Flying High in Bird Heaven: MSTR, PSUS, ETF

Summary

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Money Stuff: The Podcast

Episode: Flying High in Bird Heaven: MSTR, PSUS, ETF
Hosts: Matt Levine & Katie Greifeld
Date: December 5, 2025

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Episode Overview

This episode covers the evolving saga of MicroStrategy (now rebranded as "Strategy"), the shifting dynamics of digital asset treasury stocks—especially in relation to ETF and index inclusion—and the latest in Bill Ackman’s perennial fund-structure ambitions. The hosts blend Wall Street analysis with inside jokes and personal anecdotes, including a heartfelt update about "Bill Ackman the Bird." Themes of financial instrument evolution, market perceptions, and the persistence of unconventional trade structures take center stage, all with the pod’s trademark deadpan wit and sharp financial insight.

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Key Discussion Points & Insights

1. The Arc of MicroStrategy (“Strategy”) (04:50 – 15:08)

• Premise: MicroStrategy’s transformation from a software company to a Bitcoin proxy, and its recent struggles as its “premium-to-NAV” trade breaks down.
• Key Details:
  • MSTR’s “Trade”: Previously, MSTR stock often traded at a significant premium to its net Bitcoin asset value (NAV), making raising equity to buy more Bitcoin a lucrative arbitrage (“sell $1 of Bitcoin at $2 on the stock exchange”).
  • Narrative Shift:
    • The premium has shrunk (now about 15%, “it’s not true anymore. The BL is a little off the rose.” – Matt, 05:38).
    • CEO Fong Li suggested that, if NAV falls below 1, selling bitcoin isn’t off the table (06:03).
    • MSTR now building a $1.4 billion dollar cash reserve to secure interest/dividend payments—an ironic twist for a company once touting Bitcoin as defense against fiat “melting ice cubes” (06:31).
  • Matt’s Skepticism: Questions whether the original intent was ever truly about dollar debasement, positing it was always a capital markets arbitrage (07:02).
  • Ponzi Allegations:
    • Ongoing sale of stock to pay high-yield preferred dividends raises “Ponzi” concerns, though the hosts distinguish this from true fraud (“I would not personally use the Ponzi word about this trade… it’s all pretty transparent.” – Matt, 09:28).
  • Decision Framework: If stock trades at a premium, raise capital via equity; if at a discount, sell Bitcoin.

Notable Quotes

• “There is something Ponzi-like about selling stock to raise money to pay the 10% return that you promised previous investors.”
  – Matt Levine (09:28)
• “Can you imagine Michael Saylor saying, we might have to sell bitcoin? I cannot. I cannot.”
  – Katie Greifeld (12:08)

2. Index Inclusion and the DAT (Digital Asset Treasury) Conundrum (12:43 – 16:36)

• MSCI’s Review: Mid-October, MSCI proposed possibly excluding digital asset treasury companies (DATs) from its indices, questioning if they are more like investment funds than operating businesses.
• Why it matters: Removal would hurt demand for “Strategy” shares, especially from passive/index investors.
• Disagreement Among Indices:
  • NASDAQ 100 decided “Strategy” is an operating company and kept it in; MSCI’s verdict pending.
  • Implication: Index provider decisions are susceptible to market sentiment and performance cycles.

Notable Quotes

• “Who is that audience? ... Passive equity investors who will buy the index. And if you cut out that, then you lose a lot of demand…”
  – Matt Levine (13:31)
• “You could have a situation where MSCI is treating Strategy one way and NASDAQ is treating it another.”
  – Katie Greifeld (14:35)

3. "Bill Ackman the Bird"—An Unexpected In Memoriam (16:41 – 18:28)

• Katie recounts the passing of her beloved rescued bird, named (jokingly) "Bill Ackman" after the famous hedge fund manager. This personal note acknowledges listeners who have asked for updates, confirming the bird’s passing but celebrating their brief time together.
• Clarification for new listeners: "It was not the actual hedge fund manager Bill Ackman. It was just the bird.” (Matt, 17:41)

4. Bill Ackman, Closed End Funds, and Structural Finance (18:28 – 24:28)

• Ackman’s Ambitions: Again attempting to launch a US-listed closed-end fund, aiming for $5 billion (less ambitious than his prior $25 billion target).
  • Sweetener tactic: Investors will also receive shares in Pershing Square Capital, his management company, during the IPO.
  • The Premium Challenge: Closed end funds rarely trade permanently at a premium—his European fund currently trades at a 25% discount.
  • ETFs vs Closed End Funds: Debate over why Ackman doesn’t use an ETF wrapper. Matt argues the closed-end structure provides the “permanent capital” crucial for his investing style.
  • “Howard Hughes” Pivot: As an alternative, Ackman has been directing efforts through his massive stake and chairmanship in Howard Hughes (a public real estate company), transparently aspiring for a “Berkshire Hathaway” model.

