Ep. 13 Steve Hawkins – The Secret Sauce of Horizons ETFs

Podcast

Our conversation with Steve Hawkins, President & CEO, Horizons ETFs Canada. 'Hawk' begins by taking us on the journey from his humble beginnings on Bay Street all the way to his appointment as Head of Horizons ETFs. We talk about the culture of openness, candor, and enthusiasm he has fostered at Horizons, and of their willingness and drive to push the envelope on identifying and launching ETF solutions well ahead of the s-curve like fruition of their underlying markets.

These include making some of the lowest cost index-based ETFs available to investors; being the first to work with active portfolio managers to develop some of Canada's earliest and/or most advanced actively-managed ETFs such as Horizons ReSolve Adaptive Asset Allocation ETF (HRAA), Horizons Seasonality ETF (HAC), as well as its numerous enhanced income 'covered call' and active fixed income mandates; boldly developing some of the most progressive and wildly successful thematic investment ideas like Canada's first Marijuana ETF (HMMJ), and more recently taking the mantle on launching PSYK, the Horizons Psychedelic Stocks ETF (PSYK), which invests in companies researching and developing therapies that employ new-in-class psychedelic drugs including Psylocibin, Ketamine, and MDMA, well ahead of what were/are expected to be watershed legislative and medical care therapies changes, respectively, taking place in the field of health, and mental health sciences; finally, we discuss some very interesting 'pick and shovel' themes surrounding the technological 'gold rush.' We get into all of it.

Full Transcript:

RYA Ep. 13 Steve Hawkins – The Secret Sauce of Horizons ETFs

Pierre Daillie: [00:00:00] Hello, and welcome to Raise Your Average. I'm Pierre Daillie, Managing Editor at AdvisorAnalyst.com. My co-hosts are Mike Philbrick and Rodrigo Gordillo from ReSolve Asset Management SEZC. Our guest today is Steve Hawkins, President and CEO at Horizons ETFs Canada.

Disclaimer: [00:00:20] The views and opinions expressed in this broadcast or those of the individual guests, and do not necessarily reflect the official policy or position of advisor analyst.com or of our guests. This broadcast is meant to be for informational purposes. Only nothing discussed in this broadcast is intended to be considered as advice.

Pierre Daillie: 00:00:36] Steve, Welcome to the show. It's great to have you.

Steve Hawkins: [00:00:41] Pierre. Thank you very much. And it'll be great show with Mike and rod. Always entertaining individuals.

Pierre Daillie: [00:00:47] Awesome.

Mike Philbrick: [00:00:48] Not to mention yourself, the legendary 'Hawk.' He's probably got the, one of the best handles on Bay Street. Absolutely.

Steve Hawkins: [00:00:56] It really is. I appreciate it.

Rodrigo Gordillo: [00:00:58] And some of the best tapestries that he puts on his back, look at that shirt.

Steve Hawkins: [00:01:04] Yup it's all about the shirt game Rod. Yeah. Yeah, always. I

Rodrigo Gordillo: [00:01:08] can't pull it off. I can pull it off. I literally, this is the only thing I can do.

Pierre Daillie: [00:01:12] Where's the party?

Rodrigo Gordillo: [00:01:16] I think at Horizons.

Mike Philbrick: [00:01:17] If you look closely, you'll see some hidden message in there.

For sure. So to Hawk, tell us about your tell us about your career trajectory. How did you rise to a such prominence in the Canadian ETF industry? Where did it all start? Humble beginnings in Newfoundland, give us the, give us the scoop, tell us everything.

Steve Hawkins: [00:01:38] Hey, I started working on bay street when I was 15 years old, worked as a runner and a mailroom, and really really progressed myself from there.

Obviously had a lot of fun over the many years, but really was on the sell side of the street for a long time until I got my first opportunity on the buy-side with Altamira Management back in the early nineties, they were in a huge growth process. You know, they wanted, I worked in a, I worked in the trading floor and things like that, but I had progressed to a senior internal audit role and there was this new thing in the asset management system called compliance.

Nobody knew what it was. And what year was this compliance officer? This was 1993. Wow. And nobody knew what was the compliance officer was at that point in time. And and Altamira it was a leading, fund provider at that stage. And they wanted to create a compliance department and, uh, uh, I had a few friends there and they basically said, Steve, we want to hire you.

And we want you to be, to manage the compliance department and figure out what this compliance thing is. And, and sort that was really the career path that took me off. I was very active in the asset management industry. At that stage. I was doing a fair bit of public speaking, but I had, I was, running compliance, but running compliance.

You have your finger in every single pie inside the company got me very involved in understanding the day to day activities with the trading of the PMs of the operations. Not to mention, sales and marketing and all that kind of stuff as well. But you know, from there I progressed myself personally.

And then ultimately, I, you know, I was working very actively with one of our large institutional clients who said, Steve, we would really like you to come work for us. And that was our biggest client at that stage. And and I took on a, a different roll there. And I moved into more directly an actively overseeing the investment management process and I became a CIO.

And from there I progressed at a few different firms. Horizons ETFs was created by Jovian Capital and, and Adam Felesky, Howard Atkinson. And, uh, that was their brainchild but it was part of a bigger firm and Jovian actually bought the asset management company that I was President of and I was, uh, Philip Armstrong, always joked that I was the highest uh, cost employee that they ever hired here at Jovian and uh, or at Jovian at that time.

And and then. Ran the investment management business of Jovian for awhile, which was very integral to the operations of the Horizons ETFs. And then, and then the rules changed and the OSC said it is mandatory for an asset management company to have a compliance officer. And then it was like, I was the only guy who had the history and the accreditation to be able to be the compliance officer.

And I've had to become the compliance officer for beta pro management, which managed the leverage ETFs. And then from there, it was really history. I was started working with Adam and Howard almost every day ran the day-to-day operations of the company very quickly. We launched some closed end funds.

I had a lot of closed-end fund history. And then we were converting things from closed end funds to ETFs. We became the first issue of active ETFs and, I had my investment background there. Uh, it was, it was a long time coming, but it really started in, in working as a mailroom runner on bay street.

Rodrigo Gordillo: [00:05:20] And then wait, wait, wait that, that mail room or anything, wasn't that the first chapter of a Reminiscences of a Stock Operator. Are you sure that's your life or that, that particular book I've heard that one way too often for that?

Steve Hawkins: [00:05:35] I, you know, I had a little shirt and a little tie that was a clip on, and I had a briefcase, which they gave me and I had to carry around stock certificates and bond certificates from this bank to settle trades.

That's how the thing, this thing works, physical securities, it was a different world, for sure.

Mike Philbrick: [00:05:54] So Steve, along that journey, you have created a pretty exceptional culture at Horizons. And I know you're not fond of talking about yourself and your accolades, but w where do you think that the key insights have come, or what are your key insights about creating.

A great culture. Where'd you learn it. And what do you think your top two or three tenants are as you run Horizons, ETFs.

Steve Hawkins: [00:06:20] Yeah, it's hard to say Mike, but you know, the one thing that I pride myself as is talking to the people on a very regular basis, keeping them informed, not hiding things from people or keeping people in the dark when they don't have to, this is not a business where like we're growing mushrooms where we have to keep them in the dark and feed them manure.

This is, this is a business where we want people to participate and work as a team. And I really. Try in support and promote the team effort, everybody working together, everybody asking questions. I, one of the things that I have loved about my career is coming to work every day and trying to learn something new or being forced to learn something new.

And, and knowledge, I think is the absolute key to this business. I think it all connects everybody together and people talking and learning is, is the most important thing from a team perspective. And so knowledge, whether it's me saying what's going on, what I'm thinking, asking for everybody's opinion.

I, I, although I ultimately make the decisions on what we do and which way we're going, it's really getting that input from everybody else saying, Hey, I'm thinking about this and this and this. And as a team. Give me all of your feedback. I want this information, I have to try and distill this.

