Speaker 1:
From the library of the New York Stock Exchange at the corner of Wall and Broad Streets in New York city, you're inside the ICE House, our podcast from Intercontinental Exchange on markets, leadership and vision in global business. The dream drivers that have made the NYSE an indispensable institution of global growth for over 225 years. Each week, we feature stories of those who hatch plans, create jobs, and harness the engine of capitalism. Right here, right now at the NYSE and at ICE's exchanges and clearing houses around the world. And now, welcome inside the ICE House. Here's your host, Josh King of Intercontinental Exchange.
Josh King:
One of the unexpected outcomes of the past few weeks has been the media coverage and presence of wildlife in unexpected areas. Up here, in upstate New York, I'm tracking, at close quarters... Let me go through it, bear, bald eagles, a couple fox, and a predatory largemouth bass in my small pond who's terrorizing the fish stock and looking alarmingly well fed-in recent weeks. Also well-fed is the stock market, surprisingly near its record highs as we near July. And yet, our guest this week, Jon Maier of ETF firm Global X, calls it an unloved rally. Tweeting recently that, "The markets are just about back, but nobody has their previous way of life back." That's for sure.
Josh King:
Even on Wall Street, the human population is mixing with new neighbors, not often seen on the trading floors. CNBC has called this rally, not a V, or a check mark, or even a W, but a kangaroo with its powerful and unpredictable jumps moving into a market that's normally the habitat of bulls and bears. So, how do you play it? Individual names? Or ETFs to pinpoint particular areas of market recovery?
Josh King:
I've certainly gained some more perspectives spending some more time around the house. Disruptive technology, people in demographics, ESG, commodities, single nations. You get focused on more things when you have more time to read and look at a screen. So, you start watching your kids play more video games and eSports, a little more insight than the parent usually has on millennial habits and time sucks.
Josh King:
Well, they'll tell you that there's an app for that. And I tell them that there's an ETF for that. Ticker symbol, H-E-R-O, hero, Global X's video games and eSports ETF. Or maybe the lithium and battery tech ETF, ticker symbol, L-I-T, given how much time I'm on my Rambo electric mountain bike with its 48 volts, 750 watt LG lithium ion cell. It's an ever more popular craze. And yep, there is an ETF for that.
Josh King:
As the second half of 2020 unfolds, it's impossible to know exactly what lies ahead, but it is a good time to take a look at where the next steps of this kangaroo rally may be. Our conversation with Global X's chief investment officer, Jon Maier on the outlook for the markets, investing during COVID-19, and the role of ETFs. That's coming up right after this.
Speaker 3:
In our time of greatest need. We want to thank the true heroes around the world for stepping up, for taking care of us, and keeping us safe. With your expertise, your commitment, your sacrifice, and your selflessness. We'll work together to create a brighter future. And we thank you for reminding us what really matters. From all of us, thank you.
Josh King:
Our guest today, Jon Maier, the chief investment officer of Global X joined the firm in 2017. He works to shape the firm's market outlook, lead the construction of model portfolios, craft the firm's investment strategy, and contribute to the development of ETF products. Previously, Jon worked at Merrill Lynch Wealth Management, where he was the senior portfolio manager for its ETF model portfolio business. And prior to joining Merrill, he held positions with UBS, its predecessor firm, Paine Weber, and with AIG. Welcome inside the ICE House, Jon.
Jon Maier:
Thanks, Josh. Thanks for having me. Super excited to be on today.
Josh King:
I think we've been in some parallel places. You tweeted the other day that you visited your neighborhood in the upper west side for the first time in months, where have you been held up since then?
Jon Maier:
I'm out in The Hamptons. I've been here since March. You would think that, that sounds awesome, but March in The Hamptons is pretty cold. And so it's kind of a summer place, so you expect it to be warm, but it took about three months for that to happen. So, but now it's starting to warm up a bit.
Josh King:
So then a quick move or a quick visit back to the city. You noted that you had drinks with friends at a walk up bar. The weather is beautiful, a real slice of normalcy. I've been having that too, just to be out at a restaurant again, even if we're wearing masks at an outdoor table, drinking from plastic cups and eating off paper plates. Are you feeling this take hold, or is the grip tenuous? Like we're just skirting the edge of a second wave and a return to March and April that might be coming back on us. Where do you think we are in all this?
