Amplify Launches 3rd 'BlackSwan' ETF

Amplify ETFs is expanding its lineup of funds meant to provide downside protection against market crashes while gathering partial returns of a major index, this time following the Nasdaq-100.

The Amplify BlackSwan Tech & Treasury ETF (QSWN) debuted on the NYSE Arca on Thursday with an expense ratio of 0.49%.

The fund follows an index that holds approximately 90% of its assets in Treasurys ranging in maturity from two years to 30 years with the goal of matching the initial duration of a 10-year Treasury note.

The other 10% of assets are invested in long-dated call option contracts on the Invesco QQQ Trust (QQQ).

QSWN’s index aims to keep the delta in line so the fund would be exposed to 70% of the gains or losses of QQQ’s movements over a market cycle. The holdings in Treasury assets would in theory grow in value in the midst of a major market downturn.

QSWN follows the Amplify BlackSwan Growth & Treasury Core ETF (SWAN) launched in 2018, and the Amplify BlackSwan ISWN ETF (ISWN) launched in January, which respectively apply the same strategy of holding Treasurys and long-dated options on equity ETFs.

SWAN uses options on the SPDR S&P 500 ETF Trust (SPY), while ISWN carries options on the iShares MSCI EAFE ETF (EFA) for exposure to ex-North American equities.

SWAN and ISWN hold a combined $976 million in assets under management.

SWAN already has a track record to show in times of market crisis. The fund only took a loss of around 7% in the late March 2020 crash compared with the 30% crash in the S&P 500, and outperformed the index up until November.

SPY returned 18.62% through all of 2020, while SWAN returned 15.89%. That amounts to 85% of SPY’s return, and beats SWAN’s target delta of 70% exposure to the direction of the S&P 500.

Amplify CEO Christian Magoon said the Nasdaq-100 is increasingly popular as a large cap growth allocation in portfolios. That gives reason for a hedged exposure to be available for investors, especially as interest rate hikes next year threaten to damper sky-high valuations.

“The strong recent return set, concentration of the index and the markedly high PE’s of the companies in this index are certainly legitimate investor concerns,” he said.

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