Host Ryan Nauman welcomes Will Rhind, founder and CEO of GraniteShares, to discuss ETF innovation, the growth of active ETFs, and the rising use of derivatives in ETFs. Rhind explains how the SEC’s Derivatives Rule (18f-4) helped enable broader derivatives usage in funds, bringing strategies once limited to hedge funds and ultra-high-net-worth investors into ETF wrappers. The conversation focuses on autocallable strategies—popular in structured notes—designed to deliver attractive yield alongside defined downside protection, and why they resonate when markets are near all-time highs and investors prioritize capital preservation. Rhind highlights liquidity as a key advantage of the ETF structure versus traditional structured notes and discusses how advisors may use auto-callable ETFs as complements to fixed income, equity income, or alternatives.

Learn more about Zephyr here.

Learn more about GraniteShares here.

00:00 Podcast Welcome Disclaimer

01:10 ETFs Innovation Autocallables

02:09 Meet Will Rhind GraniteShares

04:09 Keeping Up With Trends

05:59 Derivative Rule 18f-4

08:04 Autocallable Basics

09:55 Why Now Downside Focus

12:20 Liquidity ETF Wrapper Edge

14:52 Advisor Allocation Playbook

16:56 Wrap Up Where To Learn More

Connect with Ryan Nauman:

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Welcome to the Adjusted for Risk podcast.

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Join myself, Ryan Nauman, as I talk

markets, investments, economics- Let's get

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started ... and life, as I help prepare

you for the upcoming week in markets.

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I work for Zephyr, and all opinions

expressed by myself and my podcast guests

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are solely of their own opinions and

do not reflect the opinion of Zephyr

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or, in form of, its parent company.

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This podcast is for informational

purposes only and should not be

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relied on for investment decisions.

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Welcome, everyone, to Zephyr's

Adjusted for Risk podcast.

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We are recording live on location at the

Exchange ETF Conference in Las Vegas.

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It's been a fantastic two days, had some

really great content, con- conversations,

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uh, about a lot of different sub-

topics, and this last conversation,

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it's gonna be a really good one.

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There's not very many

guarantees in this industry.

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Probably none, I should say.

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This one, I guarantee, is gonna

be a good conversation, so I'm,

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I'm really looking forward to it.

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So as we know, ETFs, they've been a

lot of innovation in the ETF space, and

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growth of active ETFs, it's exploded.

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Last year, I don't know

what the numbers are.

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I think I keep hearing different

numbers of growth, and it's like, wow.

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It's like almost every day, a

new ETF is born, it seems like.

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A lot of innovation in this space, too.

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And one of the hottest topics

in investment management is the

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inclusion of derivatives in ETFs.

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That has also led to auto-callable ETFs.

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Well, I have the industry expert and

a perfect guest to talk all things

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ETFs and all about auto-callables and

what it means for financial advisors.

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But first, this episode is sponsored

by the award-winning Zephyr, which

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helps investment professionals

make more informed investment

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decisions on behalf of their clients.

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All right, enough from me.

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I have already talked enough.

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It's time to bring on

the star of the show.

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I'd like to give a very

warm welcome to Will Rhind.

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Will is the founder and

CEO at Granite Shares.

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Will, thank you so much

for coming on the podcast.

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Really, it's a pleasure to have you on.

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Really excited about this conversation.

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Auto-callables, heard a lot

about them, lot of headlines.

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Really excited to hear more about them.

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But first, can you tell us a little bit

more about yourself and Granite Shares?

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Yeah, well, first of all, thank

you, Ryan, for hosting me, and

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for being at the conference.

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It's been a great, uh, event as always.

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But I'm Will Rhind, founder

and CEO of Granite Shares.

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We're an ETF issuer based in New York.

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We're now a global company, so I

founded the company 10 years ago.

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Seems funny to say that given that, um,

those years have flown by, but we're

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about 11 billion- Assets under management,

and we operate a number of different

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ETFs around the world, uh, ranging

from, you know, commodities to leverage

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to options-based income strategies of

which, you know, we'll be, uh, diving

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into more on this particular podcast.