Jon Maier:
Well, as you said, I just went back to New York, you saw it from my tweet. And I did feel like the city was percolating a bit. It was, there were a lot of people wearing masks, but there was a sense of normalcy that was slowly coming back. I've been there about four times, each for between 12 and 18 hours. And this was the first time that I felt, New York probably will be back. Assuming that we're smart, we take the appropriate measures and we have... The city, the state has been successful at bending the curve. If that is maintained, I think there's light at the end of the tunnel. Now for the rest of the country? They need to be prudent. We are seeing cases increase and that's a worrying-some trend for sure. I just hope they take appropriate measures.
Josh King:
You and I are recording this as New York city this week is just moving into phase two of its reopening. In a recent podcast that we did, Slack's CEO, Stewart Butterfield, spoke about the growth in the long term, or permanent, of remote work among Slack's financial firm clients. Curious how Global X is operating and planning for its future work?
Jon Maier:
Global X pivoted very quickly. So we, our CEO Luis Berruga, he's from Spain. He had some insight into what was happening in Europe. So we made an early decision to go remote. So we did a lot of preparation that enable us for a rather smooth transition. So we're all been working from home since early to mid-March and it's been effective. Some of the issues that we've had, and at least that I have out here in The Hamptons, is managing my family in terms of if we have three Zoom calls going on at once, is there enough bandwidth for us all to actually operate? So there's been some scheduling in terms of how my family operates. I'm sure that you can extrapolate that out to many different families. So, that's something that you have to manage at least on a family-by-family basis.
Jon Maier:
Now, going forward, we've proven that it's been rather effective. We haven't been traveling. There's been a lot of time for special projects. We've gotten a lot of work done. And we're really proud of the work we've done. We've helped clients. We've helped move our business model. And I think other firms are really going to see that there's aspects of working at home where you can really focus.
Jon Maier:
Now, imagine if your child wasn't home all day, that would even be so much better, which I can really focus that much more instead of making sure he is on a particular Zoom call for math, or PE, or whatever. So I think there will be points that will be taken into the future. But we're social animals, I think we all want to be with each other to a certain extent. So there's going to be some aspect of going back to work for sure. I just don't know when that'll happen?
Josh King:
I touched on your experience during the introduction, Jon, but what I didn't mention is that you did a year long tour in Kiev in the Ukraine with the Peace Corps. What made you sign up, before we get into the broader conversation, how did that experience fit into the start of what would become your career in finance?
Jon Maier:
So, I went to Emory University, I graduated and I went to work for AIG on the insurance side. There's a lot of family members of mine that have been in the insurance business.
Josh King:
I worked for the Hartford for many years. So I know from whence you come.
Jon Maier:
As an underwriter? Or as a...
Josh King:
No, as a communications guy, running communications up in Hartford, Connecticut.
Jon Maier:
Well, just imagine if you're an underwriter coming out of college after having a fairly fun four years and a decent time before that in life. Now I'm sitting at a desk, underwriting. I'm like, "There's got to be something better than this." So I racked my brain. I had gone to, on an outward bound trip in my life, I went for two weeks and I'm like, "Wow. Maybe I should really try to think outside the box and do something different." So, what could I do? And I looked at the Peace Corps, and I don't think building schools or digging latrines in a very developing country was for me. But at the time the Soviet Union had fallen and there was a business program within the former Soviet Union.
Jon Maier:
So I thought that well actually could help me in a business career going forward. So I selected that region, Eastern Europe. I'm like, "Wow, I could do something here. I don't know what, but I could do something." And that's got me going. And also something that my father wouldn't be too upset with me about. He was very straight and narrow. You have to go into business. You can't study liberal arts or anything like that, it's business, business, business. I'm like, "So how can I manage that?" And this was a way around that. And it proved to be a pretty cool experience.
Josh King:
I mean, how much pushback did you get in the Maier home? Did they say, "You can't go to Ukraine," or, "You can't do the Peace Corps," but this was your compromise with them.
Jon Maier:
There was... Some of my father's friends or one of my father's friends was a senior guy at PepsiCo in HR. So he made me go talk to him. And then he set up a bunch of interviews within PepsiCo with different HR people. And they all said, "This is a fantastic idea. It's going to open up many possibilities for you going forward," which proved to be correct. So he was okay with it. My mom was certainly crying when I left. But they came to visit me and it turned out to be a really awesome experience. And something I never would've done before.