Notable Quotes

• “Bill Ackman has to kick in some value to make the shares worth more than what people pay for them. But still people pay more than what goes into the pot. That’s the plan.”
  – Matt Levine (19:27)
• “ETF is just not permanent capital. It doesn’t solve any of the problems he wants to address.”
  – Matt Levine (21:34)
• “I don’t really understand what the distinction is between Howard Hughes and the new closed end fund.”
  – Matt Levine (24:17)

5. M&A in ETF Land: Goldman Buys Innovator Capital (26:31 – 31:26)

• Goldman Acquisition: Katie, who broke the news, explains Goldman’s $2 billion purchase of Innovator Capital (known for “buffer ETFs”).
• Buffer ETFs Explained: Financially engineered products offering capped equity upside with buffered downside, achieved via options and Treasuries.
  • Originates from the “structured notes” business—Goldman can now “etfize” these products, expanding their reach.
• Industry Context: Innovator’s founders, Bruce Bond and John Southard, are serial ETF entrepreneurs (they also founded Powershares).
• Critiques: “Friend of the show” Cliff Asness vocally argues you should just “buy less stock” rather than pay for buffered exposure—echoing widespread skepticism toward structured notes and buffer ETFs.
• Strategic Rationale:
  • Goldman’s own buffer ETFs floundered; buying Innovator is a shortcut to scale.
  • For big ETF upstarts, the Innovator story is the “blueprint” for a successful exit.

Notable Quotes

• “If you’re Goldman, you’re constantly coming up with ideas for how to sell weird volatility products to people. And with an ETF business, you, like, massively increase the audience…”
  – Matt Levine (28:50)
• “It’s so easy to launch an ETF, and it feels like everyone… this is the blueprint. I have to imagine for a lot of them, this is like the lottery ticket that they’re hoping to find.”
  – Katie Greifeld (31:10)

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Timestamps for Major Segments

| Segment | Description | Start Time | |---------|-------------|------------| | MicroStrategy/Strategy’s Corporate Trade Arc | The arc from premium arbitrage to reserve-building | 04:50 | | Discussion on Index Inclusion for DATs | MSCI and NASDAQ treat “Strategy” differently | 12:43 | | Remembering “Bill Ackman the Bird” | Personal and lighthearted in memoriam | 16:41 | | Bill Ackman’s Fund Ambitions | Closed end funds, sweeteners, Howard Hughes | 18:28 | | Goldman Buys Innovator Capital | Buffer ETFs, industry strategic context | 26:31 |

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Tone & Style

The episode fuses technical finance insight with a dry, often self-aware wit. Matt Levine blends skeptical analysis with explanatory asides (“I do not believe that when they announced the strategy, it was about the debasement of the dollar…” – 07:02), while Katie Greifeld grounds discussion in news breaks and occasional heartfelt asides, particularly around “Bill Ackman the Bird.” The interplay is sharp yet light, keeping sophisticated financial discourse accessible and engaging.

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Memorable Moments & Quotes

• “If you sell a lot of stock every quarter and you use most of that stock to buy bitcoin in an accretive way, and you use some of the stock to pay interest on your debt, then like, yeah, whatever, it's fine, Right?”
  – Matt Levine (08:15)
• “This is a capital market strategy where people wanted bitcoin and they're like, we're going to give the people what they want.”
  – Matt Levine (07:02)
• “He really has got it in his head that he wants to do a closed end fund in the US that trades at a premium. And he hasn’t yet, but he’s working on it.”
  – Matt Levine (18:40)

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Summary

This episode masterfully threads together the unraveling MicroStrategy “strategy” narrative, the immense significance (and tension) of index provider decisions for crypto-proxy stocks, the idiosyncratic determination of Bill Ackman in seeking fund-structure alchemy, and the continued innovation (and consolidation) in ETF manufacturing. Along the way, Matt and Katie maintain a lively, occasionally poignant rapport that makes even the most arcane financial engineering feel relevant and, at times, downright entertaining.

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Transcript

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[Michelle Hussain]

Bloomberg Audio Studios podcasts Radio News I'm going to Utah.

