- The newly launched Amplify Inflation Fighter ETF has topped 99% of peers in the past three months.
- Mike Venuto, the top mind behind the fund, broke down his strategy and a key mistake to avoid.
- Here are five of the top stocks in the fund — and why bitcoin and gold are included.
As inflation surges to 41-year highs, many investors have scrambled to find hedges that can protect their portfolios from price surges and preserve their purchasing power.
But not all investors are content with getting defensive. Some would rather find a way to keep inflation at bay while staying aggressive.
That’s why Amplify ETFs created the aptly named Amplify Inflation Fighter ETF (IWIN) and launched it on February 1, just as investors were getting increasingly worried about inflation. The exchange-traded fund (ETF) is managed by subadviser Mike Venuto, who’s the CIO and co-founder of Toroso Investments, the parent company of Tidal ETF Services.
Amplify’s Inflation Fighter ETF has beaten 99% of opposing funds in the past three months, according to Morningstar. In that span IWIN has logged a 5.5% gain, while the S&P 500 has fallen 5.4% over the same period.
While inflation is priced into markets to a certain extent, investors who haven’t yet insulated their portfolios from price hikes still have time to do so, Venuto said in a recent interview with Insider.
“I do not think we’re at peak inflation,” Venuto told Insider. “And I think the Wall Street definition of what inflation is, is very much understating the reality of what Main Street is feeling.”
Venuto continued: “Wall Street uses numbers to define inflation. And they use the CPI and the PPI, and those things don’t really matter that much to Main Street. Main Street sees that gas costs twice as much and milk costs twice as much. So when they hear the CPI is up 8%, it’s just a meaningless number to them because it’s meaningless to their pocketbook.”
Avoid this simple inflation investing mistake
Though the Amplify Inflation Fighter ETF is new, and mainstream interest in inflation hedges has resurfaced for the first time in decades, Venuto said that his idea for a fund like the one he now runs dates back about 15 years.
Like many inflation-focused funds, IWIN consists of stocks and commodities that have direct or indirect ties to real assets like energy, precious metals, agriculture, and land. To get exposure to the latter group, many ETFs load up on real estate investment trusts (REITs).
But Venuto noted years ago that REITs must issue at least 90% of their profits as dividends, which are taxable at a 15% rate in most cases, though the highest rate is 20%. That led the portfolio manager to think of ways to find inflation hedges that don’t result in high tax payments.
structure that forces you to pass through the income and give away 90% of your income — that’s not a great inflation hedge,” Venuto said.
The best way to fight inflation
Instead of relying on REITs, Venuto said that his inflation-fighting fund is built on inflation hedges that aren’t as dividend-dependent, like homebuilders, miners, and commodities, including gold and bitcoin. The REITs that are in IWIN are tied to farmland and timberlands, he said.
Having a diverse group of inflation-adjacent assets is key, Venuto said, especially because he believes that there are two distinct causes of price surges that can affect groups differently: currency debasement and supply shocks.
“We named the fund ‘inflation fighters’ — I’ve got to know who my opponent is,” Venuto said.
When central banks devalue their currencies by expanding the money supply too much, physical assets like homes, metals, and commodities tend to rise in value. Venuto’s ETF is hedged against that risk because it owns shares of homebuilders and miners and has exposure to real assets like gold and other rare earth metals.
But the main driver of today’s inflation, in Venuto’s view, is supply-side issues that have caused prices for oil, gas, and other goods to skyrocket. Additionally, the Federal Reserve’s willingness to rapidly raise interest rates has put fears of currency debasement to bed for now.
That’s the simplest explanation for why gold has risen just 2.9% in 2022 and why bitcoin — a cryptocurrency that has been likened to digital gold — has fallen 15.5% this year as inflation roars higher, Venuto said. But that doesn’t mean bitcoin can’t or won’t be a hedge.
“The type of inflation that we’re experiencing and driving the narrative right now is supply-chain shocks,” Venuto said. “It is not the debasement story. The debasement story was what we were hearing 18 months ago. If we look at bitcoin’s behavior during that 18 months, it’s pretty spectacular.”
Besides bitcoin and gold, Venuto spoke about five stocks that are core holdings in the Amplify Inflation Fighter ETF. All five stocks are below, along with the ticker, market capitalization, industry, and commentary, including Venuto’s views, for each.