On Tuesday, Simplify Asset Management (“Simplify”), an innovative provider of options-based exchange traded funds (“ETFs”), announced the launch of its newest ETF: the Simplify Tail Risk Strategy ETF (CYA).
CYA seeks to provide investors with a standalone solution for hedging against severe equity market selloffs. The fund deploys an advanced options overlay designed to handle multiple types of market dislocations and is structured in such a way that modest allocations to the fund may provide a total portfolio hedging solution.
“Bond yields remain near all-time lows, driving more investors into equities to find growth and income. But with so much uncertainty in the markets, it can be extremely challenging for investors and advisors to stay the course in equity-dominated portfolios. That is where CYA comes in,” said Paul Kim, CEO of Simplify. “We’ve designed the fund in such a way that a modest exposure can potentially provide a meaningful hedge against significant drawdowns, those tail risks that can have such a negative impact on a portfolio and the fear of which can push investors into making portfolio allocation missteps.”
CYA invests between 10 and 15% annually in a sophisticated options strategy designed to create a highly convex payoff when markets are down significantly. The remainder of the fund is invested in high-income strategies to help fund the option purchases.
“The larger the market moves to the downside, the larger the potential benefits from the CYA approach may be,” added Kim. “That’s why our options overlay is referred to as ‘convex,’ as there is a strong distinction between this approach and more linear equity hedging strategies.”
CYA joins a Simplify ETF family that, in just over one year, has already grown to approximately $700 million, as advisors, family offices, institutions, and the retail investor community have been drawn to the more scientific approach the firm has pioneered for combining equity index exposures with robust options overlays. More recently, the firm has also introduced several innovative ETF solutions designed around interest rate hedging (PFIX), volatility income (SVOL), and equity plus Bitcoin exposure via GBTC (SPBC).
For more information, visit www.simplify.us.