[Katie Greifeld]

For two days and then I'll be back on Friday. So I'm excited.

[Matt Levine]

Exciting stuff.

[Katie Greifeld]

Going to a corporate holiday party. That'll be fun.

[Matt Levine]

You're going to a corporate holiday party? Yes, I was going to say what if some listeners are at the corporate holiday party. But of course we're going to air this on Friday after the party is over.

[Katie Greifeld]

Yeah, that's true. So it'll be back by then. It's my husband's company's corporate holiday party, so I'm excited to go to it.

[Matt Levine]

That sounds pretty good. It's a two day holiday party in Utah.

[Katie Greifeld]

It's on a Wednesday night, which is a little bit difficult. But that means I'm going to fly out Tuesday night, come back Thursday night. And I would have taken Friday off except Invesco is holding a proxy vote for Q QQQ and I want to cover it really bad. So it's just love of the game.

[Matt Levine]

Got to come back to that proxy vote.

[Katie Greifeld]

Yeah, I wish I was kidding. I am psyched for the proxy vote.

[Matt Levine]

Are they holding an in person meeting? Are you going to it?

[Katie Greifeld]

They are, but I'm not going to go to it. It would be a little intense.

[Matt Levine]

When I was a young M and a lawyer, I went to the shareholder vote for some merger that we did. It was really sweet. The individual shareholders stood out to be like, I just want to thank management for all the work they've done and good job selling the company. It was like in Maine. I flew to the shareholder meeting. Not to do anything, just to watch a shareholder meeting. I'm really glad I did it now I've seen a shareholder meeting. You can't really appreciate a shareholder meeting until you've been to one.

[Katie Greifeld]

That's true. I would be so down except I have to cover it for the print side. I don't think that I could get a TV camera in there which might justify me going there in person.

[Matt Levine]

It's not good television.

[Katie Greifeld]

It's not good television necessarily. Especially if the meeting is adjourned.

[Matt Levine]

Exciting, per se.

[Katie Greifeld]

If the meeting is adjourned again, what are we gonna do with the camera?

[Matt Levine]

I do think that it would be like, it would be nice to just sort of have like five minutes of footage of him to be like, well, this meeting was adjourned. I don't know, it's like C Span or something.

[Katie Greifeld]

Famously good tv. Yeah. But it is easier to be at your setup when you're covering a live event.

[Matt Levine]

I would have been very surprised had you said you were going to the in person shareholder meeting.

[Katie Greifeld]

God. Maybe next time if the meeting gets adjourned again.

[Matt Levine]

Yeah. Once in your life, a shareholder meeting. It's fun. Hello and welcome to the Money Stuff Podcast. Your weekly podcast where we talk about stuff related to money.

I'm Matt Levine and I write the Money Stuff column for Bloomberg Opinion.

[Katie Greifeld]

And I'm Katie Greifeld, a reporter for Bloomberg News and an anchor for Bloomberg Television.

[Matt Levine]

I feel like we were here for the early stages of the microstrategy trade, now the strategy trade, and now we're kind of here for.

Kind of the end of the microstrategy trade. Wow.

[Katie Greifeld]

I was going to say careful, careful.

[Matt Levine]

Are you calling it the end? The end. But there's been a completion of the narrative arc in that strategy. It's called strategy, officially.

[Katie Greifeld]

Yes. Thank you.

[Matt Levine]

Strategy is now kind of trading at pretty close to its net asset value. And the whole strategy trade of being we will sell $1 of Bitcoin for $2 on the stock exchange. Doesn't work anymore. And they're kind of trying to figure out what's next.

[Katie Greifeld]

Yeah, I mean, we're not at one yet, and we're certainly not below one yet, but, boy, what a collapse.

[Matt Levine]

Below one is certainly where some of the strategy skeptics have seen it going. And I think we're a ways away from below 1. They're like 1.15 today, but it's not true anymore. The BL is a little off the rose. I don't know.

[Katie Greifeld]

Yeah, let's timestamp this and say we're recording on a Tuesday just in case it goes below one.

[Matt Levine]

If it really is right, then, like, whatever, I'm all wrong. We haven't seen the end of anything. Never mind.

[Katie Greifeld]

It's interesting. So the CEO of Strategy, Fong Li, he made waves last week. He said on a different podcast, not this one, that if the M Nav does go below 1, that selling Bitcoin is in outside of the realm of possibility. That was on Friday. On Monday of this week, I believe it was that they announced that they're building up a $1.4 billion dollar reserve, which is amazing.

