exposure, right.
So our clients that are usingkvle and and again model
providers, uh, use it as coreexposure, as sort of ballast
exposure within a broaderportfolio.
They own it and they let it runand ride and it's, it's a
compliment and an alternative toclassic us core equity smp 500.
So it's, it's, it's.
It trades pretty tight, um andit's about.
You know, turnover is fairlymodest.
So it's a, it's a, it's a, it'sa nice core position in the um.
(31:59):
The the volume aspect of it hasnot been an impediment so far.
And again, it's, it's, it's,it's picking up steam, if I can
say that.
Speaker 1 (32:06):
Anyway, Ms Kevin, do you think it's worth sort of
highlighting for the audience asfar as KVLE or Craneshare's
products in general?
Speaker 2 (32:12):
Yeah, I mean, look, I'll stick with KVLE to start.
I mean, I think you know wethink of KVLE as a hidden gem
within the lineup.
It clearly is significant, asignificant player in terms of
relative performance in itscompetitive universes.
It's at the top of the chartsover three years and since
inception it's a very, verystraightforward product, so
(32:36):
we're very excited about it.
We think the currentenvironment lends itself to a
strategy like KVLE and so again,we're targeting a lot of these
model providers and individualfinancial advisors that are
looking for more creative waysto play the US equity market.
(32:56):
So that's KVLE.
And again, craneshares.
We're about a $10 billion assetmanagement firm and again, the
flagship, what we're known forin the industry is sort of the
first to market China, chinathematic plays, which are, you
(33:17):
know, that's what we're knownfor.
We pump out a ton of educationmaterial, our CIO, brendan Ahern
, who's on CNBC and TV a lot.
We do a lot of handholding withall of our strategies of
handholding, with all of ourstrategies, right.
We believe the best way togenerate confidence and loyalty
(33:39):
in the marketplace is witheducation, both materials and
support for our advisors,particularly in some of the
asset classes that we delve into.
So we want to make peopleunderstand the risks and the
rewards with a lot of ourproducts right China, emerging
markets.
And the rewards with a lot ofour products right China,
emerging markets.
Carbon and climate liquid alts.
Right, a lot of these productsare high vol type strategies.
(34:00):
Kvle is a bit of an outlier,right, kvle is a US equity large
dividend product.
How does that fit in?
Right, again, the history ofKVLE was again, we have a suite
of strategies that we sort ofbest in class products that are
sub advised by other managers.
Right, we have, you know, mangroup, the largest hedge fund,
publicly traded hedge fund outof London runs our liquid PE
(34:21):
fund.
Mount Lucas, legendary managedfutures firm runs KMLM.
Our managed futures productValue line runs the index that
KVLE is based on.
So we do have select what wecall best in class strategies
and what we think to be veryimportant parts of the market
that we leverage other firmsexpertise, and KVLE is is one of
(34:42):
those, one of those places.
Again, it's, it's a hidden gemin the in the universe and it's
it's it's picking up steam.
It's recently, a significantportfolio manager on the West
Coast is now including it as acomplement to its core S&P
exposure and we're seeing itmore and more, as I mentioned
(35:02):
earlier, being utilized in modelportfolios.
Speaker 1 (35:05):
Kevin, for those who want to learn more about
CraneShares and the full suiteof funds, where would you point
them to?
Speaker 2 (35:09):
Our website, cranesharescom, all this
information we've talked aboutis outlined in details and
material.
Yeah, we welcome.
We appreciate the time today,we appreciate your attention and
thank you so much, michael.
Speaker 1 (35:23):
Thank you, mark, for watching this live stream.
This will be an edited podcastunder Lead, Like Live, sponsored
by Crane Chairs, and I'll seeyou all on the next episode.
Stay tuned, tuned.
Some big, big stuff's happeningthe coming weeks here.
Cheers everybody.
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