Bilal Little:

Welcome to another edition of ETF Central. I'm your host, Bilal Little. I'm excited about today's guest because it's a good friend of mine. His name is Clark Allen, head of product at Horizon Investments. They're one of the fastest growing ETF issuers on the street right now, surpassing over $4 billion. All right. And with that, Clark, welcome to the show.

Clark Allen:

Yeah, happy to be here. Excited to be at The Exchange. Good to be here.

Bilal Little:

Absolutely. When was the last time you were here?

Clark Allen:

Yeah, we rang the bell earlier this year, so it was very exciting for our firm.

Bilal Little:

Okay, good, man. So I was excited, in my intro, obviously, I announced that you guys are past four billion, which is a fast milestone the way that you guys have done that, all organically. What I wanted to do, Clark, this is important for me, I think the guests should tell their own story. How you got to Horizon, more so the personal side, like who's Clark? I want to humanize these conversations, and then we'll talk a little bit about the firm.

Clark Allen:

Yeah, so I graduated Georgia Southern many, many ages ago.

Bilal Little:

Southern gentleman.

Clark Allen:

Yeah, Southern Gentleman. I did accounting so I'm actually a CPA by education, which is kind of unique to be in the spot I am today. Ended up in Indiana working at an insurance company. Then I went from there to a family office, so for a multi-billion dollar family, so it was pretty unique, institutional side and then into I'd say the highest of the net worth. And then from there, found Horizon. My wife really wanted to get back South. She couldn't handle the cold of Indiana, and Horizon landed in my lap in a way, and it was great. So started there on the quant side, just doing quant research, and then have slowly transitioned into more product role.

Bilal Little:

And how long have you been at Horizon?

Clark Allen:

Been there seven years, but it was maybe two years ago we made a decision. We were like, "We have mutual funds, we have some SMAs. Let's just hit the active ETF space." And so we had a pretty audacious goal to launch 12 products last year, go from zero to 12, which was quite a bit of work.

Bilal Little:

Understatement.

Clark Allen:

Yeah. So obviously, now we're at 14 products. What you just said, we just surpassed four billion in 18 months, and it's been a whirlwind. You and I were just talking. It's just been so much fun. As long as you're having fun, any person that comes and works on the team, I say, "Are you having fun? As long as you' having fun, you're going to innovate."

Bilal Little:

For sure. Absolutely.

Clark Allen:

You're going to do cool things.

Bilal Little:

You want to compete. Absolutely.

Clark Allen:

Yeah, you're going to want to win, and it's going to be a joy. You're going to want to come to work, and that's great.

Bilal Little:

So for people who don't know who Horizon is, give me the quick commercial and then let's unpack a little bit about what markets are doing.

Clark Allen:

Yeah, so Horizon, founded over 30 years ago out of a wealth management firm. So started just think straight out of an advisor practice. A couple of years into that, decided to pivot into more of an asset management space, and so the roots are wealth management, but asset management was the launch point. And if you can think of the ETF strategist space, which has been around for a number of years, that was the beginnings of the firm, using mostly other people's product to build model portfolios around financial plans. We're born out of a wealth management firm. How do we build products that fit into plans, helping financial advisors? And we launched technology, and then over the years have innovated. We launched mutual funds, we have custom SMAs, think direct indexing competitor, and now we have active ETF. So we've expanded our solutions, but the core of who we are is still technology, wealth management, and serving financial advisors. How do we give them solutions that solve needs in financial plans?

Bilal Little:

I love that, and I want to stick with the story for a minute. Let's talk a little bit about what the unique value proposition is of Horizon. You said, okay, we want to service the financial advisor market. That is our market, and this is not a unique store. Not unique in that sense. I would say unique in the asset management sense. There are asset managers that say, "Hey, this is our core target client. We understand them. Obviously, we've worked with them for a long time, but we want to continue to service that business." What makes you guys that unique?

