Andrew Skatoff, Bancreek Capital

Time, but my partner, Anton Yen, who's our chief data scientist, and he's had a wonderful career and primarily as one of the top data scientists in the country. We're at Lawrence Livermore, Lawrence Livermore National Laboratory, MIT Lincoln Labs, DARPA, just to name a few. And we're constantly kind of going back and digging into our approach to make sure that we're optimizing for our shareholders and investors. Well, I will see you at Future Proof. I will also be in the ETF.com Oasis actually doing, I'm actually moderating a panel on, with a couple of ETF gatekeepers with the big, big firms. Like, can you let us small guys in, please? Like, let's learn a little bit about that. So yeah, well, I'll see you there. It should be fun.

Perfect. Let's get into club. C-L-U-B. It's the Billionaires Club ETF. You guys launched this May 5th of this year, actively managed at a high level. What's the fund? What's the thesis? Yeah. So as I mentioned, spent, it's actually a little bit, 11 years with a family in New York. And my primary responsibilities were direct public investing and direct private equity investing. And on the private side, I actually spent a ton of time working with other large family offices. So we've traveled around the US and figure out opportunities that we could partner, have synergies together, and work with other large families to make investments. And what I always found super interesting was hearing the backstories for how these families generated their wealth. And what was always interesting to me was that, despite,

In some cases, these families could have started a company 100 years ago, 150 years ago, despite all of that, they all still were pretty involved in these businesses. So they all obviously still have the shares in the securities, still driving their primary wealth creation, even to this day. So over time, I just started thinking about the idea of like, it would be kind of interesting if you put together a portfolio of all of these amazing family started businesses that have grown into these massive global tidings. And, that kind of idea was just always in the back of my head. And, as we're thinking through different data signals to identify these structurally advantaged businesses, the one that popped into my head was, well, let's think through, kind of wealth creation

As a signal. And we started digging into it, and we were really interested in the findings. And you could go back, decades, and you start to see this pretty high correlation with wealth creation, and then future performance of kind of the underlying business that they created. So that's kind of how it started. And, we spent a lot of time going through it and coming up with our methodology. And then we decided to bring it to the market. Yeah, no, I want to talk more about that. Because, the name grabs attention, right? It's the Billionaires Club. But I know with you, it's just not a marketing hook, right? Like, you guys have gone back and looked at the data and figure out like, why this actually matters. So

Can you talk about like the investment signal here? And why this just isn't like a fancy name, and you're hoping to try to raise money that way? Right, exactly. So that, with BankRig, it always starts with data science. And so for us, for the club in particular, look, there's a lot of amazing data out there, right? Tons of publicly available information. So it's not too challenging to find, ownership levels for individuals and the securities that they own, and kind of go back and create your own matrix for, wealthy individuals and the underlying entities that they've created, on top of kind of like the fundamental analysis that we're supporting all of our portfolios. So really, we've kind of created our own database for, kind of stack ranking. The wealthiest individual was tied to

These publicly traded vehicles, and the wealth creation that that vehicle drove for them. So and the important nuance here is that this is a business that they have created, they still have ownership in. It's not like, what are billionaires owning in their personal portfolios and their investment portfolios? Like these are their businesses. That's right. So these are the companies that either they started, their family started, or, they had a primary hand in driving the business forward. And yeah, it's not what they own today, right across the spectrum of high flying securities, or obviously, it's an ETF, so it's not going to be like DC or private equity or anything. So we're not trying to mimic that.

It's really just what generated their wealth. And for the most part, if you really think about it, it's kind of like a play on like long term momentum, like these businesses have done so well, they have all the key attributes that, we've talked about before. So they have pricing power, or they're usually either like monopolies or duopolies, or they have massive scale or distribution. So they've done it, they've already like one, right? That's, that's why these people are so healthy. But I think what's interesting is when you have such a strong business model, it is hard to displace it. So these businesses tend to like keep that momentum going where you might have like an underlying growth rate of low to mid-teens going forward for these businesses,

