Simplify Introduces China A Shares Plus Income ETF (CAS), Providing A Share Exposure With Options Overlay Designed to Deliver Additional Income

Rhea-AI Summary

Simplify Asset Management has launched the Simplify China A Shares PLUS Income ETF (CAS), an actively-managed fund targeting capital appreciation while providing additional income through an options overlay strategy. The fund offers exposure to small, mid, and large-cap Chinese mainland-listed companies through total return swaps.

The innovative structure using swaps, rather than direct equity ownership, protects investors from potential capital lock-up during geopolitical tensions. The swaps are designed to track A share equity indices while potentially offering better performance than physical shares due to favorable funding rates.

The fund's risk-managed options overlay involves selling put spreads on various instruments, including equity, fixed income, commodity indices, and ETFs, aiming to generate additional income without requiring extra capital investment. This approach represents Simplify's strategy to provide more resilient China exposure while addressing current investor income needs.

Positive

• Innovative structure using swaps protects against geopolitical risks
• Potential performance advantage through favorable funding rates
• Additional income generation through options overlay strategy
• Broader market exposure compared to traditional offshore Chinese equities

Negative

• Exposure to Chinese market volatility and regulatory risks
• Complex structure involving derivatives may increase operational risks

Insights

ETF Strategy Analyst

This innovative ETF launch represents a significant development in China A-shares investment accessibility. The use of total return swaps instead of direct equity holdings is a sophisticated risk management approach, providing a important safety valve against potential geopolitical disruptions. The options overlay strategy adds an income-generating component that could help offset the historically high volatility of Chinese markets.

The fund's structure addresses two key market demands: enhanced liquidity protection and income generation. The swap-based exposure offers superior capital efficiency compared to traditional A-shares ETFs, with the potential for enhanced returns through favorable funding rates. This approach effectively creates a "best of both worlds" scenario - maintaining exposure to China's domestic market while mitigating specific risks that have historically deterred international investors.

For retail investors, this means gaining access to a broader universe of Chinese companies beyond the typical offshore listings, with built-in risk management features that weren't previously available in a single product. The income component through put spread sales adds an attractive yield element, though investors should understand this creates its own set of risks.

Global Markets Strategist

The timing of this ETF launch is particularly strategic given the current market context. China's economy is showing signs of transformation, with domestic consumption and technology sectors gaining prominence. The A-shares market, historically less correlated with global markets, offers unique diversification benefits that this product makes more accessible.

The total return swap mechanism is especially noteworthy as it provides a solution to a critical market access risk that has concerned institutional investors. In an environment of increasing geopolitical tensions, the ability to quickly liquidate positions becomes paramount. Traditional A-shares ETFs face potential trading suspensions or access restrictions, but this structure maintains theoretical liquidity even in stress scenarios.

The additional income stream through options strategies could help smooth returns during periods of market volatility, though investors should recognize this comes with its own risk-reward tradeoff. This product essentially creates a new category in the China ETF space, combining tactical access with strategic risk management features.

CAS is actively managed to provide exposure to small, mid and large cap Chinese mainland-listed companies; the Fund uses total return swaps so investor cash would not be locked up in the event of adverse geopolitical events.

NEW YORK--(BUSINESS WIRE)-- Simplify Asset Management (“Simplify”), a leading provider of Exchange Traded Funds (“ETFs”), today introduced the Simplify China A Shares PLUS Income ETF (CAS), an actively-managed fund designed to achieve capital appreciation in its core portfolio, while providing investors additional current income via exposure to mainland Chinese equities utilizing an options overlay.

China A shares are equities that trade on mainland China exchanges and are predominantly held by domestic Chinese investors. The exposure available via the A share market is much broader than that available via the offshore Chinese equities that are typically accessed by foreign investors.

Simplify delivers China A share exposure in this new fund via total return swaps, which are traded through major global banks. The fund also includes a risk-managed options overlay that involves selling put spreads on a variety of underlying instruments, including equity, fixed income, commodity indices, and/or ETFs — with the goal of providing investors with additional income without requiring additional capital outlay.

“We’re very pleased to be adding China A shares to our growing roster of ‘PLUS Income’ ETFs,” said David Berns, CIO and Co-Founder of Simplify. “We’re equally excited about the means through which we are delivering this exposure. The coming year is likely to bring with it heightened geopolitical tensions, including between the U.S. and China. By accessing A share performance via total return swaps, investors do not face the possibility of their capital being locked up in the event of sanctions or other actions that may make A share equities themselves untradeable or otherwise inaccessible.”

David added that the swaps in use with CAS are designed to precisely track A share equity indices while also enjoying a performance advantage over physical shares due to favorable funding rates, as dealers effectively share their lending revenues with the swap holders.

“China is and will remain a key component of any well-diversified international portfolio, but the means through which investors add their China exposure must change with the times and with the very real risks investors now face,” continued David. “With CAS, we believe we have built a more robust and resilient China ETF, all while delivering the additional income today’s investors crave. We’re eager to continue to educate the marketplace about this approach.”

In addition to overseeing their fast-growing fund lineup, the Simplify team also produces some of the investment industry’s most engaging and informative content, including deep dives into the various investment strategies, reactions to headline-making news and trends, and interviews with some of the most compelling names in research, trading and portfolio construction, which you can access here: https://www.simplify.us/news-media.