Clark Allen:

For us, it's not about a product pitch. We always say we're wrapper agnostic. We're never going to come in with a fact sheet, we're never going to come in with a ticker. We love our tickers. We think we have some great tickers, we think we have some great products, but it's more about how do we become a holistic solution provider to a financial advisor? How do we come into your practice and ask good questions and get to know you before we just pitch you a product? Because it may not be a good fit. We may not be the right solution. We can point you in the right direction. We can then partner with you as a holistic provider.

In many cases, we hope our products can fit into that solution because that's how we get paid, but in many cases, it's very unique in the sense that another wholesaler's handing a fact sheet over. They've got to pull out of their bag a set of papers and hand it across the sheet. Our sales team is very rarely handing a sheet across the table. It's sitting down and getting to know somebody. Where are your pain points? How can we come in and help you, and where can our solutions potentially help solve some of those problems?

Bilal Little:

I think right now, the advisor profile has changed so much. I'm a former wholesaler and I spent a lot of time with financial advisors, and I think the profile has changed so much into they've taken on this role as this wealth consultant or wealth coach in many cases. People want to be coached up into making better decisions. Where are you guys spending time with the advisor today, and what are they talking about? What are they hearing from clients?

Clark Allen:

It is a tough job, because back in the day, they were expected to be a stock picker.

Bilal Little:

Trader.

Clark Allen:

That was it, and a financial advisor was giving stock picks out, picking the investments. And what we've seen is a shift from just being a stock picker to being a coach, because folks have money, whether they're either behind on their plan or whether they've succeeded and they've done really well, and now they can't figure out how to spend it. So an advisor is very much sitting there trying to help coach these individual investors from making poor decisions, and so that's where you can come in as a solutions provider and say, "How can we take some of this other stuff off your plate?" Because coaching takes time.

Bilal Little:

Absolutely.

Clark Allen:

Sitting down and getting to know somebody, whether an end client, takes a lot of time. It takes really investing, not just on a golf course but across the table with husbands and wives and their kids and their grandkids, so that you can understand the whole plan. And so the more we can come in and take away the stock picking, not because we don't want them to do that, but because they can then take their time and spend at other places I think is key.

Bilal Little:

For sure. And it's such an emotionally draining role, I think, the advisor, because they're spending time literally talking to people about obviously their life decisions, so I love that and I think that it's critical. I want to switch gears a little bit and I want to talk a little bit about your role specifically. How did you get to head of product for this firm? As you mentioned, 18 months ago, you guys decided to say, "Hey, let's really get into the ETF business. This is a transformative wrapper. The technology is there. It's aligned with what we want to do and be." How did you get tapped for that seat?

Clark Allen:

Right place, right time.

Bilal Little:

I love that.

Clark Allen:

I was working on the quant team alongside the head quant there, the head of portfolio management, and just stumbled into, "Hey, we want to launch ETFs, Clark. Go figure it out."

Bilal Little:

Go figure it out.

Clark Allen:

We had never launched an ETF and they just said, "Hey, Clark, we're going to give you a shot here. We want you to just figure out how to launch a product and then how to get it off the ground." And 12 months later, we launched 12, and it was a very busy year, but learned a lot. Thankful for many of the partners in the space that we were able to ask a lot of questions from, all the relationships. And so launched those 12 ETFs and the role expanded, and they said, "Hey, we now have all these ETFs. We also have mutual funds. We also have SMAs. Let's put you over top of all of the product. Again, be wrapper agnostic. We don't want Clark just focused on ETFs. We want him to think about the entire ecosystem of our products." And recently, that was where the role started this year they tapped me for, and it's been a blast thinking about product holistically and just really asking great questions, hopefully trying to get to know the industry. It's always a blast to have conversations like this because there's so much happening in the space.

Bilal Little:

For sure. It's progression, right?

Clark Allen:

Yes.

Bilal Little:

So I want to stick with this for a second. Let's unpack the complexity of some of the things that you guys are doing and how unique is the offering? So let's just talk about high level what you guys offer, and then I want to talk about how you guys are communicating that value proposition, that active management, and what you guys are doing is different than what else is on the street.

