Simplify Launches Money Market ETF With Floating NAV
- Simplify has launched SBIL, a government money market ETF with a 0.15% expense ratio.
- The fund invests 99.5% of assets in cash, U.S. government securities and repurchase agreements.
- Unlike traditional money market funds, SBIL operates with a floating net asset value.
Simplify Asset Management launched the Simplify Government Money Market ETF (SBIL) on Tuesday, targeting investors seeking money market fund stability in an ETF wrapper.
The fund seeks current income consistent with liquidity and stability of principal by investing at least 99.5% of its assets in cash, U.S. government securities and repurchase agreements fully collateralized by such obligations or cash, according to the prospectus.
SBIL should deliver higher yields than most Treasury ETFs while maintaining similar yields to traditional money market funds but with lower costs through its 0.15% expense ratio, Jason England, managing director, portfolio manager and fixed-income strategist at Simplify, said in an email.
The fund represents "a cash-equivalent solution that aligns with the marketplace's ongoing demand for income and stability of principal" and offers appeal for institutional investors seeking "a low-cost government money market fund in the convenient ETF format," David Berns, chief investment officer and co-founder of Simplify, said in the press release.
SBIL & the Money Market Structure
The fund maintains a portfolio dollar-weighted average maturity of 60 days or less and a dollar-weighted average life of 120 days or less, according to the filing. SBIL operates as a government money market fund pursuant to Rule 2a-7 under the Investment Company Act of 1940.
Unlike traditional money market funds, SBIL will not maintain a stable net asset value per share using amortized cost or penny rounding methods, according to the prospectus. Instead, the fund calculates its NAV based on market value of investments, resulting in a floating share price.
The fund targets investors seeking higher yields than traditional bank savings accounts and similar or higher yields than certificates of deposit while offering daily liquidity, England said. The ETF format provides intraday trading capability unlike traditional money market funds that require waiting for end-of-day NAV calculations, he added.
The fund charges a 0.15% management fee with no other operating expenses, according to the filing. Simplify Asset Management pays all operating expenses except interest expenses, taxes, brokerage expenses and the management fee.
England said the fund's 2a-7 compliance structure minimizes risk through investments in short-term, high-quality debt securities offering daily liquidity, which should result in minimal NAV changes.
SBIL trades on NYSE Arca and maintains at least 25% of assets in daily liquid assets and 50% in weekly liquid assets, according to the prospectus. The fund focuses initially on overnight repurchase agreements but may invest in longer-maturity repurchase agreements in the future.