And then from that I try and make what I would be the best informed decision. I'm not always right, for sure. Uh, but I have made some good decisions over the past few years and I really credit that to the team. And the input that I get from them,

Mike Philbrick: [00:08:05] do you feel that thirst for knowledge and that candor that you promote within the firm is one of the, the key, the keystones for the way Horizons has evolved and adapted over the years to become the largest independent ETF, offering shop in Canada.

Is that, or what are the keystones there?

Steve Hawkins: [00:08:29] I'm, I'm, I'm very open about putting myself out there as an individual and as a firm and being able to work with people, I pride myself on being a very hard worker. I used to be the first one in the office and the last one to leave the office.

That's not the case anymore. I'm still probably the last one here at the end of the day. But you know, when it talks to working with partners, I try and talk to everybody and this is. A relationship business. This has to be, if somebody does you a favor, you got to do them a favor.

It's a very quid pro quo driven type of business as well. So it's really, it's working with a lot of people. It's having a lot of good relationships out there. It's if somebody does something for you, you have to make sure that you pay that back 10 fold kind of thing. And I'm not talking like a commission dollar or something like that.

It's just, it's ideas. It's generation it's working together. It's helping promote somebody or a firm or another career out there per se. But it's really working. From a team perspective internally and working as a team externally as well with all of your partners in business relationship.

Rodrigo Gordillo: [00:09:42] I think that, again, you I know you don't like to hear this, but one of the things that I see as a key aspect of the success of Horizons is that your personality is a generosity of spirit, right? Like you said, it's. Generosity of, you know, necessarily dollars exchanging but giving yourself to the community, giving yourself to your partners, actually listening and trying to make it work where we've been partners for a few years now with some of the ETFs that we sub-advise for, with you guys.

And it's clear to me that generosity is a key thing. And then when I talk to everybody else at Horizons, it has trickled down for sure. So I think from a management perspective, I know a lot of advisors that are listening to this that is especially people that are leaving the banks and starting their own businesses.

That would be a key thing to take away from from what I know about Hawk. Uh, yeah, very much doing a good job. My friend. Yeah. All right. Let's get off the 'Hawk' flow. Okay. Let's talk about me. So what are my favorite traits, your favorite traits about me specifically,

You first, Pierre?Teasing

Steve Hawkins: [00:10:51] As you know guys, I like the work hard play hard attitude, so I'm not one to shy away from entertaining and being out there, but putting myself out there both mentally and physically for the purposes of of the enjoyment of others.

Uh, it's, it's all about working together though at the end of the day.

Mike Philbrick: [00:11:14] That's awesome. Now, how do you go through the process at Horizons of you know, idea, generation filtering and then the potential execution? So Horizons is so often been on the Vanguard of so many investment ideas and thoughts, and some of them don't work, as you said, so you have to close them down or whatever, but many of them have been.

Smash successes, whether we want to talk about marijuana, the recent uh, foray into psychedelics uranium, I think is another one where, a highly underrated under loved asset class. And you guys launched an ETF in sort of the tail end or in the midst of a huge bear market in that space.

How do you go through that? How do you know, get the idea, filter it, think about the execution. Is there a process there that you can share with us?

Steve Hawkins: [00:12:08] There's no magic to this, but it really does come down to one. We are very innovative. We pride ourselves on innovation as our capital is our primary slogan and we try and preach it every single day per se.

But, we listen to people, we listened to our clients, we listened to, uh, stock boards. We listen to, we get emails constantly about this and this. We listened to our business partners saying, Steve, this is really interesting. Maybe you should think about this. We listened to our clients.

And then they say you know, have you thought about this? Is that possible? And I am not one to shy away from something hard, something that somebody has not done before. And I think that's probably, there's a lot of people that are run around in this market. That are, are scared to take any sort of risk at all.

You mentioned another, the name of another company, even though they're in a different frame of light and, you know, that's some of the that I refer to sorta as the Walmart of ETFs, and it's nothing against Walmart, everybody shops at Walmart, everybody loves Walmart for certain things, but they're not going to be on the leading edge of the psychedelics industry or the marijuana industry or the Bitcoin industry, from a cryptocurrency perspective, there are, there are people that like to you know, that put their money where their mouth is. And we pride ourselves on innovation, putting ourselves out there.

And it's not easy a lot of times to make these decisions to say, we're going to do this and we're going to do it first. The right way. And, and there's a lot of research that goes into that, but it really is listening to people. It really is listening to our partners, uh, there's a lot of parts, smart people that work at all of the banks here in Canada.

They don't necessarily have the ability to do the things that we want to. But they can give us great feedback on how we necessarily might want to structure this, or it could be more efficient with this, or, uh, there's a lot of different ways to skin a cat. And again, I have a great team behind me as well.

And, you know, it's working with the team. It's sitting down, it's planning these things out, but at the end of the day, Mike, the very first thing to answer your question is we listen, right? That's what we've practiced.

Mike Philbrick: [00:14:27] And you've done a great job. It shouldn't be underestimated on the structuring side to something that you mentioned.

Implicitly in your comments. I would suggest as explicit the structuring and some of the products you've done over the years has been extraordinarily thoughtful and effective and answered a lot of questions for individual investors, whether that's on the tax side or otherwise, it's been very interesting watching that evolution.

Steve Hawkins: [00:14:52] Yeah we make mistakes, but we learn from those mistakes and we never make the same mistake twice, that's, you know what, w when the volatility market blew up three years ago, we were right in the heat of it. We were the only product provider in Canada in this space. And then we learned that we had to adapt and change from that.

Then the oil last year. When crude oil went crazy and negative for the first time in history, that really impacted us as a, as the biggest crude oil product provider here in Canada. And we had to learn and adapt and, ultimately we're, you seeing some success from that, but we also saw a lot of failure and structuring and restructuring that we had to think of and move.

So let's talk about

Mike Philbrick: [00:15:34] innovation isn't free, right? That's the one thing just as a final thought, innovation, isn't free. It's a mindset you have to bring to the table and it has its own slings and arrows that are that accompany it, but it, that's it, you've cars carved out an amazing niche in the industry in being able to,

Pierre Daillie: [00:15:53] I wanted to say that innovation

Rodrigo Gordillo: [00:15:55] Let's talk about embracing failure.

Pierre Daillie: [00:15:57] I just want to you know, I just to go back to where Horizons, where you launched the first marijuana ETF, and then of course the ensuing success that came with it afterwards. I think there's two ways to look at it. I, I love the fact that you guys are independent and you're able to do things that, that the big banks and other, um, large institutions, the, the behemoths, absolutely won't touch or can't touch, but, on, on one hand, people can view that and say, oh they can do whatever they want.

They're independent. But on the other hand, from inside it must've been an extremely difficult decision to make as well to say yeah, that's a really novel idea. Let's just jump in and do it. Let's do the bold thing, but there was a lot of, there was a lot of Sort of inherent, perception risk as well, right?

Like what if we do this? And it turns out to be the most colossal mistake ever right. I and so, so, it had to be, it had to be a very well thought out, well-researched decision in order to actually have the courage to do it. It's one thing to say, oh, let's do this. This will be a great idea.

What a progressive area to invest in. It's it's as bold as the activists have been on legalization.

Steve Hawkins: [00:17:27] Sometimes you, when you're talking about the subject matter like that, you're just running into roadblock. It's this is a great idea. We should talk to these people. No, no. You can't do that.

You ask somebody else. No, no, no, you can't do that. Like I like people when they tell me, no, I can't do that because that just keeps me thinking. And how are we going to restructure this? How can we move something like this forward? And, and, to Mike's point you know, I don't mind making mistakes.

I tell my staff every single day, I don't mind. If you make a mistake, you just can't make that mistake twice here with us. We put a lot on the line when we have come to market with the first, leveraged products and things like that. And we have put ourselves out there from a self-directed investor perspective, the only volatility ETF provider that the primary marijuana ETF provider, first globally thinking about it.

But we've run into roadblocks after roadblocks and. Talking with the team, sitting down, how can we overcome this? How can we overcome that? Working with our partners, restructuring things. And, and there is a significant process that you have to go behind the scenes and, uh, you the one I, I just, when I have a, I'm a dog with a bone sometimes, and I won't let go of an idea if I really want to get something done, I have always been the doer.

