Watch: Masters of Risk | Season 4 Episode 7 (Video): Beyond Traditional Investing: ETFs, AI Themes, and the Next Market Opportunity

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Stewart Webster   00:00:00

Welcome to a special edition of the Masters of Risk podcast coming to you from the 2026 Definitive Risk Conference hosted by S&P Global. This event brings together leaders from across markets, finance and risk management to explore how risk is being understood, measured and managed in an increasingly complex global environment. For this episode, we recorded a series of conversations with senior practitioners spanning valuation, derivatives, private credit, asset management and nonfinancial risk. Each discussion offers a distinct vantage point on today's risk landscape, how uncertainty shows up in different corners of the market and how firms are adapting in real time. Individually, these are focused conversations. Taken together, they tell a broader story about how risk is evolving across asset classes, business models and market cycles. This is Masters of risk. Let's get started. Today, I'm joined by Matthew Tuttle, CEO and Chief Investment Officer of Tutal Capital Management. Matt founded the firm and has become a well-known voice in the ETF space, particularly for challenging traditional investing frameworks and building products designed for a very different kind of market environment. With more than 2 decades of experience in asset management, he's built a reputation for identifying market inefficiencies and translating them into highly targeted ETF strategies from thematic and tactical products to leveraged and inverse exposures that give investors access to areas of the market that were previously difficult to reach. Matt, welcome to Masters of Risk.

Matthew Tuttle   00:01:52

Thank you very much for having me.

Stewart Webster   00:01:53

Absolutely. And Total Capital Management has made significant strides in the ETF space. So I guess, can you tell our audience a little bit about Total Capital Management and then also some of the ETF strategies you guys deploy?

Matthew Tuttle   00:02:05

Yes. So we manage about $5 billion. And give or take, we have about 70 ETFs. We're launching ETFs every single week. So I lose track. We're known for being kind of pioneers in the 2x levered and inverse single stock space. But most recently, we've kind of built out what I want to be doing is a lot more in the thematic space, but really kind of peeling the onion on some of these themes, so not just AI. but kind of the subsectors there. We also look for a lot of investment themes that are below the radar screen that no one's ever heard of before that we think could pop like we did European aerospace and defense. We've got a UFO disclosure ETF. And then we're doing some things on the income side, but not covered calls. Instead, we're selling puts, generate the same amount of income, but don't limit your upside. So that's kind of what we've been working on and we'll continue to work on.

Stewart Webster   00:03:10

Absolutely. And one of the formulas that you coined is called the heat formula, and that's an acronym for our audience here. That's an acronym for hedge, edge, asymmetry and theme. So I guess, can you expound on that and talk about why that's important and beneficial to your investors?

Matthew Tuttle   00:03:28

Yes. So most of what Wall Street teaches investors is 70 years old. And it's amazing to me that every other industry evolves and adapts but not Wall Street investment advice. So we've come up with an entirely different approach. It's how I manage my money. We also have a wealth management firm. It's how we manage money for clients there, and I've got a book coming out about it. So the idea very simply is you should always be hedged, bonds, which Wall Street has traditionally told you will protect you are not a hedge. And we've seen that 2022 liberation Day, the sell-off around the Iran war. Edge is simply be the casino, not the gambler. Put edges in your favor. Casino doesn't win every time, but the deck is stacked in their favor, the gambler always is going to lose. Asymmetry is limit your losses, not your gains. And then themes is this market has become thematic. It's not growth in value, U.S. and international, small, mid, large, you want to be positioned in today and most importantly, tomorrow's top themes. And we write a newsletter about this every day, and that's what we're designing ETFs for now is to fill those buckets.

Stewart Webster   00:04:53

And you're right. Historically, Wall Street would say that the fixed income space would act as a hedge. And you're right, in today's environment with increasing interest rates, we're seeing an increase in the long end of the curve. The valuation of bonds and treasuries, too, are starting to decrease dramatically. I wanted to talk to you a little bit about what we're seeing in the market currently. We're in late May 2026. And the market is quite interesting right now. We're seeing a lot of capital expenditure spend that's causing the market to increase dramatically, especially for these technology companies that you're mentioning about -- and to me, it kind of seems like these valuations could get quite lofty. So I'm just curious what you -- how do you see risk in this space right now? Because right now, everything is green. So how does the contrarian play and say this is actually getting risky?