Josh King:
I mean, you were in Ukraine, I think, just a few years after the dissolution of the USSR. I joined my boss at the time, Bill Clinton, for two high profile stops in Kiev in both '94 and '95 as the country was shedding the shadow of the Soviet Union, denuclearizing, and joining the EU. And recently, you helped launch Global X Emerging Market Bond ETF, which is NYSE ticker symbol ARCA, E-M-B-D. It's got some Ukrainian government bonds in it, along with those from Peru, Senegal, and hundreds of others on the Peace Corps circuit. How would a vehicle like that have been helpful to President Leonid Kuchma and those financing the newly privatized Ukrainian economy back in the mid nineties?
Jon Maier:
That's a name I haven't heard in a while. And we were there at the same time apparently. So there was a lot of Peace Corps volunteers who were super excited when Clinton came representing, we were representing America. Now, if you just think about the EM market, it's a huge market, a global fixed income totals about $117 trillion, and EM about 22% of that, about 26 trillion. So it's a big market. And then there's EM debt can be issued in either hard currency or local currency.
Jon Maier:
So for investors, hard currency, the dollar denominated bonds versus local currency becomes something that you have to decide on whether you want to invest in. Oftentimes, you see people invest in U.S. dollar denominated bonds, it takes away some of the risk of fluctuations in the local currency. Ukraine largely borrows from the IMF, certainly elsewhere also, but inflation has always been concern within the Ukraine, at least when I was there. But certainly, overall, helpful.
Josh King:
When you left the Peace Corps, how did you decide to get your start in the ETF industry?
Jon Maier:
So when I came back from Ukraine, I thought I was a hotshot, that I had this incredible emerging market experience. So when I was in the Peace Corps, I worked at an organization that assisted privatized Ukrainian enterprises develop business plans to help them adapt to a market economy. So I visited all these different, these companies within Ukraine. And you can imagine that they were stuck in the '50s, because there was no competition because of the way the command system was set up.
Jon Maier:
So you go into a factory that would make teapots or fans. The fans had no covers, meaning... And they were steel fans. So literally, you could stick your hands in the fan and it would be chopped off, yet there was no one to sue. The system wasn't set up for that. And the teapots looked like something that my great-grandmother would have. Because again, there was no competition. One region wasn't fighting, not fighting, but there was no competition against each other.
Jon Maier:
So when I came back from Ukraine, I'm like, "Wow, I have this wealth of knowledge about emerging markets." But in reality, that really didn't translate on Wall Street. So I interviewed for a bunch of analysts in the emerging market space. And they're like, "Well, that's great that you lived there, but you don't really know all that much." So ultimately, like any other job you had to commit selling you knew something. And I was only a few years out of school. So ultimately, the closed-end fund analyst at Paine Webber gave me a job. And then closed-end funds are somewhat analogous over to ETFs. Or was kind of like they started off within the same realm. And when I was at both Paine Webber and UBS, UBS purchased Paine Webber, I started to get involved with ETFs in a small way. I'd put out different reports about the small, but growing industry within ETFs. So, that got me my start with ETFs.
Josh King:
And then, what was the opportunity that brought you from that name, to Global X? A small company in an ever expanding competitive pool of ETF providers?
Jon Maier:
So, once I left UBS, and I was largely a closed-end fund researcher, I was part of global research at UBS, I got hired by global research at Merrill Lynch covering closed-end funds. And then about midway into my stay at Merrill Lynch, I was asked if I wanted to manage these asset allocation models that were created inside of research, but were created by the institutional group that was designed to service the wealth management... people within wealth management, ultimately clients within wealth management.
Jon Maier:
Now the institutional guys didn't really care about these products, and they were small. And I said, "Sure, I'll take them over." And when I looked at them, they were created in 2005 when the ETF business was rather small. And there was a lot of broad-based exposure. There wasn't a lot of nuanced exposure, but by the time I took them over in 2009, I was like, "Wait, we can do something with these portfolios because there is..." Say if you're invested in technology, it was broad technology.
Jon Maier:
But by that point, there was internet. There was cloud computing that came out a few years later. There was opportunities to get a lot more nuanced within a particular space. Within healthcare, you could go overweight with biotech. You could hedge different currencies by 2012. So I was able to build out a suite that was a lot more complicated and was able to take advantage of a lot of different areas within the ETF space. Because you had these thousands of building blocks, you needed to put them together. That's ultimately what I did.
