Lisle, Ill.-based Amplify ETFs has completed its acquisition of almost $4 billion in assets from the beleaguered ETF Manager’s Group (ETFMG).
The acquisition includes 14 funds, with 12 traditional ETFs and two ‘33 Act funds, the company said. Amplify has already rebranded its new funds with the Amplify name and the transaction places it in the top 13% of sponsors with a total of 31 ETFs and more than $9 billion in assets under management, according to the firm.
Amplify’s initial attraction to ETFMG had to do with its thematic ETFs, which made up a bulk if not all of ETFMG’s ETF lineup. Amplify has managed mostly equity income products with limited thematic funds and saw the acquisition as a chance to expand its lineup, according to Christian Magoon, CEO of Amplify ETFs.
“We were attracted to their lineup and really felt their lineup fit well within our product line,” he said.
Another factor was that thematic ETFs are well off their high prices. ETFMG’s assets were about $7 billion two years ago compared with the less than the $4 billion that Amplify acquired.
Magoon said he expects those prices to rise again.
He said he sees potential for growth in cybersecurity, cannabis, and Israeli technology. The first two sectors have been showing strong performances this year, while equities in Isreal have declined because of the war with Hamas and political unrest in the Middle-Eastern nation.
“We’re pretty confident that these areas aren’t going away,” he said. “We think this will continue to play an important part of alpha seeking in allocations.”
The deal comes several months after Summit, N.J.-based ETFMG settled charges with the SEC that accused it and its founder and former CEO, Sam Masucci, of disadvantaging an ETF they were advising and lying to trustees to obtain financing to pay for legal fines from a prior settlement.
Masucci and his firms were also fined $78 million in 2019 for breach of contract. Last year’s case led to more than $4 million in fines and penalties for Masucci and his firm. Masucci resigned from his position at ETFMG, and the SEC banned him from participating in the industry for three years.
While the charges did not come out until after Amplify initially announced its plans to acquire ETFMG’s assets, Magoon said his firm was aware of them and saw the controversy as an opportunity.
“We thought this would be an opportunity for us to turn around the lack of platform availability and some of the reputational issues at the parent company,” he said.
Magoon said that the ETFs themselves were never the cause of the controversies. However, because of ETFMG’s problems, the funds could not get on brokerage platforms, he said. With the funds now carrying the Amplify name, Magoon said he is optimistic that will change.
“We heard some really positive things that people are now willing to consider and embrace them because there aren’t the parent company issues and the funds have been solid,” Magoon said.
Amplify also changed the index providers of three of the largest ETFs: Amplify Cybersecurity ETF (HACK), Amplify Mobile Payments (IPAY), and Amplify Junior Silver Miners ETF (SILJ) to NASDAQ. They were originally on the NASDAQ index before ETFMG moved them over to Prime a couple of years ago.
Amplify restored them to NASDAQ because it was the most optimized index to provide both performance and liquidity, according to Magoon.