Simplify Launches Opportunistic Income ETF (CRDT)
Actively managed, opportunistic credit strategy focuses on security selection within high-yield, investment grade, and distressed debt; designed to provide compelling current income opportunities
The Fund is built around an actively managed, opportunistic credit strategy that focuses on security selection within the high yield, investment grade, and distressed debt universes. CRDT is sub-advised by Asterozoa Capital Management, a highly experienced alternative manager with deep expertise in credit and fixed income derivatives. That team will be deploying a proprietary multi-step investment process in the management of CRDT which combines macroeconomic, quantitative, and fundamental research as they seek current income, with long-term capital appreciation as a secondary objective.
Additionally, CRDT will employ a dynamic macro hedging overlay, typically in the forms of interest rate swaps,
“The ongoing volatility in the fixed income universe presents a host of challenges to investors and advisors as they seek to build and maintain the income generating component of their respective portfolios. Proven, active management can play a major role in not only identifying opportunities for income and growth but also minimizing risks and correlations, which can emerge with little to no warning and have a hugely destructive impact on an unhedged, passive bond portfolio,” said David Berns, PhD, Simplify’s Chief Investment Officer and Co-Founder.
“We are very excited to be launching CRDT into the current market as this is a means for all investors to add a true hedge fund-like strategy powered by active security selection but with no K-1s, lockups or high fees, which are so often associated with this kind of approach. The search for income never ends, and with CRDT, we believe we’re providing a significant upgrade for investors seeking effective current income solutions,” added Berns.
More information on CRDT can be found here.
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.
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DEFINITIONS:
The Credit Default Swap Index (CDX): A benchmark index that tracks a basket of
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.
Schedule K-1: A federal tax document used to report the income, losses, and dividends of a business' or financial entity's partners or an S corporation's shareholders.
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 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.
Emerging Markets Risk. Investing in emerging markets involves not only the risks described with respect to investing in foreign securities, but also other risks, including exposure to economic structures that are generally less diverse and mature, limited availability and reliability of information material to an investment decision, and exposure to political systems that can be expected to have less stability than those of developed countries. Futures Risk. The Fund’s use of futures involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments.
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.
Simplify ETFs are distributed by Foreside Financial Services, LLC. Foreside and Simplify are not related.
©2023 Simplify ETFs. All rights reserved.
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MEDIA:
Chris Sullivan
Craft & Capital
(212) 473-4442
chris@craftandcapital.com
Source: Simplify Asset Management