Jon Maier:
So, a long answer. So once I did that, it became a growing business within Merrill Lynch. And I managed those from 2009, to when I left in 2017. And in 2017, when the models became huge, probably about $50 billion in size. And I think they're about $80 billion at Merrill Lynch at this point, maybe even more, I wanted a different opportunity. I wanted to grow. I wanted to be noticed, not me, but the recognition of the business I was creating. And by going to a smaller provider, I was able to see that growth and really develop a business and it to be some something more tangible versus something that's big, but inside of Merrill Lynch and Bank of America, it's really not that big.
Josh King:
Right. Right.
Jon Maier:
[crosstalk 00:18:01] relative basis.
Josh King:
I watched a recent video you published that talked about the Global X business model and how it helps firms stay closer to their clients and better meet the needs of the modern knowledgeable investor. How does that work?
Jon Maier:
Well when you're giving advice, whether it be about your own products or others, you want to make sure that advice is sound, it meets the needs of a particular client. All clients have goals, and you want to create a product to create a portfolio that fits in with those goals. So you're not going to have a client for an extended period of time, unless you're working with them and recognizing their needs. Now those needs may fall in within your purview of your own product suite, it may not.
Jon Maier:
So on the model portfolio side, that's why we want open architecture. We want to provide the best product that's available for client, because we expect to be in this for a long period of time. And if you just have this narrow view, we just want to sell a product, you're not going to be in business too long. If you want to sell a product that's meaningful and a solution that works well over time, and different solutions work, you have to change things over time. That's what I mean by staying close to the client. And that's what I'm trying to accomplish while at Global X.
Josh King:
How do you think COVID-19 and its economic impact has affected your outlook for the short and medium term of the overall market? In your piece that Global X published the other day, The Generational Mashup. You say that, "COVID-19 has resulted in a bridging of the gap between generations." My 15-year-old son, my 84-year-old mom and my wife and I are all using the same technology platform, Amazon Echo Show for a bunch of different things.
Jon Maier:
Yeah. I mean, that's a great point. And it's the point I was trying to bring out in my piece. I mean, COVID has impacted everything. It's changed everything, whether it be for the better, for the worse, it's really been an accelerator. It's also, to me, it's provided a period of contemplation. How do we spend our time? Do we need to commute anymore? Or do we need to commute as much? Do we need to travel for business as much? Can we get a lot more done just being at home? Hopefully our kids are at school. But to your point, and my nine-year-old son and my 81-year-old mother, they both can go on Amazon and buy something.
Jon Maier:
They might buy different things. My son is probably going to buy a Ninja T-shirt, some merch from a gamer, and my mother's going to buy Weed Thins, she likes Weed Thins. But they both know how to use the technology. I just set up my mother on Apple TV so she could stream Netflix. I think it's going to take a little time for her to figure out how to use that remote control. She was having a little, but she'll get there. And so, the 81-year-old and the 10-year-old really are going to be doing the same things, utilizing things a little bit differently for different purposes, but the same underlying basic technology.
Jon Maier:
And so this bridge, we've created this bridge that never existed before. Old people aren't supposed to use technology, but they're going to, if they want to talk to their friends, they want to talk to their kids and grandkids. They're texting, they're streaming, they're on Zoom, and FaceTime, and things like that. It's forever changed.
Josh King:
So how does that affect the way Global X views the world? You're constantly developing new ETFs and new offerings. Has it changed the way you approach business?
Jon Maier:
I don't know if it's changed the way we approach business? But it's certainly, it's providing us an opportunity to talk about some of our themes in a way that it's very real, and it's relevant to the current period. So I've developed portfolios using thematic ETFs, and right now those portfolios are doing rather well, because we are using so many of these different technologies.
Jon Maier:
And it's really been an accelerator. Everything was happening before, whether it be the cloud, cybersecurity, gaming, robotics, artificial intelligence. There's no doubt all those things were happening, and they were being an adopted. But because of what's happened over the past three or four months, there had to be an acceleration of this adoption, just because of what we're doing. Look how we're communicating right now. So, we're just telling the story.
Josh King:
Absolutely. I mean, I'm curious, what are the Global X research teams using for comparative research for the current market, that while so many things are different for the world that you and I are living in now, there are similarities to everything. From the 1918 flu pandemic, the Great Depression in the 1930s, the civil unrest in the late 1960s. I mean, where do you peg your precedence to make a good call?
Jon Maier:
When you're a macro strategist, like myself, you certainly look to the past. You look at different recessions. You look at different periods of time, but every period is different and unique. You can take cues from them, but they're not going to tell you the entire story.