My job from day one, even under different management here was to get, I think you can say shit,

Pierre Daillie: [00:18:57] Shit

Steve Hawkins: [00:18:57] shit, shit,

Rodrigo Gordillo: [00:18:57] No, man, you can't get it just right after friends.

Steve Hawkins: [00:19:00] Yes. That was my job. I got stuff done every single day. That was my job. And then people thinks about things. They throw it up on the drawing board and it's like, Steve, can we do this?

And I'm like, I'll figure it out. And we would get it done. And that's what I, what is,

Rodrigo Gordillo: [00:19:20] what is the perception that the different quote unquote partners that you have have, have you like w how, what's your relationship with the very conservative banks out there? Cause when you're the guy pushing for the thing and the dog with a bone, putting up the latest and greatest that everybody's terrified to do otherwise the ETF providers within the bank, would've done it.

W what's H how does that relationship work for you? The bank, the banks and Horizons do you have a good relationship? Is a contentious. Is it like

Steve Hawkins: [00:19:57] it depends on the bank, but it depends on what area of the bank as well. Like there, there are some parts of the bank that are like, "Steve, I can't believe you did that. Got to shake your hand." Even the most conservative banks are "Steve. We love this. We, I will do this personally, but I can't, I can't put my clients into this, unfortunately, because the bank won't let me."

Like, and that's really the way the investing in marijuana stocks was for the first you know, three years kind of thing. You know, there's some banks that are leading in some spaces and there's some banks that the trail, but I would say there's people at every single bank. That are strongly promoting and happy that we've done or that we've taken these steps and really pushing the envelope from an ETF industry perspective, what clients can access what they can use for their clients.

And then there are parts of the bank saying, these guys are insane. They shouldn't be doing this. They're going to put a black mark on the whole ETF industry, and there are people that are saying our leveraged ETF business, those already ETFs I'm like, how is it not an ETF? It, provides direct access, for very committed individuals, you might be rolling the dice and saying, you think that oil is going to go up tomorrow and that gas is going to go down, but it's still an ETF, which gives you direct access to the opportunity to profit, protect, or lose money based on your personal view.

And that's what investing is. It's giving people options and you know, Psychedelics was something that people, it wasn't even on the radar of this, the global ETF industry, until we put our hand up and said, you know what, we can do this. We're talking to our clients this is a new asset class, which is evolving very quickly.

And I don't like to use the word evolving, but it's you know, and it was, we believe that it had all of the attributes of a new sector that could grow very quickly. It was going to be so beneficial from a global perspective to the social persona for what we do, when there's 700 million people globally that are suffering from some form of mental illness, depression, anxiety you know, this type of, drug or drug therapy, which could have such implications for.

So many different people. Like we haven't seen something like that in a long time and there's new, stocks coming on board all the time. We're having more and more IPOs. We've got companies now like Canadian companies listing themselves in NASDAQ. It's great for the psychedelics industry. I'd sell that, but the capital markets were, it was very earlier stage and it was the banks weren't involved in this space at all.

It was still, all the independent dealers that were coming to marketplace with the, with these new companies, that market has quickly progressed.

Mike Philbrick: [00:22:57] So walk us through that. For me, it was Michael Pollan's book. You know, I think it's "How to Change Your Mind, changing your mind. I think this is you know, changing your mind and, and that really got me over over the line on this.

And I thought this is going to be a repeat of marijuana in the way that they're going to go about the legalization, treatment, and whatnot. And did your experience with marijuana lead you to a more. Quick conclusion or an early, earlier entry into psychedelics, because it seems to me you've built an ETF very early days

Rodrigo Gordillo: [00:23:32] yeah. Hawk, did your personal experience with marijuana... Did your personal experience with marijuana influence your personal experience with psychedelics?

Steve Hawkins: [00:23:41] I gotta break them off and roll it here.

Mike Philbrick: [00:23:46] He's speaking from a place where all of that is perfectly legal.

Steve Hawkins: [00:23:49] So in Canada, growing marijuana in your office, what are the, so it didn't,

Mike Philbrick: [00:23:58] Was is it? Was it informative though? Was that informative to the psychedelics? How did you, because it was so new. How did you. Like it seems to me, the companies are so small still, but walk us through that.

Steve Hawkins: [00:24:10] I mean, even when we created HMMJ you know, there was only like 13 companies that we invested in, and, and some of them were very micro cap.

And someone were the larger, like the Canopy's and the Aphria's and the Aurora's I think we had a broader base of mid to larger. I'm going to say cap, when you're dealing with a marijuana company that every one of them is under a billion dollars, they're all of a certain size, but you had a lot of different opportunity to invest in it.

And it was very difficult for us to create an index and an ETF from a diversified investment portfolio perspective to, to get access to this concept. So we had to think a little bit outside the box we had to throw in the Scott's Miracle Grow and things like that, that added a little bit of stability to the portfolio that were large.cap, that were not going anywhere, and that's where, we have Johnson and Johnson. We have AbbVie we're actually adding a third larger, big pharma drug company with his current rebalance in PSYK but we learned a lot from the launch of HMMJ and the creation of an index.

Actually, one of the reasons why we made the index for PSYK a proprietary index. So it's a Horizons index rather than a third party group like selective or S&P or MSCI because there was really, we've had to change the underlying index for HMMJ eight times through, global market comment and stuff like that.

With selective, we were able to build all of those changes in rules that we learned through that whole process of a young very early stage sector, to what it is grown today, where, I mean, at one point at a time we had almost a hundred companies in the marijuana index and we could have gone more if we'd want it to kept the rules the same.

And we needed to pair that back. Here again with psychedelics. There's more and more IPO's coming almost every single day. We've got another big one coming this week. And you know, we had to learn, we had to basically build this index and build the rules, trying to keep it as passive as possible, still.

But be adaptive as this new young sector grows and could grow very quickly. You know, you think it's early stages on a relative basis, but when you actually look at what the marijuana market looked like, it's very comparable from a timing perspective. We just running into less roadblocks now because the thing about psychedelics is, ultimately these are.

Recreational per se, right? These are prescribed drugs that are going to be administered by psychiatrists and psychotherapists. Legally you have to, go to a pharmacy and buy it. You can't go to a dispensary and just figure out, which one of these, uh, levels of CBD or THC that you want to get access to.

Do. I want to be mellow tonight. Do I want to be really high tonight? And I want to party you know, and people think of that when they're thinking about magic mushrooms and LSD and ketamine based drugs. But this industry is very different because of the non recreational applications of psychedelics versus the fully recreation, hopefully, but the less, you know, therapeutic applications of cannabis.

Mike Philbrick: [00:27:43] I suppose the the interaction with the drug use and the sort of participation of a therapist along the way really solidifies that relationship.

Steve Hawkins: [00:27:54] Yeah. Yeah, for sure. I mean, obviously the illicit drug market, globally is a huge thing, but cannabis was primarily looked at as an illicit recreational drug until legalization here in Canada, per se.

But it was really the conversion of that illicit marketplace into a legal marketplace. And I can't tell you, like I live right downtown Toronto. The number of dispensaries available to me are like, Tim Horton's now there is just, you cannot walk around, you cannot walk one block without a new dispensary being available.

And, and you can just walk in and buy cannabis. That is not the case for psychedelics, we're going full FDA approval, full Health Canada approval, and it's a different value proposition.

Mike Philbrick: [00:28:41] Do you think it will be though? Do you think that eventually there will lead to a recreationalization of some of the psychedelic molecule.

Steve Hawkins: [00:28:55] Down the road. I think there is a possibility that we could get there, but we got to get the governments comfortable first and being able to prescribe this type of medicine and working, but, but the, the process of psychotherapy involving psychedelics right now is a very long process. Like you have to sit down with your psychotherapist for six meetings, and then you gotta go through a four hour process of them using the drug and putting it into your system.

