Amplify ETFs, looking to solidify its position in the thematic ETF market, has acquired a majority of the fund lineup of another firm, ETF Managers Group.
The Lisle, Ill.-based Amplify has tentatively agreed to bring over 15 of ETFMG’s 18 exchange-traded funds. The transaction requires shareholder approval from both fund companies and should be finalized by the fourth quarter. The ETFs coming over to Amplify have $3.7 billion in assets, according to Sam Masucci, founder and CEO of ETFMG.
Amplify will reorganize the 15 funds on its own platform once the deal is approved, said Bill Belden, president of Amplify ETFs. That transfer should take place by year’s end, he anticipated.
Amplify, which has 15 products with $4.4 billion in assets, built its reputation on thematic ETFs, and it saw an opportunity to double its lineup with the latest deal. Amplify was impressed with a number of the thematic ETFs that the Summit, N.J.-based ETF Managers Group had launched, including funds dedicated to cybersecurity and digital payments.
Belden said there’s very little overlap or redundancy in the two companies’ fund families. “If you look at the area in which these strategies cover in the marketplace, they’re very complementary to ours,” he said. That means when the new ETFs come over, there will be no need to consolidate or eliminate existing products, he added. Though Amplify recently announced it would be shutting down its BIDS ETF, Belden said that decision had nothing to do with the new fund purchases.
The two sides came together as Amplify was looking to expand and as Masucci was looking to move on from the work he has done with ETFMG, a firm he started in 2013. After having spent several years growing its assets and pushing a lot of first-to-market products, he wanted to partner with a firm where the ETFs he launched could grow, he said.
He said Amplify understood “what's involved in growing narrowly focused pure exposure ETFs, and there's not a lot of companies in our space that really specialize in that,” Masucci said.
The contract specifies that ETFMG will no longer launch new ETFs, and Masucci also left plans for his personal future and his firm up in the air. As for the 14 team members currently at ETFMG, Amplify is considering bringing some of them on board, Masucci said.
"We're still in discussions on some of the people from my team that [Amplify] may have interest in,” he said. “I would say at this point it is to be determined on the remaining team beyond the closing, but there will no longer be ETF Managers Group branded funds.”
For its part, Amplify is looking to build out its sales, compliance and marketing departments. The deal with ETFMG makes the need to fill those positions that much greater, Belden said.
“We feel like we can take [ETFMG’s ETFs] on pretty cleanly, but there’s no question as we go forward that building the team out further will equip us better for what we expect to be,” he said.
Three of the ETF Managers Group funds were not included in the transaction, according to Masucci. The future of those funds is also in doubt, since the firm could subadvise them or unwind them altogether, Masucci said. He declined to specify which funds.
Amplify, meanwhile, is open to further partnerships in the industry, though it wants to finish the current deal before it moves forward, Belden said.
“While this is the opportunity that’s coming to bear right now, we’ve had other conversations and found that there were some other market participants who were eager to and interested in having dialogue with us about potential collaborations,” he said.
As for this most recent deal, it is an opportunity for Amplify to provide greater options to financial advisors who are looking for ETFs that follow the thematic approach the firm has been known for.
“We’re expanding our platform … and we feel having a bigger and better product set will enable us to accelerate the pace of that,” Belden said. It will “broaden out the choices that advisors have when looking at Amplify.”