On Wednesday, Simplify Asset Management launched its latest fund, the Simplify Kayne Anderson Energy and Infrastructure Credit ETF (KNRG).
An actively managed fund, KNRG looks to offer income with a secondary objective of capital appreciation. The fund has a net expense ratio of 76 basis points.
Kayne Anderson Capital Advisors operates as the subadvisor for the fund. In this role, the firm looks to select credit instruments of energy and infrastructure companies, with a focus on relative value. Eligible credit instruments include bonds, debt, notes, preferred shares, derivatives, and loans, among others.
When it comes to selecting securities to invest in, KNRG’s portfolio team uses a bottom-up fundamental analysis. This analysis can provide a better understanding of credit quality and build a portfolio that blends both yield and capital appreciation.
At times, KNRG might opt to augment its investment approach with a hedging strategy. To do so, the fund could use a mix of total return swaps, default swaps, and options. This may be done to better manage the portfolio’s risk of default, along with opening the fund up to additional profits from credit spreads.
Activating New Sector Opportunities
KNRG launches as more investors and advisors are looking to balance their portfolio against U.S. inflationary risks. Broadly speaking, both the energy and infrastructure sectors can perform well during bouts of inflation.
“Energy and infrastructure stand to benefit from a number of favorable tailwinds, including the growing push for reshoring, increased public sector infrastructure spending, and the continued digitization of our economy, which is incredibly energy-intensive,” noted David Berns, Simplify co-founder and chief investment officer. “We have sought to build a product that provides a source of attractive monthly yield based on a portfolio overseen by a best-in-class manager.”
Notably, KNRG invests in a mix of companies in both the energy and infrastructure sectors. Grabbing multisector exposure can open new avenues for returns while creating a more diversified risk profile.
The use of active management can provide KNRG with both offensive and defensive benefits. To start, the fund’s experienced portfolio team can search beyond an index to locate attractive securities that could lead to performance. Meanwhile, the flexible active framework gives KNRG more wiggle room to adapt to changing macroeconomic conditions.
KNRG comes online as Simplify continues to expand its ETF bandwidth. Just last month, the firm debuted a pair of ETFs that blend portfolio yield with distinct downside management.
See More: Simplify Launches 2 New Active Barrier Income ETFs
Simplify currently offers a wide selection of funds that employ distinct strategies. One of the largest Simplify ETFs, the Simplify MBS ETF (MTBA), has over $1.5 billion in assets under management.
For more news, information, and strategy, visit ETF Trends.