It is not just going out and buying a joint and smoking it and getting the immediate benefits to it. You know, the use of the psylocibin and the LSDs and the ketamine uh, MDMA these are all things that people have all thought about from a rave and ecstasy perspective kind of thing, but this is a different marketplace.

And although we'll be, there'll be a target of some of that. This is really. A social benefit drug from the perspective of curing illness. And that's, it's not going to have a party, which is very different. It's

Rodrigo Gordillo: [00:30:02] been a massive breakthrough for the psychotherapy. It's not the, really the the antidepressants that exist out there and antianxiety meds and hasn't done better than placebo and trials are slightly better for a few decades.

I've always been stuck there for 50 years. Yeah. And so the, I think what's what was interesting is what pushed them in the US anyway, over the ledge was the amount of PTSD cases of soldiers coming back that were committing suicide or not just not getting over it. They weren't making any progress whatsoever.

And then. The combination of these different drugs and different therapies and approaches to integrating the experience really has led to a massive breakthrough. So from a compassionate perspective, it's a completely different ball game then than the marijuana space. For sure.

Steve Hawkins: [00:30:55] Yeah. And I didn't answer part of Mike's question before.

I was like, what stirred this on. And I think really it was a couple of years ago and Johns Hopkins came out with a you know, some massive research that they did that actually. That there were very specific, tangible benefits to the microdosing of LSD, to the use of psylocibin to the use of ketamine for treatments of anxiety, depression, major depression, and PTSD.

As you mentioned, Rod. Like like these are things that are affecting so many Americans and for then such a, uh, a reputable institution like Johns Hopkins to basically turn around and do a 180, which was the real first advancement in almost 25 years into mental illness and the betterment and curement of mental illness. So this is not going away. This is only going forward.

Mike Philbrick: [00:31:54] The hospice care too, I think was another major realization in that in helping people cope with the eventuality of their oncoming, demise which I thought was an interesting way. And I think Michael Paulin covered that in his book too.

He, he expected to get significant pushback from the medical community and instead he got actual acceptance and and, and the sharing of frustration with the drugs that exist currently. And that book, I think is four or five years old, that the, the whole healthcare system around mental health was quite frustrated with the lack of progress over the last several decades.

Steve Hawkins: [00:32:34] For sure. For sure. And then this is not the first sector where we see something like this and see what. Changes needed and investment from a capital markets perspective and is in, is needed. And that's also one of the sort of things that we're very looking at. What can have a social impact on our day-to-day lives on a going forward basis.

There's a lot of talk about the environment and social change and things like that. And I think ESG is going to be something that we have to consider in our investment decisions, a lot on a going forward basis, but technology like this past year and what COVID has spearheaded and forced us to change.

The way we do business on an everyday basis, technology itself is really going to be one of those drivers. And, something that we talked about you know, we've talked about before is what is going to drive technology? What are you what's going to support the next ideas for technology and it's around innovation and we love innovation, but where does that come from?

And, it's one of the reasons why tomorrow and, uh, you for you guys that are listening to this uh, other times, June 22nd, we're launching Canada's first semiconductors ETF. And you know, there are, we just think semiconductors are the brains behind technology and innovation, and they're going to be, powering, our phones that are the way we drive you know, the way we get our carpets vacuumed, every single day.

Is going to be involved. Semiconductors are going to be involved in our lives from a technology perspective. And that's one of the reasons, again, w I'm shocked that nobody else has launched a semiconductor here, ETF here in Canada, in the U S around the world kind of thing, but it'll need a Canadian product.

And that's why, we're, we're launching CHPS tomorrow on the Toronto Stock Exchange.

Mike Philbrick: [00:34:33] And congrats on that. And so as you built out CHPS did you go the route of a more passive index? Are you taking an active stance? How are you going to, how are you going to look at the formation of the underlying security?

Steve Hawkins: [00:34:48] So we're looking at this definitely more passively though. We use we are using, sort of an AI overlay to help us work with the index provider, to you, anybody who's sending out news releases and, uh, uh, management reports and stuff like that. And they're talking about semiconductors generally that puts them into a universe of potential opportunities.

And then there's more research that's done behind that when the index provider, and then, we're working with the index provider, but we really tried to keep this sort of as a global. A large cap global underlying portfolio, and it was a lot easier to do than psychedelics where we're having to deal with.

When we first launched P S Y K, we had some stocks that were trading at 12 cents and 13 cents, here we're dealing with every company has at least a billion dollars, us of a market cap, very different prospects for building an index in the something passive. So we wanted companies though that are very focused on semiconductors, pure play semiconductors.

And so that was very easy to do with the breadth of this marketplace, though. It is dominated by, a few Taiwanese and Asian based companies like you know, Taiwan, semiconductor but you know, something new, something different for Canadian investors to very, very specifically invest in.

Mike Philbrick: [00:36:13] Have you given some thought to being innovative, being a leader in Canada on the active side, have you given any thought to the arc invest approach and sort of maybe being more active inside the ETF with the look throughs and things like that, even though they do, they have some bands with which they can operate.

They don't, if they get lots of money and they don't have to actually buy the same portfolio, they can give the market makers a different portfolio as funds come in and they can reposition the portfolio. Is there anything like that going on at Horizons or is that already baked into the active managers that are already there making those calls?

Yeah, we haven't gone to very specific mandates like that. It's more sort of strategies as a whole you know, like Kathy woods done a great job at arc. I've known her for many years. I thought she was going to have a very tough time and she did until. COVID happens and it changes the entire investment landscape and the marketplace, which was fantastic for her and very happy for our generally, they have a spinoff here in Canada, which you know, sells the Ark ETFs through it, through a Canadian wrapper kind of thing.

Is there other opportunities for very specific strategies like that? I think it's really based on the underlying person and the talking head nature and she's done so well in the U S like over the past year. She is a go-to speaker on CNBC and Bloomberg news and things like that. And that's great from a self-promotion perspective, it's hard to get that in and strategies without very specific targets kind of thing.

And you know, we love working with you guys. And I think that, Mike, when you go and be an N a is it's, I'm always taping it in the TV in front of me and watching and listening to you and listen to your thoughts. But it's very hard to say. The adaptive asset allocation strategy specifically to an investor.

It's well, what does that all, what is that you know, when it's the arc technology ETF and we've, we know that it's up 150% year to date and it owns, a crap load of Tesla in it. You know, that's, it's a much easier talking points then. Like the Canadian ETF industry is it's an industry that has to be sold.

It's not bought like us. We're dealing with an overall investment base, which is less than one 10th, the size of the American populace of investors. And again, we're dealing with financial advisors and self-directed clients that want to understand what it is that they're investing in and you need to talk to them.

You need to be a person, you need to give them an idea. And when you're dealing. I would say themes. I think the Canadian investor is changing the way that they're looking at that kind of thing. And, you know, the COVID really has helped, democratize investing here in Canada. It has really given a lot of empowerment to the end investor here in Canada.

And it is, it has made them look at I don't need to be invested in balanced mutual funds offered by this company anymore. I should be taking a little bit more of an active approach I should be looking at fees. I should be looking at themes. I should be looking at us and allocation. I should be able to rotate my own asset allocation.

And how can I do that really easily and efficiently. And cost-effectively ETA. Hence why we believe ETS is the way of the future from an investment product to choice perspective, we've never launched a mutual fund. We're only an ETF business, and that's why we're working with you guys at ReSolve and, you know, we're happy to be a partner with the HRAA and the, our adaptive asset allocation strategy.

Rodrigo Gordillo: [00:40:04] One question I have with regard to that whole space you know, you have a unique advantage from the perspective of being innovative and, the team structure and taking everybody's opinion, but there's also some structural differences between Horizons and every other ETF company. What, what are those advantages that you've been able to almost monopolize now and how do you get there?

Steve Hawkins: [00:40:34] You want me to give away the secret sauce? I don't know if I could do that.

Mike Philbrick: [00:40:38] No, no, no. Just, just tell them the ingredients, but don't tell them the proportion of each.