Rather than, if you're fortunate enough to invest in them from the beginning, or if you're in there during the VC stage, and you're, you're compounding at 50%, 60% over a short period of time, like, that's not what we're trying to do. We're identifying the business that have basically already won, generate a lot of wealth for these families, and that's helping us identify them. And then we just want to stay involved with them, right? So we basically want to sit at the table with these families and individuals and continue to compound alongside with them. So out of curiosity, like, a billion number, a billion dollar number is like, it sounds arbitrary, but I'm like, have you guys looked at the data of, the spread between, you know,

Somebody's at 500 million or somebody's at 10 billion? Like, is there, is there a difference in maybe the compounded return or, the benefits you get at certain levels of wealth? Or, were you just kind of like running a basket of like, hey, let's look at everybody that's got over a billion dollar net worth, the companies they own, and is there like meaningful signal there? Yeah, it's, I think it's less about the absolute dollar value. It's more about kind of the relative positioning versus the overall world, right? So as, you're scaling up and, you're the 10th wealthiest person, whether that was 200 million, 30 years ago or, 20 billion today, the idea behind it is that the business that drove that

Is, one of the strongest business models that we have globally today. And I think that's kind of how we thought about it. We haven't looked specifically like today, like someone where 200 million in the business, they created, what does that look like? I would say that, just conceptually thinking through, it can make sense that the larger the business, the harder that business is to disrupt. And so I think what you'll find is that the businesses are more resilient and maybe have a little bit less volatility than somebody that's created something and they have a couple hundred million dollars worth at this point. So just being a billionaire doesn't automatically, like say you're in this portfolio, you apply your own systematic framework on top. So like, how does a name actually earn a spot in this portfolio?

Yeah. So, honestly, they have to be kind of linked in the top 30 for what we're saying and deeming these businesses have driven the most value creation for that individual or family at any given point in time. So if you think about it, you might have in the volatility, the underlying stock can move people in and out of the portfolio, right? So if you do have a position that let's say made its way in and is 28th in our rankings, and then the stock has a rough earnings period, and then it goes down 20%. And that individual has 75% of their net worth tied up into that. Like they're going to drop out of the ring. Right. So you will have some movement in and out,

But it really is just kind of the top 30 value creation businesses that are out there. Just curious too, I was looking at, it says, no, no single stock position above 10% at the time of purchase. So like, is that constant, like what, what is the reason for that? Like concentration cap cap and like, why put that guardrail in place? Yeah. So really for volatility sake, we've done a lot of analysis on like, what's the ideal size of a portfolio and what the position size should be. For club in particular, we've chosen equal weight. So we have 30 positions. if you talk to Anton, we would probably throw out the number, 25 to 50 is probably the sweet spot for number of positions in a portfolio.

And as far as concentration, I think it is important. Especially, sensitive in ETF and retail investor, like everybody can buy it. I think we just don't want to have super concentrated positions that can be jarring if one of them doesn't go well. Right. And so I think for us, it's, it's less about making a call on an individual business. It's the theme and idea that if you own a collection of these wealth generating assets, you tend to do well over time. And so it is less about like, Hey, we're going to, we're going to put 15% in this one, because this is the one. No, it's, it's really like, look, we just want exposure to this, this basket of securities. So that's why we

Are equating it. So when you kind of look at the portfolio, you've got like Walmart, Tesla, Amazon, Meta, NVIDIA, Walton, Musk, Bezos, Zuck, how much of the portfolio ends up being, kind of mag seven versus some of those lesser known founder driven companies. Like I saw some names like Warner music group, like, obviously there's a reason that's in the portfolio. It'd be nice to know like how some of these lesser known household names kind of get in other than, the ones that we all already know. Yeah. And so that was really the, probably the most interesting thing when you're diving into it, because obviously there's no need for an ETF. That's just, another mag seven or the same, it's just not interesting. Right. So for us,

What was compelling is that it's a global ETF. So we're looking across the world. So, you might have like the Ortega family within the deck. So Zara, the retailer, or the community family, CUNY NAGLE, which is a logistics company in Switzerland and Europe. And so you end up with, with all of these global businesses. And I think what was, was also super compelling is over time, you could kind of see which industries are doing well, as you go back through the decades, like you might, if we were looking at this in like the seventies and eighties, it could probably be like the large publishers or the car manufacturing family. Right. And then maybe moved into like the consumer staples driven families for a while. And then obviously, as you kind of progress through