Matthew Tuttle   00:05:40

So -- and I'd push back on could. I think everything is pretty lofty. We've got an interesting market. So as we're taping this, we've got oil somewhere around $90 a barrel. Maybe the Iran war is ending, maybe it's not, heard it before. When we have free flow through the straight of hormones and no mines, I believe it. But the damage has been done. Oil prices aren't going to go down to $60 overnight. You've got interest rates that have been ticking up, which tells you that the bond vigilantes who were in control of everything are worried about inflation. Then on the other hand, you've got all this AI CapEx spend. So what we're seeing is the market is treating inflation as transitory. We've heard that word before. It didn't work out well the first time we heard it. And in looking at this AI CapEx is this maybe even multi-decade opportunity that dwarfs kind of what we saw during the Internet. And you're not going to call the top. Top could be today, it could be tomorrow, it could be 5 years from now. Good luck. And the way this stuff moves, you're probably going to miss out on gain. So what we tell people, be in the right stocks and that shifts. Technology is changing. Yesterday's right stock is not today's. Interestingly, we've seen a lot of companies come back from the dead, Intel, BlackBerry, Nokia, Qualcomm, companies we left for dead years ago that are now part of this trade. But what I tell people is watch your position sizing. So yes, all right, own Micron, but don't make Micron 50% of your portfolio. Maybe it's 1% of your portfolio. And then balance it out. So one of the ETFs we've just launched is our heavy asset low obsolescence, HALX. It's the halo trade. So basically, what you're looking for are companies that have assets, companies that will either benefit from AI or that AI needs. So energy, utilities, metals, materials, all of that. And we look at that as the new value investing, where it used to be, hey, a stock has a low P, it's good, okay? But maybe it's got a low P because AI is going to crush it. So you can't just blindly do that. So we say, watch your position sizing and balance out the memory, the photonics, the space, all the names people are going with some of these stodgier traditional value type names where AI isn't going to kill them.

Stewart Webster   00:08:17

Now I like what you're saying about the new fund that you guys just introduced. I wouldn't say that's conservative. You're being more prudent, right? You're looking at companies that have a good amount of total assets that are capital intensive, ones that actually have value, right? They're actually credible, and that won't blow up if the AI trade starts to pull back, right? Curious to see your take in terms of when would you start curtailing your investments in this space? Is it when earnings decrease? Is it when an announcement happens? When do you start to see that this space is getting too risky and I need to start pulling back my fund investments?

Matthew Tuttle   00:08:50

So what I'd be looking for is any sort of slowdown in the AI CapEx. So every earnings season, watch what all the hyperscalers are saying, watch what Jensen Huang is saying. They'll tell you when the time comes. Keep an eye on private credit, may or may not be an issue, but keep an eye on that. keep an eye on the consumer. You got to think the consumer is just getting killed. The average consumer is just getting killed right now. I don't know if that will have an impact on the market, but you keep an eye on that. And -- but you also keep peeling the onion. So in 2023, the trade was anything that's AI. Then you look at the bottlenecks. We're big fans of looking at the bottlenecks. So the ones everyone knows are memory, photonics. And I think space is a bottleneck trade. But you've got to keep peeling that further. So one of the areas we're looking at now is glass because for photonics to work well, it works well with glass more than what it's got now. And you've just got to keep peeling that onion as technology continues to change. And what that ends up doing is it gets you out of some of the crowded names into names that people aren't thinking of, but also keep looking for we know what today's theme is, what's tomorrow's theme. So that's where, like, for example, our UFO disclosure ETF comes in, that could be a massive theme that we're not even at a stage where we're early on that.

Stewart Webster   00:10:28

Now what's interesting is you brought up the consumer. And the reason why I'm bringing that up is because bond yields are increasing. So just based on the market alone, we're seeing bond yields increase. However, inflation is starting to tick up, too. So to counteract that, the Fed will have to increase interest rates. And it seems like that will be kind of like a double negative for consumers since a lot of consumer debt is based on the 10-year yield. So how do you think the consumer holds up in the next 12 to 24 months?

Matthew Tuttle   00:10:54

I mean, unfortunately, I don't think they do. Unless oil prices -- unless I'm wrong and oil goes back to $60, like overnight, interest rates come down because you look at it, you're filling up your car, more expensive. Inflation is -- I mean, whatever numbers they give you, it's more than that. So day-to-day is expensive, and you're probably using credit card debt. Interest rates going up, that's more expensive. I don't think the Fed is going to lower -- raise rates, sorry. Why I don't think so is Trump put his guy in, and his guy is there to lower rates. I'd hate to be him right now because he can't lower rates. But if he raises rates, remember what Trump did to Powell, nobody wants that treatment. I just -- I can't imagine they're going to raise them, but they're going to be stuck. They're not going to be able to lower them here either. So the Fed is not going to bail out the consumer.

