AGGH and CDX are first-of-their-kind funds, providing exposure to diversified investment grade bonds and high yield corporate debt, respectively, with unique credit hedge overlays
NEW YORK–(BUSINESS WIRE)–Simplify Asset Management (“Simplify”), an innovative provider of Exchange Traded Funds (“ETFs”) designed to solve today’s most pressing portfolio construction challenges, is today announcing the launch of two first-of-their-kind fixed income ETFs:
- Simplify Aggregate Bond PLUS Credit Hedge ETF (AGGH), and
- Simplify High Yield PLUS Credit Hedge ETF (CDX).
“In volatile markets, during times of financial stress, credit spreads can often widen with little notice, having a seriously detrimental effect on the performance of an investor’s fixed income portfolio. Hedging against such credit risk can be complicated and expensive, two issues we’ve sought to solve with the launch of AGGH and CDX,” said Paul Kim, CEO & Co-Founder of Simplify. “Through these ETFs, investors now have an approach that allows them to build a core fixed income portfolio, capturing both the investment grade and high yield universes, while also incorporating sophisticated credit hedge overlays to help protect against sudden shifts in credit spreads.”
AGGH is the first ETF to provide investment grade bond exposure with a credit hedge overlay. The fund’s core bond exposure will be delivered via the low cost, highly liquid iShares Core U.S. Aggregate Bond ETF (AGG) with a credit hedge overlay consisting of a combination of CDX calls, Quality-Junk factor-based hedges, or SPX puts, selected opportunistically by the Simplify team.
CDX is the first ETF to provide high yield bond exposure with a credit hedge overlay, with the hedges opportunistically selected from among CDX calls, Quality-Junk factor-based hedges, or SPX puts. The underlying core high yield bond exposure will also be delivered via low-cost, liquid ETFs such as the iShares Broad High Yield ETF (USHY) and VanEck Fallen Angel High Yield ETF (ANGL).
“The credit risk premium can be an attractive return source with the potential to deliver significant income,” added Kim. “But credit spreads can turn quickly, making it essential that investors have easy to access credit hedging techniques. We’re very pleased to be bringing these funds to market as we continue to build some of the industry’s most robust suite of tools for investors looking to hedge against key risks, access opportunities with convexity, and build portfolios positioned for the uncertain markets of the future.”
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.
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 funds are actively-managed and subject to the risk that the strategy may not produce the intended results. The funds are new with a limited operating history to evaluate. The Funds invest in ETFs (Exchange-Traded Funds) and entails higher expenses than if invested into the underlying ETF directly. For CDX, the lower the credit quality it invests in, 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. 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.
Convexity: A measure of how the duration of a bond changes in correlation to an interest rate change. The greater the convexity of a bond the greater the exposure of interest rate risk to the portfolio.
Investment Grade: Refers to the quality of a company’s credit and must be rated at ‘BBB’ or higher by Standard and Poor’s or Moody’s. Credit quality does not refer to the fund itself.
Quality-Junk: A long/short equity factor created by being long quality equity names while being short junk equity names. Quality equities generally have high margins, profit stability, and strong balance sheets. Junk names are generally those stocks with high sensitivity to an increase in debt refinancing costs.
Simplify ETFs are distributed by Foreside Financial Services, LLC.