Lead-Lag Live

Howard Chan on Advanced ETF Insights, Technology Market Shifts, and Strategic Income Generation

• Michael A. Gayed, CFA

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Ready to uncover the secrets of advanced investment strategies in today's evolving market landscape? We're thrilled to have Howard Chan, the founder and CEO of Kurv Investment Management, join us. With a background in electrical engineering and critical roles at Goldman Sachs and PIMCO, Howard shares his unique insights into asset allocation and fixed income management. Discover how regulatory changes have paved the way for more innovative and tax-efficient ETF strategies, making them accessible to a wider audience. Howard reveals the shifting dynamics of alpha and beta, and how fewer institutional players can create new anomalies and opportunities for generating returns.

As interest rates rise, the investment world is shifting from passive to more active strategies, and the importance of idiosyncratic risk has never been higher. We're diving into the complexities of options-based income strategies, exploring how these can be transformed into accessible ETF formats. Howard guides us through the nuanced processes needed to balance growth and income, especially for those nearing retirement. He shares the challenges advisors face in scaling these intricate strategies and how technology-focused ETFs targeting tech giants like Amazon and Tesla can offer a solution. Learn how volatility premiums can be leveraged, providing a steady income stream while managing risk.

Our discussion wouldn't be complete without a thorough examination of the current tech market landscape. From the impact of fiscal policies and tariffs to the promising yet cyclical AI sector, Howard shares his perspective on tech companies' future. We delve into the challenges and opportunities of monetizing new technologies, exploring how launching new funds can address advisor needs and solve portfolio problems. With insights into covered call strategies and single-stock ETFs, Howard equips us with the knowledge to navigate the intersection of technology and income strategies effectively. Whether you're an advisor or an investor, this episode offers a comprehensive guide to mastering modern investment techniques.

DISCLAIMER – PLEASE READ: This is a sponsored episode for which Lead-Lag Publishing, LLC has been paid a fee. Lead-Lag Publishing, LLC does not guarantee the accuracy or completeness of the information provided in the episode or make any representation as to its quality. All statements and expressions provided in this episode are the sole opinion of Kurv Investment Management and Lead-Lag Publishing, LLC expressly disclaims any responsibility for action taken in connection with the information provided in the discussion. The content in this program is for informational purposes only. You should not construe any information or other material as investment, financial, tax, or other advice. The views expressed by the participants are solely their own. A participant may have taken or recommended any investment position discussed, but may close such position or alter its recommendation at any time without notice. Nothing contained in this program constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities

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Speaker 1:

So we actually came from the perspective how can we make this process more scalable? Let's put this capability of generating additional income into an ETF format, so that investors who don't have the infrastructure to do this can just get into the exposure when they want and actually, more importantly, get out of it when they want to. So if you look at our returns for 2024, we've outperformed five out of the six funds by a good margin relative to our competitors, and that's important to us because, ultimately, we don't have the flashiest yield, but we do want to generate more returns for our clients.

Speaker 2:

This is a sponsored conversation by Curve Investment Management. We'll talk about some of their funds and how they approach markets and the needs that they're filling with their various ETFs. And with all that said, my name is Michael Guyatt, publisher of the Lead Lag Report. Joining me here is Howard Chan of Curve Investment Management. Howard, you and I did a webinar last month. A lot of people are probably not familiar. You and I did a webinar last month. A lot of people are probably not familiar with you and maybe are just starting to get familiar with Curve, so introduce yourself. Who are you? What's your background? What have you done throughout your career? What are you doing currently?

Speaker 1:

Yeah, thank you, michael. My name is Howard Chan. I'm the founder and CEO of Curve Investment Management. It is a relatively new investment, but the team has been actually in the industry for more than I would say 20 to 30 years. A little bit about myself and a little bit about the team.

