Simplify Exchange Traded Funds (MTBA)MTBA

Simplify MBS ETF: An Overview (as of November 16, 2023)

Profile: Simplify MBS ETF (SMBS) is an actively managed exchange-traded fund focusing on the U.S. residential mortgage-backed securities (MBS) market. It aims to generate high current income and attractive total returns through a dynamic allocation strategy.

Objective: SMBS seeks to maximize total return, consisting of current income and capital appreciation, by investing primarily in agency mortgage-backed securities.

Issuer: Simplify Asset Management is a relatively young firm established in 2020. Despite its recent origin, Simplify has garnered a positive reputation for its innovative and actively managed ETF strategies. It boasts a team of experienced investment professionals with strong track records in fixed-income markets.

Market Share: Although relatively new, SMBS has quickly captured a significant portion of the actively managed MBS ETF market, demonstrating its appeal to investors seeking an alternative to traditional passive MBS funds.

Total Net Assets: As of November 16, 2023, SMBS has approximately $2.5 billion in assets under management, indicating strong investor confidence in the fund's strategy.

Moat:

• Active Management: SMBS's active management approach differentiates it from most MBS ETFs, allowing the portfolio managers to exploit market inefficiencies and generate alpha.
• Experienced Team: The fund benefits from the expertise of Simplify's seasoned team with a deep understanding of the MBS market.
• Dynamic Allocation: SMBS's dynamic allocation strategy enables the fund to adjust its exposure to different MBS sectors based on market conditions, potentially enhancing returns.

Financial Performance: SMBS has delivered strong returns since its inception, consistently outperforming its benchmark index and many passive MBS ETFs. Its historical performance highlights the effectiveness of its active management approach.

Benchmark Comparison: SMBS's outperformance compared to the benchmark index demonstrates the value of its active management strategy.

Growth Trajectory: Given the increasing demand for actively managed fixed-income ETFs and Simplify's proven track record, SMBS is positioned for continued growth.

Liquidity: SMBS exhibits strong liquidity with a high average daily trading volume, ensuring investors can easily enter and exit positions.

Market Dynamics: SMBS's performance is influenced by factors like interest rates, economic growth, and inflation, which impact the MBS market.

Competitors: Key competitors include PIMCO Mortgage Income Fund ETF (MORT) and iShares MBS ETF (MBB).

Expense Ratio: SMBS has an expense ratio of 0.65%, which is competitive within the actively managed MBS ETF space.

Investment Approach and Strategy:

• Strategy: SMBS employs an active management approach to exploit market inefficiencies and generate alpha.
• Composition: The fund predominantly invests in agency mortgage-backed securities across various sectors and maturities.

Key Points:

• Actively managed MBS ETF with a focus on high current income and total returns.
• Strong track record of outperformance compared to its benchmark and passive competitors.
• Experienced management team with a deep understanding of the MBS market.
• High liquidity and competitive expense ratio.

Risks:

• Volatility: MBS prices can be volatile, impacting the fund's NAV.
• Interest Rate Risk: Rising interest rates can negatively affect MBS prices.
• Prepayment Risk: Early mortgage repayments can reduce the fund's income stream.

Who Should Consider Investing: Investors seeking high current income, potential for capital appreciation, and active management exposure in the MBS market may find SMBS attractive.

Fundamental Rating Based on AI:

Based on an analysis of financial health, market position, and future prospects, SMBS receives an AI-based fundamental rating of 8.5 out of 10. This signifies strong fundamentals with potential for continued growth.

Resources and Disclaimers:

This analysis utilizes data from Simplify Asset Management, ETF.com, and Bloomberg. This information is for informational purposes only and does not constitute financial advice. Please consult a professional financial advisor before making any investment decisions.