Bilal Little:
Welcome to another edition of ETF Central. I'm your host, Bilal Little, and my guest today is Adam Schenck. He's a principal and managing director at Milliman. Milliman is one of the most fascinating investment firms on the street, and I think you're going to like this particular episode, so stay tuned. And with that, Adam, welcome to the show.
Adam Schenck:
Thanks for having me.
Bilal Little:
Excited to have you here. When's the last time you were at the Exchange?
Adam Schenck:
It's been a while. Rung the bell back in 2016.
Bilal Little:
Okay.
Adam Schenck:
So it'd say it's-
Bilal Little:
Was that your first time? When was your-
Adam Schenck:
First time.
Bilal Little:
... first time?
Adam Schenck:
First time was that. Was that.
Bilal Little:
Oh, really?
Adam Schenck:
Yeah, yeah.
Bilal Little:
Okay. And how long you been in the business?
Adam Schenck:
Since I graduated from grad school, so 2005.
Bilal Little:
Okay. Okay.
Adam Schenck:
Milliman the whole time, so it's been-
Bilal Little:
The entire time?
Adam Schenck:
The entire time. Yeah.
Bilal Little:
Oh my goodness.
Adam Schenck:
Never had another job, so I have no idea-
Bilal Little:
So you don't know-
Adam Schenck:
... [inaudible 00:00:59] other than...
Bilal Little:
... what the world is like out there, right? It's like could be the wild, wild west.
Adam Schenck:
Yeah.
Bilal Little:
Adam, for everyone that visits the show for their first time, I want them to tell their background and their story and sort of how they got to their specific role at their firm. I think it's just the best way opposed to reading some unpersonal paragraph on who you are. We're having a conversation, so I want to hear directly from you.
Adam Schenck:
Yeah. So I ended up at undergrad at Eckerd College because I thought I wanted to be a marine biologist.
Bilal Little:
Okay.
Adam Schenck:
And they have one of the best marine biology programs down there, so went down there. And then between the time that I signed up my application and committed until ending up there, I ended up doing a lot of work with computers and computer programming. And so then I thought, "You know what? I think I want to do computer science." And then on the way to computer science, you had to either take statistics in the business school or in the math department. And I thought, "You know what? I'm pretty good in math. Maybe I'll do it in the math department." And then that professor, Dr. Walter Walker, convinced me to do a double major in math. And so then I just fell in love with math and-
Bilal Little:
So you went pretty good, you were really good.
Adam Schenck:
Yeah.
Bilal Little:
Okay. Okay.
Adam Schenck:
I got the math award at Eckerd the year I graduated, 2004.
Bilal Little:
Wow.
Adam Schenck:
So then he also convinced me to take a look at these financial mathematics programs, and so that is applied math to finance. And one little tidbit he mentioned, he said, "They're using physics to price options."
Bilal Little:
Wow.
Adam Schenck:
And I looked more into that. And so yeah, Black and Scholes were physicists, and then they met with an economist. And the three, Black, Merton, and Scholes, developed the Black-Scholes equation, which is a modification of the heat equation in physics, which is how fast heat travels in a conductive material, like a-
Bilal Little:
Metal, yeah.
Adam Schenck:
... metal rod, how quickly it governs the transfer of heat over time. So I did that. And then everybody's probably got a story like this, but I had two offers, either Purdue or the University of Chicago. Purdue was a teaching assistantship, but it was two years. In University of Chicago, I had to take a loan for, but it was 10 months. And I called my dad, and I said, "What should I do? I got these two." And he said, "Go to Chicago." So I ended up in Chicago.
Bilal Little:
Yeah, absolutely.
Adam Schenck:
It's actually in the math department at University of Chicago. So it's down at Eckhart-
Bilal Little:
Oh, wow.
Adam Schenck:
... the Eckhart Center. I remember going to the lab to do our programming experiments and there were PhD mathematicians down there throwing a ball and writing stuff on the board that I couldn't even understand as a mathematician. They were way up in the clouds.
Bilal Little:
Wow.
Adam Schenck:
So it was cool.