Speaker 1:

I was actually trained as an electrical engineer. I somehow fell into finance. The very first job I had in finance was at Goldman Sachs Asset Management doing asset allocation for large pension funds, and that was a really great education to see everything from the 10,000 foot level how different asset classes interacted. Then I moved to PIMCO to manage their global fixed income business. I always say this it's sort of the everything in the kitchen sink portfolio. You get really into specific securities but also, because it's global, how relative rates and different markets interact with each other. And then ultimately I ended up going to London to build out PIMCO's ETF businesses. That's how I got involved in ETFs.

Speaker 1:

We started Curve really was due to a regulatory change in the SEC. There was a derivatives rule change which allowed more interesting strategies to be available to put into ETF space and we really saw that there was a lack of you know. At PIMCO and at Goldman, we primarily dealt with very large institutional investors who have these very interesting, fantastic strategies to generate returns that were not really available for everyone, and so our goal was to try to put that in format an ETF vehicle that is accessible to everyone. But there was an extra component, which is that most of these institutional investors are non-taxable entities, and once you make it available for taxable entities, you actually have to really think about the taxes. So all of our strategies are built to be tax efficient and institutional grade and make that available to investors of all sizes.

Speaker 2:

All right, let's get into this, because I think that the tax point is an interesting one become much more passive, much more about cheap beta than unique differentiated strategies, because a lot of this is what's worked right. I mean, we've seen all the data around hedge funds and alpha and all that the last several years. Here I'm curious your take on if maybe the sort of old school way of thinking about creating and developing institutional strategies is going to make a comeback. Obviously, you're at the forefront of that. But yeah, thinking about creating and developing institutional strategies is going to make a comeback. Obviously, you're at the forefront of that. But yeah, to the extent that there's not as much alpha anymore in institutional strategies because it's been so beta driven. Maybe now there's less players in the institutional landscape, which means anomalies get larger and more interesting strategies are worth looking at.

Speaker 1:

Yeah, I actually think that the question of alpha is dependent on the asset class but also on the rate environment. So I think you know you could those academics have made on these studies like Nauseam or whatever that you know you do see less alpha in certain asset classes, like US large cap, and then more alpha in fixed income where it's sort of an OTC instrument that you have to still argue about prices on which you have to buy and sell. So there's sort of endemic, depending on which asset classes that you're looking at. But I think actually the larger major factor was that many people went to passive because we were for a very, very long time in a zero rate environment.

Speaker 1:

So when your discount rate is low, all asset prices went up. So there's not as much as differentiation between what to pick. So it seems like if the boat is floating, let's just go for the index and that makes perfect sense for passive investment. And I think in a world where all asset prices goes up, passive is the way to go. But we're not in a zero rate environment anymore. We are rates at four and a quarter roughly now short rates, and if you think about as a business, your hurdle rate's higher. So you have to make different decisions about what sort of capital expenditure that can perform greater than that risk-free rate, and many people are going to make many different decisions. So I think idiosyncratic risk is higher now and, you see, that's why actually there are more active strategies flows going to active strategies, because idiosyncratic risk in the market has gone up.

Speaker 2:

Which I kind of like right. It's like if idiosyncratic risk goes up, that's when it gets to be fun again. I think from that perspective let's talk about Curve itself. So you see that there's a need to bring institutional products to the marketplace. You clearly identify, correctly so, the sort of tax differentials you know for dealing with a different type of investor base. Take me through sort of the product development side of how you decided to focus on the options end.

Speaker 1:

We actually fell into. To be very honest, we one of the things that I think my former employers. One of the ways in which they very consistently generate is through volatility. There's certain risk factors that are very well known in the market. There's growth value, large and small, the Fama French factors and those are generally pretty accessible in ETF format. There's a large cap value large and small, the Fama French factors and those are generally pretty accessible in ETF format. Right, there's a large cap value large cap growth ETFs that you can get access to, and then in fixed income, you have very well-known risk factors like duration credit spreads. You generally can get access to those as well.

