Christian Magoon, Amplify ETFs

Guggenheim sold that product line to Invesco. So a lot of the ETFs that I launched originally back in 2006 are now Invesco products and are much larger. Fun to see, kind of like kids, as having your own funds to see kind of how they do over time and how they're received. When Guggenheim purchased Claymore, I left the company in 2010 as president and started my own venture, Magoon Capital, where I helped issuers like you, kind of independent issuers, launch their own ETFs. I kind of had a passion for that, for kind of entrepreneurial investment organizations that wanted to get into the ETF space. I really fell in love with the ETF vehicle for the efficiency, transparency, and flexibility it offered. Really felt like the ETF structure amplifies

Most investment strategies through being cost and tax efficient, very flexible, having intraday trading, maybe options on the ETF. And the fact that for most part, the ETF portfolios are transparent, which I think are great for investors and allocators. And while I was consulting, I kind of had an aha moment. It was like, well, hey, why don't I start my own sponsor? And that was really in 2015, starting Amplify ETFs. And we launched our first fund in April of 2016. And that was the online retail ETF. And I guess we're almost 10 years into it here. This April will be our 10-year anniversary at Amplify. And we have about 40 ETFs and $20 billion today. So it's been a good run. And as we talked a

Little bit before this, I really feel like an upstart or an outsider in the industry. We've worked our way up in a variety of different businesses to start ETFs. And maybe my favorite little anecdote is when we launched our ETFs at Claymore in 2006, sat down with a Wall Street Journal reporter. And their first question is, do we really need a 15th ETF provider in the US? And kind of blew my mind and, again, looked at the mutual fund world and use that analogy, because really that was kind of what we thought the vision would be. And certainly today with, 450 plus brands out there and think well over 350 sponsors, we see ETF space has really grown. And there's probably some good

Things and bad things with that. But, pleased to be continued to be part of it. And, it's fun to see projects like this where you're highlighting issuers that may not be top 10, big box, Walmart type issuers that are buying all the advertising, sponsoring the tennis tournaments, the golf tournaments. So I really appreciate what you're doing with this, because I think there's some great episodes that you recorded inside, these ETFs and the businesses. And I think investors and advisors probably could benefit from some of the hidden gems that you're highlighting. So kudos to you, Brad, and good to be here with you today.

To be honest, and, try to read a lot just on different historical figures, mostly in the business area. I just finished a great book biography on Walt Disney, which I thought was amazing when you think of, what he's done in terms of creating an entire industry in the US, the theme park industry. Also, being one of the first people to license IP, which, Mickey Mouse at one time was the largest IP license in the world. So that creativity and seeing what others have done in different fields often sparks ideas for me and for our business. So, there's not many hours in the day that there's not something that I want to be doing, project wise. But, I think that's part of the energy that, you know,

Comes from being somebody who likes to build and going out and trying to make things happen. So, it's a balance though, trying to balance all that, excitement about activities personally with building the business. And the good news is I love both of them. And that's really kind of how I spend my time. I sound probably busier than I am. My wife would probably say, boy, you sound like Mr. Activities. I catch you listening to podcasts too much on the couch, but yeah, I'll claim some guiltiness there. But yeah, that's a little bit about me personally.

Security selection, but to tactically write covered calls on the individual stocks. And that's really been a great run. Devo, we launched as one of the first equity derivative income ETFs in existence in the industry. Certainly, I think the first one that wrote covered calls on individual securities, we launched that in the first year of our company in 2016. And it's our largest fund today. And that kind of anchors that option income suite, which we call YieldSmart. And, we think there's a lot of fortunately yield trap ETFs out there right now. They use a variety of different brands. We really felt like to distinguish ourselves, YieldSmart made a lot of sense. And kind of our mantra there is, that we want to balance attractive income, not necessarily maximum income, with capital

Appreciation. So we've had some really nice traction in Devo, iDevo, QDevo, where our long-term total returns have surpassed many of the equity derivative income products that have high yields, but relatively low total returns. We think that's kind of a loser's game over time. So that's really our income suite. And we have a variety of YieldSmart ETFs, about 13 there. The other half of our business would be growth ETFs. Some are active, some are index-based. And, those are a lot of first-to-market products. we have, we launched the first blockchain technology ETF that was actively managed all the way back in 2018. It's a five-star fund. It's averaged 18% a year going back to 2018 and really, relies on a professionally selected portfolio by an active management team

