Neither process nor people stand out at Amplify BlueStar Israel Technology ETF, but it gets enough right to help this strategy retain its Morningstar Medalist Rating of Bronze. The portfolio maintains a sizable cost advantage over competitors, priced within the second-cheapest fee quintile among peers.  

 The strategy gets an Average Process Pillar. 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 team managing the passive strategy earns the strategy 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

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Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. Amplify Bluestar Israel Technology ETF earns an Average Process Pillar rating. The most important driver of the rating is that this fund tracks an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. The firm's five-year retention rate of 93% also contributes to the process. Lastly, the process is limited by the parent firm's five-year risk-adjusted success ratio of 42%. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's relatively low 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 total return performance of the BlueStar Israel Global Technology Index™.  The index tracks the performance of exchange-listed Israeli technology operating companies. The fund will invest at least 80% of its total assets in the component securities of the index. The fund is non-diversified. 

 The portfolio is overweight in utilities and industrials relative to the category average by 4.6 and 3.9 percentage points, respectively. The sectors with low exposure compared to category peers are communication services and technology, underweight the average by 5.6 and 4.7 percentage points of assets, respectively. The portfolio is composed of 57 holdings and is quite concentrated. More concretely, 58.9% of the fund’s assets are housed within the top 10 holdings, as opposed to the category average of 52.3%.

Average

Process

Amplify’s team receives An Average People Pillar rating. The main contributor to the rating is the firm's five-year retention rate of 93%. The size of the portfolio management team also influences the rating. With two portfolio managers, the fund is reasonably well-resourced. Lastly, the rating is limited by the combined average three-year excess return of each manager, which implies that the funds they manage have underperformed their respective category 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.

Below Average

Parent

Amplify BlueStar Israel Technology ETF

ITEQ tracks an index composed of Israeli technology companies listed globally.

ITEQ tracks a market cap-weighted index composed of Israeli technology companies. The fund provides exposure to various industries, including biotech, healthcare, defense tech, clean energy, water tech, and life sciences.

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ITEQ 0.09%
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News for Amplify BlueStar Israel Technology ETF ETF (ITEQ)