Speaker 1:

But volatility has always been sort of this tricky thing, because there's volatility in all asset classes equity volatility, there's fixed income volatility and primarily, many times, most people either get it from the VIX, which is a broad market exposure, or in fixed income, you have to embed it with other risk factors. When you buy a mortgage convertible, there's a call option that you're getting and it's selling a call option. Essentially, that's sort of a volatility premium that you can get, but it's embedded with other risk exposures. So when the derivatives rule happened in 2019, it allowed for, I think, the separation of these risk factors. I think the separation of these risk factors and one of the ways in which you can access a volatility is through options.

Speaker 1:

And, to be frank, we were actually we stumbled on this a little bit by accident because we sort of was. You know, we're not a tech company, but I think one of the things that tech companies that get right is they try to find a problem that investors have and try to find a solution to it. And of the advisors that we talked to, a lot of them since the 80s, a lot of them have been writing cover calls to generate income for their clients, but it has always been the case that this, I guess, service has been very non scalable for their business.

Speaker 1:

Right Options you have to roll, you have to determine which names you have to write options on, where to write options on. So for, even though it's been used since the 80s, it has generally have been used or as a service offered to only the ultra high net worth individuals of an advisor's portfolio. And if you are at one of some of the largest firms like Morgan Stanley, jp Morgan, you have a dedicated execution desk that can execute this for you, or else, if you're independent, you have to do this yourself and then to keep track of the roles and stuff. That became sort of a nightmare and you can't really do it. So if you don't have this capability, then you're sort of at a deficit to the larger advisors who can offer this to their clients. So we actually came from the perspective how can we make this process more scalable? Let's put this capability of generating additional income into an ETF format so that investors who don't have the infrastructure to do this can just get into the exposure when they want and actually, more importantly, get out of it when they want to. Actually, more importantly, get out of it when they want to, because when you write a call, you have to buy the call back to unroll it, and if you do it for more than many names for one portfolio, that's sort of untenable, right. So in ETF you can just buy and sell a share in and out, and so that was sort of the genesis of of where we started.

Speaker 1:

But then we also found an issue, which is that a lot of advisors really have to pick between growth and income, right. So short rates, that's four and a quarter it was at five last year and the advisors we talked to, they generally their clients, the ones that are approaching retirement or are in retirement no-transcript and the financials were the largest components. They no longer were because they stopped being the growth engines of the economy. So we essentially pick certain tech names, which is both growth and we try to use options to generate income. So it's sort of a technology income sleeve to meet that 3% deficit in terms of income generation. So that's actually how we arrived at it. We were trying to solve a series of problems for advisors to build these out, to build these out.

Speaker 2:

I'm glad you mentioned the point about the work involved, because it sounds probably much busier than even the way you've described it and how much activity is involved. Take me through that for a little bit. It doesn't sound like it's mechanical, rules-based right. I mean, how are the actual selling of the coal and the options trading? How is that managed in general and exactly how involved is that?

Speaker 1:

Yeah, I think when you write a call or use various different options, there's always there's a few variables you have to consider right. First is what is the strike of the call that determines how much premiums? So you know when you're writing a call. In other instances but I'll use writing a call as an example you sell a call, somebody buys it by buying it, they give you a premium for that call and that premium is then distributed as income. That's how cover calls work. So you have to decide how much premium you want. You have trade-offs. You have to make a decision on the closer to the current price of the stock you're writing, you get higher premiums, but it also means that there's more chances of the options expiring in the money, which means you're losing some potential. Then you have to decide how long the options are a monthly option, a yearly option? The longer you write, the higher the probability it will expire out of the money. The shorter you are, the higher the probability that you would cap your upside, but you get more income. So those are the effects. And then, lastly, is how much cover calls you have with a write right. Like you, a hundred dollars, maybe you just want to write $50 cover calls on $50 of it instead of a hundred. So those three factors are are things that we um have to consider when we run our funds, and we are um we, we have essentially a six ETF set run on single technology names.

