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WBI Investments Aspires to “Tame the Bear, Run with the Bull”

Interview Transcript

Douglas Yones, Head of Exchange Traded Products NYSE, Interviews WBI Investments Founder, CEO, and Co-Portfolio Manager, Don Schreiber, Jr.

Douglas Yones, NYSE: Hi Everyone. Welcome back. Douglas Yones, Head of Exchange Traded Products. We’re live on the floor of the New York Stock Exchange. I’m joined by Don Schreiber. Don is the founder and CEO of WBI Investments. Don, you’ve got this great tagline “Tame the bear, Run with the bull.” Help everyone at home understand what it is that means.

Don Schreiber, Jr., WBI: Doug, you know, we manage risk to capital, first and foremost. The reason why we do that is because investors traditionally can't stay fully invested on a buy-and-hold basis when the market is down 40-50% or more which happens about every six years. So when I first came into the business, I observed that clients would bail, sit on the sidelines after they sold low and then come back to the markets two or three years later, after the bull market was running, and they’d buy high again. This is exactly opposite of what they need to do.


DY: So, concerns always about cyclicality of the markets, right, and one of the things that comes up here at the exchange. We’re hitting highs almost daily, it seems like. You offer an alternative in terms of the way investors can think about their portfolio.

DS, Jr.: You bet. So we’re going to manage risk to capital for the client. We have a true active management system, and we’ve been able to incorporate that in ETFs - true active ETFs - which is phenomenal.

One of the things we get out of that is we get tax efficiency which we didn't have when we managed in other products before. So this is a huge leap forward in terms of our ability to provide investors with more return.


DY: Big year for the New York Stock Exchange – celebrating 225 years. Lots of different anniversaries. You’re celebrating the third year now that your ETFs have been live. You launched 10 ETFs on the same day. Tell us about that experience.

DS, Jr.: So we did launch 10 ETFs on the same day. I had a conversation at a cocktail party with one of the more seasoned veterans of ETF launches. I told him I was launching 10. And he brought a whole bunch of people over next to him and he said “This guy's gonna launch 10 ETFs at one time!”


DY: You just don't hear about that these days.

DS, Jr.: Well you know we were able to do that. We had great help from the New York Stock Exchange, as a matter of fact, and we are able to pull it off and do a great job, and we had one of the largest single day launches in history.


DY: One of the things that’s unique, if we look at some of those ETF's, and you talked about this, about ‘taming the bear’ – your products can actually, they’re quite active, in fact they are active. You can move all the way to cash if you want to within the ETF.

DS, Jr.: We're managing risk to capital every day, all day long, and what we do is we will move to cash if we get stopped out. We use a very dynamic proprietary "stoploss" system but we also have a buy system that doesn't allow us to pile back into extremely overvalued markets and buy securities that just don't make sense.


DY: And what's interesting, a lot of people, they think ETFs are synonymous with indexing – they’re not always thinking active. We were having a chat beforehand -- active ETFs are actually one of the fastest growing in assets under management in our marketplace and you guys are a big part of that. What is the draw? So you know take an active manager – what's the draw for ETFs? Why choose an ETF as the investment vehicle?

DS, Jr.: Well on the active side, for us, as I said tax efficiency is huge. Before when we were active, we would generate a lot of short-term gains in an upmarket trend like this when we are starting to take risk off, and that, you know, causes a great deal of tax inefficiency, and people are real sensitive to that.

With active ETFs, we get to wash out our gains as we go through the process of creation and redemption, pretty much every day, and we end up with a much better lower-cost tax profile than what we would have in any other product type, so the idea of launching an active ETF became a way for us to help investors keep more of what we can earn for them.


DY: And it makes sense that, from a distribution standpoint, you guys are located in New Jersey I'm sure you're always welcome to have an investor come stop by but the reality is, if you're an advisor in the middle of the country, now you can access a WBI investment vehicle but you can buy it right on the New York Stock Exchange.

DS, Jr.: One of the other things that ETFs give us is that when we were managing only separately managed accounts (that's the way we came up in the business) we had large minimum account sizes. With an ETF, an investor can access us with a very small amount of capital and start to build a portfolio with some risk mitigation. We think we play extremely well with the passive set. It doesn't have any risk mitigation, it has the potential of going down just as much as the index does in a down market trend. We’re going to intervene with our active management process and hopefully take some risk off.


DY: Pretty interesting. Doesn't matter who you are or where you are – via the ETF, you can access Don and the WBI teams, the whole investment management team.

DS, Jr.: Anywhere in the country.


DY: That’s fantastic. Thank you everyone for joining us. Don, thank you for being here at the New York Stock Exchange. We’re live with another round of Issuer Insights.

Founder and CEO of WBI Investments, Don Schreiber Jr, explains their tagline “Tame the Bear, Run with the Bull”