ABOUT SIMPLIFY ASSET MANAGEMENT INC

Simplify Asset Management Inc. is a Registered Investment Adviser founded in 2020 to help advisors tackle the most pressing portfolio challenges with an innovative set of options-based strategies. By accounting for real-world investor needs and market behavior, along with the non-linear power of options, our strategies allow for the tailored portfolio outcomes for which clients are looking. For more information, visit www.simplify.us.

DEFINITIONS:

Option: An option is a contract that gives the buyer the right to either buy (in the case of a call option) or sell (in the case of a put option) an underlying asset at a pre-determined price ("strike") by a specific date ("expiry"). An "outright" is another name for a single option leg. A "spread" is when options are bought at one strike and an equal amount of options are sold at a different strike, all at the same expiry.

Put Spread: Buying a put on a strike, and selling another put on a lower strike of the same expiry.

Swap: An agreement between two parties to exchange sequences of cash flows for a set period of time. Usually, at the time the contract is initiated, at least one of these series of cash flows is determined by a random or uncertain variable, such as an interest rate, foreign exchange rate, equity price, or commodity price.

IMPORTANT INFORMATION:

Investors should carefully consider the investment objectives, risks, charges, and expenses of Exchange Traded Funds (ETFs) before investing. To obtain an ETF's prospectus or Summary prospectus containing this and other important information, please call (855) 772-8488, or visit SimplifyETFs.com. Please read the prospectus carefully before you invest.

An investment in the fund involves risk, including possible loss of principal.

The fund is actively-managed is subject to the risk that the strategy may not produce the intended results. The fund is new and has a limited operating history to evaluate. The Fund invests in ETFs (Exchange-Traded Funds) and entails higher expenses than if invested into the underlying ETF directly. The lower the credit quality, the more volatile performance will be. When junk bonds sell off, the lowest-rated bonds are typically hit hardest known as blow up risk. Likewise, the riskiest bonds typically rise fastest in a bull market however these investments that don't have a credit rating are typically the most volatile, hard to price and the least liquid.

The use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. These risks include (i) the risk that the counterparty to a derivative transaction may not fulfill its contractual obligations; (ii) risk of mispricing or improper valuation; and (iii) the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate, or index. Derivative prices are highly volatile and may fluctuate substantially during a short period of time. The use of leverage by the Fund, such as borrowing money to purchase securities or the use of options, will cause the Fund to incur additional expenses and magnify the Fund’s gains or losses. The Fund's investment in fixed income securities is subject to credit risk (the debtor may default) and prepayment risk (an obligation paid early) which could cause its share price and total return to be reduced. Typically, as interest rates rise the value of bond prices will decline and the fund could lose value.

While the option overlay is intended to improve the Fund’s performance, there is no guarantee that it will do so. Utilizing an option overlay strategy involves the risk that as the buyer of a put or call option, the Fund risks losing the entire premium invested in the option if the Fund does not exercise the option. Also, securities and options traded in over-the-counter markets may trade less frequently and in limited volumes and thus exhibit more volatility and liquidity risk.

China Risk: The Chinese economy is generally considered an emerging market and can be significantly affected by economic and political conditions in China and may demonstrate significantly higher volatility than developed markets. China may be subject to considerable degrees of economic, political and social instability. The Chinese government has undertaken reform of economic and market practices and has expanded the sphere of private ownership of property in China. However, Chinese markets generally continue to experience inefficiency, volatility and pricing anomalies resulting from governmental influence, a lack of publicly available information and or political and social instability. Chinese companies are also subject to governmental intervention in their operations and structure. The Chinese economy is export-driven and highly reliant on trading with key partners. The Chinese government regulates the payment of foreign currency denominated obligations. Consequently, the RMB is not freely convertible and currency conversion transactions are subject to approval of PRC authorities. Although Chinese authorities have indicated an intent to move to a freely convertible RMB, there is no assurance that restrictions will not continue. The Chinese government may introduce new laws and regulations that could have an adverse effect on the Fund.

Non-Diversified Fund Risk: Because the Fund is non-diversified and may invest a greater portion of its assets in fewer issuers than a diversified fund, changes in the market value of a single portfolio holding could cause greater fluctuations in the Fund’s share price than would occur in a diversified fund.

Simplify ETFs are distributed by Foreside Financial Services, LLC. Foreside and Simplify are not related.

© 2025 Simplify ETFs. All rights reserved.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250114732593/en/

MEDIA CONTACT:

Chris Sullivan

Craft & Capital

chris@craftandcapital.com

Source: Simplify Asset Management

FAQ

What is unique about the Simplify China A Shares PLUS Income ETF (CAS)?

CAS uses total return swaps instead of direct equity ownership to provide exposure to Chinese A shares, protecting investors from potential capital lock-up during geopolitical events, while also offering additional income through an options overlay strategy.

How does CAS generate additional income for investors?

CAS generates additional income through a risk-managed options overlay that involves selling put spreads on various instruments including equity, fixed income, commodity indices, and ETFs.

What advantages does CAS offer over traditional China A shares ETFs?

CAS offers potential performance advantages through favorable funding rates, protection against geopolitical risks through swap structure, and additional income generation through options overlay.

What type of Chinese companies does CAS provide exposure to?

CAS provides exposure to small, mid, and large-cap Chinese mainland-listed companies trading on mainland China exchanges.

How does CAS protect investors from geopolitical risks?

CAS uses total return swaps traded through major global banks instead of direct equity ownership, preventing potential capital lock-up in case of sanctions or trading restrictions.