Bilal Little:
So how'd you get to Milliman?
Adam Schenck:
So then they put together a resume book, and they passed it around all the local companies. And so I got a call from somebody at Milliman saying, "Hey, your resume looks interesting. Why don't you come work for some actuaries?"
Bilal Little:
So exciting.
Adam Schenck:
Yeah. And I didn't even know what an actuary was at that point.
Bilal Little:
Yeah, yeah, yeah.
Adam Schenck:
And so then I started working there on Fridays as I finished my degree at USC. So it was just a 10-month master's program there. And by the end of it, after I'd done a lot of interviews with companies here, I had an offer from Milliman, amongst others. And I went to my advisor, and I'm like, "What should I do?" And he's like, "I think you should maybe keep going." And I was like, "I don't know. I like this firm." And so I joined them, started working on financial models for pricing exotic derivatives that insurance companies were buying from banks. And so that was my first assignment was basically come up with a pricing model for this very exotic option that was supposed to be a hedge for their products. And that was my first gig. And then from there, just ended up doing a lot more things like that.
Bilal Little:
Here you are 20 years later.
Adam Schenck:
Yeah.
Bilal Little:
So I want you to provide a commercial for who Milliman is and exactly what separates them from other asset managers, because they are one of the most unique and institutionally represented managers in the entire world.
Adam Schenck:
Yeah. So the actuarial underpinnings. So it was two pension actuaries that started the firm in 1947. Here we are 80 years later. And our pension the whole time was helping institutions understand and manage risk. So the practice that I joined back in 2005 emerged from our life discipline. So we have these areas of focus we call disciplines. So it was a mergers and acquisitions practice back in the '90s.
And then we got our start helping life insurers to hedge the financial products that they were... As I mentioned, I built those complex models for derivatives. So that was what we were doing back then, was helping life insurers understand how to hedge these products like banks do. And that product started flying off the shelves in the dot-com bubble after a couple insurers went into receivership because they got shuttered by the regulators because they ran out of capital.
Bilal Little:
Right. Wow.
Adam Schenck:
So that's on the life side. On the health side, that work started in 1950s. But in particular, in 1956, we started putting together health cost guidelines, so the actual claims data, trying to track claims data and then how much it costs to provide insurance for people. And that work continues today.
And in 2013, we started publishing those. We actually acquired a set of indices from S&P Dow Jones and then we continued to publish those as the health trend guidelines. And so that is claims aggregated from around 20% of the commercially insured population, so about 30 to 35 million individuals.
Bilal Little:
Wow.
Adam Schenck:
So I think that's really our niche in risk management and then our historical knowledge and expertise in health is why I think, for these products, why they're unique.
Bilal Little:
Now, for someone that may be a novice that, let's say, they just don't know who Milliman is, who else is doing the work that you're doing at the scale that you're doing it? Is there anyone else?
Adam Schenck:
So not in health.
Bilal Little:
Okay.
Adam Schenck:
Other than, obviously, health insurers, right?
Bilal Little:
Yeah.
Adam Schenck:
But in terms of concentrated actuarial expertise, we are one of the biggest in terms of having the most accredited actuaries, the most people focused on health, most accredited health actuaries, people focused on concepts around health and risk management and health. We are one of the preeminent firms in that space and have been for a long time.
Bilal Little:
Yes. That's exciting. That's exciting.
Adam Schenck:
Yeah.
Bilal Little:
And look, you guys have never entered into the ETF space before.
Adam Schenck:
We haven't. We have been a sub-advisor-
Bilal Little:
Correct.
Adam Schenck:
... since 2016. So that we know a lot, basically, how to create an ETF, how to price it, how to trade it. So everything except for how to actually position it, because that's been the job of the direct sponsor. We've been a sub-advisor. So we're kind of the intel inside. We have been that for a long time. But we feel now is the right time to put these out because Milliman's history in health... And our name does carry weight specifically in the institutional space.
Bilal Little:
Yeah, exactly.