Clark Allen:

Yeah, for us, it's a lot of quantitative strategy. It's very systematic in nature. The reason being is because then you can communicate expectations. And if we can go to an advisor and say, "This is what you can expect from this product," and then we can deliver on that, we can build confidence, and then it can be used in a plan in a way that makes sense. So we use a lot of systematic stock selection and we use a lot of options. The reason we use a lot of options is because we think they're great engineering tools. They're great at either adding risk, taking away risk, or adding income, and so in many cases, we'll use them to add incremental risk, so if an advisor wants something riskier, how do you use options to do that? Somebody wants something that's more defensive, how do you use options to do that? The buffer space has seen a lot of growth, same with income.

And so that's our lineup in a nutshell, and zooming down, then we take those solutions and we come to an advisor and we say, "Hey, maybe not all of these 14 products or all the mutual funds we have make sense, but which of these fit into your portfolio to give you some more confidence in your financial plan, in the solutions that you're providing to your end investors?" And the more we can frame the expectations and then deliver on that, then the advisor's more confident in using those models and using those solutions, and then even then, you go down to the end client, then they're more confident. The worst thing for a financial advisor is volatile markets cause-

Bilal Little:

Don't make them look bad.

Clark Allen:

Yeah. Volatile markets makes clients make bad decisions. They come to the advisor and say, "Why am I doing this? Why am I holding this? Why am I losing money? 2022, why did my bonds finally lose money?" And so the more we can frame expectations and help communicate that to the advisor through technology, the better they can feel equipped. They don't have that surprise moment. You don't want them to look bad, and so we try to white label and put as much of the power in the hands of the advisor because then they can look good and they can feel confident, and that's key.

Bilal Little:

2026 is off to a fast start for ETF launches, surpassing over 747 for the first half of the year, and with that, there are over 5,444 ETFs listed in the market. How do you make sense? How do you rationalize which ETF is right for you? That's why we created etfcentral.com where you can compare, you can build model portfolios, and you can actually build watch lists to identify and understand and decompose some of the risks that are in some of these ETFs. Please visit etfcentral.com.

Well, let's spend a little time on markets before we dive into product additionally. VIX is trading below its 200-day moving average. Volatility hasn't really picked up, but we're kind of moving into a rate-driven market. I was having a conversation recently and I was talking to someone and I said, "It's not normal for the largest companies in the world to be swinging five to 8%." That's not normal.

Clark Allen:

No.

Bilal Little:

It's not normal. However, the market hadn't seen spook. However, the bond market with the steeping of the yield curve, you're starting to see some jitters out there. How are you guys communicating right now what the message is for risk management going into the second half of the year?

Clark Allen:

We just came out of earning season for the most part. It's not completely over. Fundamentals are super strong, companies are doing very well, and if you were to talk to an end client, regardless of the volatility, we've had a war this year, we've had inflation spiking, we've had oil markets and gas going all over the place, you obviously just saw the job markets Friday, but investors zoom out and they go, "My portfolio's up 10, 15% this year. Why do I care?" And that's the key is focus them on the long term, and if you can keep them focused on the goal of this plan over three and five years, then keep them off of the news headlines, then I think that's the key and that's where we're trying to keep investors focused.

For the rest of this year, we think there's a ton of fundamental support. Even if we see a rate hike, there's tons of fundamental support, and many of these companies are doing quite well fundamentally. As you noted, there has been a lot of volatility in the Mags. Those are the top of the market.

Bilal Little:

For sure.

Clark Allen:

You've seen some of that come back here as we started this quarter. Who knows? It's hard to put a pin on it, and that's for us, the goal for us is not to tell the advisor what's exactly going to happen. Maybe educate them a little, but then try to keep them focused on the long term, because that's the only way they're going to keep their clients invested.

Bilal Little:

Look, I agree with you a hundred percent on that. I think at the start of this year, everyone was talking about, "Hey, let's climb the wall of worry. What could go wrong? What could go wrong?" And the market's still chugging along. The Mag 7's not really driving, and obviously you got the market expansion so the breadth is there, and to your point, there's a lot of fundamental support. I want to switch gears a little bit. I saw something in the news recently about you guys making an acquisition into fixed income, which seems a little different from the tech and/or innovative side of the house. Talk a little bit about what you guys did there.