Steve Hawkins: [00:40:51] Sorry, what was the question again, Rod? Um, you know, this is again, you we, I think the single biggest thing here is our propensity to take risks, to do something different than somebody else than most other people. There's a lot of people that will take the avenue of just throwing a hundred things up against the wall and maybe one of them sticks, going back to listening to people and things like that.

That gives us, we've learned. Almost 200 ETFs over the course of my career here. 15 years at Horizons ETFs, we only have 94 currently listed on the stock exchange. We've launched and closed and launched and closed. But there are a little. More mutual fund companies that have thrown a lot of different strategies up and then ultimately close those.

And we see that, sort of as the way of the Dodo bird, we really like to do our research and figure out whether or not a strategies are going to work, whether or not we have a client who's going to help seed and back and promote these types of products and linked up. That's why we like working with you guys from a strategy perspective, because you're out there banging on the doors as well as my sales team.

And you're helping promote an idea. You know, that's easy for arc to your point, mark. Cause Cathie Wood is on top on TV all the time. She's promoting these concepts, these ideas, and just like that, people are, oh, Cathie Wood, I like here, Mike Philbrick, like what does Mike Philbrick do?

And, and, and we get to the bottom of what ReSolve is, but then we have to go out I'm interested in what's this HRAA thing. And then it's okay, now we've got to sell it. Now we've got a little hook. And, uh, and we've got to think about it there. There's not a lot of ideas where that just happens and it's bought it's bought, bought marijuana was one of those. Psychedelics has been one of those. Bitcoin cryptocurrencies this year with Bitcoin, and Ethereum is definitely one of those. But there have not been a lot of successes like that. You know, over the past five plus years in the ETF business.

So what I'm hearing is that there's what I perceive it as is that there's this execution alpha at Horizons, which is doing hard things, that are difficult to bring to market, and then you bring them to market and there's, it's almost like a VC model.

Some of them are, there's a few that are massively successful. There's that belly of the curve that is, does well or has its ebb and flow. And then there's a few that don't work out and you soldier on, but you've gotta be able to hear it. I'd be willing to do the work. And that's, I think where the excess return comes from the excess corporate opportunity for the ability to embrace that hard thing that, obstacles the way, if you will, and fight through it in order to offer unique and differentiated investment opportunities for investors.

Rodrigo Gordillo: [00:43:52] For

Steve Hawkins: [00:43:52] sure. For sure. I, I go ahead, I was going to say like I push my team and I pushed them hard sometimes when I really truly believe in something right. This is happening. This is what we're going to do. And you just need to get your head around what you need to do to make sure that's done.

And, and this is the deadline I'm giving you to do it. And they're like no, no, I can't meet that. I need, an extra two weeks, I need an extra month. And I'm like, no whatever it else it is, you got to get your day job done. And this is what you got to figure out right here to get this done.

And you know what, sometimes I push people a little hard, at the end of the day, people get rewarded for working hard and people learn things from working hard. They learn from, I got to do this outside the box. I can't figure this out the way that I normally do things. And again, pushing people to learn is so very important in this industry.

And I think one of the reasons why people like working here and people like, I mean, we're, we just one fund provider of the year. And a lot of that is the team and the dynamic of the work atmosphere that we promote here at Horizons. When they leave Horizons ETFs, and there's not that many that do, but when they leave Horizons, ETFs, they always, you

Rodrigo Gordillo: [00:45:13] know how to hire them back so you can teach everybody else.

Listen, I love that you have a Yoda approach. There is no try, only do.

Steve Hawkins: [00:45:22] You're dead to me. If you leave me, you're dead to me. And people know that. I joke about it sometimes it's true. Sometimes it's not. But, I love the fact that I always get an email from somebody who's left me to take, a little bit more money here or they think is a better opportunity there.

And it's damn, it was great at Horizons

Mike Philbrick: [00:45:44] ETS. It really speaks to the idea of communicating, not only the potential opportunity, but the fact that you don't have all the answers and that the team is there for you to push them for those answers to help you make better decisions. And it's not about you, it's about the accomplishments of the group, which you come back to over and over again.

Steve Hawkins: [00:46:04] Yeah, there's there's a public perception that a lot of time that it's about me, but I, I like being this spokesperson. I like being the biggest sales person to help push something forward from an individual concept perspective or just from a team perspective. And again, I don't like to be self promotional because I really truly believe it is the team at Horizons ETFs that makes us the better company from a putting product together, putting product out there and putting it on the shelf for the Canadian investment public to have access.

I was going to say something or then I cut you off.

Pierre Daillie: [00:46:41] There's really, there's no substitute for leading by example and working with rod and Mike and Adam, one of the reasons we really are loving our relationship with them is that, there's such a dedication to education, but even after being an advisor for 15 years, I realized that I knew absolutely nothing.

And and, and and then, the longer you're at it the, the longer you're in this business, The longer you re you know the edge of the wedge, that, that, that you do know the known knowns. And then there's the known unknowns and the unknown unknowns that wedge just gets thinner and thinner with every year.

And, but I love, you I love what I love, what Horizons is doing. I love what Rod and Mike and Adam are doing a ReSolve because they're, they're, they're really taking on the bold challenge, that no one else wants to because it's, it is difficult. But once you understand it, it makes perfect sense.

And it's, you, you become more, the more you are exposed to it, the more indoctrinated you are to the idea that so much more needs to be done than what's actually being done. And that's why it's the portfolio construction and, uh, Adaptive Asset Allocation and Risk Parity and, all of these, these very sophisticated strategies are more necessary than ever.

Rodrigo Gordillo: [00:48:06] I just think that, like you said, Hawk, you have these thematic ETFs that kind of sell themselves and you have to go after that, but your structure provides such an opportunity to really create liquid alternatives. Actively managed like what alternatives that maybe your internal team can't or doesn't have the time to, educate themselves on and then go out and be the pure play expert on that. So the partnerships that you've made with the liquid alt managers within your platform have been an interesting, so you've got HAC that the Seasonality ETF, with a very, educational tilt, I remember meeting the guys early on and they were giving me their books and I read right through it.

They were great and charismatic individuals. And of course, that's an interesting way to deal with it, right? Cause that's normally what an individual asset manager has to do on their own because nobody else wants to do it for them. No ETF company wants to launch a complex ETF and a complex strategy, but you've been able, or you've been willing and, uh, kind enough to partner with guys like Thackray and ReSolve and allow us to partner with you in that education, right? So that's been interesting and you provide a structure. Being able to trade futures in Canada is nearly impossible, but the structure that you provided allowed us to provide type, to give access to investors, something that would otherwise be really impossible to do without launching OM fund.

Steve Hawkins: [00:49:33] And investors, at the end of the day, we're trying to help the end investor make better choices and give them the tools to, to make those choices and, uh, you working with a lot of Canadian investors want access to futures, but the difficulty in opening a futures account is immensely from a paperwork and risk management perspective.

And the fact that we can partner with. Yeah. And the tax perspective and the fact that we can partner with a group like you guys who are very that I would say our future is aficionados and, uh, you you live in this space every day and too, and it's almost like a preferred share manager. There's so many preferred shares.

There's so many different types of procedures that you need. You want to invest in preferred shares. You need a professional money manager. That's going to give you access to the strategy that's living in this world all day long. And so same with futures trading and what you guys are doing. I mean, yes, we have some products that are, let them do it on their own and get access to some very specific underlying asset classes or sectors or commodities themselves.

But at the end of the day, like I don't mind trading that I'm in and I'm out and I'm in on a day basis, but I'm not going to, long-term invest into leveraged oil up. You know, I would rather let you do that for me because. You're watching it. And when to rotate it from oil to gold, to net gas, to volatility, to the S and P 500 to T bills, and, and having a strategy that accomplishes all of those things has access to all of those underlying sectors and asset classes themselves is very important.

And can Rand round out your portfolio from a tactical perspective, as well as the, as you said, an alternative type of strategy. So it's, this is not just, you don't want to just invest into the S and P 500 and manage things, your history, front lid in the lines of the Warren buffet way of doing things.

