Simplify Adds Downside Protection Offerings With EMGD, EAFD, & RTYD

Simplify has launched three new ETFs, each with an integrated downside convexity option overlay intended to limit each fund’s losses.

The trio of new funds includes the Simplify Emerging Markets Equity PLUS Downside Convexity ETF (EMGD), the Simplify US Small Cap PLUS Downside Convexity ETF (RTYD), and the Simplify Developed Ex-US PLUS Downside Convexity ETF (EAFD), which all debuted on the NYSE on January 11.

EMGD, RTYD, and EAFD will pursue their investment strategies primarily by purchasing other ETFs that invest in equity securities issued by, or tied economically to, companies in each fund’s target market exposure. 

EMGD will invest in equity securities issued by companies in emerging markets, which includes any country that is generally recognized to be an emerging market country by the international financial community, including the World Bank. 

Any country classified by the United Nations as a developing country or included in the MSCI Emerging Markets Index will also be considered an emerging market country, according to regulatory filings. 

RTYD will invest primarily in equity securities of U.S. small-cap companies, defined as those with market capitalizations below $3 billion or in the range of companies included in the Russell 2000 Index at the time of purchase, according to regulatory filings.

The capitalization range of the Russell 2000 Index is between $257 million and $7.3 billion, as of May 7, 2021, according to regulatory filings. The size of the companies included in the Russell 2000 Index will change with market conditions.

EAFD will invest primarily in equity securities of companies listed on a developed ex-U.S. index, which spans all market capitalizations and excludes only the U.S. and Canada. 

Up to 20% of each fund’s net assets will be subject to the fund’s downside convexity option overlay, which consists of purchasing exchange-traded and OTC put options on an emerging market index, a Russell 2000 Index, a developed ex-U.S. index, or similar index ETFs.

The downside convexity option overlay is intended to limit a fund’s losses and is a strategic, persistent exposure meant to hedge against market moves and to add convexity to a fund, according to regulatory filings.

EMGD, RTYD, and EAFD carry expense ratios of 36 basis points, 31 basis points, and 32 basis points, respectively.

The funds will be managed by an investment team comprised of Paul Kim, CEO; David Berns, CIO; and Michael Green, managing director and chief strategist.

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