Simplify Debuts Managed Futures ETF

The issuer worked with managed futures specialist Altis Partners to develop the fund.

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Reviewed by: Heather Bell
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Edited by: Heather Bell

Simplify’s newest ETF is a long/short managed futures product designed to provide access to a type of strategy that is often inaccessible to the average investor.

The quantitatively managed Simplify Managed Futures Strategy ETF (CTA) will invest in a portfolio of futures on commodities, U.S. Treasury vehicles and foreign currencies.

CTA comes with an expense ratio of 0.75% and lists on the NYSE Arca.

“With interest rates near all-time lows and equity valuations growing ever more stretched, investors are searching for sources of absolute return that can simultaneously serve as a portfolio diversifier. Managed futures have long been put forward as just such a potential solution but investors have too often been underwhelmed by typical managed futures strategies’ correlation to equities,” said Simplify’s Chief Investment Officer and Co-Founder David Berns.

The fund does not issue K-1 forms, as it is structured as a traditional open-ended fund with a Cayman Islands subsidiary that holds up to 25% of the fund’s assets in futures contracts. The futures portfolio held by the subsidiary is managed by subadvisor Altis Partners, an investment manager that specializes in managed futures strategies and has a 20-year track record.

According to a press release, CTA allocates its assets among four models that focus on price trend, mean reversion, carry and risk-off. The document further notes that the fund seeks to provide positive returns no matter the market environment and that it has the potential to provide significant diversification relative to equities.

Additionally, the press release says that the portfolio excludes equity futures to maintain a lower correlation to the equity asset class.

“Over the last decade, you really have not seen the amount of investments on this side of the market, [which] has really atrophied as the equity markets have just rallied and the negatively correlated parts of the market has suffered from a performance standpoint,” said Simplify Chief Revenue Officer Brian Kelleher, who notes that the timing for such a product is “exquisite” and that it offers the prospect of true diversification beyond a traditional 60/40 portfolio.

 

Contact Heather Bell at [email protected]

Heather Bell is a former managing editor of etf.com. She has also held editorial positions at Dow Jones Indexes and Lehman Brothers. Bell is a graduate of Dartmouth college and resides in the Denver area with her two dogs.