[Matt Levine]

Such a funny phrase.

[Katie Greifeld]

It is, but it's also amazing because you think about. In the same way that we started talking about the strategy trade early, and now we're sort of seeing it full circle. You think back to when Michael Saylor first announced in 2020 that they were going to be buying bitcoin, it was all about the debasement of the dollar. And they were worried about their dollar reserves basically being melting ice cube. Now you fast forward five years plus and they're back to buying dollars.

[Matt Levine]

No, I completely disagree. I do not believe that when they announced the strategy, it was about the debasement of the dollar or that they were seriously sitting there thinking, oh no, if we hold dollars in our corporate treasury, they'll become worthless and we won't be a real company. I don't believe that at all. I understand. They said it. This is a capital market strategy where people wanted bitcoin and they're like, we're going to give the people what they want. I do not believe that they believed that the dollar. But secondly, whatever they were doing five years ago, they needed cash for corporate purposes. Blah, blah, blah, whatever. The dollar reserve today is a very different situation, which is that in the intervening five years they've raised billions and billions of dollars of fixed income securities. Some of it like very low coupon convertible bonds, but a lot of it very high coupon preferred stock. They've been doing a lot of like fixed income, 10% preferreds. There was this period where they were not trading at a huge premium. So issuing stock to buy bitcoin was not super accretive, but bitcoin was still going up. And so if you issue a preferred stock at 10% to buy Bitcoin that's going up at like 20% a year, then that's an accretive trade. And so they did a lot of that trade. But when bitcoin is going down, that's not an accretive trade because you're still paying the 10% interest and you're paying the 10% interest forever. And the other thing that's happening is you have to pay the interest in cash. Yes, it's a preferred stock, so they can turn off the interest. But that's a bad look. Basically, they've incurred hundreds of millions of dollars a quarter of, they call it dividends, but essentially interest expense on the money they borrowed to buy Bitcoin. Where do you get the money to pay that? That's always been a concern. And the answer has been kind of, if you sell a lot of stock every quarter and you use most of that stock to buy bitcoin in an accretive way, and you use some of the stock to pay interest on your debt, then like, yeah, whatever, it's fine, Right? But like once that trade stops working and you still need to pay that interest, then you're kind of in a situation that strategy is in, which is you just sell a billion dollars worth of stock to pay the dividends on your preferred stock, which is not like a great situation. No, you don't love that, right? You don't love that.

[Katie Greifeld]

No, for reasons.

[Matt Levine]

One reason is people use the P word when you do that.

[Katie Greifeld]

Oh, I would not personally use the P word here.

[Matt Levine]

You know, there is something Ponzi like about selling stock to raise money to pay the 10% return that you promised previous investors. Right. I don't think that I would not personally use the Ponzi word about this trade because there's a lot going on here. It's all pretty transparent. It's fine. But, you know, some people email me to be like, you know, it's not.

[Katie Greifeld]

Yeah, great. No, it. It doesn't feel good to raise money from new investors to pay off your existing investors. We actually spoke to the CEO of Strategy on Tuesday on Bloomberg Television, Fong Li, and we did ask, I mean, would you ever suspend the dividends? And he basically said what you said, that that would create a lot of fear, a lot of uncertainty, a lot of doubt, fud perhaps. But he did also say, I mean, I asked him, how would you prioritize suspending the dividend versus selling bitcoin? And he said that basically the idea is that they're creating this reserve and they're going to build this reserve in perpetuity. Maybe they'll revisit it in a decade or so in hopes of pushing out.

[Matt Levine]

Let's talk about it in a decade.

[Katie Greifeld]

Yeah. Building a buffer so that they'll have enough to cover their interest in dividend payments until 2028, and then I guess we'll see, you know, where we are actually in 2028, which will be interesting, right?

[Matt Levine]

I mean, like, to me, their calculation is fairly straightforward. Right. If they trade at like a premium, even a small premium to their net asset value, then they should sell stock at a premium to net asset value to.

Handle all of their problems, including paying dividends on the preferred. Right. Cutting off dividends on the preferred is a terrible situation. It kind of ends the trade. It, like, makes you no longer able to access capital markets in the way they want. That's your last choice. But your first choice is if the stock is trading at a premium, you sell stock. If the stock is trading at a discount, you sell Bitcoin. You sell Bitcoin, you don't love it. You're planning to hold the bitcoin forever. But you did a great trade selling all this stock at a premium. And now you get to do the reverse trade, which is buying the stock at a discount by selling Bitcoin. I don't know, they might take a different view from me, but if it were me and my stock was trading at a discount to net asset value, I'd be selling bitcoin. And buying stock.