Speaker 1:

Um, many people use it as a basket to meet their income, different proportions to meet their income needs. And we're a team of people who like numbers. We do come from fixed income, so we like numbers and we look at a lot of historical performance, but also historical vol premiums on all of these names and then try to set it at about the right places these decisions on strikes and expiry and the amount to write. And then there's sort of exogenous factors. Right, we've seen, just in the last two quarters, during earning seasons, if it's a really good earning season, these stocks can run 10, 15, 20%. So how can you minimize, you know, clipping some of the upside in order to generate this income? And that is a little bit of more quantitative, qualitative, in terms of what, where you think earnings are going to be. So these are definitely, you know. That's why these are sort of active management ETFs. You can't really leave them and then leave them in the portfolio.

Speaker 2:

Let's talk about that fund suite. So what funds? What individual sites are these funds covered?

Speaker 1:

Yeah, we have six, I always lose one but Amazon, apple, google, netflix, tesla, so those are all tech names. We picked those actually for a specific reason is that generally they don't distribute dividends or they distribute very low dividends. So for income investors they almost always had to avoid or underweight these because they take away from the aggregate income generation. But by harvesting the volatility premium you can get a pretty good, healthy income generation. So, for instance, the lower the vol, the lower the income. The higher the vol of the underlying, the higher the income. So the lowest of them would be probably Apple, and that generates about 10 to 12% of income annually. And then the most volatile which I think wouldn't be a surprise to everybody would be Tesla, and that's generating 25 to 30% of income. So if you do a basket of it and take a little bit of it, you can easily reach that sort of 3% deficit of income that you need to generate for clients.

Speaker 1:

Is it safe to say in general that you would prefer a volatile bull market, which a lot of people probably wouldn't we actually prefer a market in which implied vol is higher and that is a directional in terms of what the underlying is doing.

Speaker 1:

I mean, one of the things I get asked a lot last year was you know where do you think the elections can end up? Right, and I said, well, you know, sometimes you don't actually need you. You might want to have certain outcomes, but maybe the better fact is that you don't need to know what the outcome of the election is. You know, as you approach the election, volatility is going to go up and so the volatility premia is going to be higher. And so those are the ways that we think about using volatilities in a portfolio, which is it generally is not. It is dependent on what the market is, but it does not depend necessarily on the direction underlying. You could have implied vol spike when the stock is going up really fast, or you can have implied vol spike when the stock is falling very fast. So it's sort of agnostic to the outcome of the underlying.

Speaker 2:

Broadly speaking, or maybe even more specialized or more specific. I mean, how did some of these funds perform last year? Right relative to the underlying individual position?

Speaker 1:

Yeah, I think it is always worth noting that in a cover call strategy you generally are selling. Some of the tend to be either income-focused investors or those who are about to approach retirement or in retirement to supplement their income. That's because they are more focused on consistency of income than price appreciation. Price appreciation is sort of bonus and what we try to do is actually balance that to have both price appreciation and income generation. So most of the funds have produced double digit returns, similarly to the underlying, but not as high. But we have actually also had price appreciation in these particular names. But what we've really tried to focus on is making sure that the income is as consistent as possible.

Speaker 1:

The other quality which is you know that I think some people don't realize is the volatility. You know you look at return but you also have to look at per unit risk that you're taking to generate that income. The calls that you write actually makes the exposure to the underlying less than one, the beta less than one, so the sensitivity less than one. So at the underlying where we write the call, is about 0.3. So you have 0.7 sensitivity to the underlying. So what that means is that if the underlying falls by 1%, our funds should fall by 0.7%, so for some that is actually also pretty comforting that, especially since tech can be volatile, this reduces the volatility of the overall portfolio.

Speaker 2:

Can we talk about the single stock side of it? Talk to me about the tech titans, Because I think people are used to, I think also trading just broad averages.

