In June, the ETF industry learned that issuer ETF Managers Group would be selling its funds to Amplify ETFs. The transaction, once completed, will bring Amplify’s total AUM to $8 billion invested across 29 ETFs.
About a month after the news of the asset acquisition, Sam Masucci resigned as CEO of ETFMG following an SEC investigation. Ultimately, Masucci and his companies were penalized by the SEC to the tune of $4.4 million in all, with Masucci banned from the industry for three years, according to an SEC press release.
VettaFi Managing Editor Heather Bell chatted with Amplify CEO and Founder Christian Magoon about how his firm decided to acquire the 14 ETFMG funds and what they will bring to the Amplify lineup.
How did this deal come about?
Amplify ETFs has been looking at ways to continue to grow our business. We’ve had some notable organic growth over the last few years, and we were starting to look at inorganic growth opportunities. We worked with investment banking, firm Oppenheimer and [its executive director] Gilbert Dychiao. We were looking at the space and market conditions. There were a lot of changes in the space, and we felt there may be some opportunities given market conditions. We were able to uncover an opportunity with the ETF Managers Group.
Amplify ETFs Not a White Label Business
Does the acquisition of ETFMG’s ETFs mean that Amplify will be moving into the white label business? Is that part of the plan?
It’s not part of the plan. We are not a white label sponsor. However, we do tend to license indexes from third parties, and we do use subadvisors to manage certain strategies where they have expertise. Three quick examples are Tim Seymour for the Amplify Seymour Cannabis ETF (CNBS), Tidal for the Amplify Transformational Data Sharing ETF (BLOK) or Capital Wealth Planning for the Amplify CWP Enhanced Dividend Income ETF (DIVO). That is something different from a model standpoint than what ETFMG does.
We look at these ETFs as complementary to our existing product line. We don’t have any plans to be in a white label business. With that being said, there are economic partners for some of these ETFMG ETFs, and we’ll be working with those partners to grow assets. When you look at their product line, some of the largest ETFs they have based on AUM don’t have those partners. ETFs like the ETFMG Prime Cyber Security ETF (HACK), the ETFMG Prime Mobile Payments ETF (IPAY), and the ETFMG Prime Junior Silver Miners ETF (SILJ) are no longer part of a traditional white label arrangement and probably contain about 70%-75% of their AUM as a firm.
Read more: “ETF of the Week: Amplify Online Retail ETF (IBUY)“
Adding a Range of Funds
Is it exciting to integrate something like HACK into your lineup? It’s the first-ever cybersecurity ETF.
We’re super excited in terms of the product fit relative to our product line. Most people thinking of Amplify, wouldn’t guess that 80% of our assets are an income ETF. Yes, we’ve primarily been known for our thematic ETFs, but given market conditions and asset flows over the last two years, we’re now predominantly an income ETF sponsor.
Being able to add HACK, IPAY, the Wedbush ETFMG Video Game Tech ETF (GAMR), the ETFMG Travel Tech Fund (AWAY), the ETFMG Treatments and Testing Advancements ETF (GERM) and the BlueStar Israel Technology Fund (ITEQ) – these are all thematic ETFs that are really disruptive.
It fits really nicely to bolster our thematic ETF offerings. And then there’s a group of more trading-type products like SILJ and the Breakwave Tanker Shipping ETF (BWET) and the Breakwave Dry Bulk Shipping ETF (BDRY). [We are also] adding some core exposure with the Etho Climate Leadership U.S. ETF (ETHO) and the AI Powered Equity ETF (AIEQ). And then you can’t forget that they have, you the first cannabis ETF, the ETFMG Alternative Harvest ETF (MJ), and a U.S.-based cannabis ETF, the ETFMG U.S. Alternative Harvest ETF (MJUS).
We view these all as quite complementary to our existing product line. That was one of the primary motivators when we began talking to ETFMG – we felt like our current footprint would be complementary to theirs. And we felt like we could increase the platform approvals and access to the legacy ETFMG ETFs. Amplify, in general, has more platform access and approvals than ETFMG currently. The ability to not only have a complementary product line but also hopefully bring these products to new firms, and new platforms.
Minimal Overlap
The only area where there might be significant overlap was with the cannabis ETFs. But even then, they don’t really have that much in terms of holdings overlap between the two of them.
The cannabis segment is interesting because they’ve taken an index approach with MJ and MJUS and we’ve taken an active approach with CNBS. That kind of differentiates those product sets. With MJ, being the first cannabis ETF, it has a broader ecosystem approach to investing in cannabis. It’s not necessarily just pure-play companies. There’s the pick-and-axe ecosystem companies that are out there like fertilizer companies and growing equipment. And then MJUS is really just all focused on multi-state operators or MSOs. Flipping over to CNBS, it’s really a combination of U.S. MSOs and pure-play companies in jurisdictions like Canada. There are definitely three different products or different ways to invest in the cannabis ecosystem. We view those as having differentiation.
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