Yuri Khodjamirian, Tema ETFs

Yeah, it's very interesting. And before we get into Tema, I always ask every guest, when you're not behind the desk and I know, the entrepreneurship life can be quite hectic, any hobbies? What do you like to do when you're not working?

Oh, so I've got a little son, he's two and a half years old, so that he keeps me very, very busy. I like to exercise. I used to do CrossFit before and now do a couple of other different types of exercise, just try to stay healthy. And I love reading about finance. I know it sounds a bit cliche, but when you become obsessed, some people read about football, I read about financial markets, I write about financial markets. So that's my sort of hobby, if you will. So whenever I'm not doing work, I'm kind of reading about it, if that makes sense.

Let's talk about Tema. As you said, you and your partner, it started the firm, I think around 2022. Can you give us a high level? What is Tema ETFs? And really, what's the firm's, I guess, investments philosophy? Just get products out there that you think people are going to want? Or is there something more core behind it?

So I should say, I didn't found Tema. I was one of the first few employees. Moritz Pot, our founder really had the vision, which was, there was kind of a gap he felt in the ETF market, especially as actively managed ETFs were opening up. And that gap was to build an independent, institutional grade manager. So bring investment talent from the hedge fund world, from long onlys, people who've been doing this for decades, like myself and our investment team, I think as a collective 100 plus, maybe 120 years of experience. And this was the thesis, bring that to areas of the market and asset classes where we felt we could add value. And the three kind of key values, I think for us are purity. So we want to build good products that are purely exposed to that particular

So you guys have built, a pretty broad suite at this point, you've got ETFs in reshoring, you've got one in heart health, you've got one in, oncology, we've got international. And now we're going to talk today about the NASA ETF. Just, when you guys are sitting around talking about this, how do you decide which themes are kind of worthy of a dedicated fund versus just a trend that's going to fade in a year or two?

It's a great question. And unfortunately, the sort of thematic part of the of our suite and the equity market, it's got a bad kind of history, right? Often products are people jump on marketing trends, they call their ETFs like millennial or metaverse or meme stocks, whatever it is. Um, we're really trying to be completely different to that. And it all starts with the investment core. Is there kind of a long-term structural steam and growth kind of trajectory of this, this particular area of the market? Or is there a really compelling reason why people want to hold this over the long run? If you start with that, you, you kind of read away all of the speculative froths and all of the marketing kind of, um, a position in people do, and you try to build products that are going to

So let's get into, the NASA ETF, uh, the Temespace Innovators ETF, ticker N-A-S-A, great ticker, by the way. You guys launched this in, in March. Um, it's, or what was launched just, uh, was launched in March, I believe. It's actively managed 75 basis points at a high level. What is this fund and what is the

Problem that it's solving for? Look, we, we, we, we launched it in March. You're absolutely right. And we set out to build essentially, um, around kind of the core values of what Teman tries to provide. So first of all, this is an ETF that offers access to interesting parts of the market. And in this case, it means actually access to SpaceX within the ETF. So uniquely we've put a private company into an ETF and I'm sure we'll get to discussing that, but the ETF gives you that access point. The second point, which is what I talked about is purity of exposure. And we want every holding to be tied to the space economy within the CTF. And we've spent a long time trying to find

So you're right. I do want to talk about the SpaceX exposure because it's extremely unique. So when I looked at this, you've got roughly 10 to 15 percent of the fund allocated to SpaceX through, an SPV provided by Forge, which is a Charles Schwab subsidiary. You've said space ETF without SpaceX is like a semiconductor ETF without Nvidia. So can you walk us through mechanically, actually, how this structure works and what an investor needs to understand about owning a private

Company exposure inside of a liquid ETF wrap? Absolutely. So look, we, I think at the outset, when we set out to build this ETF, we were so focused on the purity of exposure and getting good quality businesses in it. It felt wrong not to at least explore what it was like to put SpaceX. SpaceX for, and people will very soon when the S1 becomes public and it becomes IPO, will start to realize how fundamental this company has been to the space economy and its dominant position. As a vertically integrated player, it was responsible to more than 50 percent of launches last year. This is the premier business in space economy. It also dwarfs the rest of the businesses in terms of size. So very similar to the

Attractive to investors. So if I also read this correctly, it appears that you guys are absorbing kind of all the transaction costs, fees, commissions on that SpaceX SPV inside of that 75 basis point management fee. So no hidden costs. that's a pretty aggressive stance. You don't need to get into all the, the economics, but it's a very unique structure. And I was curious, was it difficult getting the regulatory go ahead for a product like this or for a fee structure like this?