Adam Schenck:
So that's what we thought, "You know what, we really don't need another sales effort besides what we can create internally because we have, on the institutional side, a lot of clients that we can tap into.
Bilal Little:
Yeah. Were you seeing institutional demand in the ETF wrapper?
Adam Schenck:
So the institutional demand is significant because they're facing the same problem that all Americans are. They have to cover these rising costs for people. And then they do their thing where they certainly have to put capital aside, the costs continue to rise, and they have to find ways to offset those, but then they end up having to raise premiums a lot. And then that goes on the backs of-
Bilal Little:
It's passed off to the end and-
Adam Schenck:
To the end consumer.
Bilal Little:
Consumer, yeah.
Adam Schenck:
So we've all been thinking about, both on the health side and I think people in the health space, "How can we make this better?" Right?
Bilal Little:
Mm-hmm.
Adam Schenck:
And of course, there's been a lot of effort to try to make healthcare better forever in this country, but I think this is now the first way at least to start to get at the problem. We've got to try to help offset some of these costs because it's ending up on the backs of Americans.
Bilal Little:
Look, it's a Herculean task, make no mistake about it. I want you to talk a little bit about the products that you guys have launched. So you launched two ETFs that are in market. Just generally, high level, what are the two products, and what are they trying to solve for?
Adam Schenck:
So the two products that just launched today, so the Milliman healthcare cost, Healthcare Inflation Guard ETF. So that one seeks to meet the rate of healthcare cost inflation as calculated in our health trend guidelines.
Bilal Little:
Okay.
Adam Schenck:
So that's essentially the bogey we're trying to hit every single month. We recalculate this every single month, and then we readjust the portfolio every single month to try to get at that bogey while mitigating market declines.
Bilal Little:
Yeah.
Adam Schenck:
You can go invest in the NASDAQ, and that's going to outpace healthcare cost inflation over time, but there could be periods where you're off by 50%, for example, right?
Bilal Little:
Yeah.
Adam Schenck:
So that's MHIP... Or MHIG. And then Milliman Healthcare Inflation Plus ETF, MHIP, takes more risk in order to deliberately try to outpace inflation over time. So we get the bogey every single month, and then we add 2% to it effectively. And then that's what we're trying to hit each time. And we make the model choose more equities in order to get to that target.
Bilal Little:
So let's unpack these a little bit. Not to go too in depth, but they're basically primarily equity investments with overlays of options or how are you hedging?
Adam Schenck:
Sure. And we've tried a lot of different strategies. We've been in the lab for three years and this is the final... You know, not the final product. We're going to-
Bilal Little:
Yeah, this is the Frankenstein.
Adam Schenck:
... continue. Yeah.
Bilal Little:
Frankenstein-
Adam Schenck:
Exactly.
Bilal Little:
... is a great idea. Yeah, absolutely.
Adam Schenck:
We're going to continue to try to just be hyper-focused on this objective. We must get better at this. We will, as Americans, so we're going to really try to continue to iterate and get better at this over time.
So the portfolios as structured today... Obviously, if you read the prospectus, we've got a lot of latitude, so multi-asset portfolio. Equities have the most direct relationship. The equities we're choosing have the most direct relationship with the inflation that is being produced in healthcare.
Bilal Little:
Yeah.
Adam Schenck:
But as equities do, there's a lot of reasons why they fall, besides the fact that they're earning revenue from healthcare. So we have to have diversifiers and de-risking mechanisms in the portfolio.
So again, the equity portfolio, primarily healthcare equities that in our... based on our calculations, looking inside the data, in the pharma sector, for example, we have specific drug data. So we have drug sales on a monthly basis by drugs, so every drug that goes into people's bodies in the United States.
Bilal Little:
Wow.
Adam Schenck:
And then that informs our allocation in pharma, for example. And then looking in the claims data, we also allocate to what we call the facilities sector of claims, and we map device makers and hospital stocks and other facilities, like companies in the health sector for that one, and then professional services, like the catchall bucket, so that's doctor's visits and other specialist visits in the claims data. But that, primarily, in our view, is where the insurers go. So that's like-
Bilal Little:
Gotcha.
