Lisle, Ill.-based Amplify ETFs has launched its first fixed income-only ETF as part of its ongoing partnership with Korean-based Samsung Asset Management (Samsung AM).
The Amplify Samsung SOFR ETF (SOF) will be one of the first funds to track the Secured Overnight Financing Rate (SOFR), which is a replacement for LIBOR. The goal of the ETF is to provide monthly income while reducing portfolio risk at the same time.
The firm is hoping that SOF will offer an alternative to several other funds that are on the shorter end of the curve, according to Bill Belden, president of Amplify ETFs. SOF stands out as a different product for a variety of reasons, one of which is the fact that it tracks a rate rather than an index. However, the firm also believes its uniqueness stems from its location on the short end of the yield curve, which makes it attractive.
“This does cut a bit of a unique portfolio because it’s in between the ultra short space and a money market fund and there aren’t a lot of products that fit in there,” he said. “The attractive yield relative to money market averages and the price stability relative to ultra short offer a compelling risk-adjusted return profile for investors.”
Amplify is optimistic that the fund’s positioning will provide a stable series of returns over any other options available in the market.
“This product has the most stable profile from a fixed-income ETF perspective and it’s just north of where a money market fund would be,” Belden said. “For people looking for an ideal allocation for strategic cash, we feel that this fits that niche really really well and certainly for something that will offer something with a little more appeal than a money market fund.”
The fund will provide clients with a higher monthly yield potential along with total return over cash while at the same time not significantly increasing the risk of duration, according to the firm.
It is the first ETF that the firm is launching in the fixed income space. Amplify ETFs saw the current market conditions and decided that now was the right time to enter the space, according to Belden.
“With all the cash sitting on the sidelines, fixed income is an area that we’ve been looking to build a little bit more of a presence in,” he said.
Samsung AM, which is the largest asset manager and ETF sponsor in Korea, will serve as the sub-advisor for SOF. It is the latest fund the two firms have worked together on, according to Belden. “We like to think that we bring an institutional pedigree with Samsung Asset Management sub-advising this,” he said