Simplify Adds to Its Fixed Income ETF Suite with Launch of Two Funds Focused on Hedging Credit Risk
AGGH and CDX are first-of-their-kind funds, providing exposure to diversified investment grade bonds and high yield corporate debt, respectively, with unique credit hedge overlays
February 15, 2022
- Simplify Aggregate Bond PLUS Credit Hedge ETF (AGGH), and
- Simplify High Yield PLUS Credit Hedge ETF (CDX).
“In volatile markets, during times of financial stress, credit spreads can often widen with little notice, having a seriously detrimental effect on the performance of an investor’s fixed income portfolio. Hedging against such credit risk can be complicated and expensive, two issues we’ve sought to solve with the launch of AGGH and CDX,” said Paul Kim, CEO & Co-Founder of Simplify. “Through these ETFs, investors now have an approach that allows them to build a core fixed income portfolio, capturing both the investment grade and high yield universes, while also incorporating sophisticated credit hedge overlays to help protect against sudden shifts in credit spreads.”
AGGH is the first ETF to provide investment grade bond exposure with a credit hedge overlay. The fund’s core bond exposure will be delivered via the low cost, highly liquid iShares Core U.S. Aggregate Bond ETF (AGG) with a credit hedge overlay consisting of a combination of CDX calls, Quality-Junk factor-based hedges, or SPX puts, selected opportunistically by the Simplify team.
CDX is the first ETF to provide high yield bond exposure with a credit hedge overlay, with the hedges opportunistically selected from among CDX calls, Quality-Junk factor-based hedges, or SPX puts. The underlying core high yield bond exposure will also be delivered via low-cost, liquid ETFs such as the iShares Broad High Yield ETF (USHY) and VanEck Fallen Angel High Yield ETF (ANGL).
“The credit risk premium can be an attractive return source with the potential to deliver significant income,” added Kim. “But credit spreads can turn quickly, making it essential that investors have easy to access credit hedging techniques. We’re very pleased to be bringing these funds to market as we continue to build some of the industry’s most robust suite of tools for investors looking to hedge against key risks, access opportunities with convexity, and build portfolios positioned for the uncertain markets of the future.”
AGGH and CDX are part of a Simplify ETF lineup that crossed the $1 billion mark to end 2021, and which now includes three fixed income funds, joining the Simplify Risk Parity Treasury ETF (TYA).
ABOUT SIMPLIFY ASSET MANAGEMENT INC
Simplify Asset Management Inc. is a Registered Investment Adviser founded in 2020 to help advisors tackle the most pressing portfolio challenges with an innovative set of options-based strategies. By accounting for real-world investor needs and market behavior, along with the non-linear power of options, our strategies allow for the tailored portfolio outcomes for which clients are looking. For more information, visit www.simplify.us.