People can't live like that. People need to do more. They need to learn more in, and, you th there are people that don't want to do that, but I'm, we're very supportive of the investor who wants to learn more and wants to you know, not necessarily risk more. Live a little bit outside of

Mike Philbrick: [00:51:53] the Bronx.

So you've got, you got the democratization of finance, which Horizons is providing from a structural perspective. First and foremost, providing leading edge products providing capital market enhancements to various areas like psychedelics, where that's going to create more research and more positive impact socially plus you're I think you're saying, Hey it's morally presumptuous of us to not have a two X whatever ETF it is up or down, because I'm going to leave that to the investor, decide to decide what to do with that.

Whereas most other firms will say no, no investor could handle that. So we're not going to offer it. Which again, I think that comes into that moral presumption. How do you know that you're that presumptuous of on behalf of the individual investor that you should make that right. So that big brother type of thing I, I love that you shot you, you sh you directly go against that.

I wonder having, you a top ETF mind, I would say globally, because it's not just Canada that you're involved with in the, and the marae asset management that, owns Horizons. I know that you're involved with that corporation, as well as you think globally about the ETF sector.

What do you think are looking out the next five years? What are the major opportunities in the ETF space and what are the major threats? What do you, what are you seeing from that perspective as a global leader in the ETF space?

Steve Hawkins: [00:53:26] Or let me start with threats. So I literally don't believe that there's a new investment product theme that could take away from ETFs.

I think ETFs. Up until this quarter of this year, I had sold a mutual funds in Canada for the past four plus years in the U S ETFs old mutual funds of the past 10 years. I really think that the ETF will be the investment vehicle of choice going forward. We're investors. You're always going to have some like very private strategies and SEG funds and stuff like that, that the banks will promote.

And, you know, unfortunately our industry, the asset manager industry is really controlled by the banks from a distribution perspective. They own 80 plus percent. So you're not going to be able to get away from bank owned product per se. You have to give products that the investor wants to hear and talk about.

And it's something that is top of mind every day. And I think we're again, being innovative and first to act with that type of thing. So ETFs are here to stay. You know, we have fee changes, regulatory changes that are happening every single day. And I think those are only going to be beneficial for leveling the playing field and increasing the optics on ETFs for investors going forward.

With that as well. I think ESG is again, I mentioned it earlier. It's a big subject matter candidate is way behind Europe when it comes to that and, and S is even farther behind Canada in that regard, but it's something that we have to talk about every single day. And as a, our fiduciary duty is now not just a fiduciary duty.

We have a social wellbeing that we have to think about with our investment decisions. So I think passive investing and active investing are going to be very important. I think the financial advisor is never going anywhere though. We've got the robo-advisors, we've got self-directed investors.

I'm going to be a four times. Th as many self-directed accounts opened in 2020 as there were in the past three years combined. You know, those are big stats when you're dealing with who is going to be investing in how they're going to be investing going forward. But I, I think there are some global themes.

Again, technology's not going anywhere. It's going to change. It has changed the way we've done business. Over the past year, it's going to change innovation and technology is going to continue to drive uh, how we invest, how our markets it's going to affect every single day of our lives. Who can live anything, do anything without having your phone at your hand, in your pocket all day long?

We're, we're on a computer we're on video you know, computers and phones and technologies is essential to how we live our lives every single day. And that's not changing, that's gonna, that's gonna drive it. The markets going forward, but, we're still a fossil fuel driven, culture.

And, to the extent that, electric vehicles are very important. Uh, but I think green energy is something that we have to be thinking about. You know, we've got, we talked about you know, uranium a little bit earlier. Nuclear energy is going to be a very important part of our lives going forward, but battery technology and you know, we're launching lithium ion battery technology component ETF

Rodrigo Gordillo: [00:56:58] there's enough liquidity for something like that.

That's fantastic. That's really an issue. That's interesting. Okay.

Steve Hawkins: [00:57:05] Yes, there is lithium producers, so we have uranium producers. Now we're going to lithium producers, we're also going to be launching a hydrogen ETFs. So hydrogen producers and hydrogen technical. So H Y D R is going to be an important part.

We believe again, of green metals, green energy, fueling the future is how we refer to it, between uranium, lithium hydrogen. These are all very important parts of of just what we do on a day-to-day basis and how important our batteries going to be in our lives going forward, how important is hydrogen energy, nuclear energy in our day-to-day lives, as we move away from oil, Nat gas, cold, these fossil fuels and how.

Bad. They are on our environment. I'm, I, I want my children and my grandchildren's children Shay, to be here and be able to breathe without having to wear a gas mask every day. And you know, we've gone through enough of that with COVID over the past year, wearing masks every day. We don't want our children and our children's children to have to wear those things going forward just to, to breathe a normal piece of air without even being diseased for you or you know, virus free and, uh, and, and having overcome that huge hurdle that we've had to overcome.

So there's a lot of great themes that are going to be happening. I think, in a lot of evolution in this in the thematic space over the six months we saw thematic ETFs in the U S in the past few years. Blow up like just huge trends towards that space. It hasn't happened here in Canada yet.

It, it started happening in Europe. It's already happened in Asia and I think, more and more thematic ETFs are going to be very important part of everybody's portfolio going forward. But you can't take away from the alternative type of investment as well. Themes are an alternative type investment.

It is choice that you're actually making every day to move away from. I could just earn the benchmark at if I want earn the benchmark, the benchmarks grade, and I'm not going to lose. I'm not taking any risks, but people have been empowered by code. People have been empowered by self-directed accounts and ETFs.

And I think that it's,

Rodrigo Gordillo: [00:59:28] it is interesting how my brother, my younger brother asked me the other day, what a he's I don't understand how could there be so many advisors don't you guys all do the same thing like this? Every, everybody. Just advising if it isn't there one optimal way of managing money.

And I, as I started trying to explain that what it came down to was that every advisor has attracted a tribe that has a certain set of values. And, and it's surprising how often individuals invest based on values first and ROI. Second. And I think the theme-based ETFs, the access to alternative strategies is really allowing the, the advisors and the retail investors out there to express their personalities inside their portfolios in ways that simply did not exist.

When you had the monolith bank at the top telling their advisors what they needed to invest in their advisors, just dropping that down. That's still exists. And I think more in Canada than anywhere else, but hopefully, these, the MDTs coming our way will help Canadians express themselves.

Steve Hawkins: [01:00:33] I mean, I, I, a great example of to, to take that thought one step 30 row rod is really asset allocation. ETS are balanced funds, right? Like just the very simplest strategy. It needs to have X percent of us equities and Canadian equities and government bonds. We built our suite of balanced funds, asset allocation, ETFs back in 2018.

But we, we said the way of the future is going to be different. People are going to want income still. And this is a very low interest rate environment, probably for the next 25 years. From a cycle perspective, people are going to be living longer because healthcare, it continues to improve and people need more income.

People need more return at the end of the day. How are you going to do that? Investing in more fixed income? You're going to have to increase the allocation of equity. So 60 40 is like I say, it, I'm happily going to say it's 60, 40 is dead. It is really dead. That is not how you have to structure a balanced portfolio.

We made ours like 70, 30, right out of the gates. If you want to grow the portfolio, it's not, it's a hundred percent equity. That's a growth portfolio. And guess what? When you're looking at us equity, it's not just the S and P 500. What is the, what is what's driving returns in us, equities, the NASDAQ.

So we put, NASDAQ 100% in our balanced funds and guess what's happened. Our balanced funds have destroyed all of the other balanced funds from a performance perspective, because we have over-weighted them when we should have we put alternative investments, broad-based indices into these because we should have, but we're looking out for the end investor here, guess what people still gravitate towards? The very simple to understand based strategies offered by several of our competitors, who we are like a balanced fund outperforming on a one-year basis by 10% or 12% or 15%. That's not really something that people have ever heard of ever before, but guess what it's happened.

And, but people have a very different mindset of investing and some people are, not thinking about the future, just thinking about let's just play it safe and we'll do it the simple way in the normal way that people have always done it for the past 50, 75 years and 60 40 is the way to do things.