Clark Allen:

Yeah, so this is our second acquisition. So last year, we acquired a fundamental equity manager. So we were tech-driven, systematic, quantitative in nature, and we knew we had a hole, so we acquired a fundamental manager. He's got two mutual funds and managers here out of New York City, and we said, "We are not great fixed income managers. It's not a strength of ours." So we looked for a fixed income shop, again, fundamental fixed income bond selection. It's an ex-PIMCO team out in California. And so we made that acquisition to just expand our expertise and give us the ability to deliver in different facets, manage money different ways.

We'd say it's different alpha drivers. If all of our processes are quantitative, then we only have one way to win. If we have fundamental stock selection and fundamental fixed income, we have lots of different ways to win, which allows us to fit into a portfolio in a way that makes sense for an advisor. We don't have to force them into our methodology. We can say, "Well, we've got other ways of managing money, and these different ways can fit into your box in a way that makes sense for you."

Bilal Little:

Understood. Let me ask you this. How long did it take you to identify that this was the right manager for you? Obviously you guys are blending business models at this point in time, but how long was that process for you guys?

Clark Allen:

Very long. For us, it's really about culture. As much as there's great managers out there and great firms, they have to fit our ethos. We have a very unique culture, and so we talked to a lot of firms before we landed on the firm that really fit who we were as a firm and who we are as a firm, and again, I'd say that's top. Obviously, they're great managers, they have great track records and they have product, both an ETF and a mutual fund wrapper. Put that aside, there's other firms that have that, but they have a great culture that really fits into ours, and that's, again, paramount above all else.

Bilal Little:

Okay. So let's continue to move this forward. What's on the horizon, no pun intended, as far as product launches and where are you guys are thinking new opportunities are for you in the ETF space?

Clark Allen:

Yeah, we have two more products that are launching and we're recording this week. By the time this comes out, they will have launched, and so that'll put us at 16 total ETFs. We'll probably take a bit of a pause here, digest that. We have quite a bit more that we have in our roadmap, but that'll probably be think further out here. We're going to take a bit of a break and just let the sales team digest what we have. We just closed a second acquisition. We want to just make sure that the product landscape at our firm is-

Bilal Little:

You got to grow into your growth.

Clark Allen:

That's right.

Bilal Little:

Yeah.

Clark Allen:

So as a product individual or even on the content side for you, you're constantly pushing, and sometimes you have to let the rest of the sales engine and everything else come to you, if you will. If you keep pushing, maybe you begin to break some things, and so we're just going to take a pause here, breathe, and then you'll probably see some more product launches for us into next year.

Bilal Little:

From your seat as head of product, what's your assessment of the ETF industry right now? Look, we've nearly launched 6,000 ETFs in the United States at this point. The industry continues to grow. Obviously, you're seeing a lot of concentration in certain parts of the space, but you're seeing a lot of growth right now in derivative income, you're seeing a lot of support around, I would say, option strategies. From your seat, what are you seeing?

Clark Allen:

Yeah, I think the innovation continues. Our hope is that that innovation doesn't cause anything to break and cause black eye on the industry because we believe the ETF wrapper is powerful. I think we're at NYSE, we're at The Exchange. It's a powerful technology, if you can call it that, and the ability to use that, definitely more derivative income products. We just hope that many of those are done thoughtfully. And there are folks in the space that are thinking really thoughtfully about how do we launch a solution that is going to support the products to be able to support itself over time, and this income is not something that's going to be detrimental? We think that there's going to be a lot more innovation as it relates to derivative income products and also just other options-based strategies, because we think that it's really powerful for financial plans and for advisors.

