Taylor Krystkowiak

Taylor Krystkowiak comes from Themes ETFs, a firm founded by Jose Gonzalez, the former co-founder of Global X. Taylor's background spans investment strategy at Raymond James (where he worked as a macroeconomic analyst), derivatives strategies at CboVest, and now product development at Themes. The firm launched within the last year and is already bringing a lineup of thematic and targeted ETFs to market at competitive price points. On this episode of Behind the Ticker, Taylor joins Brad to discuss GSIB, the Global Systemically Important Bank ETF, which holds the 28 banks designated as "too big to fail" by regulators.

Too Big to Fail as an Investment Thesis

GSIB targets the 28 banks globally that have been designated as Global Systemically Important Banks by the Financial Stability Board. These are the institutions deemed so critical to the global financial system that they receive enhanced regulatory oversight, higher capital requirements, and, implicitly, a government backstop. The list includes names like JP Morgan, Bank of America, HSBC, BNP Paribas, and Barclays, among others.

Taylor's investment case for concentrating on G-SIBs rather than buying a broad financial sector ETF rests on three arguments. First, these banks have competitive moats created by regulation itself. The higher capital requirements that G-SIB designation imposes actually make these institutions more resilient and create barriers to entry that protect their market positions. Second, the implicit too-big-to-fail guarantee means they have lower cost of funding than smaller banks, which translates directly to higher profitability. Third, they have dramatically lower exposure to the commercial real estate risks that have been weighing on regional and mid-size banks.

Performance and the Commercial Real Estate Advantage

Taylor puts some numbers on the performance story. Through the end of July, Barclays was up 56% year-to-date, trouncing six of the seven Magnificent Seven stocks. These aren't the kind of returns people normally associate with 300-year-old banking institutions. The broader G-SIB cohort has delivered double-digit returns in an environment where financial sector concentration in regional banks has been a source of anxiety.

One of the lesser-discussed drivers of G-SIB outperformance is their low exposure to commercial real estate. The post-COVID shift to remote work has devastated office properties. The IMF has labeled commercial real estate as one of the biggest financial risks to stability. Office sector values were down over 23% over the preceding year. But G-SIBs, because of their diversified global operations and regulatory capital requirements, have relatively minimal exposure to this ticking time bomb compared to regional banks that often have concentrated CRE loan books.

Taylor also discusses the interest rate dynamic. While markets had been pricing in rate cuts, the commercial real estate problem isn't solved by modest rate reductions. Loans taken out at 3-4% rates need to be refinanced at significantly higher rates, and many office buildings have occupancy rates that don't support the economics. By investing in G-SIBs instead of broad financials, investors sidestep this concentration risk while still getting exposure to the banking sector's earnings power.

Diversification Beyond the Magnificent Seven

Taylor makes an interesting portfolio construction argument. Most investors' equity exposure is dominated by technology stocks through their S&P 500 or NASDAQ holdings. The Magnificent Seven have driven the majority of market returns, creating significant concentration risk. G-SIBs offer double-digit return potential from a completely different sector and geographic base. Because the fund holds banks globally (not just U.S. institutions), it also provides international diversification that many portfolios lack.

Brad and Taylor discussed how unusual it is to see this kind of return from the banking sector. The combination of higher interest rates boosting net interest margins, disciplined capital return programs (buybacks and dividends), and the relative safety of the G-SIB designation has created a rare moment where conservative banking stocks are delivering growth-like returns.

Themes ETFs: A Familiar Playbook

The firm itself is worth noting. Jose Gonzalez built Global X into one of the most successful thematic ETF platforms in the industry before it was acquired by Mirae Asset. Now he's running a similar playbook with Themes: launch differentiated products at competitive price points and build a suite that covers specific investment themes the market is underserving. Taylor says more products are in the pipeline, with a second tranche of launches planned.

Key Takeaways

• GSIB holds the 28 globally systemically important banks designated as "too big to fail," giving investors concentrated exposure to the most regulated, well-capitalized financial institutions in the world.
• Barclays alone was up 56% year-to-date through July, outperforming six of seven Magnificent Seven stocks. G-SIBs are delivering growth-like returns from traditionally conservative banking names.
• G-SIBs have minimal commercial real estate exposure compared to regional banks, sidestepping what the IMF has labeled one of the biggest financial risks to stability.
• Themes ETFs was founded by Jose Gonzalez, co-founder of Global X, running a similar playbook of differentiated thematic products at competitive price points.
• The fund provides sector and geographic diversification away from tech-dominated portfolios, holding banks across the U.S., Europe, Asia, and other global markets.

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