Simplify launches capital-efficient short-term Treasuries ETF

Nov 21st, 2022 | By | Category: Fixed Income

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Simplify Asset Management has launched a new ETF delivering capital-efficient exposure to the short end of the US Treasury yield curve.

Simplify launches capital-efficient short-term Treasuries ETF

The fund provides short-duration exposure to US Treasuries from only a modest capital allocation.

The Simplify Short Term Treasury Futures Strategy ETF (TUA US) has been listed on NYSE Arca with an expense ratio of 0.15%.

The actively managed fund targets the duration of the ICE US Treasury 7-10 Year Bond Index by investing in near-term Treasuries and taking leveraged positions in short-term Treasury futures.

These allocations are designed to provide significant duration from only a modest capital allocation while simultaneously attempting to harvest efficiencies from the short end of the yield curve.

According to Simplify, the ETF may be used as a replacement for less efficient short-to-intermediate duration holdings, as a means of increasing capital efficiency of short-duration portfolio allocations, or as a building block within portfolio solutions such as risk parity.

The fund is similar in strategy and approach to the Simplify Risk Parity Treasury ETF (TYA US) which Simplify launched in September 2021 with the key difference being that TYA focuses on Treasuries and Treasury futures at the intermediate portion of the yield curve. TYA, which targets the duration of the ICE 20+ Year US Treasury Index, houses $40 million in assets and also has an expense ratio of 0.15%.

Simplify notes, however, that TUA can potentially create more efficient intermediate duration exposure by capitalizing on favourable roll yields at the short end of the Treasury curve.

David Berns, co-Founder and CIO of Simplify Asset Management, said: “We’re pleased to be adding TUA to our fund line-up and see a number of key use cases, particularly in the current environment. Given its leveraged exposure to short-term Treasuries, TUA can be used to gain short-duration exposure with only a fraction of the capital required by an unleveraged position, significantly increasing capital efficiency.”

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