‘Shark Tanker’ O’Leary Jumps In ETF Pool

July 27, 2015

ETF.com: You mentioned fixed income, any products being planned for that?

O’Leary: Yes, because fixed income is 50 percent of my trust. As a fixed-income investor, I care a lot about what the Fed does, because there are two things I can control as a fixed-income guy. I can control duration and I can control credit quality. Do I buy government bonds, which is debt, or do I buy corporate credits?

I want a strategy in fixed income to deal with both of those. When I look at the kinds of ETF products that I want to use to solve that strategy, one would be a floating-rate loan ETF. That’s definitely on my radar screen. And I'm working on that now. Secondly, I want to look at corporate credits that have a quality measure to them. I don’t want to own high-yield debt with no covenants.

I can't find the product I want there, so I'm going to have to build it. Just owning a high-yield debt because it’s called “high-yield debt” doesn’t meet my quality test.

Finally, there are government bonds. And in my view, it’s not time to be in those yet. If we go back over the last 17-20 years, we’ve had nothing except rate declines. If we normalize back to, let’s say, 3-4 percent, you’ll lose 20 percent of the value of a 10-year Treasury bond, which I don’t want to do. So I’ll bring to the market what solves my fixed-income problem.

I'm extremely conservative on the fixed-income side. Right now, I'm getting about 4.7 percent with my strategies, and my duration is under five years. We’ll probably bring products that resemble what I have discussed.

ETF.com: Do you see yourself as a wealth-manager or ETF issuer? Or is there a larger role you envision for O’Shares, such as ETF strategist or something else?

O’Leary: The reason I do “Shark Tank” is that I am a huge advocate of this philosophy. If you’ve had success as an entrepreneur, you owe the next generation a road map on how to get there. I spend 60 percent of my time today teaching undergrads and graduate students in MIT and Notre Dame. I want those graduating students to start businesses. I'm a passionate advocate for that.

I also believe we don’t educate our children enough about financial literacy. And so my roleand what I hope to do in using the platform that I've created across all media—is that I would like to explain to people what to do in terms of how to invest. I'm not telling them what to buy. I'm just sharing with them what I'm doing. I eat my own cooking. I'm trying to solve a problem for myself and my family as an investor.

What I ask others to do is to look at what I'm doing and compare against what's out there. That’s all. If you can find better, please let me know, and I’ll buy that. Because I'm doing this to really protect my capital. I’ve got to make 5 percent a year, minimum.

 

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