Amplify rolls out first SOFR-based ETF for income seekers

By Suzanne McGee

(Reuters) – Amplify Investments teamed up with the asset management division of Korean conglomerate Samsung (KS:) to launch a new actively managed exchange traded fund (ETF) designed to deliver returns tied to the Secured Overnight Financing Rate (SOFR).

The Amplify Samsung SOFR ETF, which debuted Wednesday, is the first ETF to track SOFR, the overnight interbank lending rate that has emerged as the U.S. replacement for the now-defunct Libor gauge of overnight borrowing interest costs.

The new fund’s launch comes amidst a wave of enthusiasm for ultra-short term fixed income ETFs, as yields on products throughout the fixed income spectrum have risen to multi-year highs following an aggressive rate hiking cycle by the Federal Reserve.

“It wasn’t until this year that rate-driven products became priorities,” said Bill Belden (NYSE:), president of Amplify.

Flows into money market and ultra-short term products account for about 36% of all inflows into fixed income ETFs this year, though the category represents only 15% of all fixed income ETF assets, according to Matthew Bartolini, head of product research at State Street (NYSE:) Global’s SPDR Americas ETF division.

The fund seeks to offer investors exposure to overnight lending rates, which because of their short-term nature are less subject to duration risk, or the risk that rate volatility will eat into investors’ income.

Amplify said that SOFR currently is yielding roughly 5.32%. The firm’s fees will total 20 basis points.

Belden said that a large institutional investor has provided seed capital of $50 million for the new ETF. He declined to name that investor.