The two thousands, you start to move more into tech oriented business modelism, retailing distribution started to pick up as well. So, it is kind of like a state of the world as you're kind of looking through, it's like, no, these are the businesses that are driving real value growth in our economy. So why wouldn't you want exposure to those businesses? And then, again, if those slow down or kind of taper off a bit, then the new companies that are driving in industry growth, kind of economic growth globally come into the portfolio. So how often are you kind of rerunning the screen? And do you have any guardrails on kind of U.S., non-U.S. exposure? Because I did see your benchmarked against MSCI, ACWI,

Like, is there, or is it kind of go anywhere? Does it matter? Let's go where the opportunities are. Yeah, it's kind of, we're going to pick the top 30, regardless of where they exist. Historically, it's really been in, call it like the 40 to 60-ish percent ban for international. and I would expect it to kind of like maybe stay within that ban or maybe 30 to 70. Like, that's kind of the ban that we expect. But again, if it were to go 80-20 international, that's where we could go. We're going to go where the wealth is being graded. And so, obviously, the U.S. has been a behemoth for such a long period of time. You're always going to have this disproportionate exposure there, which we're fine with.

And then again, how often are you guys like kind of rerunning this? Is it monthly, quarterly, annually? Like, when are you redoing the portfolio? Yeah, so we update monthly, although we reserve the right to change our minds. But that's basically the cadence that we've been using. frankly, because they're just, if we did it weekly or whatever, there's just not that much movement. monthly, though, you can definitely have, two or three positions come in and out. So, we feel like that's kind of the right cadence right now. But again, we could revisit that a little later, Dave. So, there's been a couple of founder-led ETF products launched recently. Michael Moynihan launched FFF, which is their founder's fund. You got GlobalX launched BOSS, BOSS. Like,

How do you think this fund kind of differentiates from some of these other, like, founder-led ETFs? Yeah, I think, again, just given my family office background, I think the framework for why we're doing this is what differentiates it. Just kind of the understanding of, know the family office world. We understand kind of these businesses and how they have driven such incredible wealth creation over time and really allowed these families to do so many other things as well. I guess the way we're thinking about it is, this is a vehicle that will allow regular shareholders to go in and participate in these amazing businesses.

And it's less about kind of what the family is doing with their capital now. It's really, this is, these are the driving forces for that wealth creation. We want to be involved. These are, it's another way to identify structurally advantaged assets and just, getting shareholders into a portfolio with this collection. Like, these are amazing companies, right? So, and it's global. And I think that also is a differentiator. Again, it's not always about the US. Like there's a lot of other businesses out there. And I think it's important to not have all your eggs in one basket in the US. And I think this is a good way to diversify, especially for, for investors that might not be as familiar with the international markets. At the very least,

Like these businesses, for the most part, they'll, they'll know if they spend a little bit of time digging into them. Like, oh yeah, like, I know Indiglo, uh, or it's like Uniqlo in, in Japan. Like, I understand, like, I know that brand. And so I think it's also approachable, which there are some international global portfolios that, um, might feel less approachable or more opaque if you don't really know the market that well. So while we have a couple more minutes, I think it's, we've had a lot of new listeners than probably the first time that we we've talked. And I think it's important, maybe if you can kind of talk a little bit and it's a repetition, but that's okay. The underlying framework that you use,

Which is structurally advantaged businesses, like you've got network effects, brand equity, distribution modes. Like, can you talk about your firm's kind of like underlying thesis? Cause this, it rolls right into, kind of the framework of this fund. Cause a lot of these businesses already have these things. Um, so if you could, can you just, remind everybody about the thesis, the process and why that moat or structurally advantaged business. It's so important. Sure. So just rewinding, um, I'm a classically trained value investor, even though I don't sound like one anymore. So we kind of went through the value investing firm at Columbia, um, and, and coming out of it, which, which basically means you dive in deep when you're,

When you're doing your work on individual ideas. So when I first joined the family office, it was spending maybe six months on an idea where, you're digging in, you're understanding every aspect of the business, how, how they've evolved over time, what's driving the returns, like all of it. And over, over my time at the family office, I really kind of created this framework for the types of attributes that, businesses that compound throughout cycles, which is what our target was. Um, the attributes, they have these very specific attributes. And what I ended up doing was kind of creating this framework to say, okay, here are these 10 attributes. Let's look for businesses globally that have similar attributes, right? And you start to find, really interesting