Jon Maier:
So, what's different about what's going on right now, forgetting COVID for one moment and forgetting that this is a self-induced recession just for one moment. What's different right now is that we have this tremendous amount of technology and this acceleration of technology. Just imagine if COVID happened before the iPhone existed 12 years ago or so. Life would be very different right now. Our business environment would be very different. And I'm not even sure we could operate on the level we're operating right now. So, we can look to past recessions and upheavals.
Jon Maier:
But this one is very different. First, it's a self-induced recession because we effectively shut down the economy because we wanted to stop the spread of the virus. It's better to stop it early than to keep stopping the economy going on. Because if you keep stopping it, there's so much uncertainty. So look at New York, we stopped it for 78 days.
Jon Maier:
New York has been very effective in bringing down cases. And it looks like New York is taking the approach of opening in a very methodical, slow way in the efforts to not have a second wave, because if we shut down again, it's going to be a worse shutdown of the first in terms of how it's going to impact us economically. But throughout this whole time, we haven't, at least Global X and many other firms, we haven't missed a beat.
Jon Maier:
And that's in the finance world. There's many firms that have had to readjust their business models, shut down, unfortunately close. But many are just evolving and will take some of what they have learned during this period and add it to their business model. So if you think about a restaurant, they couldn't serve in a normal way. They had to transition to curbside delivery, or deliver their food. And if they were able to survive, now they're gradually opening up to different capacity levels. But this aspect of delivering has probably accelerated, potentially could accelerate their business going forward. So you're going to see a lot of... I think there's going to be an increased amount of automation, whether it be in the hotel industry or just the overall leisure industry in general.
Josh King:
Curious how Global X's own adaptation has taken place. It takes a long time for an aircraft carrier to execute a 180 degree turn, but the Navy's mark six patrol boat can do it in a matter of seconds. Does Global X's relative size give you an advantage to pivot and adjust quickly to a new environment?
Jon Maier:
Without a doubt. We have, I'm sure I'm getting this exact number wrong, we have approximately 60 employees. As mentioned earlier, we're able to pivot very quickly on Slack and Zoom. And what we've been doing is we've been executing on projects we haven't had time to focus on. And being at home, when I'm not being interrupted by my son jumping in. He's like, "Dad, can I talk now?" The amount of focus and what we can get done has been just incredible. And we're actually hiring. So interviewing on some platform and hiring people and interacting with those new people. It's been a very interesting experience. And we're expecting, once we start in person again, we're going to be very well-positioned going forward.
Josh King:
At the end of may, the Fed disclosed that it spent $1.3 billion to buy corporate bond ETFs. And chairman Jay Powell has signaled he'll continue that trend, supported by former chair, Janet Yellen. What impact has both the real buying and promised support had on the ETF space, and how might the Fed being involved affect the industry over the long term?
Jon Maier:
Well, what the Fed has really been trying to do is to provide liquidity to the market and they've been buying securities, many different types of securities. Some have been saying they may buy equities at some point, if it comes to that. So in terms of buying ETFs, it's really buying the underlying components. That was the purpose. It was just an efficient way to access those underlying holdings on the corporate side. So I think that's a positive, I don't think that necessarily speaks to the ETF industry per se. In the sense it speaks to the ETF industry is that it's a very accepted structure.
Jon Maier:
But really, what the Fed is trying to do is to make sure there's enough liquidity in the market so that our financial system can operate effectively. And they've been doing that. And I always say never bet against the Fed. Seriously, don't ever bet against the Fed. So, I mean, the ETF industry has brought in about $190 billion of new money year-to-date. 81 billion of that new money is in fixed income ETFs. And that's directly or indirectly aided by what the Fed has been doing. So it's, again, doesn't, it only speaks to the ETF industry as a very competent and relevant industry, but it's really to access the underlying components.
Josh King:
After the break, Jon Maier, the chief investment officer of Global X and I will drill into how investor habits have changed in the first half of 2020, and what that means for long term investing trends. That's right after this
Speaker 5:
Board diversity is important.
Speaker 6:
Board diversity is important.
Speaker 7:
Board diversity is important.
Speaker 8:
Board diversity is very important.
Speaker 9:
Not just because it's the right thing to do, but because diverse leadership at companies creates better companies.
Speaker 10:
This is about value, not values.
Speaker 11:
With board diversity, you build better companies.