[Katie Greifeld]

Yeah. I mean, we'll see how this evolves. I do think it's an interesting moment where you're really reminded that Michael Saylor is not the CEO. He hasn't been the CEO for several years now.

[Matt Levine]

He's reminded because you booked the CEO on tv.

[Katie Greifeld]

I know, but also, I mean, listen.

[Matt Levine]

His picture is still on all the articles.

[Katie Greifeld]

Can you imagine Michael Saylor saying, we might have to sell bitcoin? I cannot. I cannot.

[Matt Levine]

I guess you're right. Yeah.

[Katie Greifeld]

Thank you. I think I am right in this situation.

[Matt Levine]

Right. If you're a true believer, then you're like, I'm in the business of buying bitcoin and never selling it. If you're just like the other 200 digital asset treasury companies, you're like, I'm in the business of doing a lucrative arbitrage trade and if my stock is trading at twice the value of my bitcoin, I'm selling stock and if it's trading at half the value of my bitcoin, I'm selling bitcoin. Should we talk about msci?

[Katie Greifeld]

Oh yeah, we should. I asked him about that. So, msci, I wrote a newsletter on this because I also have a newsletter, it's called etf.

[Matt Levine]

I quoted your newsletter on it.

[Katie Greifeld]

Yes, you did, in your newsletter.

[Matt Levine]

Yeah.

[Katie Greifeld]

It's very interesting in ouroboros of newsletters. But MSCI in mid October, for context, I guess no one really noticed it until JP Morgan pointed it out in a research note. But MSCI said that it was looking at whether or not digital Asset treasury companies, DATs, if you will, look more like investment funds than traditional companies. And they propose have an answer to that question. They proposed excluding DATs from their indices. The decision is coming in January, I believe. But obviously that would be bad news bears for strategy and all these DATs.

[Matt Levine]

Yeah, right. There are various rationales for a DAT, but surely one of them is like there is some audience of stock investors who can buy corporate stocks but can't buy crypto directly or even crypto ETFs. And so one thing you are doing is appealing to that audience. And who is that audience? I mean it is to some extent boomer retail investors who don't want to open a crypto account or even deal with ETFs. Right. It is to some extent like fundamental long only equity investors like Capital Group, which is a big shareholder of strategy, who like the trade and would feel weird buying a bitcoin etf, but like getting crypto exposure through strategy. And then it is to A very large extent, passive equity investors who will buy the index. And if you cut out that, then you lose a lot of demand for digital asset, treasury stock. And maybe you take that last leg down from a small premium to net asset value to a small discount to net asset value. Maybe.

[Katie Greifeld]

Yeah. Well, the fun thing is that this decision point is coming up in January. I'm curious to see a situation where MSCI says that, okay, strategy is an investment fund. We can't have it in our index. But then you think about the NASDAQ 100. They went through this whole thing when they added strategy to the NASDAQ 100 and they landed on the side of the this is a company, this is an operating company. So you could have a situation where MSCI is treating strategy one way and NASDAQ is treating it another.

[Matt Levine]

Yeah, a couple of points there. One, there's 10,000 DATs and they're all investment funds. And maybe strategy is the biggest exception. Maybe strategy has a real business, like a software business that is at this point a teeny tiny fraction of the size of its pot of Bitcoin. But, like, it's a business, you know, you get to like. And every dad has some fig leaf like that. But Strategies is probably bigger than most. The other thing I'll say is, like, when NASDAQ made this decision, it was trading at a premium and bitcoin was going up, right? And so, like, these are sort of like decisions influenced by real world politics, right? Where like, if you are an index provider, one thing that happens is there are index funds and just other benchmarked investors who go to you and are like, I want to own strategy. It keeps going up. And so then you put it in your index, Right. Whereas MSCI is looking at it in a different context where it's been going down and they're like, wow, get out of the index. Which is it's badly cyclical in that you make the index funds buy it when it's going up and then you make them sell it when it's gone down. But still, there's some of that, that element to it.

[Katie Greifeld]

All right, let's try to say it. So we're going to talk about.