Stewart Webster   00:11:48

Now speaking about the consumer, you also mentioned private credit. And over the past couple of months or so or the past year, there have actually been private credit ETFs that are targeting retail investors or investment retirement accounts. Do you feel as though private credit should exist in the ETF space? And do you think that's fundamentally sound?

Matthew Tuttle   00:12:07

So I think everything should exist in the ETF space, but I think education is paramount, which is why -- I mean, I think we do more than anybody on the education front. I've again, my daily newsletter, I'm on Twitter all the time talking about things. We do webinars. I do things like this. So we really try to get out there as much as we can from a compliance perspective. I mean, obviously, I can't -- there's a lot of things I can't do, which I wish I could do, but we try as much as we can because I think it's not for anyone to say, hey, this ETF shouldn't exist. But if it exists, we've got to be able to educate you about it.

Stewart Webster   00:12:55

Right. And I like that you're presenting the education component, and it needs to fit inside the client's portfolio accurately, and they need to be able to withstand, for example, illiquidity risk, right? When you're in that private credit space, you can't necessarily get out of the investment, right? So we may have -- ETFs are -- many people love them because they're liquid, right, and they're low cost. But when you add the private credit layer on top of that, it could become illiquid.

Matthew Tuttle   00:13:21

You also got to wonder if something is private and they're offering it to you, probably not that good because the best private investments are offered to the billionaires. If you're not a billionaire and someone's offering you a private investment, I would question that.

Stewart Webster   00:13:39

And what you're getting at is you don't want to be someone else's liquidity, right? And that's what I see a lot in the cryptocurrency space, in the Bitcoin space, I guess, more on the smaller cap cryptocurrencies. But I guess, how does your strategy look in terms of crypto ETFs or investing in that space?

Matthew Tuttle   00:13:55

So I think crypto is something that you should own in your portfolio. You can't trade it, good luck predicting it. We look at it as 2 buckets. So I think you should own Bitcoin. I think you should probably own a little bit of Ethereum, but more on the Bitcoin side right now. I also think you should own digital credit. So what digital credit is, is you've got MicroStrategy and you've got Stryve, which are issuing preferred shares that both pay over 11% taking that money buying Bitcoin. And basically, that yield is -- I mean, if Bitcoin goes to 0, yes, all right, that's -- you're not getting the yield. If Bitcoin has a steady year-after-year drop, all right, you got a problem. But if Bitcoin is just normal, you're getting that yield. So it's a way to get crypto-ish exposure for the person who said, Bitcoin is too wild to ride for me. And of course, we're doing an ETF for that as well, and that will be out in June. The cool thing -- I buy my own ETFs. The cool thing about what I do is I'll design ETFs that I want to buy. I want to buy my digital credit ETF.

Stewart Webster   00:15:08

Absolutely. That sounds interesting. And what I love about research and your ETF strategies is that they're more forward-looking in nature. When we started this conversation, you talked about how a lot of finance is based on past data or past valuation strategies from 70 to 100 years ago, right? And times have significantly changed. So I guess, how do you pick your themes, right? Because you have the UFO ETF, you have SPIC or SPCI, -- these are all profitable investments because you're investing in the new space economy, innovative aerospace and defense sector, right? So these aren't the -- your father's aerospace and defense companies, right? These are new age companies are quite literally launching rockets into space and setting up either -- whether it's a satellite or a data center, so on and so forth. But how do you actually choose your investments within that space? And how do you choose the themes that you capitalize on?

