#526: Raj Lala on Innovative Technology ETFs
4/2/2021 · 48 min · transcript via mlx
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Key topics
— Raj Lala's background: Started as a telemarketer for investment advisors, built multiple companies (hedge fund of funds, later sold to major asset manager), ran WisdomTree Canada before founding Evolve ETFs in 2016 focused on disruptive technology themes.
— Bitcoin ETF structure: Evolve offers physical Bitcoin (not futures-based) held in registered accounts like RRSPs and TFSAs; uses CME futures pricing as reference rate to avoid premium/discount issues that plagued closed-end funds trading 10–30% above NAV.
— Cybersecurity thesis: Non-discretionary corporate spending; 3.5 million job vacancies; cybercrime will cost global economy $10 trillion; 75% of cybersecurity work outsourced due to talent shortage.
— Cloud computing adoption: Only ~40% of data migrated to cloud; legacy system migrations ongoing; three pillars tracked (PaaS, IaaS, SaaS); Amazon Web Services, Microsoft Azure, Google control ~55% market.
— Electric vehicles and e-sports: EVs facing range anxiety and charging infrastructure gaps despite 75% battery cost reduction in five years; e-gaming has 3 billion players and multiple revenue streams (in-game purchases, brand sponsorships, tournaments, media rights).
— Canadian ETF market constraints: Difficult to sell Canadian-listed funds to US investors; US investors easily buy US-listed ETFs, creating competitive disadvantage for Canadian issuers competing on quality.
Market & price signals
— Bitcoin's $500 million pizza transaction (10,000 BTC in 2010) illustrates long-term value appreciation. Institutional adoption accelerating: Tesla ($1.5B), MicroStrategy, PayPal moving reserves to Bitcoin. Limited 21 million supply; ~18.4 million mined to date. Retail investors using FOMO and portfolio allocation logic ("couple percent" allocation). Canadian ETF adoption driving retail participation; US SEC approval timeline uncertain but possible within months to years given incoming SEC chair Gary Gensler's crypto background. Asset flows highly correlated to Bitcoin price performance.
Actionable insights
— For Canadian investors seeking Bitcoin exposure, ETF structure (Evolve EBIT or similar) eliminates wallet setup complexity, enables tax-advantaged registered account placement, and prevents premium/discount trading distortions that plague closed-end structures.
— Cybersecurity, cloud computing, e-sports, and EV sectors represent multi-year secular growth themes with recession resilience (cybersecurity is non-discretionary spend) and demographic tailwinds; Evolve ETFs provide diversified thematic exposure without single-stock picking risk.
— Bitcoin as portfolio diversification tool: zero to negative correlation with North American equities and fixed income over past two years supports 1–5% allocation for uncorrelated store-of-value positioning; long-term institutional adoption and scarce supply underpin narrative.
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