We're going to talk about Bill Ackman the man. We need to talk about Bill Ackman the bird a little bit. Unfortunately, my good friend Bill Ackman the bird passed away in the last couple months. I haven't been telling you our dear podcast audience, because it's been very difficult for me. I knew that when we took in friend of the show Bill Ackman, that it was going to be touch and go. And unfortunately, he did pass. But I'm really happy for the time that we spent with him. I think that, you know, the months that he did spend with me and my parents, you know, he was on this earth for a little bit longer than he would have been. And it's very painful, but, you know, it was a beautiful couple of months. And he came to us right after my pony Batman had passed. And certainly he was a wonderful bit of joy. So that's why we've been a little bit mum on Mr. Bird. But he is flying high in bird heaven.

[Matt Levine]

I'm sorry for your loss.

[Katie Greifeld]

Thank you.

[Matt Levine]

I do worry that someone who hasn't listened to previous episodes would be very confused about how Bill Ackman came into your and your family's life for a few months. And I want to be clear. Katie rescued a bird. And on the podcast, we jokingly named the bird friend of the show Bill Ackman, but it was not the actual hedge fund manager Bill Ackman. It was just the bird.

[Katie Greifeld]

I really didn't want to talk about it, but even last week I was interviewing this guy from Vanguard and he said, there's three guys on my desk who want me to ask you about friend of the show Bill Ackman. And I was like, oh, yeah, he's a bird. So people reach out to me and ask about him.

[Matt Levine]

So, yeah, I've never seen him.

[Katie Greifeld]

And it's weird to talk about the man without talking about the bird, without mentioning the bird. All right, so Bill Ackman. Bill Ackman, the hedge fund manager, he's at it again.

[Matt Levine]

He really has got it in his head that he wants to do a close end fund in the US that trades at a premium.

And he hasn't yet, but he's working on it.

[Katie Greifeld]

Yeah, he does. So Bloomberg News reported that he's aiming to raise $5 billion for his US listed closed end funds. Listeners of this podcast will remember that he tried this a few months ago, maybe a year ago. Over a year ago at this point, actually. And initially I think his target was as much as $25 billion. So the valuation, a little bit less ambitious this time around. And he's also trying to sweeten it a bit by giving investors in the fund some shares in Pershing Square Capital, the hedge fund that he's also trying to ipo.

[Matt Levine]

Yeah, the problem that he ran into is that it's really important that you sell shares of a closed End fund at a premium to net asset value of a new one because that's how you raise the net asset value. You cannot sell them at a premium to net asset value. And he thought that he would solve that problem by just telling everyone that he was amazing and therefore they should buy shares at a premium to net asset value because he would compound their money much faster than other alternatives would. And that didn't work. So he's trying something else, which is the obvious solution is you give people a sweetener. Basically, Bill Ackman has to kick in some value to make the shares worth more than what people pay for them. But still people pay more than what goes into the pot. That's the plan, which is basically if you do the IPO of the closed end fund at the same time you do the IPO of the management company, which seems to be the plan, then you have a management company which is worth $10 billion. Was the number in their last round. You give 10% of the management company to the investors in the closed end fund, like, ooh, they got a N$sweetener. And then they're willing to buy shares in the closed end fund. And the math all works. And then the next day you separate the sweetener and maybe the closed end fund trades at a discount to net asset value. But yeah, that's a problem for another day. Or maybe it trades at a premium. Maybe it was hard to bootstrap this, but once it gets going, everyone will be like, oh, wow, he really is good at managing our money and the thing will trade at a premium. Doesn't happen a lot.

[iHeartRadio Sponsor]

Yeah.

[Katie Greifeld]

And I mean he has the hard fact that you think about his European listed closed end funds.

[Matt Levine]

Sure. There's not a ton of precedent for trading.

[Katie Greifeld]

Yeah, it's trading at a 25% discount right now.

[Matt Levine]

Sure. And there are reasons, there are distinctions.

[Katie Greifeld]

But yeah, yeah, it's a similar idea. So I was going to say, I thought you were going to say the obvious solution here is to just launch this in an etf. That seems where my mind wants to go. Tell me why that doesn't make sense.

[Matt Levine]

Bill Ackman has a good investing track record, but the best thing he did was he was early to permanent capital for hedge fund managers. I have written a lot that the important job of a hedge fund manager is not to pick the stocks that go up, but to continue managing a hedge fund. And Bill Ackman, by launching a closed end fund in Europe, has given himself permanent capital in a way that allows him to be patient and not worry about making. It's the best possible setup for a hedge fund manager, for sure. ETF is just not that. It's just not permanent capital. It doesn't solve any of the problems he wants to address.

