New York-based Simplify Asset Management has introduced a suite of four actively managed thematic ETFs that combine a high-conviction equity portfolio with an options-strategy overlay.
Paul Kim, co-Founder of Simplify Asset Management.
The funds, which have listed on NYSE Arca, provide exposure to the investment themes of robotic cars, fintech, pop culture, and cloud computing/cybersecurity.
The equity sleeve of each ETF will account for at least 80% of the fund’s total assets and will be managed by San Francisco-based Volt Equity, a newly formed investment company focused on the technology sector.
Volt Equity will use its proprietary analysis to identify companies listed globally that are aligned with the relevant theme.
Each ETF will take concentrated positions of up to 25% per holding in a small number of companies considered to be the most disruptive within their industries. This is supplemented with a position in targeted sector ETFs, typically Invesco QQQ, to complete the equity component.
The options overlay, meanwhile, is managed by Simplify and accounts for up to 20% of each ETF’s total assets. The overlay may consist of discretionary call options on the portfolio’s individual securities as well as put options on the Nasdaq 100, the S&P 500, or ETFs linked to these indices. The call options serve to enhance returns when the funds’ holdings are trending upwards, while the put options are aimed at reducing drawdowns during periods of poor performance.
Paul Kim, co-Founder of Simplify Asset Management, commented, “Our thematic ETFs are designed to be an attractive alternative to watered-down thematic ETFs that try to buy every company in a particular theme. We believe in concentration for upside potential. We also believe concentrated, professionally managed ETFs are an attractive alternative to single stock or options for many investors.”
David M. Berns, Chief Investment Officer of Simplify Asset Management, said, “Thematic portfolios are essentially trying to concentrate in likely winners. We try to identify firms that have important technological or cultural edges and provide meaningful concentration to their stock price. We combine concentrated stock exposure with call options to add ‘convexity.’ But because of the inherent volatility of growth stocks we also incorporate risk management, diversification, and downside hedges as a way to smooth out the experience of concentrated portfolios.”
The funds are as follows:
The Simplify Volt RoboCar Disruption and Tech ETF (VCAR US) comes with an expense ratio of 1.09%. The fund’s top stock holding is Tesla, the American electric vehicle and clean energy company that recently ascended into the bellwether S&P 500 Index.
The Simplify Volt Fintech Disruption ETF (VFIN US) comes with an expense ratio of 1.03%. The fund’s top holdings are Square, an American financial services merchant, services aggregator, and mobile payment company, and Lemonade, an innovative technology-driven insurer that users artificial intelligence to assess claims.
The Simplify Volt Pop Culture Disruption ETF (VPOP US) also comes with an expense ratio of 1.03%. The fund’s top holdings are Spotify, the digital music and video streaming service, and Snap, the American social media company behind Snapchat.
The Simplify Volt Cloud and Cybersecurity Disruption ETF (VCLO US) comes with an expense ratio of 1.02%. The fund’s top holdings are Crowdstrike, an American company providing endpoint security, threat intelligence, and cyberattack response to consumers; and Snowflake, a cloud-based data-warehousing company located in California.
Simplify debuted its first ETFs in September, unveiling three options-enhanced funds tracking the S&P 500. The firm followed this up in December with three similar ETFs linked to the Nasdaq 100.