Simplify Launches Actively Managed Emerging Markets Bond ETF: GAEM

Rhea-AI Summary

Simplify Asset Management has launched the Simplify Gamma Emerging Market Bond ETF (NYSE Arca: GAEM), an actively managed ETF focusing on Latin American issuers. The fund, subadvised by Gamma Asset Management (GAM), aims to provide exposure to underrepresented smaller economies in Latin America, offering diversification across sovereigns, corporates, and currency bonds.

Key points:

• GAEM targets Latin American issuers with favorable investment fundamentals
• GAM brings expertise in LatAm investing with $5 billion AUM in the region
• The ETF offers potential for yields equal to or higher than U.S. high yield bond indexes
• LatAm bonds are issued under New York law, providing similar protections as U.S.-based issuers
• GAEM joins Simplify's fund lineup, which recently surpassed $5 billion AUM

Positive

• Launch of a new actively managed ETF (GAEM) focusing on Latin American issuers
• Potential for yields equal to or higher than U.S. high yield bond indexes
• Diversification across sovereigns, corporates, and currency bonds
• Subadvisor (GAM) brings expertise with $5 billion AUM in Latin America
• Simplify's fund lineup recently surpassed $5 billion AUM

Negative

• None.

Insights

Financial Analyst

The launch of Simplify's GAEM ETF is a notable development in the emerging markets fixed income space. By focusing on Latin American issuers, GAEM addresses an underrepresented segment in many passive EM debt vehicles. This active management approach could potentially offer higher yields and diversification benefits for income-focused investors.

However, investors should be aware of the risks associated with emerging markets, including currency fluctuations, political instability and economic volatility. The fund's performance will heavily depend on the expertise of Gamma Asset Management in navigating these challenges. With $5 billion AUM in Latin America, GAM's track record will be important to watch.

The ETF's focus on securities issued under New York law provides an additional layer of investor protection, which is a significant advantage in the EM debt market. Overall, GAEM could be an interesting option for investors seeking to diversify their fixed income portfolio, but careful consideration of the risk-reward profile is essential.

Market Research Analyst

The launch of GAEM reflects a growing trend in the ETF market towards more specialized and actively managed products. This move by Simplify is timely, as investors are increasingly seeking alternatives to traditional passive index funds, especially in complex markets like emerging economies.

The focus on Latin American issuers is particularly interesting. This region has been underrepresented in many EM debt indexes, potentially offering untapped opportunities. However, it's important to note that this concentration also increases geographic risk.

Simplify's rapid growth, surpassing $5 billion AUM in the first half of 2024, suggests strong investor interest in their innovative approach. The expansion into emerging markets and fixed income products like GAEM and IOPP indicates a strategic diversification of their offerings. This could position Simplify well in the competitive ETF landscape, especially if these new products gain traction among yield-seeking investors.

Legal Expert

The emphasis on GAEM's bonds being issued under New York law is a significant legal advantage. This provides investors with familiar and robust legal protections, potentially reducing some of the legal risks typically associated with emerging market investments.

However, it's important to note that while the legal framework may be similar to U.S.-based issuers, the underlying economic and political risks in Latin American countries can still impact bond performance. Investors should not conflate legal protections with economic stability.

The active management approach allows for more flexibility in security selection, potentially enabling the fund to navigate complex legal and regulatory environments more effectively than passive indexes. This could be particularly valuable in emerging markets where regulatory landscapes can change rapidly. Nonetheless, investors should carefully review the fund's prospectus to understand the specific legal and regulatory risks associated with its investment strategy.

Gamma Asset Management serves as the Fund’s subadvisor; GAEM will focus on Latin American issuers, providing an important diversification tool for income-focused investors

NEW YORK--(BUSINESS WIRE)-- Simplify Asset Management (“Simplify”), an innovative provider of Exchange Traded Funds (“ETFs”), is today announcing the launch of the firm’s first Emerging Markets fixed income ETF: the Simplify Gamma Emerging Market Bond ETF (NYSE Arca: GAEM).

GAEM is an actively managed ETF designed primarily to provide exposure to Latin American issuers that, in the eyes of the Fund’s management team, display favorable investment fundamentals. Gamma Asset Management LLC (GAM) serves as the Fund’s subadvisor and has approximately $5 billion in assets under management in Latin America. Their portfolio management team brings significant expertise in investing in the LatAm region and will use fundamental, economic, and political analysis to seek out securities with the most favorable return and risk profiles.

“In looking at the legacy passive vehicles through which many investors gain EM debt exposure, it became very clear that their underlying indexes target the largest issuers from the biggest economies, leaving smaller economies, particularly among the Latin American nations, underrepresented. With GAEM, we’ve constructed an actively managed approach through which advisors and investors can access a range of under-followed securities with attractive yields,” said Simplify’s CIO David Berns.

“GAEM will provide exposure across sovereigns, corporates, US. dollar and local currency bonds; and it’s also worth noting that EM bonds from Latin America are issued under New York law, with identical protections as bonds from U.S.-based issuers,” added David.

The Simplify team points to a number of use cases for GAEM, including as a portfolio diversifier (across geographies, currencies, and issuer type), as well as providing the potential for yields equal to or higher than those of U.S. high yield bond indexes.

GAEM joins a Simplify fund lineup that passed the $5 billion AUM mark in the first half of 2024 and has recently been expanding its lineup to include a broader range of fixed income and Emerging Market exposures, such as the March launch of the Simplify Tara India Opportunities ETF (IOPP).

For more information on GAEM, please visit: https://www.simplify.us/etfs/gaem-simplify-gamma-emerging-market-bond-etf

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.

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 the 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.

Fixed Income Securities Risk: When the Fund invests in fixed income securities, the value of your investment in the Fund will fluctuate with changes in interest rates. Typically, a rise in interest rates causes a decline in the value of fixed income securities owned by the Fund. In general, the market price of fixed income securities with longer maturities will increase or decrease more in response to changes in interest rates than shorter-term securities.

Emerging Markets Risk: Investing in emerging markets involves not only the risks described below 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.

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

© 2024 Simplify ETFs. All rights reserved.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240813906126/en/

Chris Sullivan

Craft & Capital

chris@craftandcapital.com

Source: Simplify Asset Management

FAQ

What is the ticker symbol for the Simplify Gamma Emerging Market Bond ETF?

The ticker symbol for the Simplify Gamma Emerging Market Bond ETF is GAEM.

What is the primary focus of the GAEM ETF?

GAEM primarily focuses on providing exposure to Latin American issuers that display favorable investment fundamentals, as determined by the Fund's management team.

Who is the subadvisor for the GAEM ETF?

Gamma Asset Management (GAM) serves as the subadvisor for the GAEM ETF.

What types of bonds does GAEM invest in?

GAEM invests in a range of bonds including sovereigns, corporates, U.S. dollar-denominated, and local currency bonds from Latin American issuers.

How does GAEM differ from other emerging market debt ETFs?

GAEM is actively managed and focuses on underrepresented smaller economies in Latin America, unlike passive vehicles that target larger issuers from bigger economies.