That is looking at blockchain from crypto to private blockchain to payment technologies and has navigated that space for many years. We have the first cybersecurity ETF, hacked the first and only junior silver miners ETF, first online retail ETF. So we have a lot of thematics and growth segments that have, I would say, long tails. we really felt like there are a lot of key innovations that are happening in the market that aren't just captured by sector. So like blockchain is a great example. You'll see technology companies in there, chip companies, software companies, payment companies, fintech companies, Bitcoin in there. It doesn't really fit into a sector play. And, we felt like there was opportunities there and we've been able to harvest a lot of those

Opportunities. So of our 20 plus billion dollars, like about, half is in the income side, half is in the growth side. And we really want people to kind of show up at Amplify ETF's homepage and find kind of additive investment options, either for their income suite or their growth suite that really maybe they can't find anywhere else or potentially they're the original version. And now, there's like our block ETF being first to market. Now there's 19 funds in their peer group and the big box, groups have come in over the last couple of years and done products that we think are, well, I'd say maybe a little bit more inferior or more kind of copycat type products that maybe don't have the specialization baked into the

Active selection process we use. So, essentially when you come to Amplify, hopefully you're finding something that's very unique and different and spans a variety of asset classes from equity, equity income, fixed income to growth areas. candidly, these are areas that I think are just unique investment opportunities. And, our portfolio is kind of a reflection of areas that we really believe in long-term. And we've been fortunate enough to be in the market for 10 years now and develop some track record and that's helped kind of increase momentum. And, we're always challenged to continue to launch products. We launched 10 products last year, Brad. It was an all-time high for us and we may surpass that this year.

There's just a lot of unique ideas out there. ETF structure has become a lot more friendly to different types of assets, whether that's derivatives or even on the crypto side. So, we've been trying to take advantage of that. So, yeah, that's Amplify in a nutshell. Again, the name Amplify, we think kind of harkens back to ETF vehicle amplifying most investment strategies or market segments because of the efficiency, the transparency, and the flexibility that the ETF vehicle delivers versus maybe a mutual fund or a closed-end fund or other vehicles like that. So, yeah, we're excited about the future and we'll continue to build.

That seems to hearken to something that has staying power over a long period of time. So, we do have a variety of people that are dedicated to business development and product development besides me that are kind of searching out areas, thinking strategically in our product line on maybe holes we fill. Because we have a pretty robust distribution force, we're out in the field a lot. So, we get a lot of feedback from different users of ETS, institutions, financial advisors looking for certain solutions. We're now approached by a variety of asset managers that say, hey, can we partner with you? We'd love to be a sub-advisor on a fund. I think one unique aspect of Amplify is we weren't built on, a premise of underlying kind of like research or IP.

We really said, hey, we want to be an open architecture to be, to launch index ETS, to launch active ETS, to partner with sub-advisors that have expertise in certain market segments. And I think that's given us flexibility to not necessarily be, cornered in a certain area. And, there's times that that is not as advantageous because people don't look at us and say, oh, you're a precious metals ETF provider or a commodity ETF provider. we have kind of something for everyone in a lot of ways. But that really helps us, I think, over time diversify our flows, our asset base and allow us to have conversations with virtually any ETF user because we have, such a diverse product set. So, yeah, I would say, we have a variety

Of ways we launch product and different triggers. And, I think ultimately we just continue to try to grow. I'll be the first one to say that, I've probably failed in my career. I think I've launched more than 100 ETFs now. I've probably closed more ETFs than, some of the groups have launched. So, you can't be 100%, as you know. And I think, having a good discipline on launching product and then really managing your product out in the marketplace, the market ultimately is going to be the judge whether there's investor interest there and you're bringing value. you could be early to a theme. You could see, an area or a market segment just outperform for a long period of time. International is a great example.

And then suddenly come back and really push your ETF upward in terms of interest in AUM. So, we're about trying to have a diversified portfolio and kind of weathering different market environments. And, it's hard to do, especially when you're a new upstart firm and you're trying to launch products that are, door openers and, trying to educate people on how you're different and then trying to deliver a track record and an AUM and a volume that supports more and more usage. And, that's the challenge for all ETF providers. But, we're in a decent stage right now in terms of seeing more platforms open up to us and having more access to distribution. And that kind of allows us to take a little bit more, I don't know if I'd say risk,

But invest a little bit more in our product line to expand it across a larger user base.

