Anthony Caruso, Nomura Asset Management

Anthony Caruso has spent his whole career inside ETFs. He helped stand up the ETF business at JP Morgan, from pre-launch through the launch, then went to Dimensional, then to Macquarie to head up ETFs there, and he now runs product and strategy for ETFs at Nomura. The firm has been in business a hundred years in Japan and a hundred in the US, and his job is building the ETF platform outside Japan and Asia, starting here and eventually in Europe. He came on to talk about an actively managed innovation strategy that ran as a separate account from 2018 and converted into an ETF in January. Most of the conversation was about where he thinks that kind of exposure belongs in a portfolio.

His argument is that innovation is a core allocation. Most advisers treat thematic exposure as a small tilt bolted onto the outside of a model. Anthony thinks that sizing has it backwards, because innovation is what drives the growth side of the market in the first place. If that holds, it belongs in the core, and the short term theme bets go around it.

Two Lenses

The process starts with themes. The two portfolio managers work through the secular ideas on the board and ask a short list of questions about each one. How mature is it. How long does it run. Is it economically viable, and can you actually own it in public markets today. That first pass leaves a working universe of roughly 60 to 75 companies attached to themes the team believes in.

The second lens is bottom up. Valuation, durability of the business, quality of the management team, and what the economic pickup looks like from here. That work cuts the universe to 20 to 30 highest conviction positions. The portfolio holds just over 25 names today, with the top ten at roughly 57 percent.

Anthony is direct about why it is built that way. If you want access to innovation, you have to decide which companies are going to lead it and which are going to be left behind, and then, in his words, put your money where your mouth is. A passive thematic product owns everything with the theme attached to it, leaders and laggards in the same basket. That buys the theme without taking a view on who wins it. The concentration here is deliberate.

Not a Technology Fund

The misread he runs into most is that this is a technology sector product. It is not. The framework is innovation, and innovation shows up in different industries in different decades. The portfolio leans heavily toward AI infrastructure right now because that is where the buildout is, and the mandate lets it move. Healthcare, longevity, rare disease, industrials, logistics, space, quantum. The franchise has been investing in innovation for 75 years, back through steam power and electricity, and the two managers running the strategy bring more than 50 years of combined experience to it.

The thesis underneath it is that markets consistently underestimate the magnitude, breadth and duration of innovation cycles. He argues it from applications. Nobody modeled what the iPhone would turn into when it launched, and every long range survey of ETF growth from a decade or two back has already been passed by what the industry actually did. He compares talking to his portfolio managers to watching a science fiction show, where the thing you cannot believe will happen ends up happening.

The Babe Ruth Problem

The framing he uses is Babe Ruth as a pinch hitter. If innovation is what powers the growth segment of the market, a small satellite sleeve is a strange way to use it.

He puts the sizing at 10 to 20 percent of an equity allocation, on the growth side of the book, in mid and large cap. The more useful part for advisers is where he says that money comes from. The conversations he has are with people who already own passive Nasdaq 100 or Russell 1000 growth trackers, and the pitch is a swap into active innovation exposure in place of a passive growth index. He says that also pulls the allocation away from the mega cap concentration those indexes have built up and spreads it across more of the AI supply chain.

He is fine with satellites. If an adviser has a view on driverless cars or robotics, tack it on. What he cares about is what sits underneath them, and whether the core position gets managed by a team whose whole job is deciding where innovation goes next.

The Other Side of the Coin

A concentrated position in a volatile corner of the market has to hold up through selloffs, and Anthony's answer there is that the risk work is daily while the views are long term. Turnover runs 20 to 40 percent, so the portfolio is not getting rebuilt on the news cycle. When a hyperscaler earnings report shakes the sector, the managers read the move as a mispricing and a place to add.

For an adviser, that means the holding period has to match the process. Anthony describes the clients who own it as people who wanted access to innovation they do not have to check every day, with shorter term theme bets layered on top separately. The fee is 65 basis points, which he puts against the single theme products that come up in the same conversation.

What Is Coming

The US platform runs nine ETFs. The ETF business opened at the end of 2023, and Nomura's acquisition of Macquarie's US and European public business closed in December, bringing over the legacy Delaware Investments and Ivy franchises along with equities, fixed income and multi asset capability.

Two other strategies came up. The first is an emerging markets equity fund, launched in 2024, also concentrated, with meaningful exposure to Korea and Taiwan. He frames it as a natural pair with the innovation strategy for an adviser trying to diversify away from mega cap growth without leaving growth. The second is a high yield municipal strategy, where his case rests on default rates that run lower and recovery rates that run higher than the corporate equivalent.

There is more in the pipeline. Three conversions were announced the week before the episode, covering a few taxable funds, a small and mid cap equity strategy, and a Japan equity strategy built with the Tokyo team. Anthony expects the lineup to look significantly larger by the end of the year.

Key Takeaways

• Anthony's core argument is that innovation is a core allocation. It drives the growth segment of the market, so a small satellite position underuses it. His line for that is Babe Ruth as a pinch hitter.
• The process runs two lenses. A thematic pass on maturity, duration, economic viability and investability leaves a universe of 60 to 75 names, and bottom up fundamental work cuts that to 20 to 30 highest conviction positions.
• The portfolio holds just over 25 names with the top ten at roughly 57 percent. The concentration is deliberate, on the view that owning every company attached to a theme buys the laggards along with the leaders.
• It is not a technology sector fund. The framework moves across industries as innovation cycles shift, from AI infrastructure today toward healthcare, longevity, industrials, logistics, space and quantum.
• He sizes it at 10 to 20 percent of equity, sourced from passive Nasdaq 100 or Russell 1000 growth positions. He says the swap also pulls the allocation off the mega cap names and out across more of the AI supply chain.
• Turnover runs 20 to 40 percent and the managers treat volatility as a source of mispricing. The holding period an adviser signs up for has to match that.

Listen to the full conversation on Spotify, Apple Podcasts, or YouTube.