Speaker 1:

Yeah. So again, it's funny because it's sort of one thing leads to another, because cover calls tend to limit upside, right. And we've been asked by our clients like, well, originally we did the six because we're like this is a la carte menu, right, so you can pick different proportions to meet income target that you want. If you need more, maybe put a little bit more Tesla because it's more vol in it and you can adjust it as you want. You know, if you need more, maybe put a little bit more Tesla because it's more vol in it and you can adjust it as you want. But the feedback we got from some groups is like we don't want to pick, right, like you pick, and then so you know how do we put together a fund that has a basket of technology names. But we also wanted to kind of remedy the fact that cover calls does limit some upside. If we were to put it in our portfolios as a group of basket of names, how would we actually build that strategy? So that's actually how the Tech Titans ETF came about, which is that one of the great things that options have is that can give you asymmetric upside and downside when you own a stock, when it goes up by 1%, you make $1. If you go down by 1%, you lose $1. But in options that 1% increase can make you maybe more than a dollar and then when the dollar 1% decrease, you maybe can lose less than $1.

Speaker 1:

And so what we try to do is actually use that quality of options to change the return profile of owning tech. So what we do is first we select a basket of technology names that we think will persistently do well over the next three to four years. And then what we do is, when the market is up, when risk is on, we try to momentum weight these technology stocks. I think people who have been in this business for a while know that generally technology stocks exhibits momentum and so for those that have exhibited price momentum, we want to overweight those names a bit more to get some additional returns, so it's no longer linear.

Speaker 1:

And then when the market or individual names do not exhibit price momentum, we start writing calls to generate income. And it's basically when the market corrects we actually generate income to cushion some of the downfall, to mitigate the downside. So then you lose less when the market corrects to mitigate the downside. So then you lose less when the market corrects. And it's actually a very interesting time to write calls, because generally when you have a market correction, implied vols goes up, so you actually get incrementally more income. And so basically we want to try to achieve the sort of best of both worlds when the market is going up, we magnify the upside and then when the market corrects, we generate income to minimize the downside.

Speaker 2:

I think the momentum act of decision is an interesting one and definitely a differentiator. But let's talk about other ways that people listening to this can think about curve as a differentiator in the space. Because, let's face it, covered call strategies have been all the rage. There's all kinds of competitors, all kinds of different takes, all kinds of different distribution, numbers, different yields. How would you say Curve stands out?

Speaker 1:

Well, we are from the school that ultimately performance matters, and so I'll separate the two suites because I think they have different attributes that we can talk about. For the first suite, the single name cover call ETFs. We know a lot of people are in this space for income and a lot of people invest because people market on yield. The higher the yield maybe, the more attention they get. But we've actually resisted because we know that yield is just one component of return. What we really care about is total return and we've been, for the first year, kind of preaching that yield is sort of it can misdirect. You have price appreciation which you can also essentially distribute. And maybe I'll just break. One of the tax efficiencies in these strategies is that if you get some sort of distribution from either interest payments from bonds or dividend from equities, these are taxed at ordinary income. But when you use options to generate this income, it's actually capital gains. So there is a possibility that you can actually have long-term capital gains, which would be a savings in terms of tax liability. It's a lower rate than ordinary income. But, going back, we are very, very cognizant that you know there are competitors in this space and we're really focused on total return. So if you look at our returns for 2024, we've outperformed five out of the six funds by a good margin relative to our competitors, and that's important to us because ultimately we don't have the flashiest yield, but we do want to generate more returns for our clients' portfolios.