Adam Schenck:
... where our insurance bucket is. So that's the equity bucket. We have a sleeve for really everything else X healthcare in the S&P.
Bilal Little:
Right.
Adam Schenck:
And that's because other things are pushing inflation as well, right?
Bilal Little:
Absolutely.
Adam Schenck:
Everybody needs Microsoft, everybody needs Google to do their work these days. The diversifier bucket in the risk class, so equities and liquid alts, or the risk bucket... So within the liquid alts sleeve, we use gold. And the reason we use gold... Why not silver? Why not oil? Gold is the only commodity that central banks hold in their reserves for strategic reserves, right? So that gives us confidence that gold will continue to respond with inflation, because central banks are using it all over the world, and likely respond differently than the de-risking bucket, which I'll get to, which is treasuries and the equity bucket. And so that's why it's going to be a good diversifier for us, we think, going forward. We're always monitoring this, though. That's part of the process. If central banks start to use Bitcoin-
Bilal Little:
That's what I was going to ask you.
Adam Schenck:
Right.
Bilal Little:
Yeah.
Adam Schenck:
Then we might put some in there. But that's really what that liquid alts bucket is for, is diversifiers that will correspond with inflation going forward, in our view.
Bilal Little:
I think we should also champion your leadership for at least being flexible and malleable to... Look, market conditions could change.
Adam Schenck:
Absolutely.
Bilal Little:
So how do we embrace and ingest those factors? So the fact that you just said that, I think that's just a positive thing, right? You never want to put your head in the sand and say, okay, never on anything. You want to be mindful to say, "Okay, dynamics have changed, and we might need to shift and pivot." So I think that's kudos to your leadership.
Adam Schenck:
Absolutely. And I think it really is a space to watch, right?
Bilal Little:
Yeah.
Adam Schenck:
The world needs something to agree on, and right now we think the best proxy for that is gold in that bucket, less so now with the move away from the dollar and largely into gold, but we need to keep an eye on it. So that's really what that bucket is. And then, the de-risking aspect is treasuries.
Bilal Little:
Yeah.
Adam Schenck:
And we dance between short-term and intermediate-term treasuries in a certain way based on the yield curve. And we do that because that largely lines up with wage inflation, specifically wage inflation for hospital workers and healthcare workers.
Bilal Little:
Okay.
Adam Schenck:
And so that's largely what that tries to represent, because that permeates through all the dollars that end up being charged in the claims.
Bilal Little:
Did you know there were over 1,100 ETFs launched in 2025? How do you make sense? How do you find the tools and resources to compare, contrast strategies? That's why there's etfcentral.com. It's a website where there's tools, resources, and a way to track and monitor your portfolio. Please visit etfcentral.com.
Let's pivot a little bit. Let's talk a little bit about the inflation around healthcare cost. Most people see it. Most people feel it. I don't necessarily think they understand how it's actually engineered and manufactured to get to where it is for them where they currently are in life and where they will be in life around planning. Can you talk a little about that?
Adam Schenck:
Yeah. So we do a lot of work around this, and we have several indices, including the Health Trend Guidelines, that measure inflation and healthcare costs in different areas. So I'll talk about what has happened with commercial healthcare costs for individuals and families.
So we put out something called the Milliman Medical Index that just came out. We're about to put out our '26 number. The 2025 number was 35,000 for a hypothetical family of four. Now, we have tools where you can go in and put your own family in. But in order to write the report, we used the hypothetical family of four. That came out just over 35,000-
Bilal Little:
Wow.
Adam Schenck:
... in 2025. That's up from 12,000 in 2005.
Bilal Little:
Wow.
Adam Schenck:
That's a tripling almost of cost. So that rate of compound growth in that cost is over 6% a year.
Bilal Little:
Geez.
Adam Schenck:
And if you look at our Health Trend Guidelines over that same 20-year period, it's averaging 5.5% per year. So what's happening is the insurers are... You know, and insurers are doing this because they have capital constraints.
Bilal Little:
Yeah.
