An incline in its Process Pillar rating is the primary driver of Amplify Inflation Fighter ETF's upgrade to a Morningstar Medalist Rating of Neutral from Negative. The strategy charges fees in line with its similarly distributed peers, priced within the middle quintile.  

 The longest-tenured manager has a wealth of experience, but due to other weaknesses, the strategy earns a Below Average People Pillar. The strategy gets an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a considerable underweight position in liquidity exposure and has a substantial overweight in quality exposure compared with category peers. Low liquidity risk exposure is attributed to stocks with a low trading volume, limiting managers' flexibility. And a high quality exposure is rooted in holding stocks with low financial leverage and strong returns on equity. 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 index on a risk-adjusted basis over the long term. Amplify Inflation Fighter ETF earns an Average Process Pillar rating. 

The main driver of the rating is the firm's five-year retention rate of 93% over the period. The size of the portfolio management team also strengthens the process. With three portfolio managers, the fund is reasonably well-resourced. Lastly, the process is limited by the parent firm's five-year risk-adjusted success ratio of 30%. 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 modest success ratio suggests that the firm could do better across its fund lineup.

 This strategy leans toward larger, more growth-oriented companies than its average peer in the Small Blend Morningstar Category. Looking at additional factor exposure, this strategy continually held some stocks with low trading volume over the last few years. Less-liquid stocks might offer strong returns to compensate for their risks, but they can be harder and more expensive to trade in bear markets. In the latest month, the strategy was also less exposed to the Liquidity factor compared with Morningstar Category peers. This strategy also has tilted in favor of high-quality stocks, those that have demonstrated low financial leverage and solid return on equity, during these years. Such holdings could cause it to trail peers during economic booms, but help it better endure busts. Compared with category peers, the strategy also had more exposure to the Quality factor in the most recent month. In addition, this strategy has exhibited a tilt toward higher-volatility stocks in these years, meaning companies that have a higher historical standard deviation of returns compared with peers. Such stocks tend to rise faster and fall harder than the broad market. High-volatility exposure contributes to stronger performance during bull markets, but often at the cost of losing more during downturns. Nevertheless, the fund's Volatility exposure was in line with peers in the latest month. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio is overweight in energy and real estate relative to the category average by 21.2 and 20.2 percentage points, respectively. The sectors with low exposure compared to category peers are industrials and financial services, underweight the average by 17.6 and 14.6 percentage points of assets, respectively. The portfolio is positioned across 63 holdings and is quite concentrated. In particular, 36.1% of the fund’s assets are housed within the top 10 holdings, compared to the category average of 24.4%. And finally, in terms of portfolio turnover, looking at year-over-year movements, 23% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Average

Process

Amplify Inflation Fighter ETF earns a Below Average People Pillar rating. The team is supported by the firm's five-year retention rate of 93%. However, the rating is weakened by the combined average five-year excess return of each manager, which shows that the funds they manage have trailed their respective category average. The number of months that the management team has been running this vehicle together also holds the rating back.


Michael J. Venuto, the longest-tenured manager on the strategy, provides strong guidance, offering 11 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 2.5 stars, reflecting below-average risk-adjusted performance compared to category peers. Although the team is small, it is a solid supporting cast. Together, the three listed managers boast more than an average of 11 years of listed portfolio management experience.

Below 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 Inflation Fighter ETF

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News for Amplify Inflation Fighter ETF ETF (IWIN)