Speaker 1:

On the Tech Titans ETF, that is a very traditional. Our benchmark is NASDAQ 100, or you can use a Pasadena ETF like QQQ. Our ETF is KQQQ, so it was named specifically to try to manage performance against that. We have been able to. We launched it in July and for 2024, we were able to outperform Triple Q by more than 5%, and that's on an after-feed basis. So we are really focused on making sure that the outperformance we generate is pretty sustainable and that you know. Going back to your very, very first question, right Rate environments are higher. There's more idiosyncratic risk and so by being active you can outperform the benchmark, because not all asset prices are being inflated by low discounts NAV erosion, obviously, and that becomes an issue right With a long enough time scale, especially for retail.

Speaker 2:

that may not be understanding of the nuances and sophistication of these type of strategies relative to the idea that they're getting this huge yield, sure, but then the erosion of the NAV is crushing it.

Speaker 1:

Yeah, that is a thing that we try to educate, but I think it's a little bit. You don't really encounter this with. You know, lower income sort of product with, like a bond fund or something like that. Nav erosion quite simply is that it's a result of over-distribution and the way that I would, the simplest form I can put it is you know you're as an investor, give us investment managers $100 to generate more than $100, right, and over a month we generate $5. What the maximum we can distribute is that $5, or else you know we would be returning some of your capital. But because some of these funds advertise really high yield and want to sustain that high yield let's say they promise a 7% yield they give $7 back to you, so they only generated $5 of return.

Speaker 1:

They have to find that $2 somewhere else and that essentially eats into your principle and oftentimes people said, well, okay, well, I get $2 back, I'll reinvest it and help maybe potentially make more.

Speaker 1:

But the key thing here is that that $2 that you get back is not the same $2, because now it's distributed as income you have to pay taxes on. Two dollars that you get back is not the same two dollars, because now it's distributed as income, you have to pay taxes on it, so you get less than two dollars. So where you reinvest it again, it's actually at the end of the year you actually have to pay something, uh. So so if you continuously do this, um, it's sort of uh, it will erode into the nav. And another funny example is some folks have rental properties, right, and you're expecting a certain amount of income let's say $2,500 a month and one month your tenant is a little bit late and you can wait it out and maybe something happened and the rent will arrive at some point. But maybe then you start selling pieces of your kitchen to make up for that $2,500 you're missing, you're eating into your house, and so that's really like the proper equivalent of a NAV erosion in real estate.

Speaker 2:

Yeah, and I think I give you credit for the point about educating the audience on this dynamic, because I've done this myself. I looked at some of these Reddit posts by people talking about some of these extreme high yield and you see like crazy things, like people saying well, you know, I'm taking a HELOC on my house and I'm investing in other funds that do super high yield. You know, I'm taking a HELOC on my house and I'm investing in other funds that do super high yield. You know the extreme yield, and then I pay off my house loan with that extreme high yield. It's like printing money, it's like no, but it's like. This is the challenge, I would think, from your perspective it's really getting people to understand what it is they're buying.

Speaker 1:

Yeah, and I think we have been sort of in a bull market in 2024. So some of these trades do work. I'm not going to. You know, if you borrow, you know, whatever the rate of the fund is minus your borrowing costs on the HELOCs is probably what you would net. But it works well when the market is going up. But the market will correct at some point. And so what does that look like? Many of those folks are buying on margin, and when the asset goes down in price, you have to post more margins. And where is that money going to come from? So I think this is a very you know, this is what we think about in terms of risk management. Right, everybody loves an upward market, but you want to always try to find ways to minimize downside when the market doesn't go your way. And what's the worst case scenario? And how can you eliminate or reduce the probability of you know being stopped out in your positions?

Speaker 2:

Let's take a big picture view for a moment here and talk about this year in general, since obviously there is, as you noted, more of an active aspect to not just option writing but also the decision on where to wait some of these positions on the momentum side, do you have a sort of a firm-wide view on what you think is likely to happen this year to markets and then, specifically, tech companies?

