Beginning with their introduction nearly three decades ago, the hallmarks of the ETF structure have been efficiency, transparency and flexibility. That is why ETF sponsors have been able to bring products to the market that target the sectors corresponding to the greatest investor demand, areas like online retail and the battery production to support electric cars. At the forefront of this innovation has been Christian Magoon, the founder and CEO of Amplify Exchange Traded Funds.
An ETF veteran, Christian has launched over 60 ETFs in the United States to date. He has helped drive the adoption of ETFs by U.S. investors through numerous educational efforts highlighting the efficiency, transparency and flexibility of the ETF vehicle. Christian has been behind many innovative ETFs, including cybersecurity, online retail, frontier markets, spinoff, solar energy, multi-asset income, data sharing technology, and battery metals. Prior to founding Amplify, Christian served as President of U.S.-based asset manager Claymore Securities. Amplify ETFs, sponsored by Amplify Investments, has over $700 million in assets across seven ETFs for which it is Adviser or Sub-Adviser (as of 2/28/2019).
I interviewed Christian on February 12 at the Inside ETF conference in Hollywood, Florida.
Amplify finished 2018 with significant growth in assets. What stood out to you about last year?
2018 was an interesting year – a great year for stock market investors until about September 20th. What stood out was the volatility we experienced from that September 20th market high through Christmas Eve. It was very challenging at the end of the year, and reminded investors and advisors that there is volatility in the marketplace. Going back to 1941, we have had a 20% chance in any given year of the S&P correcting at least 15%. That hasn't happened for the last eight or nine years, and it was maybe a bit refreshing or startling for some investors and advisors to see that type of decline in a short period of time.
What stood out for me about 2018 was the emergence of that downside volatility that historically has been there, but something we haven't experienced in the last eight or nine years.
We had a great year. We grew our assets 66%. The ETF industry was actually down 1%, and we grew by providing some defensive strategies as well as growth strategies.
One of the big announcements in the world of ETFs are the nominations and the awards that are given out by ETF.COM. Amplify just secured five of those finalist nominations. What can you tell us about that recognition?
We're really pleased. We have seven funds, so to receive five ETF of the Year nominations was an honor, and a little bit surprising, frankly. There are about 2,500 ETFs in the marketplace. One of the areas that we had nominations that we were most excited about was Asset Allocation ETF of the Year. We have a Black Swan ETF (SWAN) that held up very well during that aforementioned decline that's raised some nice assets and has been recognized as a finalist.
We also have the EASI Tactical Growth ETF, which is a growth ETF that has a tactical trigger that can go 100% into fixed income ETFs. It went into fixed income in early October, and really had some attractive performance relative to the typical growth ETF.
Those were two awards we're especially proud of.
Of course our largest ETF, our online retail ETF IBUY, was nominated for Thematic ETF of the Year. People continue to buy online, and that's a basket of companies that benefit from that. We're excited to see if any of these nominations can lead to a win.
Congratulations on those nominations and good luck with the awards. You mentioned the online retail ETF. That's an example of the thematic offering that you're best known for. You also have a defensive ETF suite, and you mentioned your BlackSwan ETF. What are those products and how have they fared?
In addition to the BlackSwan ETF, we have an ETF that corresponds generally to a five-star rated Morningstar SMA, and that is ticker: DIVO. It's a dividend and option income ETF. As you can imagine, during the downturn, owning high-quality dividend payers and being able to write calls against them allowed that portfolio to outperform and avoid some of that decline. DIVO is one of them, and the other two are our BlackSwan ETF and our EASI Tactical Growth, growth with a tactical trigger.
I want to make sure we have a chance to talk about your growth-focused ETFs. What are some of the opportunities you see for them in 2019?
There are two types of advisors: ones who ask what's hot and ones that ask what's not hot. The ones who ask what's not hot are the veterans, because they know those are the beaten-down opportunities, and unfortunately I have a good one to share with you that we have. We have an Advanced Battery Metals and Materials ETF. The ticker is BATT and since June, the fund is off 35%. Why? Because of the China trade war fears. The underlying demand for advanced battery metals and materials is strong, whether it's through smart devices or energy storage or electric vehicle adoption. The problem is these are commodity-sensitive stocks. They're generally not denominated in U.S. dollars, and there's a lot of concern about a China trade war.
If you believe in the future of that story – we're going to have more devices, vehicles and robotics powered by batteries – then you need to have exposure to these actual battery metals and materials stocks. We're talking lithium, manganese, cobalt, etc. We're the only ETF that offers diversified exposure to it. I would like to say it's on sale, since it's down about 35%. It's something to watch, especially if we do have a China trade deal happening. Over the long term it's a very bullish case, because of a very limited supply of those metals, and demand that is expected to be seven to eight times greater over the next four to five years. That's an attractive supply-demand equation, and right now you can buy that at about a 35% discount than what you could have in June due to some macro factors.
That's one I'd share right now for a 2019 idea as a bounce back candidate.
I'm going to put you on the spot here, since you obviously follow the battery space closely. What's your take on Tesla?
I always get concerned when I look at its erratic management, not knowing what the latest tweet or message is going to be. There seems to be a lack of reliability, and a questioning about numbers and data from the company. There's certainly a lot of people trying to disprove what they're trying to do. While I believe in the future of the electrification of fossil fuels in electric vehicles, Tesla is something that carries too much risk for the average investor. There's just so much volatility that starts at the top of that company.
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Beginning with their introduction nearly three decades ago, the hallmarks of the ETF structure have been efficiency, transparency and flexibility. That is why ETF sponsors have been able to bring products to the market that target the sectors corresponding to the greatest investor demand, areas like online retail and the battery production to support electric cars. At the forefront of this innovation has been Christian Magoon, the founder and CEO of Amplify Exchange Traded Funds.