Junior or the small cap. SILJ is really kind of GDXJ, but for silver miners. And it's the only ETF in that category, been around since 2012. And silver had a great year, as last year. And we saw some really attractive returns from SILJ as well. So the fund holds about 60 names, but like the top

And that's kind of one of the ways we try to, get some level of purity in here. In addition, at the top level, companies have to meet a minimum market cap, trading volume, trading history. Right now there's 42 countries that we look at from an index methodology standpoint where a company could qualify if they meet a variety of those tests, as I mentioned before, and are listed in one of those 42 countries. We have nine countries exposed right now in SILJ,

And, certainly there's been some geopolitical concerns there. Market cap or a modified market cap weighting scheme kind of weeds that out a little bit. So, this is, again, 86% exposed to Canada and North America. You don't really see any Africa exposure. That's another area that sometimes you can see some really small silver stocks come out of. And that is kind of ruled out just based off the underlying illiquidity in many of those markets. At one point, Egypt was a market that was considered, but it's been disqualified just due to some of the issues, custodying securities and other things.

So I think part of the magic of this being in an ETF, you have to have a certain amount of liquidity in the underlying companies and the exchanges have to, that they're listed on, have to have certain policies and procedures. So you tend to weed out maybe some of the, I don't know if I'd say crazy, but very, very speculative micro cap silver mining stocks that are in many of these, call it third world markets.

So that's very big for batteries and clean energy type products, EVs, et cetera. So I think there's a huge tail of demand on silver just relative to those industries and those build outs. And then, of course, you have about, say, 40 or 50% on the other side as just a store of value. And that always, resides out there as being something that's store of value, but maybe not at the absolute price point as gold is today. So a little bit more accessible for maybe investors who are looking to buy, coins or bars physically.

And suddenly, if silver jumps to $90, that most of that, say, $55 to $60 gain is going to be profit. If you're a larger silver company, it'll be less percentage of profit. If you're a smaller silver company, it'll be more of a percentage of profit. And that's where you get these exponential returns where, silver mining stocks can go, three, four times higher than the price of silver. Junior silvers can go sometimes 10x what silver does in bull markets. Now, the other side of the coin is true as well. So, we've seen in the last several months silver be down 30% in a day, right?

And you can see silver stocks respond to that, so you can see increased volatility on the downside. So, if we were able – if we were seeing the sustained silver prices increase and then many of these companies start to create their business plan for the next 12 months with silver at, $80 or something like that and suddenly silver drops back to $40, that's a huge hole and there's a lot of risk. And with junior silver, they're less capitalized. They rely more on financing. So, you're going to see less of a cushion there and you're going to see a lot more of a drop in market value than you would with a large silver mining company.

So, you really have to be careful here in your exposure knowing that there's extreme volatility on both sides. And this is really not a core position. This is something maybe you sprinkle in. I think we can talk about that later on how it might fit into an overall portfolio. honestly, we see a lot of people who own SILJ really coming from the individual silver mining ownership where they own underlying silver mining stocks and are familiar with the volatility and maybe are looking at our basket of 60 stocks to be reduced company specific risk or geographic issues or management team concerns. We often see more of those people look at SILJ, kind of that trading or short-term silver equity crowd.

Then we see kind of mainstream advisors start to go from maybe physical into owning the equities. Of course, that all changes when you have, really attractive performance on the equity side. As there's some performance chasing there. So, again, people need to be cautious with this and really look at kind of the volatility associated with silver mining and junior silver mining stocks.

Certainly, there's a fairly low correlation of silver to the S&P 500. It's about a 0.24 over a long period of time. So, there is some kind of interesting return sets that come from this space. And certainly, on the equity side of silver investing, those can be magnified. So, adding it to an alternative sleeve may make some sense. And then, the last area is kind of similar to what you said, looking at, existing growth or satellite allocations that, maybe be an AI or electrification, solar. Those types of areas are all really dependent on, and drive silver prices.

So, this is kind of a complement or maybe an additional kind of layer to add on as one of the key underlying materials that will work alongside these themes. So, a variety of ways to use it. we've even launched a version of SILJ called SLJY that is a covered call version of SILJ that's a little bit more moderate in terms of its volatility. So, it's simply writing covered calls on junior silver miners as well as silver to target an 18% per year option income distribution while still giving you about 50% of the upside of the portfolio.

So, again, trying to balance attractive income, option income in this case, with capital appreciation. So, there's a few ways that you can kind of incorporate this. And for many who maybe aren't used to kind of the volatility of mining stocks, specifically small cap, maybe the cover call way might be a better way to have kind of some guardrails, if you will, around kind of the total return equation. Because certainly, getting that 18% option income, I think, can help offset some of the volatility that's inherent in this space.