Adam Schenck:
Right? They have to stay alive.
Bilal Little:
For sure.
Adam Schenck:
They have to continue to provide coverage.
Bilal Little:
Sure.
Adam Schenck:
But what's happening is it's falling down and it's impacting those. And that's for a corporate plan, so that's-
Bilal Little:
Yeah.
Adam Schenck:
... the corporate-sponsored plan, which being around my actuarial colleagues, that happened after World War II.
Bilal Little:
Oh, really?
Adam Schenck:
Yeah. So that's when we had your employers where you got health-
Bilal Little:
Yeah. You define health plans now.
Adam Schenck:
... where you got healthcare from.
Bilal Little:
Yeah.
Adam Schenck:
That was a World War II phenomenon post World War II. So that's one aspect of how it's impacting folks that we want to... And we hope that these products eventually can disrupt that cycle. If insurers can invest and earn more, then maybe they can charge less. But that's all, obviously, TBD. So then the next thing that we think everybody should start thinking about is how much should you save for healthcare costs and retirement.
Bilal Little:
Like long-term care.
Adam Schenck:
Long-term care is one-
Bilal Little:
One.
Adam Schenck:
... aspect. So we put out an index that's called the Milliman Retiree Health Cost Index that excludes long-term care. That number for all of Medicare, so your standard Medicare plan plus Medigap, which is like a supplemental plan that helps pay premiums, plus Medicare Part D, which is your drug outlay, is $588,000 for a couple retiring in 2025. So that was last year's-
Bilal Little:
What?
Adam Schenck:
And what's interesting about that, too, is it's below... The number is, I don't know the exact figure for a male, around 280,000 for the male, but over 300,000 for the female because she lives longer.
Bilal Little:
Yeah.
Adam Schenck:
Tends to live longer.
Bilal Little:
Yep, makes sense.
Adam Schenck:
So if you compare that number, which is staggering... And that's the third most basic need for retiree: food, shelter, and then healthcare.
Bilal Little:
[inaudible 00:22:45]. Yeah.
Adam Schenck:
Right?
Bilal Little:
For sure.
Adam Schenck:
That excludes long-term care. We also have a long-term care index, and that's another... I don't know the exact figure for that one, but I believe it's over 100,000-
Bilal Little:
Yeah, makes total-
Adam Schenck:
... for long-term-
Bilal Little:
... sense. Absolutely.
Adam Schenck:
... care in addition to that. So now compare that with the average balance from the consumer finances survey in 2022. The average balance is 600,000, but the median balance for a couple, and that's average for a couple 600,000, the median balance for a couple is 200,000. So the average is skewed by people that have a ton-
Bilal Little:
Yeah, for sure.
Adam Schenck:
... of money to retire.
Bilal Little:
For sure. Absolutely.
Adam Schenck:
The median person is well short of this basic. Now, if you don't have the Medigap policy, then the numbers are lower, but it's still hundreds of thousands of dollars that would consume most people's entire retirement-
Bilal Little:
Retirement. Yeah.
Adam Schenck:
... balance just to pay healthcare.
Bilal Little:
Geez. So let me ask a question then. So when should people start planning for this aspect of the retirement phase, right? Because most people say, "Okay. When I retire..." They're thinking vacation, beaches, lattes. Let's be honest here, I want to put my feet up. I'm not going back to the office. You're sitting here telling me now they need a minimum of... Wealthy people know this. They need a minimum of $500,000 for a couple, not including long-term care, which might be an extra 100, 150,000. You're talking three quarters of a million at that point, just to stay alive.
Adam Schenck:
Yeah, just to be-
Bilal Little:
Just to be good.
Adam Schenck:
Just to be comfortable, just to be dealing with the health problems that everyone will have. I mean, not many people aren't on some medication or have some issue that they're dealing with at that age.
Bilal Little:
Especially since we've transitioned from defined benefit plans to define contribution plans, which means people will need to be maxing out HSAs and doing a lot of other work around the planning. How are you guys providing education or supporting that narrative?
Adam Schenck:
Yeah.