Businesses and all different sectors. And, as I was doing that, I was also becoming very interested in information theory. And I think we chatted about fortune's formula by William Haps on how walks with the Kelly criterion. So as I'm doing this, imagine on the side, I'm just getting super interested in the data science, uh, approach. And can we bring that into public market investing and really over time figured out that we're good. And, if you think about it, what we're really doing is making the process of diving into a company more efficient. And again, uh, my friendship with Anton over the years, we're chatting about this and that's his background, information theory and data signal processing, building complex simulations.

So I was bouncing these ideas off to Anton saying like, okay, well, here, here's my idea. These are the fundamental attributes. I like, here's some of the quantitative stuff that I've been working on. Like how does this make sense that we could overlay this? And turns out that we could, and, it's really about finding, very specific signal patterns, uh, that work in conjunction with these fundamental attributes to point you to these companies. And, the example I always, I was raised, cause I think it is helpful is if you have asset A and asset B, and they both compound at 10% over five years and you come to me and you're like, well, which company is going to do better over the next five years? I'll look at asset A and let's say asset

A was 10% every year, 10, 10, 10, 10, 10, 10, 10. And then asset B was up 50, down 30, up 20, down 15, but it ends up in the same place. We would tell you that asset A is far more predictable, obviously, and is infinitely more valuable because there's something going on with asset A that is allowing it to compound ratedly at 10% with no volatility, right? So they have absolute pricing power. There's something going on there, right? And again, nothing's ever 10% a year, but just for this exercise, asset A is, is telling us, Hey, something is really interesting with this asset. Asset B it's growing. So it could be in a, in a new industry, um, that has new competitors coming in,

Creating that volatility, or it could just, there could just be a lot of competitors in there in general and people could come in and, or existing competitors to grace price or cut price. And that's going to create a lot of signal noise for that business. And so for us, we're looking for asset A's, obviously we want companies that, um, can rateably compound their capital with as little volatility as you, as you can, not because we, we don't like volatility. It's because it tells you a lot about the underlying business and it tells you that it has this edge. And then you can dig into the asset like, Oh yeah, that makes sense. Cause they're a monopoly or, they, they've scaled up so much that they'd have incredible distribution and get product placement

On all the shelves of grocery stores. If it's a consumer state of company. So like, those are the signals that we're looking for. And that's the framework that we developed for, all of our ETFs and then bringing it back to club. This is just a different perspective on finding those similar type companies. So with club, you're sitting with an advisor, they've got a diversified model portfolio. Like how, how would you advise them to kind of use this? Is this a core equity holding, maybe a satellite? Like how would, where does this fit? Yeah. Again, for, for all of our ETFs, um, they're actively managed, right? So when you start to get into like, you're tracking air, like we're going to have tracking air because one, especially if you're

Looking at versus MSCI world or SAB, there's hundreds or thousands of securities in these indices. We have 30 step over, like there's going to be volatility. We're not going to track exactly with the market. Um, so, if this is not to displace your passive position in spiders or whatever, like that's not what we're trying to do. Um, so it probably is more, complimentary, um, whether it's a three to 5% position in your allocation. I think that's probably what makes the most sense. Um, cause it is a true active component. If you're an advisor and you, and you only want active, well then sure. We think ours would be a very interesting foreplay for your active portfolio.

But if you are trying to blend and have, interesting returns, but also, uh, fairly low tracking error, then you're going to want as much passive and then sprinkled in what we think are interesting, active approaches like ours. Well, Andrew, I really appreciate you spending some time with me today before I let you go, where can people learn more about your firm and this ETF club? So they can go to bank Creek.com, which is our advisor site, bank Creek ETFs.com, which has, information on our three, core ETFs and then, uh, billionairesclubetf.com, which goes into detail, everything about club. And you can come talk to us at future. Yeah, great. Well, I'll see you there. And I appreciate, spending some time with me today.

Appreciate it, Brad. Thanks for having me back on. Bye.