Matthew Tuttle   00:16:01

Yes. So we're looking at it 2 ways. And again, I'm an investor. I've been investing since 1981. And I've been doing thematic investing for quite some time. So we're looking at a few things. First and foremost, where are the bottlenecks for AI to achieve whatever the end goal is, which hopefully isn't to kill us all. But whatever that end goal is, what is stopping it from getting there? And then what company solves that problem. So what we've seen, memory, photonics, and then I would argue space is a bottleneck trade because what's stopping us now is you don't want a data center in your backyard, neither do I. Where are we going to put them? They're going into space. They're not going into space tomorrow. But during our lifetimes, there will be data centers in space. So we look at where are the bottlenecks. But we also look at where are the bottlenecks likely to be because this technology is rapidly changing. But then I want to find what are the non-consensus trades that nobody else is thinking about that makes sense. And you can do that, and I'll give you an example. So we launched European Aerospace and Defense, UAD, right after Trump got elected. We looked at it and said, "All right, we saw Trump 1. What lessons are we going to learn? And what is the Trump trade in Trump 2? Well, he doesn't like NATO, he didn't like paying for all the European countries defense. But the cool thing for us in Trump 2 is you've got Russian tanks in Ukraine that everyone is scared to death -- they're going to roll over the Polish border. And we know what happens when tanks roll into Poland, that's World War III. Trump did exactly what we thought. Hey, NATO, we're not paying for you and the European countries did exactly what we thought. Oh my God, we got to start spending and we're going to do it locally. And I was pounding the table for that trade. Nobody cared. And then last year it was up some ridiculous amount, 70% or whatever it was. And then everyone is piling in, great. I still think it's got legs. We're off to what's the next trade. That's our UFOD. And forget about the aliens, the aliens makes it more fun, but it's really a convergence trade where we're seeing something new in defense, where defense used to be big chips, big tanks, planes. Now it's drones, anti-drones, missile shields, robots, and it's all converging defense and all of these AI aspects and people are not thinking about that. So that, to me, is the next trade that nobody else is thinking about. And we're always looking at it from that standpoint. What's next? What's next? What's next?

Stewart Webster   00:18:56

When you look at these space companies, how is their performance contingent on government expenditures, right? Right now, we're trying to decide we should spend $1.1 trillion on aerospace and defense or $1.5 trillion, right? How much of their growth is dependent on the government expenditures in that space?

Matthew Tuttle   00:19:15

So I don't know that it's a lot. It depends who's going to pay to put the data centers up there. But also space needs a massive infrastructure. So the problem I have when I put a data center in space, I mean, number one, my enemies can attack it. If I put a data center in Indiana and the North Koreans want to get at it, they've got to invade on one coast and march all the way there. probably not going to happen. But if we put a data center in space, then you get one of those James Bond satellites that can come and eat it. So we got to defend it. We got to get stuff back and forth. We've got to have some sort of energy infrastructure. So space is probably going to get really, really crowded. And there's going to be a lot of stuff going on there. Now government will tell you, especially now. I mean, Trump, regardless of what you think of them, is the most investable President we've ever had. It was funny, one of my newsletter subscribers a couple of months ago sent me a text. He's like, I love Trump. He's giving out free money. And just watch where the government is putting its money and invest in it. And you can even predict where is the government going to put its money. So recently, we bought one of the quantum names, INFQ. -- and boom, Trump announced, we're putting money into the quantum names. It was up some ridiculous percent. It's -- we're in this weird area where, yes, the market is bubbly, but you've got the government telling you where to put money. So it's kind of easy right now, which is pretty cool.

Stewart Webster   00:20:52

Absolutely. And on the Masters of Risk podcast, typically, we talk about credit risk, financial risk. But from what you're articulating, I'm seeing more like military risk, right, in space. But what I like about the space economy companies, not only do they make money from launching the satellites, you have to maintain those satellites as well, right? So there's maintenance expenditure. And I guess the margins could be quite sticky or there are recurring margins, right? There's recurring revenue that's coming from maintaining the area.

Matthew Tuttle   00:21:20

Yes. I mean we're not even in the first inning of what's going to happen in space. That is the next frontier, and there's going to be a lot of money to be made there. in companies that are not public right now beyond SpaceX.

Stewart Webster   00:21:38

So I guess if we take a step back, what risk do you think investors or the market in general is underestimating the most this year?

Matthew Tuttle   00:21:45

So I think the bubble risk, which the only way you take care of that is position sizing and diversification. No one ever thinks about tail risk and you should. It's not the down 5% that kills you, it's the down 50%. And we've got an ETF coming out for that. ticker symbol OO should be out in a month or so. But you've got to cover your tail risk. And again, bonds don't do it.

Stewart Webster   00:22:14

Yes, you're right. You should always think about the tail risk, and there's always a black swan event that could happen in the long term. So -- but I definitely want to thank you for joining us today, and we definitely learned a lot around the space economy and around ETF strategies.

Matthew Tuttle   00:22:28

Thank you very much for having me.

Stewart Webster   00:22:30

Thank you, Matt.

Disclaimer   00:22:36

The views and opinions expressed by the guests are their own and do not necessarily reflect those of S&P Global, its affiliates or employees. The content is intended for informational purposes. Discussion of any company, security, product, service or investment strategy does not imply endorsement by S&P Global.