Speaker 1:

Yeah, I think we have a wait-and-see approach. You know, I think we're a fixing-home shop, so one of the things we do focus on is Fed funds rates and how that affects the broader market. And we've seen that last September the market was pricing in five rate cuts and now the market is pricing almost only one rate cut for all of 2025. And that's because forward guidance has dramatically changed. We you know we argue this about internally a lot. My perspective was that the change in forward guidance is because the Fed doesn't really know what fiscal policy is going to be like you know, we just had a new administration come in If they were to sort of implement all of their fiscal policy, particularly stricter immigration policy, which removes sort of labor forces, and then if we were to enact tariffs, which on different items that we have, I think right now just in the last two days it's been spoken on tariffs on Canada, mexico and China those tend to be inflationary and so it was, I think, wise for the Fed to remove on the table further rate cuts and be a little bit more conditional about what to do in terms of short rates in managing the economy right If they are truly inflation. And I think that the big caveat is that we have to be more specific in terms of how these policies are implemented, what part of the labor force are being removed. Really quick story, which is that in the first Trump term there were tariffs, but for some reason a lot of the Apple products, apple components, were all exempt from tariffs. Another story right, there was a steel tariffs and you would have thought that did make American steel more competitive, but the downstream was that the largest car steel consumer were actually car companies, that they were the ones who actually had to pay a lot of the prices. So we take sort of this wait and see approach in terms of the fine details of what these policies are going to be and then how that filters into the economy. But the one thing that we're kind of sanguine about the market is actually technologies, for a few different reasons. One is that and I think I should caveat saying the technology companies we're talking about are generally have monopolistic power and pricing power right. So they have had been under pressure in terms of the way that they've dealt with business and it seems like, from a regular turner standpoint, that's going to be a lot easier for them going forward than what was in the past going forward than what was in the past, and oftentimes I think the market is always trying to find a new story, but this AI story really, for us, feels still at the early ending of the story.

Speaker 1:

We still believe that, if you look at the stack of AI, the hardware will continue to do really well. The demand for chips and compute power is overwhelming relative to supply. Who the winner is might change a little bit. We think NVIDIA for the short term, for the next six months, will still be a winner, but now the other chip makers are trying to catch up and to try to produce competitive products. And you see this sort of with the semiconductor cycle, which is you have this surge in demand for semiconductor products and then it becomes so prevalent then the price drop all of a sudden. So that is a flag that we will look forward to, but we don't think we're quite there yet. And then there is a mitigating downside, which is that it's a soft wheeler.

Speaker 1:

How are people going to monetize this new technology?

Speaker 1:

Right, we've seen some people, some companies like Facebook, have successfully done it in a way that essentially better targeting of ads, etc.

Speaker 1:

But where AI is competing with existing products like Google, the search it's a little bit more open-ended Whether they would succeed. You know, the innovator's dilemma is always a big one how do you disrupt your own existing business to capture the next one? And then you can actually maybe take the let's wait and see approach from Apple. Their iPhone is they have an open AI, but they allow different models to make decisions, ai decisions on their phone. That's sort of a la carte. So we think there's some legs. Valuations can be stretched at times, and so that's why we developed the Tech Titans, because we want to be able to navigate these moments of exuberance and corrections. But the important thing is sort of allocate out of technology because it's very expensive. You get a tax bill when you sell out of it, but we think that particular industry will still be pretty strong because there's just sort of a technological push change to have all of this even further into our lives. So we were pretty bullish.

Speaker 2:

I'm curious from a fund issuer perspective how would you determine the next batch of funds to launch? I mean, your suite is obviously the ones people are familiar with. On the single stock. Yeah, I would think it gets to be the holy grail where you would be launching a fund on a single stock at the exact moment in time that single stock, which nobody's really paying attention to, starts to work.

Speaker 1:

I would say, launch our funds a little bit after sort of or a little bit before kind of the zeitgeist. I mean, for us really, we're trying to find pain points for the advisor in terms of what they have in the portfolio and then make it easier for them to manage their things. I mean, we do not do the same thing as a financial advisor. In fact I'm very odd of the advisors that we work with because they have to manage sort of the emotional components of, you know, their clients and estate and we're just a really small sliver of that function, and so we are trying to make that part of the life as much as easier as possible. So, in many ways, like a tech company, we try to find a problem and try to solve something in the portfolio. The problem in the portfolio.

