AXS Investments enters ETF space with multi-asset inflation-protection ETF

Jan 5th, 2022 | By | Category: Alternatives / Multi-Asset

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AXS Investments, a New York-based alternative investment manager, has launched its first ETF: the AXS Astoria Inflation Sensitive ETF (PPI US).

AXS Investments enters ETF space with multi-asset inflation-protection ETF

John Davi, portfolio manager of the AXS Astoria Inflation Sensitive ETF and founder and CIO of Astoria Advisors.

Listed on NYSE Arca, the fund is a multi-asset ETF designed to combat the adverse effects that inflation can have on a portfolio. Inflation in the US is presently running at levels not seen since the 1980s.

The fund is actively managed by John Davi, founder and CIO of institutional manager Astoria Advisors, and is designed as a one-stop allocation for inflation-hedging protection.

In pursuing its investment strategy, Davi and his team seek to identify investments that are believed to be positioned to benefit from a sustained inflationary environment, such as companies with earnings profiles that are expected to grow alongside rising consumer, producer, and raw material prices.

Examples of such companies include financial services companies, consumer discretionary companies, such as homebuilders and household durables, companies producing industrial machinery, metals and steel, and companies engaged in the exploration, production, transportation and mining of commodity assets, such as oil, gas, coal, agriculture, minerals and other real assets, including the passive ownership of royalties or production streams of such assets.

The portfolio management team will generally target approximately 50-60 companies in the mid- to large-capitalization range.

Although the majority of the fund’s portfolio securities are expected to be of issuers that are either domiciled in or earn a majority of their revenues from activities within the US, the fund may have significant exposure to issuers that are either domiciled in or earn a majority of their revenues from activities within Asia, Canada, or Europe.

The fund may also invest in third-party ETFs with exposure to commodities that have an opportunity to benefit from higher demand, elevated global growth, or a shortage of supply, including, but not limited to, crude oil, copper, natural gas, gold, silver, platinum, palladium, soybean, live cattle, coffee, and corn. The ETFs typically gain exposure to these commodities through the use of commodity-linked derivatives, including futures contracts.

Alongside this, the fund may also invest in ETFs that hold investment-grade fixed income securities including inflation-protected bonds of the US Treasury, commonly known as TIPS.

In selecting investments, the portfolio management team employ a top-down quantitative approach, selecting securities that pass various fundamental screens, such as valuations, growth prospects, and quality measures.

‘First-of-its-kind ETF’

Commenting on the launch, Greg Bassuk, Chief Executive Officer of AXS Investments, said: “An ETF comprised of a broad range of inflation-sensitive assets requires highly specialized and experienced active management, and we believe there’s no one better suited to manage this strategy than John Davi. He and the Astoria team have a long history of success in managing inflation-sensitive portfolios for RIAs and financial advisors, and we are thrilled to partner with them to bring PPI to market at such a crucial time for advisors and investors to position their portfolios for the dramatic return of inflation we’re expecting into 2022.”

John Davi added: “After years of managing ETF portfolios, I could not be more excited to team up with AXS to bring this first-of-its-kind ETF to market. To this point, ETF investors have been largely forced to select among a menu of single-exposure inflation-sensitive strategies, but commodity-only, equity-only and TIPS-only strategies each have drawbacks and limitations, as different asset classes behave differently in inflationary environments and often in unexpected ways. An expansive multi-asset class approach offers investors a compelling way to dynamically hedge inflation and potentially generate positive, real rate adjusted investment results.”

AXS expansion plans

“We are just getting started when it comes to the AXS ETF business. In the coming months, we’ll be aggressively building out our ETF lineup to complement our existing family of differentiated alternative funds, including by partnering with leading investment managers to launch ETFs based on their success and pedigree as leaders in their respective categories,” said Bassuk.

In addition to Bassuk, who co-founded IndexIQ, AXS counts among its leadership team a number of ETF industry veterans, including Ben Fulton. Fulton is seen as one of the early trailblazers of the ETF industry, having been active in the space for more than 25 years, including as a driving force behind PowerShares and, later, Invesco’s global ETF business.

“AXS is about access, and we believe our ETFs will provide investors and advisors with access to cutting-edge strategies and best-in-class managers as we endeavour to build what will soon become one of the more compelling ETF lineups in the space,” said Fulton. “Launching our first ETF with someone of John Davi’s calibre speaks volumes about the nature of funds and the types of teams we’ll be partnering with going forward. The ETF market is ripe for a new level of innovation, and we are excited to trailblaze at this unique and defining time in the global ETF industry’s continued evolution.”

PPI comes with a management fee of 0.70% and total annual operating expenses (including acquired fund fees) currently running at 0.71%.

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