Jan 19, 2024

Sandy Kaul, Head of Strategy for Digital Assets Unit at Franklin Templeton, joins "First Mover" to discuss the asset manager's vision on their spot bitcoin ETF after the product received approval from the SEC. Plus, what's going on with the banter around Franklin Templeton's X account?

Video transcript

This next asset manager has the lowest fees bought Bitcoin ETF on the market. Joining us now to weigh in on what happens from here is head of strategy for Franklin Templeton's Digital Asset unit. Sandy call Sandy. Welcome to the show. It's nice to see you again. Great to be here, Jen. Nice to see you again as well. Ok, Sandy, this is what everyone wants to know your Twitter account. A drastic change happened as soon as that ETF was approved, what's going on. We uh let our digital asset team loose on Twitter and uh they had a great time and we've had a great time because we're big believers in digital assets and we thought what a fun way to take the old fashioned image of Ben, right, Ben Franklin for Franklin Templeton and give him the laser eye that shows we really understand, believe in and support where we see Bitcoin headed. Um And we've really had fun with the social media since then as well. Um You know, a lot of the big traditional asset managers still are uncomfortable with this channel, but luckily, we have uh lots of great young, engaged and enthusiastic people in our team who really love, like engaging in that medium. And so they, they've been having a great time and it's really so fun because they've worked so hard to get us to this point. So it's been a really fun week for everyone on the team. Sandy take us behind the scenes a bit. When I think about an asset manager as established as Franklin Templeton, I think that sometimes in organizations like this, it's hard to make change quickly, especially a drastic change like this. What, what was the um I guess was it an uphill battle to try and get the strategy approved? Uh you know what it actually was not? Um We're so fortunate Franklin because from our CEO Jenny Johnson down, um there's a huge belief in bringing our clients and our investors um the best possible investment opportunities and being headquartered in Silicon Valley. Uh we're very attuned to new technologies. And then when you think about what happened last year with generative A I, there was so much buying interest and you saw so many investors really able to benefit from this new technology coming out, but it's been hard to benefit from the new technologies that are emerging from the crypto domain because you've had to have specialized accounts or you've had to have access to digital wallets or work with ex changes that aren't registered. Uh And all of this has really kept this opportunity out of a lot of investors portfolios. Uh And that's why we were so enthusiastic about the ETF as an access vehicle because it's really opening up this entire new uh innovation uh area to investors to really benefit from the growth and, and the new technologies that are emerging from it. We are a week and a day out from the day when asset managers started trading that about Bitcoin ETF, talk to us about the interest that your firm is seeing. Is it meeting expectations, exceeding, exceeding them? Yeah. So we have 22 views on this, right? There's the short term view and we're so thrilled with the growth of the overall Bitcoin ETF uh ecosystem. You know, we've never seen a situation like this where so many firms launched at the same time. And so it's really exciting to watch the horse race. Uh But where we think the real battle is going to occur is as this moves out of kind of the speculative, direct to consumer channel and in to the more wealth channels. And that takes time to get listed on these platforms. They need to really examine and look at each product and how it performs. And this is where Franklin Templeton's strength lies. So we've done great uh in the out of the gate. But our sweet spot, uh you'll really see that start to kick in over the coming months, as we say to people, it's a fun horse race, but it is not a short horse race and it's gonna take some time to really see who the true winners are in the end. Let's talk a little bit more about that race. I mentioned it in my intro, Franklin Templeton has the lowest fees at 0.19%. I believe you lowered fees again after the approval of the ETF, what went in to making that decision? Do you really see, uh, the fees being a competitive advantage for you as you move forward? I think fees are always important to think about not because they're important to the asset manager, but because they're important to the client, right? And we aren't looking at the spot. Bitcoin ETF is kind of an asset gathering opportunity. We're looking at it as an investment opportunity. And so we want our investors, particularly those who reward us with their trust in coming early into the fund to get the full benefit of that. And we decided that we're in this for the long haul. We have already multi coin portfolios that we're trading in separately managed accounts. We have the first ever uh us public mutual fund on Blockchain. We, we have many products that we're looking to push and the Bitcoin is a exciting new one and we want our investors to get 100% of the benefit of that out of the gate. So we really decided to suspending the fees until we got to 10 billion A um or until we got to the first through the first six months was the way to really reward those who went on this journey with us. You just mentioned a few different types of digital asset products. Um Are you seeing new clients come to Franklin Templeton for these offerings or are your existing clients? Um you know, are they excited about these products or is there kind of a an educational gap that the firm is trying to fill for them? Well, we have a whole range, right? So there's been clients that have been on this digital asset journey with us from day one. You know, we run our own nodes, we're on five different public blockchains. We're really working um across many of the crypto natives and with many of the crypto natives in the