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Yeah, I love it.

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I- 10 years, when you think about

10 years in the overall scheme

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of things is not very long, but

10 years is a lot in ETF space.

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You probably have seen a lot

in just that short 10 years.

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I mean, it, it's a lot,

and it never stops.

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You know, the, the, the job never,

is never finished, and, you know,

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the market's constantly evolving both

from the, the regulatory side, from

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the, uh, product innovation side, and,

you know, even just funny thinking

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five years ago even, the kind of

strategies that we'd be talking about

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today w- just would not be possible.

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Um- Yeah ... and that just goes to

show, you know, how things move on and,

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you know, how just when people think

that, you know, we, they go, "There

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can't be more innovation, surely."

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You know, we go on and do something else.

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Yeah.

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It's amazing, and I often talk,

like, for financial advisors,

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how do you stay on top of all the

innovation, all the new products?

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It's like they have to wear so many

hats already and stay on top of it.

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But though also for providers and

issuers like GraniteShares, like, how

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do you stay on top of the trends to

know, like, all right, this is the

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next product or the next feature or

innovation, we gotta stay on top?

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How do you stay on top of it,

especially with technology?

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I mean, it's, um, really, I suppose the

difference between success and failure

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ultimately for a company like us because

first and foremost, we're a product

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company, so our job is inventing, and

we're only as good as our last invention.

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And, you know, there's a combination

of experience, um, being in the

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industry and markets for a long

time and understanding trends.

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Uh, there's a, you know, regulatory aspect

to it, understanding how regulations are

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changing and how they apply to potentially

new strategies, and then there's just

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technology more broadly in terms of,

you know, what we'll discuss today,

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which is how technology has enabled us

to bring strategies to market that, you

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know, just previously weren't possible.

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Yeah.

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And the auto-callable is a,

is a great example of that.

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Yeah.

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And before, you would know a lot better

than I would, it would probably take

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months to bring a product to market, and

now it's probably, you know, half that.

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It's probably a lot quicker because

of technology and what technolo-

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it kinda makes it easier Yeah.

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I would say.

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And, and I think it's technology

across the value chain.

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So it's not just about

technology that we have.

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It's about technology that partners

have that enable asset classes to

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be traded, um, to be wrapped, to be

offered in ways that, you know, even

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just a few years ago weren't possible.

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Yeah.

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Yeah, it's fantastic.

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So let's talk about derivatives.

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It's one of the hotter trends in ETFs.

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Innovations is adding derivatives

to ETFs to, you know, offer downside

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protection, risk mitigation.

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What was the primary drivers

of adding derivatives to ETFs?

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Was there one, like, kind of a tipping

point, or was like, "Let's go for it," or

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There's one piece of regulation that came

in after the so-called ETF rule, um, which

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is, you know, conveniently short-handedly

named as the Derivative Rule.

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Um, but, uh- I, I think I can

remember that one now ... yeah.

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That one, that one.

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My memory's not the best.

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That one I can remember, I think.

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It, it's called, it's called 18f-4.

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Um, but- I like Derivative Rule better.

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Exactly.

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Derivate- the Derivative Rule

shorthand, um, really just allowed

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for the wide, you know, scale use of

derivatives in funds, and clarified,

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I think, a lot of positioning around

the use of derivative in funds.

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And, you know, sometimes for those of

people that aren't necessarily that

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familiar with derivatives or don't

use them, you know, specifically on

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their own as individual strategies,

I think just taking a step back, what

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this broadly is all about is taking

strategies that previously were only

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open to ultra-high net worth investors,

hedge funds, et cetera, and then

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wrapping those in the ETF and having

them distributed to the mass market.

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And that's kind of the essence of what the

majority of these strategies are about.

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I'm a big fan of democratization.

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I think it's very important.

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Like you said, a lot of these products

were earmarked for institutions,

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ultra-high net worth, about 1%.

