The Julia La Roche Show | Harold Bradley On The Danger ETFs Pose To The Stock Market @TheJuliaLaRocheShow | Uploaded May 2023 | Updated October 2024, 20 hours ago.
Harold Bradley, a long-time investment manager and chief investment officer, joins Julia La Roche on episode 77 to discuss why Exchange Traded Funds (ETFs) have distorted the role of equities markets in capital formation while posing systemic risks.
Bradley has broad and deep experience in mutual funds, foundations and endowments, exchanges, and private equity partnerships, including venture capital and hedge funds. His experience also encompasses investments in farmland, metals and mining, futures and options, and a track record of successful engagement with venture-backed technology and FinTech companies, including W.R. Hambrecht's OpenIPO, Euronet Worldwide, StarMine Corp (sold to Reuters) and Archipelago, LLC (IPO).
In 1982, Bradley introduced first of a kind cash-settled stock index futures contract in the Value Line Composite Index while at the Kansas City Board Trade before purchasing a membership and trading for five years on the floor. In 1988, he was hired at Twentieth Century, now American Century, as the first equity trader and built a globally recognized trading operation over the next ten years. He was the lead portfolio manager of small-cap growth funds from 2003 to 2007. He was later appointed Chief Investment Officer of aggressive growth strategies before being named President in 1999 of American Century Ventures, which invested $63 million in businesses likely to disrupt the mutual fund industry. From 2003 to 2007, he managed American Century Tomorrow and a team of software engineers and developers who used artificial intelligence, fuzzy logic, inference engines, and pattern recognition to develop manager compliance systems and quantitative investment strategies for American Century growth mutual funds managing $10B. The American Century trading desk received global recognition as an innovator of electronic trading techniques and protocols, including the Financial Information Exchange (FIX) Protocol steering committee that created open source standards for order, trade and settlement instructions between investment firms, brokers and exchanges in global equities and foreign exchange trading.
Throughout his career, Bradley delivered Congressional testimony on stock market regulation, electronic trading, soft dollars, decimalization of stock prices, and ETFs. As Chief Investment Officer of the Kauffman Foundation (2007 - 2012), he co-authored a vital research paper with Robert Litan highlighting risks to market stability from lax regulation of ETFs. He also co-authored widely-cited papers on subpar venture capital fund returns, with recommended best practices. He's been interviewed by CNBC, Wall Street Journal, New York Times, and others.
Read Harold Bradley's October 2011 testimony here: etf.com/docs/Bradley_Testimony_10-19-11_SII.pdf
0:00 Show Open
1:21 Welcome Harold Bradley
2:15 An accidental investor
3:00 Learning about markets as an agricultural commodities reporter
5:00 The little exchanges do all the innovation and get crushed
5:43 Beginnings of a major structural shift
6:45 Pace of change in markets
7:50 From the wheat pit to equities
10:29 1987 Black Monday
13:04 Black Monday blamed on portfolio insurance. ETFs are 'a form of portfolio insurance'
13:45 20 years at American Century building trading operation
16:30 Trading electronically
19:00 Many firms in investment management do not dream
21:15 Fees
22:40 Flawed system was a bug, not a feature
23:01 Soft dollars
28:59 Testified before Congress six times
30:10 Risk in ETFs
32:00 Drawback to mutual funds
35:12 Why did ETFs start
36:20 War against Wall Street market makers
38:22 Decimalization
40:30 How Washington worked
43:00 ETFs are presented as a passive investment, but they're not
48:30 KRE ETF during banking crisis
51:00 Incentive compensation
52:25 People came running out of the banks
53:29 ETFs have instant liquidity, but the component securities within an ETF aren't immediately liquid
57:00 Gold and silver ETFs
1:00:45 Margin lending against portfolio securities
1:03:18 How are ETFs distorting markets and the systemic risk they pose
1:06:00 ETFs have undermined price discovery
1:10:38 How ETFs can create bubbles
1:11:50 AI could be the next ETF craze
1:13:00 I worry good company managers won't be rewarded unless they're in an index
1:17:00 How Harold invests today
1:20:00 Investing challenges that come with size
1:22:54 Why market won't go down with everyone expecting it to go down
1:27:00 Everything is more fragile
1:28:00 Why the ETF risk likely won't go away
1:34:00 State of capital markets today
#stockmarket #investing #etfs
Harold Bradley, a long-time investment manager and chief investment officer, joins Julia La Roche on episode 77 to discuss why Exchange Traded Funds (ETFs) have distorted the role of equities markets in capital formation while posing systemic risks.