So fee waivers are actually quite a normal part of the ETF business. A lot of people will have, gross fees, and then they waive them, they waive certain types of fees. At the beginning, when we launched the ETF, and I should say that this is up to a certain point, right? Like we have a cap on these fees. But effectively, what we're doing is at the initial kind of investor, we felt that there was a point where, some of the fees associated with buying private stakes can be complicated. And those fees can sometimes sting investors. And there's a couple of examples of that out there. And so we felt that it was prudent to kind of create this transparency by saying, look, we'll cover all of the fees. Now, those fees are kind of management,

Interesting. So why don't we talk about the rest of the portfolio beyond just SpaceX, you guys hold, 20 to 40 names, can you kind of walk us through the full stack of what the space economy looks like in your eyes, and how you're trying to build a portfolio around it?

Yeah, absolutely. Look, so you've got SpaceX, which is a vertically integrated business, and as an important part of us, this portfolio, then you have the kind of concept of launch and propulsion. So these are companies that are providing launch services. So they'll take whatever payload you want, and they put it up into low Earth orbit or space. Often that payload is satellites. And so we also own companies that manufacture the satellites. And sometimes there's a full integration. If you take SpaceX, they own Starlink, which is a satellite conservation, they make the satellites for Starlink, and they put them up into space in their own rockets. Then you have connectivity, because the kind of first error of space is to use those satellites to improve access. Starlink really improves broadband

That makes sense to me. And kind of looking at portfolio construction, top 10 holdings are about 60% of the fund. That's a pretty concentrated portfolio and a niche theme. How do you think about position sizing and kind of managing concentration risk? Or is it based or do you have some sort of kind of metrics around how you're weighting these companies? Like is it market cap weighted or is it purely an active decision?

So the weighting methodology is really around kind of conviction. That's how we sort of size the positions, right? So we're looking for companies where two things sort of happen. There's a conviction on the valuation of the company and there's a commission on the quality of business. And that's how the sizing happens in the portfolio. We try to create kind of buckets of size, if you will. So we're trying to take away some of the unnecessary discretion that exists within active management. The kind of pure focus of the ETF is to, it's kind of what I would say is the selection of the stocks, right? Finding those under the radar supply chain businesses, rather than necessarily the size. Often what I see with active funds is sizing is where alpha is lost or

Makes sense. And so let's talk about just real briefly, kind of the space economy as a whole, it's projected to nearly triple from about 630 billion in 2023, to almost 2 trillion by 2035. That's a 9% annual growth rate. What are the two or three biggest drivers you think that that market is like maybe still underpricing? And how are we going to where are we going to see a lot of that?

Yeah, it's a great point. And obviously, people listening to this will say, okay, well, 9%, that doesn't seem like a super, exciting number. But I think what it belies is kind of the transition that's going on within the space economy, which I touched on earlier. We're moving from a world where space was dominated by kind of defense primes and governments. Space was a highly expensive and risky endeavor. So, satellites cost $600 million. They were highly engineered products. They would go into geostationary orbit. And space was really this kind of bespoke cost plus type business, which meant that it was slower moving and not as exciting. What SpaceX did, and really, it's that company that has transformed it. It's changed space into a kind of a manufacturing business,

So the fund, like I said, it launched in March, March 30, what happened to coincide with the Artemis 2 mission window, you called it a fortuitous coincidence. But the fund since debut is up quite significantly. I'm not going to say the numbers because compliance hates that. But how much of, the performance in the ETF is the Artemis Terrawind? And how much of it is just structural demand for space exposure?

So Artemis was fortuitous, right? We've been working on this product for a while. I think we launched as soon as it became effective. We filed it earlier this year. And it just happens to coincide. if you follow space launchers, right, the weather matters, all these things. So like, there's no way you can really time it exactly three months out when it's going to happen. But it's really recaptured the imagination of people. I think it's gotten everyone to realize, actually, there's, there are, we can do this, right? It's the furthest astronauts have gone. It was, and I don't know if you've read the article in the Atlantic, like, there was real personalities behind this, there were stories, it was a real human story. And I think part of space is it's this

So AUM growth has been very significant in the first handful of weeks here. It's a very, very strong launch by any metrics. No pun intended there, since we're talking about space. But what do you think is driving flows here? Is it that unique SpaceX demand that you have in the fund? Is it advisor allocation? Is it retail? Like, where do you think you're seeing a lot of your flows?