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Now, with ETFs and innovation that

you've talked about, now all of a

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sudden those retail investors or

private wealth get access to it.

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Now, some people may say that brings some

issues, uh, involved, like understanding

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and exactly what is a auto-callable

and, you know, the education part of it.

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But why are auto-ca- uh,

auto-callables in an ETF structure?

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You know, what is it and

how does it work, you know?

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So for those financial advisors,

we've heard a lot about it, you know.

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What, what do they need to know?

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So the word comes from the strategy

which has been the, if not the

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biggest, certainly one of the biggest

selling strategies in the structured

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note or structured product world.

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And these are products that are created

by banks primarily and sold to ultra-high

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net worth clients or financial advisors.

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And the idea is that you give a high

level of yield, which comes from an option

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strategy, uh, with downside protection.

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But define downside protection.

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So- You can get a level of yield,

which is very attractive to the

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investor, plus a level of downside

protection that's knowable.

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So in other words, we offer, uh,

autocallables in single companies,

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um, like some Tesla, Nvidia.

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So the quick proposition to the

investor would be a high level of yield.

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So let's for argument's sake say around

twenty percent per annum, but with a

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defined level of downside protection.

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So if the price of Tesla falls by more

than thirty, forty, fifty percent within

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this particular time, you still get your

yield, which people are looking for.

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Mm.

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So I think it's the combination

of level of income, which is very

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importantly for everybody who's seeking

income, plus understanding where the

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downside is or what the downside is.

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Yeah.

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That's fantastic.

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Great explanation there.

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And I talk a lot about risk,

like understanding what is

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the primary risk of investing.

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Years ago, aging myself, twenty

years ago when I started, it was all

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about standard deviation volatility.

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Now, like at Zephyr, we're

focusing more on post-MPT stats,

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drawdown statistics, you know.

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That to me is the real risk of

investing, losing my money, right?

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Give me all the upside you want, I

just don't wanna lose my money, and

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that's where autocallables protection

on the bottom is so important I think,

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and it helps people sleep at night.

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Yeah.

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I think that's right.

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It's the, the return of your

capital being more important than

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the return on your capital, and

this idea that, you know, as...

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You know, we're, we're obviously at

a particularly interesting time at

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the moment with the war in the Middle

East, but still, we are hovering

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around all-time highs in markets.

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And again, at this particular

juncture, you get investors much

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more interested in saying, "Okay.

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Well, I'm not necessarily concerned about

the market going up too much from here,

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but I'm more concerned about what happens

if it pulls back- Yeah ... and is there

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anything that still gives me yield, but

yet there's some downside protection," and

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that's where the autocallable comes in.

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Yeah.

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I think it's fanta- We've had this

great run-up, let's try and preserve

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some of these gains that we've had.

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Without...

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You know, a lot of times it used to be,

well, if we're gonna preserve the gains,

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we gotta take it off the table, we gotta

sell something and stash those gains away.

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But now with new products like

autocallables and the ETF wrapper, you

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don't have to sell something, right?

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You can still have that protection.

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You take a single stock, for example,

and now you have all these different

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permutations of an expression of an

investment idea with that single stock.

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So you can have leverage

on that single stock.

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You can have a short on that single stock.

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You can have a yield- Whether it's

through covered call type strategies,

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or you can have a yield with downside

protection through auto callables.

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So you still are participating in the

name that you love, but doing it in

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a way that benefits your investment

objective, be it yield, be it, you

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know- Yeah ... upside or downside.

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Um, and I think that's again, a good

example of how the market's evolved.

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Yep.

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I think that's fantastic.

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So kind of the elephant in the room here

is liquidity with all the issues with

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private credit, and which I don't...

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If that's a whole 'nother podcast.

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Yeah.

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We'll, uh, we'll talk about

private credit, but liquidity.

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They need re- liquidity, and I

think we've found that out how

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important liquidity is to them.

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So auto callables, are they a liquid or

more illiquid pri- Is that something that

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investors or financial advisors really

need to consider when recommending them?

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Great question.