[Katie Greifeld]

I hear what you're saying. Can I say one more thing about ETFs? Okay. I'm just going to borrow some logic from Bloomberg Intelligence. They wrote a note about this saying ackman tries again at a closed end fund. I hear your point on permanent capital. They make the point that, okay, you raise capital once at ipo and then you typically struggle to grow beyond that initial capital. Whereas there's plenty of examples at this point of like big names coming into the ETF wrapper and raising billions of dollars. And if you're so confident that you are such a good hedge fund manager, why not launch in the ETF and just hope that that capital doesn't leave because they're so satisfied with your performance.

[Matt Levine]

I just think that if you plan to do long term investing that requires you to commit to hold stakes for a long time or buy private companies, you can't do concentrated long term investing in the form of an etf. I understand people do some of it, but it's not the right vehicle, I think.

[Katie Greifeld]

I disagree on that point. But it's okay.

[Matt Levine]

You do have an etf.

[Katie Greifeld]

I do.

[Matt Levine]

Can we talk about Howard Hughes, which is that when the closed end fund didn't work, when he couldn't launch this $25 billion close in fund, we're going to team up with Howard Hughes. Howard Hughes is an already public company. He was a big shareholder. He bought more shares. He's the chairman now of Howard Hughes. And he was like, in his mind, closed end fund is like, it's going to be Berkshire Hathaway, right? It's not going to be a fund. It's going to be a company that buys companies or buys stakes in companies or invests. And he is going to invest people's money much like Warren Buffett does in the form of a public company. And he realized after the close end fund didn't work that he should just do it in the form of an existing public company. One of my readers suggested Herbalife, which is a great suggestion. Little deep cut Bill Ackman joke. But he's like, oh no, I have Howard Hughes right here. Howard Hughes is a real estate company. You can pivot that to being a general purpose investment. And so he owns like pershing, owns like 47% of it. He's the chairman. It still says in its 10Q. We have a strategy of becoming a diversified holding company. I don't really understand what the distinction is between Howard Hughes and the new closed end fund. Right. He will now have, let's say, three publicly traded permanent capital vehicles where he can put investments. The European fund, the closing fund, and Howard Hughes and. I don't know, pick one and Howard Hughes.

[Katie Greifeld]

I was reading their most recent earnings call just for fun. They're getting close to announcing their next acquisition with Bill Ackman at the helm. So we'll see.

[Matt Levine]

I hope it's Fannie Mae.

[Katie Greifeld]

That would be great.

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[Michelle Hussain]

Hello and welcome. This is the Michelle Hussain Show. I'm Michelle Hussain. I speak with people like Elon Musk.

[Matt Levine]

I think I've done enough.

[Michelle Hussain]

And Shonda Rhimes.

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This will be a place where every weekend you can count on one essential conversation to help make sense of of the world. So please join me, listen and subscribe to the Michal Hussein show from Bloomberg Weekend. Wherever you get your podcasts, you certainly ask interesting questions.

[Matt Levine]

Speaking of ETFs.

[Katie Greifeld]

Yes, thank you. Speaking of ETFs, Goldman Sachs. I helped break the news this week that Goldman Sachs is going to pay $2 billion for ETF issuer Innovator Capital. One of the first movers in buffer ETFs, an area that you know and love. Matt.

[Matt Levine]

I do love a buffer ETF. You know, I've written about buffer ETFs, like the buffer ETF, which is where effectively you like, take people's money. You buy like a Treasury strip and then you have like a little extra money and you use that to buy call options on A stock index. And so then you've given people upside in the stock index with no downside, and you're like, ooh, it's a magic trick. That's like a classic piece of derivative structuring magic. It's a classic building block of the structured notes business at an investment bank. And it is now Innovator and others have etfized it. Or now, instead of buying a structured note from a bank or building your own options product, you can buy an etf. And Goldman looked at that and said, we want to be in the business of providing those ETFs, which is like an obviously great business for Goldman in a couple of ways. One, the structured node business is great, and there are people in the lab cooking up structured notes to make a lot of money. And you can scale it more with an ETF than you could with the structured notes. And then also, I wrote this. I don't know how true this is in the case of the buffer etf, but in general, structured notes are a place for a bank's volatility desk to lay off some volatility. If all of your hedge fund clients are buying, like, Korean stock call options, then you might, like, package a structured note that allows your retail clients to sell you Korean stock call options, because then you can offset some of that risk. And, and stereotypically, the audiences for structured notes are more willing to listen to the story that the bank tells than the hedge funds who come to the bank for trade. The structured notes was, this is a nice risk sink. And doing that in an etf, maybe. Also, if you're Goldman, you're constantly coming up with, and I should say disclosure. I was an equity derivative structure at Goldman.