Speaker 12:
Diversity of thought, diversity of perspective.
Speaker 13:
Different perspectives often yield better outcomes.
Speaker 14:
You need to have different perspectives with different backgrounds to really inform and find the best solutions for our organizations.
Speaker 15:
Companies that have more diverse boards perform better.
Speaker 16:
Diverse teams are better performers, that is absolutely true in the boardroom as well.
Speaker 17:
It makes a difference to the employees who work for companies. It makes a big difference for the communities in which they work.
Speaker 18:
Our business is about building leaders for the future. And that talent cannot be only half the population of the world.
Speaker 19:
What are you waiting for? 50% of the population for some reason, isn't qualified? Let's put the smartest people we can in the boardroom, and why ignore people or exclude people for any reason other than that they're not qualified?
Josh King:
So before the break, Jon Maier, the chief investment officer at Global X and I were discussing his career arc and how Global X is adapting its business in reaction to the COVID-19 crisis and all of its effects. I want to start with discussing some actual drilling, Jon. We've had several episodes devoted to the impact of the pandemic and the shutdown on the energy markets, but not much discussion of the midstream market. How has the midstream sector been affected? And what's your outlook for the space?
Jon Maier:
Well, I mean the entire energy business has been impacted by a supply and demand problem in general. I mean, there's too much supply, and just not much demand. You're seeing a changing landscape of low oil prices that's really bringing this sector down. The OPEC deal is helping. Economies across the country and across the world reopening has raised demand. But there's really been a shift towards renewable energy. There's been a tremendous amount of growth in electric vehicles. Look at Tesla sales. All of this is proving to be a lot for energy. And while we are reopening, and reopening slowly, it's certainly impacting demand. And that's really a root problem right now.
Josh King:
Long term, there could be a de urbanization turning the trend of cities as more people fear both density and mass transit. What are some of the potential ramifications from a societal shift like that do you think?
Jon Maier:
I mean, I don't think the concept of de urbanization is anything new to COVID-19. We saw a lot of people moving out of major urban areas prior to COVID and that had a lot to do with high taxes and digitization. And I think, as I've talked about earlier is, the acceleration of a lot of these different trends is really playing out right now. If you think about it, prior to COVID, remote working was fairly easy, but now it's all we do. And after COVID some will continue to work at home. And because companies needs to diversify, they can't have everybody in one spot. And you're just going to see an acceleration of a lot of these different trends.
Jon Maier:
And I think that will play into the de urbanization trend. And in the long run, we may see the U.S. as more of a mashup. People in New York moving to different parts of the country because taxes are lower, and because they always wanted to in the first place and now their companies are letting them. And that potentially can change actually the political landscape of the country in different parts of the country.
Josh King:
Global X offers a lot of products that provide exposure to the growing role of AI, and robotics, and automation, which is affecting both white and blue collar industries. Where, if at all, have you seen significant shifts in adoption trends?
Jon Maier:
Well, first of all, there's a lot of talk that robots are going to take our jobs. And I mean, I think robots in general, they're going to work alongside humans. They're not going to necessarily replace humans. So it's not humans versus robots. I think that's just science fiction, that's movies. And, but humans are so important to just the functioning of robotic technology, and robotic technology has been able to reach many different areas. So companies that implement different types of robotic solutions, they hire a lot of people. And automation related to robotics, really just is increasing productivity. And it's allowing companies to reinvest in people, and they can train more people, and they can hire more people.
Josh King:
On one of our recent podcasts, Jon, the CEOs of Slack, Box, and PagerDuty discussed the growth and stress on the cloud and cloud-based software caused by this world that we're talking about, this world gone remote. I read an interesting stat on the Global X site that ETFs offering cloud computing exposure now make up the most AUM, do you see this as a short term trend as people follow the tried and true axiom of buying what they know and use, or does the space have significant growth potential beyond the short term?
Jon Maier:
Just think about it, if you have a computer and an internet connection and you have access to the cloud, you can work literally anywhere. I could pick up today, go to Bali, accept the time difference, and work from there. Actually, I'm not sure you can fly to Bali right now. So I think we think that the cloud really presents attractive, it's very attractive towards the business model both for companies, investors, and also the consumer.
Jon Maier:
I mean, if you think about the cloud computing business model, it's just such a great revenue stream that's really, really sticky. On the companies they can generate recurring revenues through subscription based services. And then again, that cashflow is very important. So yes, I think cloud computing is here to stay, and it's going to be accelerating, and is very valuable to customers.