Speaker 2:

Speaking of advisors, I mean, what's been the response to advisors? Are they favoring more the KQQQ? Are they favoring the individual positions? Is there pushback? What does that pushback look like?

Speaker 1:

Yeah, so availability of income after retirement is a big issue. It continues to be a big issue. So the advisors that we work with, they generally don't buy just one, they buy a basket to meet their and there's some inherent diversification, right, even though they're all tech stocks, their tech names behave differently. So there's some diversification. But the income generation is the most important because oftentimes their clients require more income than a traditional income. Portfolios of bonds and stocks can provide dividend stocks can provide.

Speaker 1:

We get a request on more single names but we are a little bit disciplined. We don't think these strategies work for all names. We've been asked to do an NVIDIA cover call ETFs and we've been resisting it for a long time, largely because the stock. We think you should write the price return instead of the income return on that particular name and you should invest in. If you like NVIDIA, you should invest in it. If you need income, sell a little shares to generate income. The upside behavior is a little bit unpredictable. So writing a cover call really does, we think, severely limit the upside at how the stock is currently behaving. But I think our strategy really is different. Advisors use it for different purposes, so the first suite are tend to be clients who are a little bit older, who need to fix income. And then the last is actually for clients who are younger, who don't want the upside cap. They want growth. It can compound, but having some income is also pretty advantageous.

Speaker 1:

In the next few ETFs we launch we are moving away from tech, not because we don't like it but because you know we have other ideas that we think can benefit the portfolios and so you know we don't have a lot of pushback. I think the biggest pushback thing is that you know, people often see one name out of the whole six and they say I would never buy something with a single name. But they don't realize it's sort of a whole suite and generally when we talk about it they understand what we're doing. And then sometimes we get pushback because they kind of compare these single names to the leverage single name ETFs, which is a completely different animal. They think these are trading vehicles and not sort of advisory products. And we try to also try to differentiate that. These really are meant to help advisors to meet that income target versus, I don't know, the leverage equities probably. I would probably fit it more as a trading vehicle.

Speaker 2:

Yeah, no, I think that makes a lot of sense For those that want to learn more about curve and maybe just educate themselves in general around cover call strategies. Where would you point them to? And I know that because because then you're big on education it sounds to me correct from wrong that you were very much open, having conversations with anybody and everybody.

Speaker 1:

Uh, if they're you know, they want to spend the time yeah, um, we we love to talk to advisors um a lot of the commonly asked questions. We try to be as efficient as possible, write them down and they're available on our website at curveinvestcom k-u-R-V-I-N-V-E-S-Tcom. We do, for our existing investors, do sort of a monthly investor call just to go through the portfolios to make sure they understand what's happening. And you know not to compete with you. We just launched our own podcast called Curve your Enthusiasm, and it's purely about discussions with the portfolio manager, dominic Terson, to really focus on you know how do we think about trading in portfolios. So that's a little bit just to make sure it really is a response to a lot of these folks that you mentioned in the Reddit community. I think that you know they're really into investing and I think having the ability to pass down some of our institutional knowledge hopefully can help them invest better.

Speaker 2:

Honestly, the fact that you thought of the name Curve, your Enthusiasm that alone. I was laughing as you were saying that because it's perfect, I got to give you a lot of credit. Anybody that's listening to this should listen to that podcast and honestly consider the funds, just for the creativity alone. Yes, that's the way I view it. Appreciate those that watched it under Lead Lag Live. This is a sponsored conversation with Curve Investment Management. Hopefully all of you enjoyed it and I'm going to do more of these, as well as webinars with the good folks at Curve.

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Michael A. Gayed, CFA

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