So obviously, in ETFs, it's always difficult to know exactly where it's all coming from. We just have the kind of final number, especially it's very early days, right? I think we're well on track to reach about 300 million probably this week, maybe a bit later. The interest we're seeing is there's definitely a retail interest. I think investors have followed some of these companies in the retail space. They like it and they like the exposure to SpaceX. There's a clear demand for it in a vehicle like this. So it's transparent, it's easy to use, and they're getting that exposure. We've seen a little bit of advisor demand as well. Advisors want a kind of exposure to interesting growth parts of the market. As I mentioned, kind of some of those launch growth numbers, when you're talking

Mostly lean, lean towards retail. And so just curious, like playing a counterpoint here, like how, how dependent is this overall space thesis to things like government spending, Department of Defense, the Artemis program, budgets get cut, like how resilient is just the commercial side of this, where, the government spending in this area, does that weigh on, the overall, maybe long term success of this space? Is that an overhang, I guess, is the short way to ask?

Yeah, I was, I would say that if you're starting to invest in kind of the future of space, and you're forward looking, and you're now investing in some of the kind of legacy, maybe defense primes, there's just less exposure to government. Government is part of that slower moving piece, but interestingly, within government, what we like are two things. One, the, programs and areas where government is embracing that commercial level of execution. And that's, that's really interesting, whether it's lunar, whether it's launches, Artemis 2, etc. Where we, where we think there's kind of this idea of embracing some of that try, fail, keep moving on, commercial level of manufacturing. There, you see much faster growth within government and much

So I want to ask an overall question about, the theme or thematic space. You've said passive management really doesn't work well for themes because indices are backward looking and the winners of tomorrow aren't really the winners of today. So, space seems like the perfect case study for that argument. Can you give us, a specific example of where, you've seen active management really make a difference? I don't know if there's like a direct space index. But I agree with your point that active management in this space is important and to be able to look forward. So any, any, anything in particular about this specific product, where you think that active touch gives you guys a little bit of an edge? I think it's probably a bit too

Early to tell, right? The ETFs just been out in the market, not that long. So I can't sort of say, Hey, here's a perfect example of where we've sort of thought something and it's happened. I think there's been early on, probably the exposure to the supply chain has been the right thing. you take a company like Filtronic, these companies are going to be doing really well. And part of what we like about them is they're high quality businesses. They're existing, they have good balance sheets, they're growing into suppliers, and they're just taking on less risk than maybe backing a launch provider, if that makes sense, even though those are also interesting businesses to look at. So we're seeing that kind of the fact that we found these

I've talked to a lot of them, they like to put things in buckets, right? This is my large cap bucket, this is my mid cap bucket, here's my fixed income bucket. This is a unique exposure, like how would you approach like finding a bucket for this ETF? Is it, is it tech? Is it there's a lot of moving pieces here. Where would you kind of give an advisor recommendation on where this product already fits in a well diversified portfolio?

I think I would say sort of two things there. What we're seeing with these successful advisors, they've got their kind of traditional buckets, value growth, parts of the equity market internationally, US. And I, that that is the way portfolios should be run like a classic portfolio. But where we've seen successes, where they introduce maybe a little bit of a satellite portfolio that sits on top of that, that takes parts of the maybe the core or the mid cap allocation, and just allocates it to areas of the market that are seeing thematic growth. So there's a kind of group of advisors that we talked to, and maybe it's across all of our ETFs, but really space as well, where they're saying, okay, I need something where the growth rates are higher, and it's interesting.

If we had more time, I'd love to continue to dig into the themes versus sectors, because that's, it's definitely an interesting way to start looking at portfolio construction rather than just, the 11 sectors of the S&P. But unfortunately, Yuri, I really appreciate the time you spent with me today. Very interesting product, very interesting area of the market that I think advisors and investors are going to be looking in. But before I let you go, where can people learn more about TEMA and the NASI ETF? Absolutely. So anyone listening that's interested, head to our

Website, www.temaetfs.com. I'd encourage you to sign up to our newsletter, but they're under the insights page. We're going to be writing tons of articles about space and about some of our other thematics as well. And if you want to check out information about the NASA page, sorry, about NASA, you can go to the NASA page. So it's just www.temaetfs.com forward slash NASA, N-A-S-A. And there there's lots of information, all of the kind of disclosures that you need are top 10 holdings or you can follow as well. And we've actually recently added a handy FAQ for all of those questions related to the SPV, the valuation of SpaceX, the fees, all of that stuff is on there as well.

Well, again, Yuri, thanks so much for spending some time with me today. Sure. My pleasure.