Revving the ETF vehicle: Roundhill’s CEO on DRAM, next-gen innovation and more

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Funmi Osiyale: The ETF industry has come a long way from traditional index investing. Today, with more than $16 trillion in assets in the U.S. ETF market, investors can access everything, from thematic exposures, derivative-based products, and increasingly sophisticated portfolio tools, all through the ETF wrapper. At the same time, the pace of innovation continues to accelerate. New investment ideas are reaching the market faster than ever, and issuers are continually entering new frontiers of what can be delivered through an ETF. Welcome to J.P. Morgan's Making Sense. I'm Funmi Osiyale from J.P. Morgan's ETF sales team. Today, I'm joined by Dave Mazza, CEO of Roundhill Investments. Launched in 2018, Roundhill has emerged as an innovator in the ETF space, helping pioneer products designed around some of the biggest trends shaping markets today – from AI and semi conductors, and the next generation of retail investing. Dave, thanks so much for being here today.

Dave Mazza: Thanks for having me. It's great to be here.

Funmi Osiyale: Many of our listeners will be familiar with Roundhill products. They'll have heard of MAGS, DRAM, and have heard of Roundhill making its mark in the ETF industry. But can you take us back to the beginning? Tell us about Roundhill's origins and how you got to the firm that you are today.

Dave Mazza: Yeah, no, happy to do so. So Roundhill was founded in 2018 by Will Hershey and Tim Maloney. They were actually in their late 20s at the time, and the impetus behind the firm was creating an asset manager that was really focused on the next generation of investors. So those are millennial investors, Gen Z investors. And most people think that, well, that means it really is only about direct retail, but actually, you know, that's an important part of Roundhill's origin story and really our focus. But when you think about the de-aging of financial advice and the team building approach that financial advisors have, and just, um, as a new generation of portfolio managers coming to the institutional side, the firm w- was well set up for that. And I joined in 2023 really with an idea of helping take that vision and mission, uh, that Will and Tim set out to see if we could, um, bring that to a larger pool of investors. And really since that time, we've been proud of our accomplishments and being able to do so as the firm has expanded markedly over the past few years.

Funmi Osiyale: Now moving on to MAGS, that's a product that really put Roundhill on the map. Can you tell us about the original thesis behind this fund?

Dave Mazza: Yeah, it's interesting. So MAGS is the Roundhill Magnificent Seven ETF, and this was the first ETF to provide precise exposure to the Magnificent 7 stocks. And it's funny when I think about that ETF, when we first launched it, many people were pointing the fingers and saying, "Well, this is going to be the top of the market. This is going to be the end of the Magnificent 7 story." And the term itself, and there's debate over who kind of, uh, first coined it, but at this point, I think the Magnificent 7 and the MAGS are tied at the hip. And what's been interesting to me is really how fast some of the early adoption was. But what we heard from investors is that they were really interested in that precision that, that MAGS could provide, and allowing them to be able to, to make investment in trading decisions with greater certainty of that potential outcome, at least when it comes from the exposure point of view. So, at the same time, MAGS actually, was one of the first ETFs to combine cash equities, so traditional stocks, plus derivatives, in this case, total return swaps, to provide that exposure in a portfolio. So, some of the benefits of MAGS is not just that it, it's a, a highly liquid, uh, vehicle for investors looking to access exposure to those seven names, there was also some financial innovation behind it.

Funmi Osiyale: Thanks so much for those insights. Now, what do you think was the inflection point for Roundhill? What took you from an emerging issuer becoming the firm that we see today?

Dave Mazza: I think certainly the, the growth that we saw with MAGS over the past few years really helped provide validation to the thesis that investors wanted that more precise exposure, were interested in ideas that could not just have the potential for them to outperform, should, should markets do well or the underlying exposures do well, but again, do so with greater certainty. But at the same time, Roundhill has expanded in what I call kind of a new generation of thematics or precise industries, true actively managed ETFs, and then income and other derivatives-based products. So really everything we've been laying out in the areas that we participate in, are all areas of growth and interest from investors both large and small.

Funmi Osiyale: That brings us nicely to DRAM. Take us back to the original insight. What did you see in the memory market that you felt wasn't fully appreciated, and what has surprised you most about the way investors have adopted the fund?

Dave Mazza: Yeah, it's interesting. So, DRAM's origin story has a few different components to it. So the names like Micron, SK Hynix, and Samsung, uh, we had been following, transacting in, in different portfolios for some time, certainly seen, the idea that the memory semiconductor space was emerging as a true bottleneck in the AI build-out, and the underlying performance of those names have had been on a particularly strong run over the past 12 to 18 months. And then when we were looking at saying, "Hey, the ability for investors to actually access these names in a complete fashion is missing." So for example, investors have been using South Korean, equity ETFs as a proxy to gain access to Samsung and SK Hynix. Interestingly enough, the Korean equity market, those two names comprise about 50% of the exposure because their market capitalizations are so large compared to the rest of the equity market. But for an investor, that's kind of an imperfect solution, right? So you get about 50% to the names you want, and then 50% to other names. And, and they may all be good companies, but they're industrials, they're defense stocks, they're shipbuilders. So doing so with South Korea ETFs was, again, a really imperfect solution. And then you can say, "Well, hey, Dave, there's a wide range of great semiconductor ETFs that are available." Well, the challenge with those ETFs is that your exposure to memory might be limited to Micron. You may not have some of the storage names like Western Digital or Sandisk in there, and you most definitely do not have the two South Korean BMS, Samsung and SK Hynix. And until recently, those two names are really inaccessible, uh, to the majority of investors globally. Even for large institutional investors, they can be difficult and sometimes painful to transact in. And so the idea behind DRAM was combining all of those names together in a precise fashion, but also a complete fashion. So the DRAM ETF takes a full global perspective on memory. But what's interesting is that there really is only a handful of companies that are truly involved in this space, so you don't have a large tail of companies that maybe dabble in memory, but isn't really their core business. So DRAM solved a lot of those challenges for investors. And while we were certainly bullish on the outlook for adoption, by investors, I would be remiss to say that we were not surprised at how quickly that adoption came and how, how wide and far that adoption came from.

