Simplify unveils two fixed-income ETFs with a credit hedge overlay

By Marisa Wong

Los Angeles, Feb. 15 – Simplify Asset Management announced the launch of two first-of-their-kind fixed-income exchange-traded funds: Simplify Aggregate Bond PLUS Credit Hedge ETF (AGGH) and Simplify High Yield PLUS Credit Hedge ETF (CDX).

“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,” Paul Kim, chief executive officer and co-founder of Simplify, said in a press release.

Simplify said 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.

The company introduced CDX as 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.”

AGGH and CDX are part of a Simplify ETF lineup that now includes three fixed-income funds, joining the Simplify Risk Parity Treasury ETF (TYA).

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