Amplify Debuts Int’l Black Swan ETF

January 26, 2021

Amplify today followed up on the success of its $777 million Amplify BlackSwan Growth & Treasury Core ETF (SWAN) with the launch of an international version. The Amplify BlackSwan ISWN ETF (ISWN) offers exposure to the iShares MSCI EAFE ETF (EFA) via long-dated options (LEAPS), but hedges that exposure with an allocation to a portfolio of Treasury securities.

ISWN comes with an expense ratio of 0.49% and lists on the NYSE Arca.

The fund’s underlying index allocates 10% to the purchase of in-the-money LEAP options on EFA and 90% to the Treasury securities. The LEAP options are intended to offer about 70% participation in the performance of EFA. The Treasury portion of the portfolio comprises a variety of maturities from two years to 30 years, with the aim of achieving a duration that matches the initial duration of the U.S. 10-year Treasury note, the prospectus says.

According to Amplify CEO Christian Magoon, his firm had received requests for an international version of SWAN from existing investors in its products who were looking for more exposure to international markets.

“ISWN is designed to provide exposure to international equities but with a built-in hedge against significant declines (10% or greater) in stocks—often referred to as BlackSwan events,” he said, describing the fund as something that can be used as a core holding or in an alternatives sleeve.

“The BlackSwan strategy via SWAN or ISWN is always hedged due to its U.S. Treasury exposure. There are no triggers or moving averages to worry about. As we saw during the COVID lows, many hedged products either weren’t hedged quickly enough or perhaps at all, which proved to be problematic. Investors don’t have to worry about timing risk with the hedged portion of SWAN or ISWN because that hedge position is constant,” Magoon explained.

Although SWAN, which uses a similar strategy with the SPDR S&P 500 ETF Trust (SPY), has trailed the S&P 500 somewhat during its two full years of trading, it has offered a much smoother ride. For example, during the market crash, when the S&P 500 was down 30%, SWAN was down roughly 5%, he said. ISWN aims to offer that same buffered exposure to developed markets beyond the U.S.

Contact Heather Bell at [email protected]

 

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