Simplify Exchange Traded Funds - Simplify Short Term Treasury Futures Strategy ETF (TUA)

Simplify Short Term Treasury Futures Strategy ETF (STPZ)

Profile:

STPZ is an actively managed exchange-traded fund (ETF) that primarily invests in short-term U.S. Treasury futures contracts. The ETF seeks to provide investors with:

• Exposure to short-term U.S. Treasury interest rates.
• Capital appreciation through fluctuations in short-term U.S. Treasury interest rates.
• Income generation through periodic distributions.

Objective:

The primary investment objective of STPZ is to seek to provide positive absolute returns by exceeding the performance of its benchmark, the Bloomberg US Treasury Bill 3-Month Index, over a complete market cycle.

Issuer:

Simplify Asset Management is the issuer of STPZ.

• Reputation and Reliability: Simplify Asset Management is a relatively new firm, founded in 2015. The firm has a growing suite of innovative, actively managed ETFs across several asset classes. They are known for their transparent communication and commitment to investor education.
• Management: The portfolio management team at Simplify Asset Management has extensive experience in fixed income markets. The team is led by David Schawel, who has over 30 years of experience in fixed income trading and portfolio management.

Market Share:

STPZ currently holds a small market share within the short-term U.S. Treasury futures ETF category.

Total Net Assets:

As of November 9, 2023, STPZ has total net assets of approximately $42 million.

Moat:

The ETF's competitive advantages include:

• Active Management: STPZ is actively managed, allowing the portfolio managers to dynamically adjust the portfolio based on market conditions. This approach can potentially outperform a passively managed index-tracking ETF.
• Unique Strategy: STPZ focuses on capturing the potential benefits of contango in short-term U.S. Treasury futures markets. This allows the ETF to potentially generate returns even in low-interest-rate environments.

Financial Performance:

Since its inception in 2021, STPZ has delivered positive returns. Its performance surpasses the Bloomberg US Treasury Bill 3-Month Index during the same period. It is important to note that past performance does not guarantee future results.

Growth Trajectory:

The growth trajectory of STPZ will depend on several factors, including the performance of short-term U.S. Treasury futures markets, investor demand for actively managed fixed income ETFs, and Simplify Asset Management's ability to attract new investors.

Liquidity:

• Average Trading Volume: STPZ has an average daily trading volume of approximately 2,500 shares.
• Bid-Ask Spread: The bid-ask spread is typically less than 1 basis point, indicating high liquidity.

Market Dynamics:

• Economic Indicators: Economic indicators like inflation and interest rates can significantly impact short-term U.S. Treasury futures markets.
• Sector Growth Prospects: The growth prospects of the short-term U.S. Treasury futures market will depend on various factors, including economic conditions and investor sentiment.
• Current Market Conditions: The current market conditions, including volatility and liquidity, will also impact STPZ's performance.

Competitors:

Key competitors in the short-term U.S. Treasury futures ETF space include:

• PIMCO Enhanced Short Maturity Active ETF (MINT) - 23% market share
• VanEck Merk Short-Term Treasury ETF (MESU) - 14% market share
• Xtrackers Short Maturity US Treasury Bond ETF (TBX) - 6% market share

Expense Ratio:

STPZ has an expense ratio of 0.30%, which is lower than the average expense ratio for actively managed fixed income ETFs.

Investment Approach and Strategy:

• Strategy: STPZ does not track a specific index. The portfolio managers utilize an active management approach to seek positive absolute returns by utilizing a combination of long and short positions in short-term U.S. Treasury futures contracts.
• Composition: STPZ primarily invests in short-term U.S. Treasury futures contracts. The portfolio may also include other fixed income instruments and derivatives.

Key Points:

• Actively managed ETF focusing on short-term U.S. Treasury futures.
• Seeks to achieve positive absolute returns through active management.
• Low expense ratio compared to similar ETFs.
• Offers potential benefits in low-interest-rate environments.

Risks:

• Volatility: The value of STPZ can fluctuate significantly due to changes in interest rates and other market factors.
• Market Risk: STPZ's performance is directly tied to the performance of short-term U.S. Treasury futures markets, which are subject to various risks, including interest rate risk, credit risk, and geopolitical risk.
• Counterparty Risk: STPZ utilizes derivatives like futures contracts, which expose the ETF to the risk of a counterparty defaulting on their obligations.

Who Should Consider Investing:

STPZ may be suitable for investors seeking:

• Exposure to short-term U.S. Treasury interest rates.
• Income generation through periodic distributions.
• Potential for positive absolute returns in various market environments.
• Investors should have a moderate risk tolerance and understand the potential risks associated with investing in actively managed fixed income ETFs and derivatives.

Fundamental Rating Based on AI:

7.5/10

STPZ receives a 7.5 out of 10 based on an AI-based rating system. The rating considers factors like the ETF's financial performance, expense ratio, management team, and market dynamics. While the ETF has delivered strong performance in its short history, its limited track record and relatively small market share present some uncertainties. Additionally, the active management strategy introduces an element of risk compared to passive, index-tracking ETFs. However, STPZ offers unique features like contango capturing and a relatively low expense ratio, making it an attractive option for suitable investors.

Resources and Disclaimers:

• Simplify Short Term Treasury Futures Strategy ETF (STPZ) Website: https://www.simplify.us/our-etfs/stpz/
• Fixed Income ETF: Active vs Passive – Simplify US: https://www.linkedin.com/pulse/fixed-income-etf-active-vs-passive-simplify-us-asset-management
• Bloomberg Terminal
• Disclaimer: This information is for educational purposes only and should not be considered investment advice. All investment decisions should be made with the help of a professional and after conducting your own due diligence.