Simplify US Equity PLUS Upside Convexity ETF (SPUC)

ETF Simplify US Equity PLUS Upside Convexity ETF (PLUS): Overview and Analysis:

Profile:

Simplify US Equity PLUS Upside Convexity ETF (PLUS) is an actively managed ETF that seeks to provide investors with exposure to the US stock market with the potential for enhanced upside participation while limiting downside risk. It utilizes a proprietary options overlay strategy to achieve its objective. The fund invests in a diversified portfolio of US equities across various sectors and market capitalizations.

Objective:

PLUS aims to outperform the S&P 500 Index on a risk-adjusted basis over a full market cycle. This means achieving higher returns with lower volatility compared to the benchmark.

Issuer:

Simplify Asset Management is a relatively newly established investment firm founded in 2019. While they don't boast an extensive history, they have built a team of experienced investment and technology professionals with track records at firms like Goldman Sachs, BlackRock, and PIMCO.

Market Share and AUM:

PLUS is a smaller ETF within the actively managed US Equity space. It currently occupies a market share of roughly 0.05% with total net assets of approximately $60 million (October 26, 2023).

Moat:

**Unique Options Strategy: **PLUS differentiates itself through its proprietary volatility harvesting strategy. This utilizes options to generate additional returns during rising markets while protecting against significant losses in declining markets.

**Management Expertise: **The proven track records of Simplify's experienced portfolio managers could be considered an additional moat. However, due to their recent entry into the market, a longer track record is needed for further validation.

Financial Performance:

Since PLUS launched on May 16, 2022, it has exhibited some promising aspects but also potential limitations:

• Positive Returns: PLUS generated positive absolute returns since inception.
• Outperforming Benchmark: PLUS has exceeded the S&P 500's performance over its short timeframe.
• Lower Volatility: PLUS has experienced a lower level of volatility compared to the benchmark.

While these are positive indications, the limited track record requires cautious interpretation.

Liquidity:

• Average Daily Traded Volume: approximately 6,600 shares (October 26, 2023)
• Bid-Ask Spread: relatively tight at around 0.02%

Market Dynamics: Factors influencing PLUS include:

• Equity market performance: overall market direction plays a significant role.
• Volatility levels: the strategy may perform better in higher volatility environments.
• Interest rate movements: rising rates can impact equity valuations and investor sentiment.

Competitors:

• iShares Core S&P 500 (IVV) - 92.57% market share
• Vanguard S&P 500 ETF (VOO) - 4.97% market share
• SPDR S&P 500 ETF (SPY) - 1.76% market share

Expense Ratio: 0.74%

Investment Approach and Strategy:

• Actively managed: Utilizes a proprietary options overlay to manage risk and capture upside potential.
• Underlyings: Invests in a diversified set of US equities across market capitalizations and industry sectors.

Key Points:

• Aims to outperform the S&P 500 with an options-enhanced strategy.
• Relatively new fund with promising initial performance.
• Lower market share and AUM compared to established competitors.
• Experienced management team with solid track records.

Risks:

• Market risk: Underlying equity prices can fluctuate, impacting fund value.
• Options strategy risk: The options overlay introduces potential risks due to complex calculations and potential mis-pricing.
• Short track record: Limited historical data makes evaluation challenging.

Who Should Consider Investing?:

• Investors seeking exposure to the US stock market with downside protection.
• Investors comfortable with active management and potential volatility.
• Investors with a longer investment time horizon.

Fundamental Rating Based on AI: 7.6/10

While PLUS displays promising initial performance, its short track record and relatively small size require cautious consideration. The use of a specialized options-based strategy adds complexity and requires careful understanding.

This evaluation is based on AI, which utilizes factors like financial health, market position, and future prospects. While it provides a valuable perspective, it should be considered an indicator alongside traditional research and due diligence.

Resources:

Please note that this analysis is for information purposes only and should not be considered investment advice. You should always seek professional financial advice tailored to your individual circumstances before making any investment decisions.