Amplify ETFs, begun trading a new Blockchain ETF, the Amplify Transformational Data Sharing ETF (NyseArca: BLOK), on Wednesday, January 17, 2018. Here is a synopsis of the new ETF:
|Exchange: NYSE ARCA
|Name: Amplify Transformational Data Sharing ETF
|Net Expense Ratio: 0.70%
The Amplify Transformational Data Sharing ETF is an actively managed ETF that seeks to provide total return by investing at least 80% of its net assets (including investment borrowings) in the equity securities of companies actively involved in the development and utilization of transformational data sharing technologies. The Fund may invest in non-U.S. equity securities, including depositary receipts. Toroso Investments, LLC and CSAT Investment Advisory, L.P., d/b/a Exponential ETFs serve as the investment sub-advisers to the Fund. Toroso manages the investment strategy and portfolio selection. Exponential constructs and implements Toroso’s trade decisions.
In selecting companies that the portfolio managers believe are relevant to the Fund’s investment theme, the portfolio managers seek to invest in companies developing or utilizing transformational data sharing technologies. These companies will primarily include, but are not limited to, those developing or utilizing blockchainbased and other distributed ledger technologies. The “blockchain” is a peer-to-peer shared, distributed ledger that facilitates the process of recording transactions and tracking assets in a business network. It derives its name from the way it stores transaction data – in blocks that are linked together to form a chain. As the number of transactions grow, so does the blockchain. Blocks record and confirm the time and sequence of transactions, which are then logged into the blockchain, within a discrete network governed by rules agreed on by the network participants. Although initially associated with digital commodities, it can be used to track tangible, intangible and digital assets and companies in all business sectors. Blockchains may also be private or public.
The distinction between public and private blockchains is related to who is allowed to participate in the network, execute the consensus protocol and maintain the shared ledger. A public blockchain network is completely open and anyone can join and participate in the network. A private blockchain network requires an invitation and must be validated by either the network starter or by a set of rules put in place by the network starter.
In pursuing its investment strategy, the Fund’s portfolio managers seek investments in companies across a wide variety of industries that are leading in the research, development, utilization and funding of transformational data sharing technologies. The Fund’s portfolio managers determine whether a company is eligible for investment by the Fund based upon an examination of whether a company is committing material resources to transformational data sharing (including blockchain-based) technologies in one or more of the following ways:
• actively engaging in the research and development, proof-of-concept testing, and/or implementation of transformational data sharing technology: the Fund’s portfolio managers review the scale, continuation and growth of such initiatives, and the dedication of organizational infrastructure (e.g. corporate divisions, number of employees) and capital to such activities.
• profiting from the demand for transformational data sharing applications such as transaction data, cryptocurrency and supply chain data: the Fund’s portfolio managers evaluate companies for both direct profitability, obtained by providing direct access to transformational data sharing technology, and indirect profitability, obtained by benefitting from cost reductions and economies of scale through transformational data sharing technology implementation for its business.
• partnering with and/or directly investing in companies that are actively engaged in the development and/or use of transformational data sharing technology: the Fund’s portfolio managers review both the number and size of partnership and/or projects invested, including a company’s internal initiatives.
• acting as a member of multiple consortiums or groups dedicated to the exploration of transformational data sharing technology use: the Fund’s portfolio managers review the number of consortiums or groups and size of investments, including a company’s internal initiatives.
In reviewing the above criteria, the Fund’s portfolio managers actively evaluate the legitimacy of each potential portfolio company’s commitment to transformational data sharing technologies. In addition, the Fund’s portfolio managers will construct the portfolio so that it meets the following standards:
• each security must be listed on a regulated stock exchange in the form of shares tradable for foreign investors without restrictions;
• at least 90% of securities issued by a U.S. company must have a minimum market capitalization of at least $75,000,000;
• each security issued by a non-U.S. company must have a minimum market capitalization of at least $100,000,000;
• each security issued by a U.S. company must have a minimum price at time of purchase of $3 per share; and
• each security must have an average daily trading volume of at least $250,000 over the prior six months.
The Fund’s portfolio managers will further review these constituent companies and classify the companies into 2 groups:
• Core: companies are designated as “Core” if they derive significant direct revenue from transformational data sharing-related business and/or are among the largest investors in transformtional data sharing-engaged companies, as defined by the portfolio managers.
• Secondary: companies are designated as “Secondary” if the company directly invests or partners in transformational data sharing technology companies, or participates in multiple blockchain industry consortiums.
The portfolio managers believe that an active management approach will enable the Fund to remain flexible and identify companies that are best positioned to profit from the developing transformational data sharing technology space. The Fund’s portfolio managers will actively seek opportunities for the Fund to invest in new and emerging transformational data sharing technology companies meeting the Fund’s eligibility criteria.
Through portfolio management, the Fund’s portfolio managers believe that there will be opportunities to take advantage of market pricing dislocations, and to purchase, sell or weight the Fund’s portfolio holdings accordingly. The Fund’s portfolio managers will initially have the following portfolio allocation: 70% Core constituents and 30% Secondary constituents. Initially, constituents will have an equal weighting within such groups.
However, the Fund’s portfolio managers will manage the portfolio to increase, decrease or eliminate weightings of the portfolio holdings, based upon its assessment of:
• changes in a company’s business model or operations;
• a company’s increase or decrease in transformational data sharing related revenue;
• public disclosures indicating that a company’s intent to engage in transformational data sharing business enhancements;
• financial fundamentals, such as price to earnings and potential revenue growth, relative to other transformational data sharing universe constituents; or
• unusual trading volumes and market pricing.
The Fund’s portfolio managers expect, under normal market circumstances, that the Fund’s portfolio will consist of 40 to 60 companies.
FUND TOP HOLDINGS (01/16/18):
|TAIWAN SEMICONDUCTOR MFG LTD SPONSORED ADR
|SBI HOLDINGS INC
|OVERSTOCK COM INC DEL
|INTERNATIONAL BUSINESS MACHS COM
|HIVE BLOCKCHAIN TECHNOLOGIES
|GMO INTERNET INC
ΒLOK Home Page
Here is a comment from Christian Magoon, CEO of Amplify ETFs:
“We are excited to offer BLOK as a professionally-selected, convenient and responsive way to invest in a basket of the leading companies engaged in advancing blockchain-based technology. BLOK may offer growth-oriented investors an attractive way to gain diversified exposure to a new technology whose impact has been compared to that of the internet.”