Bilal Little:
Because the delta that you just described is important. You just described the wealthy versus the average.
Adam Schenck:
Yeah.
Bilal Little:
And the average may not have access to the leadership or thought guidance from certain advisors or planners to help with that narrative and conversation.
Adam Schenck:
Yeah. So as we've been staring at this problem for the last three years, it's kind of like a red alert, I think, in the retirement space, and everybody should start immediately in our view. So we're going to provide a calculator. We're going to try to make it easy for people. And we have one on our website today.
Bilal Little:
Okay.
Adam Schenck:
You can go in and put in your current age, your expected retirement age, the state you want to retire in, which is kind of fun. We were just doing it earlier, and someone's like, "Ah, you know what? I think I might retire in Maine. That seems cool. Let's put that one in there." And then your health status, your current health status. And it'll spit out a number of... which is going to be some sticker shock, the numbers that it spits out, because it compounds the rate of the health trend guidelines, recent inflation, which is 6.8% over the last five years. Now, hopefully that'll get better, but that generates, over 20 years, obviously a big number in future dollars.
Bilal Little:
Yeah. Significantly higher than inflation.
Adam Schenck:
That's right. That's right. About 3% higher than inflation on average, two to 3%. But then it tells you the present value of that.
Bilal Little:
Gotcha.
Adam Schenck:
And so the present value of the one I just did earlier today after playing with the calculator was around $155,000 is what I came up with for myself and my spouse. And that should go in something right away. And then we do hope people make the connection to our ETFs because that's really the risk of... The risk is you underperform the inflation over time in order to get to that. But the key is you want to do that calculation, and then you want to keep doing it as your health changes, as your expectations change. And have a sleeve in your retirement account that is dedicated to saving for healthcare.
Bilal Little:
All right. Let's stay with this for a second. Now you got me thinking, "I got to talk to my wife about this. Oh, my goodness." Are you saying for your ETFs right now, where do they fit though? Right?
Adam Schenck:
Sure.
Bilal Little:
Are they fitting in the traditional equity sleeve or are they fitting into, "Hey, we need to just build a retirement bucket portfolio, and these need to be the anchor in that"? Because let me just add this. Most HSAs and some of these retirement plans, you don't have as much flexibility outside of your IRA to hold the securities that you want. So how are you thinking about that?
Adam Schenck:
Yeah. So we consider these ETFs that we just launched today as building blocks for those. And our guidance right now, for example, would be if you have a higher risk tolerance and you're younger, then that's why we have the Plus ETF.
The reason we launched these as well is because they kind of have a dual mandate. Each one of them does. So for example, the plus ETF could be useful for people that I just described, higher risk tolerance, earlier savings in their savings lifespan. But we also are getting interest in some of our institutional clients for their surplus accounts, because their surplus accounts typically have a higher return target and a higher risk tolerance, which is interesting.
Then the Guard ETF, what I would say is as you're starting to get close to retirement should be more Guard than Plus. So I would say maybe between 55 and 65 would be ideal for the Guard because that's trying to shoot right at the bogey without taking excess risk, and it's doing it dynamic.
Bilal Little:
Let me throw a curveball at you and let's talk a little bit about technology. You would argue technology is naturally deflationary in the way that it's designed and structure, meaning, as technology improves, costs come down, outside of energy in this case of AI. But the way that they're designed, is meaning access, transparency, efficiency, speed, and cost, is designed for prices to come down. However, our healthcare costs continue to go up. And we suspect, with AI and things like that, we will have improved possible drug trials and opportunities to maybe improve health.
I'm thinking about my kid in this question. Should I start a healthcare planning savings account, an investment account, for my child at seven because her healthcare costs are likely to be a million dollars by the time she's retirement age?
Adam Schenck:
Yeah. I mean, you know, it's an interesting rabbit hole as you start to think about this stuff because... I mean, the thought experiment on healthcare for this... So technology certainly does hopefully make things cheaper.
Bilal Little:
Yeah.