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And again, I think this is one of

the, the key, key selling points

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of the ETF wrapper, which is that,

you know, with structured notes,

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typically that's a one-sided market.

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So people would buy a structured

product from a bank, and the idea was

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you hold it or held it to maturity.

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That maturity date could be three years,

could be longer, could be shorter.

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But the point is there's no, no

real secondary market for that.

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You wanted- Mm-hmm ... to sell it

back, um, there wasn't really a market.

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There's not really a market

for that actual note.

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Mm.

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So you've got a package of options

within the fund, and you have

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different auto callable options.

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So the fund itself holds a

portfolio of options, and you

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have two levels of liquidity.

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You have the level of liquidity from

being able to sell the option if the

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underlying was to be called, and then

you have the ETF wrapper liquidity,

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where ETF's listed on exchange,

there's a market maker quoting prices.

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And so with those two levels, you

have a depth and a level of offering

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that you just don't have with the

traditional structured product world.

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And I think you've seen that with

other types of, you know, formally

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structured product type payoffs with

the buffered funds and other varieties,

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whereby putting them in the ETF gives

you that liquidity which you just, you

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just don't have- Mm ... traditionally.

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And like you said, we've realized how

important that is, especially- Oh, yeah

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when now we're seeing a c- after three

years of great markets, now we're seeing

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some distress out there, and the behavior

of retail investors and what they want.

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They demand liquidity.

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S- And that ETF wrapper, the

combination works well, and it provides

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them a strategy that, uh, is j-

normally earmarked for institutions.

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Yeah, that's right.

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So.

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And so it's a big, big benefit

of the ETF more broadly.

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Yeah.

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So let's finish back to

the financial advisor.

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Great product.

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How, how...

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Just now the how.

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Like, they're building a portfolio,

like, what's the type of allocation?

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Is it, you know, do they take it

out of fixed income sleeve, or is

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it more of an alternative sleeve?

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Like, in terms of the construct of

portfolio construction, where, where

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does it fit in, auto callables?

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I, I think it will depend on the

advisor, of course, because auto

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callables are not something new.

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What's new is they're being

put into an ETF wrapper.

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So advisors that run their business and

use auto callables will either be using

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it as a fixed income alternative, using it

as an equity income alternative, or like

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you said, even in the alts, uh, bucket.

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But they will be using it in one of

those three places, and the ETF just

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replaces those existing solutions.

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And typically, what we've seen so far

is that it's a complement to existing

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fixed income portfolios, and income

portfolios more broadly, because with

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the auto callable, it's options, so

you're not doubling down on duration

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risk or credit risk like you are with

different fixed income strategies.

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And so it's able to sit beside

that and complement it quite well.

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And you know, obviously, your, your yield.

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Mm-hmm.

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You know the level of downside protection.

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So from that perspective, people

are comfortable putting it alongside

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fixed income or, of course, in an

alts bucket or wherever they see fit.

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Interesting.

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I'm glad you brought that up, that

it's a complement to fixed income.

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Some may not think that it's com- or

just throw it in that bucket, but it's

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nice not to have to worry about duration.

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Just get into that subject and- Yeah

... you know, trying to explain that to your

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clients and, um, the uncertainty there,

which is what goes on with fixed income.

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Will, great conversation.

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Thank you so much.

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It, uh...

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I've been looking forward to this

conversation for a while now.

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Thank you, Ryan.

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Thank you for coming on.

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It's been an honor.

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Where can our audience get more

information about Granite Shares?

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The best place to find us

would be graniteshares.com,

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which is the main website, and of

course, we're active on social media,

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@graniteshares on X and/or LinkedIn.

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Awesome.

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Thank you, Will, and thank you everyone

for listening to this episode of

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Zephyr's Adjusted for Risk podcast.

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You can catch all of our other episodes

on the Zephyr YouTube channel, Spotify.

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Please be sure to like, follow, and

give us a, uh, follow on LinkedIn.

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Thank you very much, and have

a great rest of your week.

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Let's get started.