Bradley has broad and deep experience in mutual funds, foundations and endowments, exchanges, and private equity partnerships, including venture capital and hedge funds. His experience also encompasses investments in farmland, metals and mining, futures and options, and a track record of successful engagement with venture-backed technology and FinTech companies, including W.R. Hambrecht's OpenIPO, Euronet Worldwide, StarMine Corp (sold to Reuters) and Archipelago, LLC (IPO).
In 1982, Bradley introduced first of a kind cash-settled stock index futures contract in the Value Line Composite Index while at the Kansas City Board Trade before purchasing a membership and trading for five years on the floor. In 1988, he was hired at Twentieth Century, now American Century, as the first equity trader and built a globally recognized trading operation over the next ten years. He was the lead portfolio manager of small-cap growth funds from 2003 to 2007. He was later appointed Chief Investment Officer of aggressive growth strategies before being named President in 1999 of American Century Ventures, which invested $63 million in businesses likely to disrupt the mutual fund industry. From 2003 to 2007, he managed American Century Tomorrow and a team of software engineers and developers who used artificial intelligence, fuzzy logic, inference engines, and pattern recognition to develop manager compliance systems and quantitative investment strategies for American Century growth mutual funds managing $10B. The American Century trading desk received global recognition as an innovator of electronic trading techniques and protocols, including the Financial Information Exchange (FIX) Protocol steering committee that created open source standards for order, trade and settlement instructions between investment firms, brokers and exchanges in global equities and foreign exchange trading.
Throughout his career, Bradley delivered Congressional testimony on stock market regulation, electronic trading, soft dollars, decimalization of stock prices, and ETFs. As Chief Investment Officer of the Kauffman Foundation (2007 - 2012), he co-authored a vital research paper with Robert Litan highlighting risks to market stability from lax regulation of ETFs. He also co-authored widely-cited papers on subpar venture capital fund returns, with recommended best practices. He's been interviewed by CNBC, Wall Street Journal, New York Times, and others.
Read Harold Bradley's October 2011 testimony here: etf.com/docs/Bradley_Testimony_10-19-11_SII.pdf
0:00 Show Open
1:21 Welcome Harold Bradley
2:15 An accidental investor
3:00 Learning about markets as an agricultural commodities reporter
5:00 The little exchanges do all the innovation and get crushed
5:43 Beginnings of a major structural shift
6:45 Pace of change in markets
7:50 From the wheat pit to equities
10:29 1987 Black Monday
13:04 Black Monday blamed on portfolio insurance. ETFs are 'a form of portfolio insurance'
13:45 20 years at American Century building trading operation
16:30 Trading electronically
19:00 Many firms in investment management do not dream
21:15 Fees
22:40 Flawed system was a bug, not a feature
23:01 Soft dollars
28:59 Testified before Congress six times
30:10 Risk in ETFs
32:00 Drawback to mutual funds
35:12 Why did ETFs start
36:20 War against Wall Street market makers
38:22 Decimalization
40:30 How Washington worked
43:00 ETFs are presented as a passive investment, but they're not
48:30 KRE ETF during banking crisis
51:00 Incentive compensation
52:25 People came running out of the banks
53:29 ETFs have instant liquidity, but the component securities within an ETF aren't immediately liquid
57:00 Gold and silver ETFs
1:00:45 Margin lending against portfolio securities
1:03:18 How are ETFs distorting markets and the systemic risk they pose
1:06:00 ETFs have undermined price discovery
1:10:38 How ETFs can create bubbles
1:11:50 AI could be the next ETF craze
1:13:00 I worry good company managers won't be rewarded unless they're in an index
1:17:00 How Harold invests today
1:20:00 Investing challenges that come with size
1:22:54 Why market won't go down with everyone expecting it to go down
1:27:00 Everything is more fragile
1:28:00 Why the ETF risk likely won't go away
1:34:00 State of capital markets today
#stockmarket #investing #etfs
