Amplify High Income ETF's recent fee hike and decreased Parent Pillar rating result in a drop in this strategy's Morningstar Medalist Rating to Neutral from Bronze. Fees are a weakness here. The strategy's lofty fees are a high hurdle to clear, as it is priced within the highest quintile among peers.  

 The strategy’s management team earns an Average People Pillar rating. The strategy's investment approach stands out and earns an Above Average Process Pillar rating.  The strategy's parent organization earns the firm a Below Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

Morningstar's evaluation of this fund's process seeks to determine how repeatable, consistent, and reliable it is, and whether management maintains a competitive advantage. Amplify High Income ETF earns an Above Average Process Pillar rating.  The most significant contributor to the rating is that this fund tracks 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. 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 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 as follows: 

 The investment seeks investment results that generally correspond to the price and yield of the ISE High IncomeTM Index (the “index”).  The fund will normally invest at least 80% of its net assets in securities of the index. Because the index is comprised of securities issued by other investment companies, the fund operates in a manner that is commonly referred to as a "fund of funds, and " meaning that it invests its assets in shares of funds that are included in the index. The index seeks to measure the performance of the top 45 U.S. exchange-listed closed-end funds.  

 The portfolio is overweight in energy and utilities relative to the category average by 17.1 and 16.8 percentage points, respectively. The sectors with low exposure compared to category peers are technology and healthcare, underweight the average by 14.8 and 5.2 percentage points , respectively. The portfolio is overweight in Developed Europe and United Kingdom regions relative to the category average by 3.1 percentage points and 2.8 percentage points, respectively. The regions with low exposure compared to their category peers are North America and Japan, with North America underweight the average by 4.1 percentage points and Japan similar to the average.

 The fund’s bond sleeve takes on more interest rate risk as its average duration is 6.5 years compared with the category average’s 4.6 years.

Above Average

Process

Amplify’s team is valuable but does not stand out as one of the industry's best, warranting an Average People Pillar rating. There are three managers listed on the fund: Anand Desai, Ernesto Tong, Dustin Lewellyn. The team is well equipped, with an average of 11 years of portfolio management experience. Together, they manage a total of 28 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.

Below Average

Parent

YieldShares High Income ETF

YYY tracks an index of US-listed closed-end funds, weighted by yield, discount to NAV, and trading volume. There are no restrictions on the assets or strategies of the underlying funds.

Amplify High Income ETF has maintained a consistent portfolio allocation with a focus on high-yielding closed-end funds. YYY delivered strong returns in 2023 but still under-earns its distribution yield, raising concerns about the sustainability of its payouts. Investors may want to consider the Saba Closed-End Fund ETF as an alternative, with higher historical returns and a more sustainable distribution policy.

Clear Winner Between YYY And CEFS

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While ETFs are traditionally passive products, active opportunities in the broader ETF market have been growing significantly over the past few years. Active ETFs of CEFs have historically had lower distribution rates than their passive counterparts.

Passive Vs. Active ETFs Of CEFs

Closed-end funds (CEFs) are relatively under the radar compared to peers like exchange-traded funds (ETFs) and mutual funds. Closed-end funds are generally desirable for two reasons: 1) high income; and 2) premium/discount mechanism.

Passive vs. Active ETFs of CEFs

Amplify High Income ETF warrants a sell rating due to declining share price, high expense ratio, and negative dividend growth rate. YYY consists of 79% bonds and 21% stocks, with holdings in U.S.-based closed-end funds. An alternative fixed-income fund, JPMorgan Equity Premium Income ETF, is preferred over YYY due to more favorable characteristics.

YYY: Too Many Factors Working Against This Income ETF

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CHICAGO, Nov. 28, 2023 (GLOBE NEWSWIRE) -- Amplify ETFs announces November income distributions for its ETFs.

Amplify ETFs Declares November Income Distributions for its ETFs

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It's been a great year for alternative income strategies as inflation, interest rate, and recession risk fears dominated markets. Garrett Paolella of NEOS and Christian Magoon of Amplify ETFs joined VettaFi's Tom Lydon to discuss alternative income opportunities at the Income Strategy Symposium hosted by VettaFi on October 27.

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Amplify High Income ETF is structured as an exchange-traded fund and serves as a "fund of funds" in the closed-end fund space. YYY aims to replicate the ISE High Income Index, which selects CEFs ranked highest overall by ISE via the following factors: yield, discount to net asset value and liquidity. The article argues why a rules-based methodology, like the one used by YYY, might not be suitable for the CEF space, with the fund's historic performance confirming this view.

