Speaker 0: Joining us now to share where he's seeing opportunities in exchange traded funds is Jay M Andrew, head of Strategic Beta Sales at Columbia Threadneedle Investments. Well, Jay, it's great to have you back with us with the persistent volatility in the market and the potential impending recession. What are investors and advisors looking for right now?

Speaker 1: Well, thanks Jen. I'm glad to be back. Uh You know, generally investors are looking for smart tools uh at a low cost that offer quality exposure with so many people focused on the market, slowing investors want to be more intentional and precise rather than using just broad blunt instruments in their portfolio implementation. One of the ETF S that we've had success talking about and that has gathered assets recently is Rex

Speaker 1: tier R ECs. It stands for the Columbia Research enhanced core ETF. And it's really a simple concept. It's about taking a benchmark that, you know, the Russell 1000 and quote unquote leaving out the losers. So what do I mean by that at Columbia? We have a quantitative modeling process. It's based on factors like quality value and catalyst.

Speaker 1: It has done a really good job since 2004 in identifying companies that can outperform and also those that can underperform. And so in Rex, what we do is we recreate the Russell 1000 at the sector we level. But rather than using all 1000 stocks, we only use the 350 that are considered to be Columbia's strong, buy and buy.

Speaker 1: And this has worked out really well, you know, rex relative to the Russell 1000 has outperformed that index by about 100 and 60 basis points annualized over the last 3.5 years. Uh Rex has a pretty cheap price at about 15 basis points. Uh And it just offers investors quality and one radiate quality is by making apple losers.

Speaker 0: How has the declining dollar been impacting emerging markets? And are investors looking to play the recovery after the slowdown?

Speaker 1: Jena? Excellent question. And to our surprise, yes, when we take a look uh at investor surveys, we find that emerging markets

Speaker 1: today is actually in an overweight. So it's evidence that many investors are actually looking through a potential slowdown and already to recovery, which is a great thing. And what we're speaking to is our E M offering, which is uh ticker X ce M X ce M which stands for the Columbia emerging market core

Speaker 1: ex China ETF. And just as it's, it's name states it offers core exposure to emerging markets, but without China and without Hong Kong and this really allows investors to choose their own China, both in terms of the allocation as well as the investment type, new China or Old China.

Speaker 1: And this is not a new conversation. We saw this with Asia, right. We have Asia Japan. Investors don't want one country to be too dominant in the exposure. And at its peak, China represented 43% of broad emerging market industries. The other thing that we uh understand is that China beta hasn't necessarily performed well.

Speaker 1: Statistics tell us that China and China Beta

Speaker 1: typically filled with a lot of state-owned enterprises has been a performance drag and a volatility enhancer. So a solution like X Ce M again allows investors to choose their own. China

Speaker 1: increasingly they're choosing no China because some of the headlines that are in the uh newspapers today and some of the headlines we've seen from the largest pension plan in Texas as well as the state of Indiana. Investors are just staying away uh from China. So E M really is a portfolio tool tool to allow investors to express their own point of view on E M.

Speaker 1: It's been around for a little over seven years. It's done very well from a performance standpoint relative to its broad E M competitors,

Speaker 1: it's appropriately priced at 16 basis points. And uh we think X ce M uh which has been one of our fastest growing ETF S here to today is really a solution that will get more attention in the future.

Speaker 0: Looking at bonds, Jay for those ready to get back into fixed income. Where do you see opportunity?

Speaker 1: Absolutely in bonds. And as we like to say at Columbia, we're very happy for investors that fixed income got its last name back, which is income. And so that's a, a great place to start. Many of the conversations that we're having today are on the municipal side, primarily because municipal bonds have tax advantages, uh and volatility advantages versus their taxable peers.

Speaker 1: And municipal bonds tend to do really well after the fed pauses. And so for that, uh that leads us to a conversation uh around must ticker symbol M U US, T as it sounds, which stands for the Columbia Multi Sector, Muni ETF. And again, it's built on a foundation that is different than many of the traditional National Muni portfolios that are out there. So let me start with a concept,

Speaker 1: most fixed income ETF S track a bad bond benchmark. And I say that a touch facetiously. But the reason I say a bond benchmark is bad is because most bond benchmarks tend to give the most weight

Speaker 1: to the greatest issuers of debt. And in the municipal landscape, that means that you're giving a tremendous amount of exposure to state and local general obligation bonds, state and uh state and uh local general obligation bonds tend not to have a lot of income because they're backed by the tax power of their constituents. So you get a lot of exposure to what doesn't have a lot of income.

Speaker 1: And so at must, we tried to flip that script. We worked with our active portfolio manager, Katherine Steinstra, who is also the portfolio manager on Musk. And we were very intentional and decided on trying to minimize GEO exposure and have more exposure to revenue bonds and health care and high yield bonds which produce more income. So a simple way to think of that is we want to give more exposure

Speaker 1: to the higher income producing sectors in the community market and less exposure to the lower income producing sectors of the new market must uh has done very well as well. It's a four star morning star rated fund, it's priced to 23 basis points and relative to many

Speaker 1: of its uh national ETF peers, uh it's had about 60 basis points about performance over the last uh five years since its inception. So really happy with must as a solution for clients looking to uh get back into fixed income and get off the sidelines and cash.

Speaker 0: Finally, Jay with increased investor demand and continued inflows into ETF products. What else is on your product development? Road map.

Speaker 1: Well, Jenna, thank you so much for asking at Columbia. We're very excited because in April, we had an opportunity to launch a new ETF. It is the Columbia Research enhanced real estate ETF, which was a collaboration within the firm that we're really excited about.

Speaker 1: Uh One thing that we know in getting ready for this launch and doing surveys of what's on the minds of financial advisers is that even with the recent headlines, financial advisors, a majority that we surveyed were very uh steadfast in their dedication to reef in maintaining them or actually increasing their exposure. So we wanted to make sure that we had an offering that was uh attractively priced at 33 basis points, offers liquidity

Speaker 1: and the construction process uh and insight into Craig is that we leverage our quantitative uh research at Columbia. But we also have a real estate subsidiary called Lion Investments, which does a lot of work on the geographic exposure that are has. And so in our construction process, we were very focused on taking the, the input and research and insight from Lion,

Speaker 1: combining that with income and the income distribution for each week. And the outcome is that we have a real estate portfolio that provides more exposure to sectors like cell towers and data centers and has less exposure to traditional areas like office, retail, uh and traditional real estate space. So we're very excited about cred uh in its recent launch.

Speaker 0: Well, uh congratulations on the launch and thank you so much for joining us, Jay.

Speaker 1: Thanks so much for having me, Jen and I appreciate the conversation

Speaker 0: and thank you for watching. Once again, that was Jay mcandrew head of strategic beta sales at Columbia for needle investments.