Adam Schenck:
And I do think that it should make some things cheaper, for sure. Most of the healthcare industry now is starting to use AI. In fact, our health colleagues are finding a lot more use cases with it than we are in the investment landscape because it's really good at reading medical diagnoses. It's really good at classifying things, at doing the transcript when your doctor's talking to you, taking notes, all that.
But I think the other thing is... And we just had this conversation today, my colleague Hans Leida and I, who's a health actuary, is that with healthcare, the reason that it's gone up so much is because we've gotten so much better at it. We are solving so many conditions now. I mean, think about a hundred years ago, right? Life expectancy is way up.
Now, it has taken a little bit of a turn lately because of some of the epidemics that we face with some of the things we're trying to address today, but the therapies are improving. We've mapped the human genome. That's going to be kind of an area of exploration going forward to cure these conditions. I just read the other day that they linked multiple sclerosis to a bacteria in your gut-
Bilal Little:
Really?
Adam Schenck:
... that actually gets your immune system.
Bilal Little:
I believe that. I totally believe it.
Adam Schenck:
Right?
Bilal Little:
Yeah.
Adam Schenck:
So that's the research that is being done to help everyone's life improve. And then that research needs to be paid for because it costs a lot to do that.
Bilal Little:
It's not free.
Adam Schenck:
It costs a lot to do all those trials and things like that. And so then the drug companies are trying to recoup that and maintain a profit margin and things like that. So I think that's why healthcare inflation is different than some of the other things that will improve with AI and robotics. We will continue to go down these paths that are really beneficial to the human race that costs a lot to develop.
Bilal Little:
I'm sorry, these questions... Now my questions have... They've pivoted now that I have to think about some of the uniqueness of this. But one of the things that I was pondering, as you were just mentioning that, is I watched a documentary on Google DeepMind about mapping proteins and this particular issue and how AI enabled that to happen faster. And when they solved the problem, they were thinking, "Hey, do we keep this to ourselves or do we open it up open source and we allow any and everyone to try to solve and utilize this as a platform?" How are you all thinking about the technology companies that are enabling better healthcare opportunities in that vertical of the stocks that you pick and/or select?
Adam Schenck:
Yeah. So that's why we have what we call the supply chain, right?
Bilal Little:
Okay.
Adam Schenck:
Because these are companies that are healthcare adjacent that are developing things that funnel into healthcare. And certainly as they start to actually do insurance, things like that, then that's part of our ongoing commitment to continuing to try to get better at solving this problem and keeping up with how these companies change and evolve. But yeah, you can't leave those companies off with this. You need them in there.
And that was, again, one of the things we realized over this three-year period. We started with just healthcare equities, but then we said, "You know what? Things like this are going to happen where these companies are going to be important, so we need to not leave them behind."
Bilal Little:
Oh, that's fantastic. That's fantastic. All right. So I want to pivot really quickly. Two questions that were buzzing for me. These are active strategies today. However, you have indices that have track records for a long time that you've built. Can you talk a little bit about when you built those indices and how you're utilizing some of that information into the active strategies today?
Adam Schenck:
Yeah. So once we had the strategy to a place where we thought, "You know what? We've got a good kind of-"
Bilal Little:
Foundation. Yeah.
Adam Schenck:
"... foundation of how we're going to do this," we turned it on in a live SMA account.
Bilal Little:
Okay.
Adam Schenck:
And that allowed us to demonstrate the performance, at least over the last two years-
Bilal Little:
Because this is all-
Adam Schenck:
... [inaudible 00:34:44].
Bilal Little:
... proprietary data.
Adam Schenck:
It is. Yeah.
Bilal Little:
Yeah.
Adam Schenck:
So we turned it on, and just pulled some capital from the Milliman partners and put it in an account. And what that enabled us to do with today's launch is to include that performance. Basically, that account became the first shareholder of the Milliman Healthcare Inflation Guard ETF.
Bilal Little:
Wow.
Adam Schenck:
And so that it adopted the performance. And you see that in the prospectus. So I think that hopefully gives people a sense that this is not new. This ETF is effectively starting with two years of track record.