[Katie Greifeld]

I had no idea.

[Matt Levine]

If you're Goldman, you're constantly coming up with ideas for how to sell weird volatility products to people. And with an ETF business, you, like, massively increase the audience of people you can sell weird volatility products to.

[Katie Greifeld]

Yeah, so a couple of notes here. Buffer ETFs obviously have some vocal critics. Friend of the show Cliff Asness, for.

[Matt Levine]

Example, has been very vocal as a former derivative structure. Like, he's just right. Like, instead of, like buying some weird buffers around your stock exposure, just buy less stock. It's a better trade. It doesn't involve paying huge fees to gold. This is a standard critique of structured notes. It's frankly a standard critique of all equity derivatives. And it's a perfectly valid critique of ETFs. Buffer ETFs.

[Katie Greifeld]

I do find it interesting from an ETF angle that Goldman has its own buffered ETFs. This is a product that they've already launched. They launched three earlier this year. Received really little traction. The fact that they went out and decided to buy an entire other firm for $2 billion versus trying to really put the golden muscle and distribution might behind their own products is super interesting. Another detail I also love in here is that the folks who founded Innovator, Bruce Bond and John Southard, this is the second time that they've founded an ETF company and then sold it. Their first experience was with Power shares 20 years ago. @ this point, they sold it to Invesco Bonds, tried to retire for a little bit. It didn't work. He came back and founded Innovator. They're pulling him back in. Well, him and his pal.

[Matt Levine]

John. You know the appeal of ETFs. You can't walk away from.

[Katie Greifeld]

ETFs. I get it. Hearing him tell it. It was John Southard who came across the idea of, you know, structured products are huge. We should put them in ETFs. And that's what they did. They founded Innovator in 2017. They launched their first buffered products in 2018, and now they're selling to Goldman for $2 billion. Bruce Bond has at least 50% stake in INN. So you now have a new ETF billionaire, which is super cool. It's a great story, Heartwarming.

[Matt Levine]

Story. We should put structured products in ETFs. I mean, right? I can't fault that. That's like the thought I wish I would.

[Katie Greifeld]

Have. I know, I know. That's the thing you think about all the upstarts that are in the ETF industry right now. It's so easy to launch an etf. And it feels like everyone ends. This is the blueprint. I have to imagine for a lot of them, this is like the lottery ticket that they're hoping to.

[Matt Levine]

Find. Good for them.

And that was the Money Stuff podcast. I'm Matt.

[Katie Greifeld]

Levine. And I'm Katie.

[Matt Levine]

Greifeld. You can find my work by subscribing to the Money stuff newsletter on.

[Katie Greifeld]

Bloomberg.Com and you can find me on Bloomberg TV every day on the close between 3 and 5pm.

[Matt Levine]

Eastern. We'd love to hear from you. You can send an email to moneypodlumberg.net Ask us a question and we might answer it on the.

[Katie Greifeld]

Air. You can also subscribe to our show wherever you're listening right now and leave us a review. It helps more people find the.

[Matt Levine]

Show. The Money Stuff podcast is produced by Anna Mazarakis and Moses.

[Katie Greifeld]

Ondahm. Our theme music was composed by Blake.

[Matt Levine]

Maples. Amy Keen is our executive producer.

[Katie Greifeld]

And Sage Bauman is Bloomberg's head of.

[Matt Levine]

Podcast. Thanks for listening to the Money Stuff Podcast. We'll be back next week with more.

[Barry Ritholtz]

Stuff.

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I'm Barry Ritholtz, inviting you to join me for the Masters in Business podcast. Every week we bring you fascinating conversations with the people who shape markets, investing and business. CEOs, fund managers, billionaires, Nobel laureates, traders, analysts, economists, everybody that affects what's going on in the market. Whether you own stocks, bonds, real estate, commodities, crypto. You really need to hear these conversations. Sometimes it's behaviorists like Dick Thaler or Bob Shiller. Sometimes it's fund managers like Peter Lynch, Bill Miller, Ray Dalio. Sometimes it's authors. Michael Lewis, author of the Big Short and Moneyball. Regardless of the conversation, these are the folks that move markets each week. That's the Masters in Business podcast with me, Barry Ritholtz. Listen on Apple, Spotify or wherever you get your podcasts.