Amplify ETFs has launched a new growth equity exchange-traded fund focused on covered-call writing following the success of two similar products in its lineup.
The Amplify CWP Growth & Income ETF (QDVO) delivers high total returns using the capital appreciation of growth-focused equities combined with a high monthly income the fund generates by opportunistically writing covered calls on individual stocks. The new fund is actively managed by Capital Wealth Planning, which has a separately managed account that uses the same strategy, according to Christian Magoon, CEO of Amplify ETFs.
The fund is the third ETF in a suite of similar products that started with the Amplify CWP Enhanced Dividend Income ETF (DIVO), which launched more than 10 years ago and has amassed more than $3 billion in assets. The second was the Amplify CWP International Enhanced Dividend Income ETF (IDVO), which has accumulated about $170 million in assets in two years, according to Magoon.
Given the success the two ETFs have enjoyed, coupled with the fact that the firm did not have a growth-based product in its suite of covered-call ETFs, the Lisle, Ill.-based Amplify moved to rectify that, Magoon said.
“There have been a fair number of covered-call products that instead of focusing on value stocks, they’re really focusing on growth stocks,” said Magoon in an interview. “We didn’t really have that coverage in this lineup.”
About 80% of the new ETF’s investment strategy is dedicated to growth assets, with the rest focused on the covered-call options, the firm said. The specific stocks it will be investing in are large-cap names with growth potential. The goal is to generate about 6% of the income from optimum premiums and 2% from dividends, according to Magoon.
“So this will be a nice way to further diversify or reduce volatility of your growth allocations, because that option income and the quality focus on the growth names should give growth investors a smoother ride in this fund,” he said.
The fund itself is an ideal fit for the growth sleeve of the average portfolio and is less volatile than similar portfolios, Magoon said. It is also an option for those who have been aggressive in the space and want to reduce that risk, he added.
“I think that there’s a lot of people looking to rebalance where their growth allocation is, and this would be more of a prudent way, I think, to invest on the growth side. It could be a nice diversifier for a majority of people who buy growth stocks who are not expecting any dividend income from them and they’re certainly not writing options on the growth stocks.”
The fund has an expense ratio of 55 basis points and is trading on the New York Stock Exchange. It’s available on those platforms where ETFs are available, Magoon said.