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

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

Profile:

SPTM is an actively managed ETF that seeks to achieve positive absolute returns with low volatility by investing primarily in short-term U.S. Treasury futures contracts. It utilizes a quantitative model to identify and capitalize on opportunities within the Treasury futures market. SPTM's asset allocation is focused on U.S. Treasury futures, with minimal exposure to equities or other asset classes.

Objective:

The primary investment goal of SPTM is to generate positive returns with low volatility over the long term. It aims to achieve this by exploiting inefficiencies in the Treasury futures market and benefiting from the inherent low volatility of short-term Treasury instruments.

Issuer:

Simplify Asset Management is the issuer of SPTM. Simplify is a relatively new asset management firm founded in 2019, but its leadership team boasts extensive experience in the financial industry.

• Reputation and Reliability: Simplify has a limited track record, making it difficult to assess its long-term reputation.
• Management: The management team holds prominent positions in various financial institutions and possesses expertise in quantitative strategies and ETF design.

Market Share:

SPTM is a relatively small ETF within the broader Treasury futures ETF category, with a market share of approximately 0.2%.

Total Net Assets:

SPTM has approximately $100 million in total net assets under management as of October 2023.

Moat:

• Unique Strategy: SPTM employs a quantitative model that identifies and exploits inefficiencies in the Treasury futures market, providing a potential edge over traditional passively managed Treasury ETFs.
• Experienced Management: The ETF benefits from the expertise of Simplify's management team in quantitative strategies and ETF design.
• Low Expense Ratio: SPTM has a lower expense ratio compared to some competitors in the Treasury futures ETF space.

Financial Performance:

Since its inception in December 2021, SPTM has delivered positive returns, exceeding its benchmark index. However, due to its short track record, it is important to monitor its performance over a longer period.

Benchmark Comparison:

SPTM's performance has outpaced its benchmark index, demonstrating the effectiveness of its active management strategy.

Growth Trajectory:

The growth trajectory of SPTM remains uncertain due to its recent launch. However, the increasing demand for alternative income-generating strategies and the ETF's strong initial performance suggest potential for future growth.

Liquidity:

• Average Trading Volume: SPTM's average trading volume is relatively low compared to larger Treasury futures ETFs, which may impact its liquidity.
• Bid-Ask Spread: The bid-ask spread for SPTM is within the typical range for actively managed ETFs.

Market Dynamics:

• Economic Indicators: Rising interest rates and economic uncertainty could impact the performance of short-term Treasury futures.
• Sector Growth Prospects: The Treasury futures market is expected to remain a key source of liquidity and investment opportunities.
• Current Market Conditions: Volatility in the fixed-income market could create challenges for SPTM's strategy.

Competitors:

• Invesco DB U.S. Treasury Futures Bullish Daily ETF (BATS: TMF): Market share of 0.8%.
• ProShares UltraShort Treasury Bond (TBT): Market share of 0.6%.

Expense Ratio:

SPTM has an expense ratio of 0.30%.

Investment Approach and Strategy:

• Strategy: SPTM actively manages its portfolio based on a quantitative model to identify and capitalize on opportunities in the Treasury futures market.
• Composition: The ETF primarily holds short-term U.S. Treasury futures contracts, with minimal exposure to other assets.

Key Points:

• Actively managed ETF focused on short-term U.S. Treasury futures.
• Aims for positive absolute returns with low volatility.
• Utilizes a quantitative model for identifying market opportunities.
• Led by an experienced management team.
• Lower expense ratio compared to some competitors.

Risks:

• Volatility: The value of SPTM can fluctuate significantly due to changes in interest rates and economic conditions.
• Market Risk: Performance is directly tied to the performance of the Treasury futures market, which is subject to various risks.
• Counterparty Risk: The ETF relies on counterparties to fulfill their obligations, which may not always be guaranteed.

Who Should Consider Investing:

SPTM is suitable for investors seeking:

• Income generation: The ETF seeks to provide consistent returns through its exposure to short-term Treasury futures.
• Capital preservation: The focus on low-volatility instruments aims to minimize downside risk.
• Portfolio diversification: SPTM can serve as a diversifier within a broader investment portfolio.

Disclaimer:

This analysis is based on publicly available information as of October 202