Simplify Asset Management (Simplify) has launched its latest product: the Simplify Tail Risk Strategy ETF (CYA).
CYA is designed as a standalone hedge that can help protect equity-dominated portfolios against significant market drawdowns. It seeks to provide investors with a solution for hedging against severe equity market selloffs.
The fund deploys an advanced options overlay designed to handle multiple types of market dislocations and is structured in such a way that modest allocations to the fund may provide a total portfolio hedging solution.
The strategy invests between 10 and 15 percent annually in a sophisticated options strategy that is designed to create a highly convex payoff when markets are down significantly. The remainder of the fund is invested in high income strategies to help fund the option purchases.
CYA joins a Simplify ETF range that has grown to approximately $700 million. More recently, the firm has also introduced a number of ETF solutions designed around interest rate hedging (PFIX), volatility income (SVOL) and equity plus bitcoin exposure, via GBTC (SPBC).
Commenting on the current investment climate, Paul Kim, CEO with Simplify said: “Bond yields remain near all-time lows, driving more investors into equities to find growth and income. But with so much uncertainty in the markets, it can be extremely challenging for investors and advisors to stay the course in equity-dominated portfolios. That is where CYA comes in.”
Explaining the thinking behind the new fund, he added: “We’ve designed the fund in such a way that a modest exposure can potentially provide a meaningful hedge against significant drawdowns, those tail risks that can have such a negative impact on a portfolio and the fear of which can push investors into making portfolio allocation missteps.”