Less than a year after launching the Amplify YieldShares Prime 5 Dividend ETF (BATS: PFV), Amplify ETFs revealed significant changes to that exchange-traded fund. That fund is now known as the Amplify YieldShares Senior Loan and Income ETF(BATS: YESR).
YESR follows the Prime Senior Loan and Income CEF Index, which is designed to provide targeted exposure to closed-end funds (CEFs) that invest at least 80% of their assets in floating rate senior loans and other floating rate instruments, pay dividends and are listed in the United States. The New Index will be developed, maintained and sponsored by Prime Indexes, which is not affiliated with the Fund, the adviser or sub-adviser, according to a statement from Chicago-based Amplify.
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Floating rate notes and senior loans are unique in that their yield is tied to a benchmark such as LIBOR, rather than being fixed. Loans are also higher on the capital structure than other unsecured obligations, and some even carry floors to insure you earn a respectable yield even if rates stay low. Their coupon rate typically resets every 90 days, resulting in a duration shorter than three months, Benzinga reported.
In its new form, YESR will evaluate floating rate closed-end funds based on distribution rate, premium/discount rate, total expense ratios and liquidity. As an asset class, senior loans are often favored during rising interest rate environments because the floating rate component makes them less sensitive to higher borrowing costs.
The ETF's top 10 holdings combine for over 55 percent of its weight. With a total expense ratio of 2.15 percent per year, or $21.50 on a $10,000 investment, YESR is pricier than the old PFV. PFV charged just 0.45 percent per year. Still, YESR's fee is comparable to those found on other ETFs that hold closed-end funds.
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Other Amplify ETFs include the fast-growing Amplify Online Retail ETF (NASDAQ:IBUY), one of this year's best-performing retail ETFs; and the YieldShares High Income ETF (NYSE:YYY).
Amplify ETFs, sponsored by Amplify Investments, has over $295 million in assets across ETFs for which it is Adviser or Sub-Adviser (as of August 22, 2017), according to the statement.
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