On Tuesday, Simplify Asset Management launched its newest fund, the Simplify Wolfe US Equity 150/50 ETF (WUSA ).
For its investors, WUSA aims to provide access to robust capital appreciation. The actively managed fund has a net expense ratio of 0.75%.
The cornerstone of WUSA’s strategy lies in total return swaps that generate the returns of a basket of common stocks. WUSA uses a long-/hort strategy, and mixes both long and short positions to do so.
True to the fund’s name, WUSA aims to hold a 150%/50% weight in long and short positions. While the fund’s goal is to maintain this weight, it may pivot to a different weighting to capitalize on potential market movements.
Factor Screening With Machine Learning
To choose which securities to include in the swap basket, WUSA uses a multifactor quantitative ranking system. Developed by fund subadvisor Wolfe Research, the system uses machine learning to screen its assets.
“We’re very excited to be introducing WUSA in partnership with the team at Wolfe Research,” said Simplify CIO and Co-Founder David Berns, Ph.d. “When it comes to machine learning-powered investment approaches, the model matters; and there is no firm more experienced or better qualified when it comes to the construction of sophisticated, differentiated models than Wolfe.”
This system uses about 300 different fundamental factors to measure potential positive and negative returns of eligible companies. These factors include momentum, earnings growth, and profitability, among many others.
According to the fund prospectus, Simplify’s goal is to have about 250 stocks available for the fund’s long basket. Meanwhile, WUSA’s short basket aims to have 150 stocks available.
WUSA’s portfolio is expected to be balanced on a monthly basis, using the aforementioned ranking system to guide investment calls. However, the fund may be rebalanced more frequently depending on market and economic conditions.
Equity securities are expected to dominate the fund’s net assets under traditional investment circumstances. However, WUSA will also hold cash or invest in short-term fixed income securities or cash equivalents to serve as collateral.
Investors who choose WUSA can leverage Simplify’s established experience in piloting unique fund strategies. Currently, Simplify’s ETF library represents over $5.9 billion in assets under management.
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