Decreased confidence in Amplify Online Retail ETF's prospects relative to its Morningstar Category peers leads to a downgrade in this strategy's Morningstar Medalist Rating to Negative from Neutral. The strategy charges fees in line with its similarly distributed peers, priced within the middle quintile.  

 The strategy earns a Below Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in liquidity exposure and volatility exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. The strategy’s management team earns an Average People Pillar rating. The strategy's parent organization earns the firm a Below Average Parent Pillar rating, and this rating is inherited from vehicles belonging to the same branding entity and is indirectly assigned by an analyst.

Analyst Rating

Wayfair

BigCommerce Holdings, Inc.

Carvana

FIGS

Revolve

Liquidity Services

Chewy

1-800-FLOWERS.COM

Hims & Hers Health

Booking Hlds

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. Amplify Online Retail ETF earns a Below Average Process Pillar rating. The process benefits from tracking an index. Historical data, such as Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. However, the rating is held back by the fund's mediocre long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the process has struggled over that period. The parent firm's five-year risk-adjusted success ratio of 30% also detracts from the process. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's subpar success ratio suggests that the firm could do better across its fund lineup.

The investment strategy as stated in the fund's prospectus is:  The investment seeks investment results that generally correspond (before fees and expenses) to the price and yield of the EQM Online Retail Index.  The fund will invest at least 80% of its net assets in global equity securities that comprise the index, which will primarily include common stocks and/or depositary receipts, and such as ADRs and GDRs. The index seeks to measure the performance of global equity securities of publicly traded companies with significant revenue from the online retail business. The index methodology is designed to result in a portfolio that has the potential for capital appreciation. 

 The portfolio is overweight in communication services and technology relative to the category average by 10.5 and 9.0 percentage points, respectively. The sectors with low exposure compared to category peers are consumer cyclical and industrials, underweight the average by 20.1 and 4.2 percentage points of assets, respectively. The strategy owns 73 securities and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 33.3% of the fund’s assets were concentrated in the top 10 fund holdings, as opposed to the category average's 44.1%. And in closing, in terms of portfolio turnover, on a year-over-year basis, 62% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Below Average

Process

Amplify’s  team is comparable to peers, resulting in an Average People Pillar rating. There are three managers listed on the fund: Dustin Lewellyn, Ernesto Tong, Anand Desai. The team is well equipped, with an average of 11 years of portfolio management experience. Together, they manage a total of 32 strategies, with a Bronze asset-weighted average Morningstar Medalist Rating, demonstrating their potential to deliver positive alpha relative to the category median in aggregate.  

 Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

Average

People

While differentiated from much of the competition, Amplify ETFs' concentrated lineup of largely thematic exchange-traded funds harbors considerable risk. It earns a Below Average Parent Rating.

Amplify targets niches not previously explored by larger ETF firms. This leads to product launches in relatively narrow parts of the market like cannabis, online retail, and battery technology. A recent acquisition of 12 mostly thematic ETFs from ETF Managers Group only enhances this focus. Products like these tend to be extremely concentrated and volatile, inviting significant risks to their investors, not the least of which are ill-timed purchases and sales. Because of these risks, product success is unpredictable and leads to more closures than there are among traditional strategies. Since its 2016 founding, Amplify has merged or liquidated several ETFs that failed to gain traction or produced poor results.

Five subadvisors are responsible for the day-to-day management of Amplify's 29 ETFs. The firm regularly reviews subadvisor activity and performance and risk data but does not have a dedicated risk management team. Overall, its subadvisory relationships seem to emphasize product development and distribution rather than long-term, proven investment merit.

Amplify ETFs does what it sets out to do—offer investors differentiated ETF strategies—and leadership comes with considerable ETF experience. The firm's ETFs are not cheap but neither are they particularly pricey. Many levy category-competitive fees. Few of Amplify's ETFs should be considered core holdings, but they can serve a purpose for investors seeking specific exposures so long as shareholders understand the risks embedded.

Parent

Amplify Online Retail ETF

IBUY tracks an index of global stocks issued by firms with revenues dominated by online retail sales. Stocks are equally weighted within two geographic buckets.

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News for Amplify Online Retail ETF ETF (IBUY)