And I'm going to be very risk adverse and, you know, some people work that way. I think the majority of Canadian investors are starting to wake up and this past year really helped them move that mindset.

Pierre Daillie: [01:03:20] I think, um, speaking of advisors and investors, advisors are craftspeople, they they're builders, right? You know, you all have access to the same tools, right? Like a, a whole stable of ETFs that Horizons, for example or, you know, the industry itself. And, just like some craftspeople build wooden boxes and other crafts, people build fine Swiss watches, right?

You either, you have a hammer and nails and you can build a box or you have, you have a whole set of very sophisticated tools and you can build a finely made, a finely tuned. And so, you maybe, maybe the hammer and nails is some of the simpler thematic focused ETFs, which allow you to do or buy a basket of one kind of security.

But then you have, you know, the fine watch the, the finely tuned Swiss watch, which is like what resolve is doing, which is like what you guys are doing, building very finely tuned portfolios. And every advisor is a craftsman. They, they can build a portfolio, which can be a very simple, wooden box or are they

Rodrigo Gordillo: [01:04:48] it's been 10 years ago.

You couldn't do finally to build a wooden box. It's been amazing. How the technology yeah, it has grown.

Pierre Daillie: [01:04:57] Exactly. I think there's a huge, there's still a massive learning curve. As you said, Steve, the 60, 40 portfolio is dead. Just how many it is, how many investors? Yeah.

Mike Philbrick: [01:05:13] It didn't even dead cat back.

Steve Hawkins: [01:05:15] I w I would say to your point, like financial advisors have also like they're relationship people. And like, when I first met Mike, he was a client, he was a financial advisor and he was working with a group of guys and, they were using our products as tools. But his client base from my perspective was built off of Mike and his personality and his outgoingness.

And I loved going out to dinner with Mike and some of his clients and bringing them along and the stories he can tell and stuff like that. He's got 10 times the personality that I do, I wish I had one 10th, his personality, but to that end when, when he got together with rod and Adam and I, I sit down at a lunch with these three talking heads and I'm like, how are these guys going to work together?

That's just not going to happen like that. They all are strong personalities. They're all their own boss. And there's just no way that these guys can collectively work together. They proved me wrong. They, they actually are. They're a great team and they work together and, uh, and they, they collectively have some great inputs from an advice perspective for our clients, for financial advisors to hopefully listen to from a tools perspective.

And I just wish. There was a BNN reporter talking about adaptive asset allocation you know, at least five or 10 minutes every single day on TV, rather than marijuana, every single day there is an interview on marijuana, but there isn't on adaptive allocation. There really shouldn't be, there really should be on balance.

There really shouldn't be on 60 40, they, but that the S the stories go where, they're going to get the most readership and viewership.

Mike Philbrick: [01:06:56] It's a lot more fun to talk about thematic than it is that the the boring long-term allocation to the, their risks.

Steve Hawkins: [01:07:06] Absolutely. My, my, I love talking about ETFs. I love talking about derivatives. Cause a lot of our business is built on derivatives and structure and tax efficiency. I love talking about marijuana and psychedelics because they are uh, interesting from an ultimate end user perspective and there's, they're topical and there's something that you can bring up and have

Mike Philbrick: [01:07:26] fun with, they challenged the current paradigm too, which is, I think one of, one of your strengths to you is that you're not afraid to challenge the paradigm. And I think as you mentioned earlier, Rodrigo advisers form tribes, right? You're managing a utility function of a group of investors that have a certain view and a good advisor takes into account.

What, what is the proclivity for the end investor to want to have a portfolio of these thematics? And then balancing off that against what is a responsible structure of a portfolio with an allocation to more normal based type portfolios and making sure that client feels fulfilled through the

Rodrigo Gordillo: [01:08:03] expression.

I think what's often people miss in that tribal view is, our value system at resolve is to make sure that our investors actually have. The best rate realized risk adjusted returns. And what does realize mean? It means that what are you going to stick to? Long-term right. I can give you the best mathematical equation, the highest sharp portfolio, but if you don't get it and if you're not, you don't believe in it and it's not part of your value system and you go through a rough period.

You're going to abandon that is incredibly quick. So when you are an advisor and you establish a tribe and let's say it's an ESG tribe, and yes, GE is not guaranteed to perform everything, but it's, if you have a tribe that cares about that stuff, you're more likely to have them stick to it longterm, which is almost like all of them.

It's being able to stick to a methodology and a strategy long-term and that comes down to belief systems and it comes down to being part of a tribe. That is that is part of, your day to day conversation. So this is it. This is the important part. You don't need to strive for max sharp.

You need to strive for mad max, stick to it-ness and all these tools allow you to create those tribes. It's a great, it's a great new world. And you know what you've said, the hock about a COVID has changed a lot of things. I'd actually never heard that before. I think I understand why, but why do you think COVID has made this much more uh, has advanced the mission of these using these unique tools more for the general society?

Steve Hawkins: [01:09:41] Honestly, it's empowerment. Like it really is like investors are at home investors have more time on their hands to actually pay attention to what's going on. People are like, oh my God fees actually do matter. Why am I paying all of these fees for this mutual fund, this simple, balanced mutual fund when I could be in something else that for, one 10th, the cost and better returns.

And then it's well, I can buy that myself. It's an ETF. I don't need to be invested in the this large bank balanced fund when I could be invested in this you know, high growth technology ETF or, and I could create my own portfolio again, ETFs have really empowered investors.

Self-directed investing has changed completely, and I don't think it's going away. I think there will always be a mindset of people that always need financial advisors. People need somebody to hold their hand. People need somebody to talk to to, uh, help. And you guys do that a lot from an end investor perspective.

And. And, but this investment landscape is significantly knee jerk, reactionary. And there's guys like you and funds like you, which are, Pratt proactive and not reactive. And unfortunately a lot of the investment landscape out there is reactive. And, and people when people's, self-conscious, when people's gut reactions uh, you know, take effect with respect to their investment decisions.

Unfortunately, it's usually the wrong decision and we need people that can stay the course that can believe in a strategy, have a mindset, use a financial advisor to help hold their hand, stay calm, not make rash decisions when it comes to changing things, when they're actually, th the capital markets is always going to be, there's always ebbs and flows.

Hmm. People saw that a lot more proactively last year but COVID itself. Rod, I mean the governments and, um, you stepping in and supporting the entire capital market ecosystem from stocks to bonds, putting more money in, um, the, the end Canadian and us investors hands and giving them the opportunity to make investments.

That, that thing is. Has never happened before, and there's just been more money, flooded our system in the past year. And all of it is from the governments at the end of the day. And that, QE is going to end at some point in time if it hasn't already. And uh, but so much money has come into the system.

And people are chasing returns. People are we're being reactionary to positive returns rather than you know, negative reactionary to negative.

Mike Philbrick: [01:12:32] Are you, or are you seeing that the flow, the massive flow to passive investing, changing the market structures at all? We've certainly heard a lot about that in the U S markets from guys like Mike Green and Corey Hofstede.

Yeah, about how these passive flows ongoing, systematic are impacting the allocation to companies within the indexes. Are you paying much mind to that? Are you seeing that at all? Are you seeing that in Canada at all? Or is that a bit of a us phenomenon? Is it passive investing gone too far?

Or what are your thoughts there?

Steve Hawkins: [01:13:07] I don't think passively investing can go too far ever. You know, there's just as many active mandates that are competing against each other for performance in dollars in investment in these companies, same with the passive investments. There's more indices in the world than there are individual stocks listed, right?

Like you can slice and dice this world in so many different ways. But I, I can't think of, will this, fixed income market be driven by this bond, ETF and ebbs and flows into this bond ETF? I don't believe that's the case. I think the capital markets itself is too efficient for that.

Per se, I I think there can be points where it could be a little bit more scary and you need to be a little bit more timely when it goes to getting in and out on different things. But I think the new active is really the asset allocation of passive per se. Uh, and, and, and, you guys do that well, like rotating from asset classes, rotating from sectors.