Obviously, you're seeing many, many of these 351s and other folks come into the space. This is my personal opinion is you're going to probably see some folks that have maybe pushed a little too fast, too hard, maybe didn't have enough of a distribution strategy or a marketing plan. We've launched a lot of products, but we're definitely going to probably see some strategies not make it, which honestly is probably healthy for the space, because we've had a really fast pace of launches, but there's probably not been enough time, let's call it those running subscale for folks to just throw in the towel. I imagine over the next year or two, we're going to see more of that, which will be helpful. Because the managers that have a plan, the managers that are able to do distribution and marketing well are going to be able to support these products and continue to drive innovation in the space. Again, hopefully positive innovation.

Bilal Little:

For sure. What concerns you about this space right now?

Clark Allen:

I'd say that the innovation goes too quickly, and that in this administration, folks try to push too hard, and it causes innovation that may not be helpful for the industry, for end investors. And as much as some of that innovation's exciting, it can also be dangerous because you get regulators or even the folks in DC looking over their shoulder.

Bilal Little:

And then it stifles innovation.

Clark Allen:

Then it stifles innovation for a period of time. And so I hope we don't push too fast too hard, whether it be on the tax side or even just in the underlying strategies, and cause DC to get involved. Maybe not in this administration, but in the next administration, which stifles innovation because then it's going to just slow us all down, and we're having so much fun innovating and delivering solutions that are helpful.

Bilal Little:

Before I wrap, I always ask the guests, what's your ETF underdog? What's something in your lineup that you've launched that is not getting the traction that you believe should have more traction and/or that people should pay attention to, but for whatever reason, they're just not? Typically in the US, you see international just because of home country bias. What is it for the horizon lineup?

Clark Allen:

Yeah, I think it would be two for us. We do systematic stock selection obviously, and we have two products, small and mid-cap international have had phenomenal track records. I think they're six months in. One of them is FRGN, frigging good ticker, F-R-G-N, and the other one's SMOX, small and mid-cap, and they've had a great track record. Systematic stock selection has done quite well for us in our opinion, and obviously they're just over six months old, but we're already beginning to see momentum as folks have recognized the ability to provide alpha in these underserved markets. It's very hard to deliver stock selection alpha in the large cap space. If you don't have an overweight to Micron or Nvidia over any given period of time, you just missed. In the small midcap space, there's a thousand stocks in the S&P 1000. Go overweight a little bit on a few of those and you could do quite well.

Now international, there's over three or 4,000. There's a lot of opportunity for stock selection alpha, and so pretty excited about those and so we hope that investors will continue to recognize the opportunity. And this year, to your point, the broadening out trade, they've done quite well, not just our particular products, but as an asset class.

Bilal Little:

Absolutely.

Clark Allen:

Internationals have finally had their day. A little bit of softening here more recently, but they've done quite well this year, which is great to see.

Bilal Little:

Yeah. Clark, we've gotten to a point where I ask a question that you have no clue where this is going.

Clark Allen:

Right.

Bilal Little:

So I've been thinking about this for a long time, humanizing this industry, and I'm really curious to know from you, what was or who is the one person that saw the talent of Clark and that provided you an opportunity that you're forever indebted to or feel grateful for in this business? What is that person's name? And I want you to give them their flowers.

Clark Allen:

Yeah. I would say I was working at the insurance company, the institutional management, and I was working on the reporting desk as accounting, and there was a PM that saw me and pulled me off the desk to work under her, LaDonna, and she gave me the first opportunity. And at the time, I was working on alternatives, and the management said, "You should do your CAIA." And she looked me in the eyes and she said, "I don't care if you do that, but you have to do the CFA." And she said, "I'll support you in that, but you have to do that one as well." And so I did both those exams at the same time, and she was the first one that gave me the opportunity, and from there, the rest of my career trajectory is forever different and so I'm ever indebted to her. We just caught up pretty recently and still stay in touch quite a bit, so grateful for LaDonna and the work that she's done and just for her giving me a shot.

Bilal Little:

That's awesome, man. Thank you for joining ETF Central.

Clark Allen:

Appreciate it. Thanks so much.

Speaker 3:

That's our conversation for this week. Remember to rate, review, and subscribe wherever you listen, and follow us on X, @ICEHousePodcast. From the New York Stock Exchange, we'll talk to you again next week inside the ICE House.

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