Amplify is the latest ETF issuer to create a fund specifically designed to benefit from runaway inflation, although this one includes a hefty weighting in bitcoin products.
The Amplify Inflation Fighter ETF (IWIN) debuted on the NYSE Arca Wednesday with an expense ratio of 0.85%.
IWIN is actively managed by subadvisor Toroso Investments and aims to build a basket of securities that accesses inflation-sensitive industries based on where it believes inflation is being driven. The fund can place up to 60% of its assets in equities linked in particular to real estate and commodity production. It can also allocate up to 40% of its assets to buy securities directly linked to the price of commodities.
The fund also has a rather large potential allocation to bitcoin, which is often touted as resistant to inflation because its value isn’t directly tethered to other asset classes, and there is a mathematical limit to the number of tokens that can be mined. IWIN can allocate up to 20% of its assets into bitcoin futures, and up to 15% of assets into the private-placement Grayscale Bitcoin Trust.
Toroso Chief Investment Officer Mike Venuto described the fund as a “thematic” take that changes based on whether loose monetary policy or the rising cost of goods is the bigger driver of inflation.
IWIN will tilt more of its assets toward equities, Venuto says, as the firm sees the Fed’s planned rate hikes slowing the monetary policy driver of inflation.
“If we saw that the biggest inflation threat was the money printer turning back on, most likely in that scenario, we would be 20% bitcoin and 20% gold, because that’s a scenario where we’re fighting the debasement of our currency,” he said.
Inflation strategies have gained steam alongside steadily high inflation in the U.S. throughout 2021, with the headline Consumer Price Index rising 7.0%, and core CPI rising 5.5% over the year.
ETFs that aim to actively hedge or profit off inflation already exist in the form of the Quadratic Interest Rate Volatility and Inflation Hedge ETF (IVOL), the VanEck Inflation Allocation ETF (RAAX), AXS Astoria Inflation Sensitive ETF (PPI) and the SPDR SSgA Multi-Asset Real Return ETF (RLY).
Venuto says having potential allocations to both bitcoin futures and the Grayscale trust allows the fund to allocate its exposure to each of them depending on factors like liquidity or GBTC trading above or below its net asset value, while keeping the noncorrelation that cryptocurrencies have against fiat currencies.