Amplify ETFs has launched a third ETF in the US designed to protect against so-called ‘black swan’ events, with the latest fund focusing on Nasdaq 100 exposure.
A ‘black swan’ refers to a rare and unexpected event that typically causes significant market losses.
The Amplify BlackSwan Tech & Treasury ETF (QSWN US) has been listed on NYSE Arca with an expense ratio of 0.49%.
Within financial markets, a ‘black swan’ is a term used to describe a rare and unexpected event that typically causes significant market losses. It is based on a misguided belief that black swans do not exist.
The fund is linked to the S-Network Tech & Treasury Index which consists of a 90% allocation to US Treasury securities and a 10% allocation to LEAP options on the Invesco QQQ (QQQ US), the largest ETF tracking the Nasdaq 100. LEAPS are long-term equity options that typically extend for two years or more.
The Treasury allocation consists of securities with durations between two and 30 years but will collectively seek to approximate the duration of the ten-year Treasury note. Equity returns are achieved from the options, while the allocation to Treasuries provides downside protection by capitalizing on the frequently negative correlation between Treasury bonds and stocks during periods of market volatility.
According to the fund’s prospectus, the methodology results in an approximate 70% exposure to the Nasdaq 100 during a full market cycle.
The index is rebalanced on a semi-annual basis.
Amplify’s two existing BlackSwan ETFs offer risk-hedged exposure to US large-cap equities (S&P 500) and stocks listed in global developed markets excluding the US (MSCI EAFE). Collectively, the two funds house around $1 billion in assets.
Christian Magoon, CEO of Amplify ETFs, said: “With a variety of all-time highs in technology stocks reached in 2021, we believe hedging this exposure is a prudent consideration. QSWN provides technology stock investors the ability to manage downside risk while continuing to be invested. The launch of QSWN will broaden the BlackSwan product suite for investors by applying this proven and powerful investment philosophy to the technology market segment.”