Simplify Asset Management has expanded its suite of equity ETFs that provide core exposures while utilizing option strategies to create convex payoff profiles.
Paul Kim, CEO and co-Founder of Simplify Asset Management.
Listed on NYSE Arca, the three new funds provide broad market exposure to US small-cap, developed ex-US, and emerging market stocks.
They are the Simplify US Small Cap PLUS Downside Convexity ETF (RTYD US), the Simplify Developed Ex-US PLUS Downside Convexity ETF (EAFD US), and the Simplify Emerging Markets PLUS Downside Convexity ETF (EMGD US).
RTYD, EAFD, and EMGD invest 80% of their assets in sizable ETFs from BlackRock that passively track the S&P Small Cap 600, MSCI EAFE, and MSCI Emerging Markets indices, respectively.
The remaining 20% of the ETFs’ assets are allocated to actively managed options components that are designed to create convex payoff profiles on the downside.
Convexity is a mathematical term that, in this case, indicates that the relationship between the performance of the ETFs and their target indices is not linear.
The strategy consists of purchasing a series of out-of-the-money put options in order to increasingly protect capital as market drawdowns deepen.
The ETFs are likely to outperform their target indices in bearish conditions but may lag during bullish or range-bound conditions.
RTYD, EAFD, and EMGD come with expense ratios of 0.31%, 0.32%, and 0.36%, respectively.
Simplify also offers similar options-enhanced ETFs based on the S&P 500 and Nasdaq 100 indices.
Paul Kim, CEO and co-Founder of Simplify Asset Management, said: “Equity and convexity were the focus of the first funds we brought to market in late 2020, and we’ve been thrilled with the response from investors and advisors who have gravitated to the twin goals these funds have of allowing performance participation on the upside and convex equity payoffs on the downside.
“Global market volatility is likely to remain a fact of investors’ lives for the foreseeable future amidst geopolitical uncertainty, diverging Central Bank policies, inflation concerns, and a number of other key factors. With these new funds and others already in our fund family, we’re working to provide a complete toolset for investors in domestic and international equities to build and maintain a diversified portfolio with added opportunity for downside convexity.”