A brutal year for markets has sent investors looking for new ways to diversify their portfolios, and the Amplify International Enhanced Dividend Income ETF (IDVO) aims to offer two different popular solutions in one package. The three-month-old fund is an actively managed strategy that combines dividend-paying international equity holdings with covered call writing, an income strategy used frequently by fund sub-advisor Capital Wealth Planning. Income investing has been a popular theme this year, as inflation and declining stock markets have spurred investors to seek out dividends. And international funds are also gaining traction. According to Strategas Research, emerging market equity was the second most popular category for ETF inflows in November. Funds for China and Europe also saw positive flows. Tim Seymour, the CIO of Seymour Asset Management and a CNBC contributor, is a portfolio consultant and research provider for the fund. He said that the expected weakening of the dollar and shift away from tech stocks make international investing particularly attractive in the coming years. “International investing will be very different in the next 18 months than it has been in the last 18 months,” Seymour said. The fund’s largest exposures are currently in materials, financials, technology and energy. It holds American depositary receipts, or ADRs, instead of purchasing the stocks on foreign exchanges. Gold Fields is the single biggest holding in the fund, taking up nearly 4% of the portfolio. “We think we’re in an environment where gold can finally outperform,” Seymour said. Over time, the fund may add to its positions in international banks as the global economic picture becomes less uncertain, Seymour said. The fund is small so far, with about $4 million in assets under management, but its sister fund Amplify CWP Enhanced Dividend Income ETF (DIVO) has about $2 billion in assets. The covered call portion of the strategy sets the ETF apart from many other international funds. The idea is to write call options on stocks that the portfolio holds. That caps the potential upside if one of stocks proves to be a runaway winner, but it does produce a steady income stream for the fund. Capital Wealth Planning CIO Kevin Simpson said that because the fund focuses on large, well-known companies, the derivatives market is deep even for international names. He added that the fund managers may actually be a bit more aggressive in writing calls in the international fund than in the U.S. version. Christian Magoon, CEO of Amplify, said that the success of the U.S. fund DIVO led to conversations with financial advisors and allocators about the demand for an international version. The covered call strategy addition may actually be more important in an international fund, he said. “It’s not unusual for international stocks to suspend or reduce their dividends more frequently than U.S. stocks do,” Magoon said. Since its launch in September, the Amplify International Enhanced Dividend Income ETF has a total return of about 7%. The fund has an expense ratio of 0.65%.
© heardonwallstreet.com