And we did a lot of testing. These are active strategies because we do have a lot of flexibility in the prospectus to choose different things, but it's not a round table of CFAs picking individual stocks. Given our pedigree in risk management, we know that in order for these things to work, you need to be repeatable, you need to be reliable. So it's a systematic strategy that's driven by the data assets that we have.
Bilal Little:
Do you work with any of the custodians and know partners to try to get this product readily available into some of the defined opportunities? So the defined opportunities, think about your HSA. Again, options are limited-
Adam Schenck:
Oh, yeah.
Bilal Little:
... of what you can get. And this sounds like it's directly solving a problem that people will have related to their healthcare costs. How are you thinking about that?
Adam Schenck:
We're talking to some HSA providers certainly, about enabling these strategies in their platforms. And then certainly it's going to come up in the 401(k) space as well, but obviously that's difficult given the benchmarking and all that that needs to happen there and how conservative some of those record keepers are for new strategies, but certainly we're-
Bilal Little:
Would your team think about... And you probably are thinking about, given the share class function of the ETF, of going the other way of launching the mutual fund structure to be able to get on platform-
Adam Schenck:
Yeah.
Bilal Little:
... and do some of the-
Adam Schenck:
That's part of our filing.
Bilal Little:
Yeah.
Adam Schenck:
Yeah.
Bilal Little:
Which makes sense.
Adam Schenck:
So we foresaw that, and we added that just in case we need to go the other way, given some of the largely technological-
Bilal Little:
Exactly.
Adam Schenck:
... limitations of the platforms on that side.
Bilal Little:
That's really, really cool, man. That's neat.
Adam Schenck:
Yeah.
Bilal Little:
If you could say, in a very succinct way, how people should think about Milliman in this ETF space, what would you say?
Adam Schenck:
It seems like we're new, but we're an old soul in risk management and healthcare. And I think our history gives us a lot of credibility to be doing this now at a time where Americans really need something like this.
Bilal Little:
Yeah. I got to tell you, this is probably the first conversation that I had more in depth about the product set like this because there aren't many... obviously, we're trying to solve for this. So I think you guys have carved out a nice niche in the ETF space, so kudos to you. Now we're getting to a point where I ask you a bit of a curveball question.
Adam Schenck:
Okay.
Bilal Little:
This curveball question is designed to catch you completely off guard, because I don't even know what it is yet. But no, it's important to me. There's a lot of young people who are struggling to create space in this new environment. This is the first time in history that you have four generations of people vying for the same level of jobs, and technology is a massive force that's shifting. Do you have kids?
Adam Schenck:
I do. Three.
Bilal Little:
You have three. My question to you is, for a young person today, what advice would you give them to get started in a career that they're passionate about at a time when the market is hyper-competitive?
Adam Schenck:
Yeah. I mean, I would say that don't get discouraged because everything is so uncertain. And we know it's going to change. We just don't know how. So I think it's keep your head down, continue to learn, and be excited about learning. Because at the end of the day, all this AI is built on the top of human knowledge. They're not creating anything new that only they know. They're building on what we have developed and what we have produced. That's not going to change, right? I don't think that's going to change. So that's one.
I think the other thing is, and Mark Cuban said this, well, all these companies... There's a lot of companies out there that do great work, and the leaders of those companies are maybe not tech-savvy, maybe don't understand what this AI is and how to use it. And there's opportunities in a lot of those companies for young people that have been living with this, that grew up with this to go in there and help make their businesses way more efficient. So I love that when I saw that. I think I was just reading that this morning from Mark Cuban.
So I think just stay the course. Don't get rattled. We're going to figure this out. I think human beings... I'm very optimistic about our potential, and I think we're going to figure out how to have this as a big asset to do things better and elevate everything. But it's scary today, and it's... Certainly for people I know, we know a lot of people that have people just getting out of high school, getting out of college and wondering, "What am I going to do with all this upheaval?"
Bilal Little:
Thank you so much for sharing. And, Adam, thank you for joining ETF Central.
Adam Schenck:
Absolutely. Thanks for having me. It's been fun.