space and there's been a crypto native audience that's been investing with us for many years now. Uh Then there's been a set of investors who are investing with our venture capital fund who are inventing investing uh through some of our separately managed accounts. Um But it's the newest audience that we're excited to be accessing, which is the more everyday investor that hasn't had this opportunity or, you know, the real technical know how to get into the space. So I think you're finding different audiences have different levels of excitement and it's this newest audience that really has been probably watching but not really feeling comfortable getting into digital assets uh that we think are the most excited about this opportunity. I want to talk about that new audience and come back to the Twitter. Uh There's been some buzz around Solana. I know Franklin Templeton has been tweeting about different ecosystems, different layer ones, Ethereum and Solana being two of them in the last week. Does that mean that investors can expect products that might give them exposure to these two assets or are you maybe thinking about a Solana ETF in the future? Well, we, we have our own investment research team that does research on individual coins and, and certainly both Ethereum and Salana are coins where we co we have coverage, we have our own price forecasts and targets. Uh We talk with our investors about what our research is showing us. Uh And so it feels natural that over time our ETF uh ecosystem will expand. Uh but I can't comment on any specific timing on any of that. But you know, this, it makes sense to think about this as a portfolio of ETF S and opportunities, not just a single Bitcoin portfolio. Ok, Sandy. I have to ask you the last time you and I spoke was at consensus 2023 and we're talking about music and culture as digital assets that folks could invest in any progress there uh from the firm's perspective or has the focus really been on getting this ETF off the ground? Well, we have different teams working uh on different initiatives within the group. And I could say that we're starting to make some very interesting partnership decisions uh that will hopefully allow us to have some progress on these cultural assets. And this idea that you can own a growing set of assets by using the tokenization wrapper uh and embedding the utilization uh rights and the benefits and the rewards. Uh And we're starting to experiment this with this even within our own organization uh for our conferences now that our digital asset team helps to support we're issuing NFTS for those conferences and those NFTS are giving access to the research, uh the proprietary research that we're publishing. So that's our first step on this journey in starting to bring smart contracts into our ecosystem and we continue to expect that to evolve and grow over time. Our audience might not have been a consensus 2023 last year. So just explain to us a little bit about how Franklin Templeton is thinking about music specifically as a, as a digital asset, as an investable asset for uh investors who are working with your firm. Yeah, I mean, music is a fantastic example, Jen, because when you think about it, you know, royalties are a wonderful cash income stream, right? You know that the songs are gonna be played. Uh you know that the artist has a body of work that keeps their uh fans interested and it it's a great way to add an income stream to a portfolio. But it's very hard to think about administering a re a royalty pool across millions of investors, right. It's just operationally too difficult to do uh in today's world. But once you start moving into the world of smart contracts and you start to be able uh to really programmatically split up that pool of royalties into small small fractional shares and have that automatically administered by the algorithms. All of a sudden those royalty pools become amazing sources of potential return. And so this is something we want to unlock for our clients. We think that music are digital, um you know, collectibles, these are all things that people have always put money into for investment purposes, but they haven't been able to wrap them into a portfolio. Uh and therefore you're not getting the risk benefit, the diversification benefit. And we think that this is really going to change in the next few years and we really want to be at the forefront of that. OK. And Sandy, just before we wrap, we've been talking to all the asset managers, your peers who have been approved for a spot, Bitcoin ETF, many of them come from the traditional finance world. If you were to look forward, uh paint a picture for me, what does the future look like with traditional finance firms, interacting with crypto and vice versa? That's been the most uh I think enjoyable and exciting part of what's been happening in the last few months, Jen is that I think we're finally starting to see the two sides come together, right? The innovation, the creativity, the willingness to push the boundaries and find new business models that the crypto natives represent, um which is just not coming in many instances from the traditional investment side and yet the comfortableness working with regulators, the understanding of investor protections, uh the thinking about the total portfolio and how that comes together from a risk management and a volatility perspective. That's the real strengths that traditional investment managers bring to the table. So combining uh these innovations with these uh traditional values that have really worked over decades, I mean, Franklin Templeton is 76 years old. Um That's what's so exciting to me, that's really what opens up the potential of the future and it's all to the benefit of our investors. And that's what, you know, all of us in this industry are the most focused on and we're the most excited about Sandy. It's been such a pleasure chatting to you. Thanks so much for joining the show. Thank you so much for having me. That was head of strategy for Franklin Templeton's Digital Asset unit. Sandy K.

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