YYY: Fund Of Funds That Fails To Deliver

CHICAGO, Oct. 27, 2023 (GLOBE NEWSWIRE) -- Amplify ETFs announces October income distributions for its ETFs.

Amplify ETFs Declares October Income Distributions for its ETFs

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Amplify High Income ETF has underperformed the S&P 500 index, with a -33% price decrease and -11% total return since February 2021. The YYY ETF is a fund of closed-end funds with a high expense ratio of 2.72% and a portfolio heavily weighted towards bonds. A rotational strategy in CEFs may be a better option for preserving capital and income stream against erosion and inflation compared to YYY.

YYY: Data Are Unattractive, And That's A Euphemism

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CHICAGO, Sept. 27, 2023 (GLOBE NEWSWIRE) -- Amplify ETFs announces September income distributions for its ETFs.

Amplify ETFs Declares September Income Distributions for its ETFs

CHICAGO, Aug. 29, 2023 (GLOBE NEWSWIRE) -- Amplify ETFs announces August income distributions for its ETFs.

Amplify ETFs Declares August Income Distributions for its ETFs

Amplify High Income ETF holds a basket of high-income closed-end funds. These include PDI, OXLC, USA, PTY, PAXS, and JPS. This does appear like income on steroids with extreme levels of diversification.

Amplify High Income: 12% Yield With Holdings Including PDI, PTY, OXLC, And USA

YYY invests in high-yield, highly discounted liquid CEFs but has a history of investing in underperforming CEFs, leading to consistent capital losses and dividend cuts. Despite its strong 12.2% dividend yield and diversified portfolio, YYY's strategy has proven ineffective, with the fund's share price down 41% since inception and dividends declining by 50%. A look at the fund, and its many pitfalls, follows.

YYY: Risky, Ineffective Strategy, Declining Share Price And Dividends

Amplify High Income ETF has a current dividend yield of 12% but has underperformed market indices since its inception, with a share price down -42%. The fund holds 45 CEFs in its portfolio, selected based on dividend yield, discount to NAV and liquidity, but this approach can result in picking "yield traps" and underperforming CEFs. The fund's long-term performance shows an annual compounded growth rate of 3.12%, and its total annual return is only a quarter of its annual dividend.

Don't Expect Too Much From YYY

CHICAGO, June 28, 2023 (GLOBE NEWSWIRE) -- Amplify ETFs announces June income distributions for its ETFs.

Amplify ETFs Declares June Income Distributions for its ETFs

Ampify ETFs' CEO and co-founder Christian Magoon told NYSE's Judy Shaw at Exchange 2023 that the company is “really focused on income this year.” See more: “Amplify's Thematic ETF Lineup Will Soon Be More Diverse” “I know rates are rising, and people are getting a little bit more in their savings account,” Magoon said.

NYSE's ETF Leaders: Amplify ETFs' Christian Magoon

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The thematic ETF world will soon have a larger player to watch. Today, Amplify ETFs announced plans to acquire the ETF Managers Group (ETFMG) ETF lineup.

Amplify's Thematic ETF Lineup Will Soon Be More Diverse

Amplify High Income ETF is an exchange-traded fund of closed-end funds implementing a rules-based strategy. The yield is attractive, but history shows a steady decay in value and distributions.

YYY: A High-Yield, High-Risk Fund

Amplify ETFs, sponsored by Amplify Investments, has over $4.2 billion in assets across its suite of ETFs (as of 3/31/2023). Amplify believes the ETF structure empowers investors through efficiency, transparency, and flexibility. Amplify ETFs delivers expanded investment opportunities for investors seeking growth, income, and risk-managed strategies.

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VettaFi's Associate Director of Research, Roxanna Islam, joined the Active Investment Company Alliance's The NAVigator podcast and host Chuck Jaffe to talk ETFs, and specifically, buying closed-end funds in the ETF wrapper.

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If you're looking for the best closed-end funds (CEFs) to buy, it helps if you understand what they are and aren't. They are similar to initial public offerings (IPOs) and stocks in that an amount of capital is raised at the launch.

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CHICAGO, March 29, 2023 (GLOBE NEWSWIRE) -- Amplify ETFs announces March income distributions for its ETFs.

News for YieldShares High Income ETF ETF (YYY)