Josh King:
Shifting to the nearer term, Jon, it's a day-by-day issue, but it appears that all major sports one day are they're going to be returning without live crowds. The next day they've got cases and they're getting farther and farther away from even the playing field in an empty stadium. Does that impact seem to be an opportunity for eSports and platforms like Twitch?
Jon Maier:
Well, I mean, I think people love in-person sports. I think in-person sports are going to be very relevant when they come back, people can go to stadiums. But video games and eSports are here to stay. It's a ship that started way before COVID, it's something that will continue well past COVID. Just, again, somewhat of an accelerator because eSports can occur right now. I mean, in terms of revenues eSports and video games has, if you combine movies in the film industry and professional sports, eSports has way more revenues, it's approximately a $150 billion. So it's just not a niche market at all.
Jon Maier:
And if you look at the geography, it's both in Asia as well as in the U.S. China is a big adopter, as well as Korea, of eSports. And also, if you think about going back to the cloud a little bit, a lot of the new games are being launched on the cloud, both by Microsoft and Sony. And all of these things are interrelated, whether it's cloud and cybersecurity. I think eSports are definitely here to stay. I mean, they're here, they're not even here to stay.
Josh King:
One overlooked trend that the markets and investors should pay closer attention to than they are right now?
Jon Maier:
Well, a couple things that I think we should pay attention to is, we have an election coming up in five months, how will the policies of a potentially new administration change, and what will the impact be on the market? So that's something that we really need to think about. And another thing that I think is important is, globalization and de globalization. If we de globalize, and well, you can't entirely cut yourself off from the rest of the world, but if you do it in smart ways with different types of technologies to reduce cost, I don't necessarily think that's a bad thing. But again, that could change somewhat if there's a different leadership come November or in January.
Jon Maier:
So I think we need to... And I think those two concepts are linked. We have a way of not thinking more than two or three weeks in the future, but I think we need to think a little bit further into the future. We need to think about how we're going to effectively reopen. How we're effectively going to crush the curve with respect to the virus. And hopefully there's a vaccine relatively soon. And what is it going to look like in November? So.
Josh King:
One of the fascinating aspects of ETFs as we look past November is the endless adaption and solutions the industry has brought to us over the past 30 years. What are some of the ways you think the industry will respond to the first half of 2020? Not only over the next six months, but into 2021 and the years beyond.
Jon Maier:
Sure. Aside from the more structural aspect like non-transparent ETFs, which are coming to market, and the new ETF role, which really levels the playing field for ETFs. I think we should have really started thinking more about ESG, especially the SG of ESG, social governance. I think there needs to be more good options, particularly in the international developed equity and fixed income areas. And I think you'll see an acceleration of new products in that area going forward. Now there's already some overlap between certain tech themes and some more environmentally-focused ETFs. Now I think with investors becoming more focused on ESG, there may be ways to incorporate some more of the SG versus the ESG into certain themes.
Josh King:
Well, we will continue to stay abreast of all of them Jon, have you back on the show, maybe toward the end of the year, into next year and see how the outlook may have changed, if at all. And see, maybe focus some more on the S & G of ES&G.
Jon Maier:
I appreciate that Josh, this was a lot of fun. And hopefully my forecast about trends in the future are correct.
Josh King:
Well, keep watching Jon. Thanks so much for joining us inside the ICE House.
Jon Maier:
See you later.
Josh King:
That's our conversation for this week. Our guest was Jon Maier, the chief investment officer at Global X. If you like what you heard, please rate us on iTunes so other folks know where to find us. And if you've got a comment or a question you'd like one of our experts to tackle on a future show, email us at [email protected] or tweet at us @ICEHousePodcast. Our show is produced by Pete Asch, with production assistance from Stephen Romanchik and Ian Wolff. I'm Josh King, your host, signing off from the remote library of the New York Stock Exchange. Thanks for listening. Talk to you next week.
Speaker 1:
Information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither ICE, nor its affiliates make any representations or warranties, express or implied, as to the accuracy or completeness of the information, and do not sponsor, approve, or endorse any of the content herein. All of which is presented solely for informational and educational purposes. Nothing herein constitutes an offer to sell, a solicitation of an offer to buy any security, or a recommendation of any security or trading practice. Some portions of the preceding conversation may have been edited for the purpose of length or clarity.
