The Exchange Traded Fund market has been a buzz of activity in 2020 in the wake of the Federal Reserve cutting interest rates to record lows. Investors have continued to shun yields in favor of ETFs that continue to provide broad exposure to a stock market that shows no signs of slowing down, clocking record highs by the day.
Amplify High Income ETF
Bond exchange-traded funds are some of the ETFs that have continued to elicit strong demand, given their ability to generate reliable passive income. Amplify High Income ETF (YYY) is one such ETF that continues to accord investors a reliable stream of income backed by a 9% yield.
The ETF consists of 30 closed-end funds made up of a mixture of stocks and bond funds managed by some of the biggest names such as Blackrock and Legg Mason. While most closed-end funds trade below their net asset value, the same appears to be the case with the Amplify High Income ETF. The ETF is currently trading at a 13% discount to be net value while still being able to produce high current income.
YYY has succeeded in generating high income for its investors, given its ability to buy a dollar worth of assets for just 8 cents. Therefore, it does not come as a surprise that the ETF is increasingly being used in income-focused barbell strategies to balance low volatility income investments.
Vanguard Group China Focus
Even As Amplify High Income continues to outperform the market, Vanguard Group is moving to double down on its mainland China mutual funds holdings. The world’s largest mutual fund company has confirmed plans to exit Hong Kong, Japan, and Singapore. The exit will pave the way for the asset manager to set base in Shanghai, China.
However, there is a cloud uncertainty as to whether Vanguard stands a chance to succeed in Mainland China. The direct to client model backed by low fees, while successful in North America, has so far failed to have a similar impact in Hong Kong and Singapore.
The firm failed in Singapore and Hong Kong, given that investment products in the two countries are sold by agents who live on commissions. In contrast, Vanguard offers low fees products and does not pay for distribution.
A move to China appears to be fuelled by the country’s 1.4 billion population that could provide an attractive market for the asset manager products. Vanguard is especially looking to target investors with its Exchange Traded Funds. The Mutual funds market would also provide unique opportunities, with the market set to more than triple to $8.75 trillion in a decade.
A move to China is also part of an effort to take advantage of a growing online investment community. Chinese are increasingly investing in the capital market, providing an ideal target market for investment funds. Vanguard has already formed a China investment advisory joint venture led by the Ant Group.
Vanguard is not the only asset manager looking to set base in China. Blackrock Fidelity and Neuberger Berman have all established retail fund businesses in mainland China as part of an expansion drive.