That is the new active, it's not this picking one individual stock or this one individual bond over it. It is really the overall adaptive asset allocation. As you guys put it that's, from my perspective, that's active, that's the true active, and that's the way that active should be looked at going forward and really ETFs either from an overall theme perspective, like what, where we are with HRA or with the S and P 500 versus TSX 60 versus NASDAQ, 100 versus Russell 2000.

Those are individual ETFs and strategies that you can use inside your own asset allocation. And again, that's where that's how ETFs have empowered. The investor is I'm going to overweight tech. I'm going to go to the simples and easiest. I'm going to go to the NASDAQ 100 or the NASDAQ competent, right?

Like it's just, I NASDAQ, I did a presentation six months ago. I said, the NASDAQ is the new S and P 500. And the S and P virus is the new Dow Jones. Like when it was like nobody invested in the Dow Jones. Is there any more, what's the Dow Jones now. But it's on my screen right here. The doubt 30 is right there.

I'm looking at it every single day.

Rodrigo Gordillo: [01:15:25] Cause it's a fan Castic momentum system. I don't know, man. Tough to beat, but

Steve Hawkins: [01:15:32] it's part of the 60, 40 portfolio.

Mike Philbrick: [01:15:39] Amazing.

Steve Hawkins: [01:15:41] So I, again, I just, to finish that thought off is asset allocation is the true active. It is the new active, and it is the active as I see it going forward over individual stock picking. And I hope that investor's mindset changes and we're helping, trying

Mike Philbrick: [01:15:59] to, yeah. Give us what we're we're cut.

We're clear. We're over an hour now, but I'm wondering if you could just give us one more thing, which is what would you think is your top unexpected surprise for the next 12 months in markets?

Steve Hawkins: [01:16:14] All goodness,

Rodrigo Gordillo: [01:16:15] where we're going to publish this in the golden mail, by the way. And then again, 12 months from now,

Mike Philbrick: [01:16:20] no, this is not

Rodrigo Gordillo: [01:16:22] advice Kenji's on it on you being right.

I don't even know what you're going to say, but I know how good you are. So just so you know

Steve Hawkins: [01:16:35] if people are looking for stable, longterm investment returns, they should not be looking at cryptocurrencies. You know, I looked at as cryptocurrency as an asset class that I can play from a day-to-day volatility perspective, we're going to see and continue to see huge volatility in the cryptocurrency plates.

And if people want to make bets in the end, ETFs have made it a lot easier for people to make bets on cryptocurrency, which is why we launched an inverse Bitcoin ETF. There is, there's a lot of opportunity there to make very quick returns and, you know, Cryptocurrency is going to continue with huge volatility.

It's going to be up and down 5%, 10% on a daily basis. And it, but it's never going to be a real asset that is backed by something tangible at the end of the day, from a need perspective, like oil or Nat gas or gold or equities. You know, you have to look at it as truly alternative don't bet your life and your future on cryptocurrency.

That that's the one I guess, overriding is there's just too much. To the sector, which there's so much risk to overall, I like people who can trade cryptocurrency and actively trade cryptocurrency, but not everybody who invested in cryptocurrency at $10. And it went to 60,000 actually made money.

There there's a lot of people that lost money during that process. Um, for us, I just like the Canadian investment landscape I think is just continuing to mature every single day. I love the empowerment that ETFs have given investors per se. I think our ETF industry, which is now over 300 billion is still a lot less than the 10 plus trillion in the U S but we're going to continue to grow very aggressively.

And I, and I think that investment landscape is going to be driven by ETFs. Canadian investors, you need to open a self-directed account. You need to open an RSP, to open it, to say, and you need to start buying start simple bias, buy an ETF that somebody does the work for you. Like an HR, a where you're taking the risk off the table.

You're buying a professional management. They'll let them make the mistakes, but much less mistakes than you would make as an investor. But you need to learn. You need to start and you need to do it somehow. And I think that it's a matter of signing a piece of paper or clicking an online form to open an account and putting a few bucks in there and, uh, and, and putting it to work and just watching learning.

Pierre Daillie: [01:19:25] And you need to stop thinking. You need to stop thinking that you can successfully balanced your portfolio on your own.

Steve Hawkins: [01:19:32] I don't, I can't balance my own portfolio and I'm a professional. Money manager per se kind of thing. Like I, I make mistakes all the frigging time, unfortunately. And I have a part of my portfolio, which is very passive run by an investment advisor, friend of mine.

And, uh, she does a great job but I don't move that portfolio around and that's the core. And then I play on the fringes and probably too much. So over the past year say, but, uh, you know, I've made a lot of money investing in cryptocurrency and investing against cryptocurrency, investing with marijuana stocks, investing against marijuana stocks, it's, it's, um, but I only use ETFs, and I use ETS for every single investment I've made over the past 10 years, because I think that you can get access to any sort of underlying sector, asset, class exposure, positive, negative, that you want to be able to make a decision and profit from.

Mike Philbrick: [01:20:36] I love that. I think that's probably a nice natural break point for the final question here.

Steve Hawkins: [01:20:44] Oh boy, there's

Pierre Daillie: [01:20:45] more. Yeah, there's one more question. This wouldn't be raised your average. If we don't ask this question at the end, Steve, would you rather spend a week in the past or a week in the future and why?

Steve Hawkins: [01:21:04] I've never had that question before? So let me think about that for a second. There are, I, I love the time. Of the early 19 hundreds in the way of life and, um, uh, just the way that people live their lives back then but long before the thirties, but I don't want to be ever involved in a global war, dealing with world war one and world war II and the pre and the post and all of that stuff.

I just, I just couldn't handle that. So if I could avoid those periods of time and just enjoy life and, and be successful in at those times I would love to be able to take, it's like, I'm a 50 year old now and it, you I would love to have known everything that I know now when I was 18 years old.

And, and how would you have lived your life differently if you were that smart or that well seasoned from a knowledge perspective, you could avoid making the many mistakes that you do. So, but that said, I think there's so many things that we need to look forward in the way that we live life going forward.

You know, the improvements that are to our medical system and health system every single day you know, I'm a guy who has back issues for 50 year old and there's no spine replacement surgery. There's no disc replacement surgery right now, but what could there be in five years and how much better could all of our lives be better without mental illness without back pain, um, and, and if these things can be solved easier and more efficiently in the future, like I would love to live 20 years from now when I could go into a doctor's office and he could give me a pill.

Rodrigo Gordillo: [01:23:00] You and me, both brother

Steve Hawkins: [01:23:03] can wait. That would be amazing. I would be. So I think there's some positives and negatives, Peter, but if I had to pick one, I would probably want to have the knowledge that I have now and go back to the, the 19, uh, 1910 it would be you know, on the first car is in the, and and, uh, the way of life that they had back then.

Awesome. Very entertaining. I love the old movies. Love it. And the

Mike Philbrick: [01:23:31] pandemic go through

Pierre Daillie: [01:23:33] the Spanish flu and the pandemic too.

Steve Hawkins: [01:23:40] There you go. Thank you.

Pierre Daillie: [01:23:42] Yeah, it's funny. Isn't it? When you can, think like, if I could just take all that knowledge that I have now back to then,

Rodrigo Gordillo: [01:23:52] well, I feel like we're going to live for a hundred more years. So what kind of, you're in your twenties right now, given where the way technology is going.

You're good, baby. Yeah. Yeah, you're going to crush it over the next hundred years of your time at horizon.

All right, gentlemen. Love it,

Steve Hawkins: [01:24:11] Steve. Thank you so much, Steve.

Pierre Daillie: [01:24:13] Thank you so much.

Steve Hawkins: [01:24:16] Guys, thank you very much for having me here today is lots of fun as always. And you know, I hope I hope that your clients and the viewing public uh, can enjoy this discussion. I hope they can actually sit through my rambling.

Rodrigo Gordillo: [01:24:31] They're going to love it again.

Mike Philbrick: [01:24:32] Awesome.

Pierre Daillie: [01:24:35] Thank you so much.

Where to find Steve Hawkins:

Steve Hawkins on Linkedin

 

Where to find the Raise Your Average crew:

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