Funmi Osiyale: Now, both MAGX and DRAM focus on themes that investors were super focused on. When you think of narrowing down on a key theme to focus on, what do you think distinguishes them between being a long-term investment idea and a short-lived narrative?

Dave Mazza: Yeah, this is a really important component because the thematic ETF industry has grown markedly over recent years. A lot of 2026's growth is coming from DRAM itself. So our research team, we really take a mosaic approach to product development, and then portfolio construction so that we can ensure we have, you know, a diverse range of views and points of view on this. And that's really where there's both kind of an art and a science component to it. And so what we're really trying to identify is, is this theme structural in some way? So in the case of memory, the AI build out is going to go in fits and starts, and we're seeing some of that now, of course, with what's happening with the debate about data centers and the funding behind data centers in the U.S. But longer term, you can see the CapEx that's being spent to build what's required for the AI build out. So in that case, there's kind of a, a structural opportunity. Then there are some themes, that need a different catalyst to play out. Maybe in the case of you think of something like a cannabis or a sports betting, that needs legalization or adoption to really kind of have a wider appeal. And then there's other themes that might be a great theme and a good narrative in the market, but they are more just trades. And they may not make a great long-term ETF. So what we're really looking to do is kind of separate the wheat from the shaft to identify are there, is there a structural component, that's being tapped into to provide a longer term, tailwind, or is there something catalyst-driven that, that would provide an opportunity for investors, to access these companies prior to that catalyst happening?

Funmi Osiyale: With the success of DRAM, other issuers have actually started to launch their own derivative or leveraged products around the fund. Do you view this as a form of validation, competition, or as a natural evolution of successful idea?

Dave Mazza: Well, this may be a bit of a cop out, but I would say probably all of those combined in some different way, shape or form. So certainly, there's always a competitive aspect, uh, when someone takes, you know, an idea that you spent time working on and then applies it in a bit of a different way. But the more I've thought about it, I've come to terms with the fact that that isn't really a great sign of validation that, you know, other issuers, uh, or whether they're creating ETF products on it or there's banks creating structured notes around things like DRAM and MAGS. To me, that's real validation across the thesis. And it's saying, "Hey, there's a, essentially, an ETF here that can now be used in different ways, whether that's to provide an amplified exposure for investors, or more so traders looking for daily leverage, or are investors looking for particular outcomes on the income side that can use the options ecosystem and liquidity ecosystem that's been built around these products." I think because the ETF vehicle itself has shown the ability to be used in so many different ways to deliver so many different outcomes to investors and traders that I believe it's ultimately a sign of an evolution of a healthy market.

Funmi Osiyale: Now, Roundhill has built something that's relatively unique to the ETF industry, which is a very direct relationship with retail investors. What have you learned from engaging directly with individual investors that you may not hear through traditional institutional channels? And do you think there are any misconceptions on what the Roundhill investor looks like?

Dave Mazza: It's really interesting. So I think, we all know the book and the movie, Dumb Money and the stories about retail investors, both dating back to the TMT bubble, and then of course what we saw with meme stocks in 2020 and 2021. But if I actually look at what's occurring with direct retail investors today is they're significantly more informed than I’ve, really I think most people believe them to be. We really even view retail investors as a bit of a risk factor in the market that because they play such a greater role today in the U.S. capital markets than they did historically, prior to the COVID period, retail investors made up somewhere around 8%, 10% of daily market volume. Today, that's around, you know, and these numbers fluctuate, but today it's around 20%, 25% on average, and there's different ways to view this data, like I said, but they just play a greater influence in price setting. And they are also really interested in being part of communities. That, I think, is a really distinct component. So, you know, there's a dedicated channel on Reddit, just talking about Roundhill ETFs. So, it's a great means to be able to, to connect with these investors, understand what questions they have. Many of our most successful products have come from ideas of what we're seeing, you know, the retail community talking about.

Funmi Osiyale: So Dave, final question for you before we wrap up today's conversation. You had a front row seat to the evolution of the ETF industry. What do you hope people, five years from now, view of Roundhill and the ETF industry as a whole?

Dave Mazza: I think you hit something really interesting. I've been in and around ETFs now for a long time, and I've worked at a wide variety of firms that offer ETFs in the market. But when I think about Roundhill, the thoughtful financial innovation is something that I'd like people to look back on. Also an opportunity for them to be provided with tools to help them meet particular outcomes that they're interested in, whether that's precise exposure to memory stocks. And they know if you look at the perspectives of DRAM and then compare that to its holdings, it's pretty clear it's doing what it's intended to do. So that's kind of what I mean on the, on the thoughtful side. But also, because the market is so dynamic, I'm excited about where the future could land and where, you know, we can continue to create new, interesting ideas for investors to be able to meet any outcomes that they're looking for in their portfolios.

Funmi Osiyale: Dave, I think that's a really great place to wrap up today's conversation. Appreciate your time and look forward to the next one.

Dave Mazza: Thanks so much for having me, Funmi. This was great.

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