Simplify has expanded its ETF lineup with the launch of the Simplify Piper Sandler US Small-Cap PLUS Income ETF (LITL ) on the NYSE Arca today.
The new fund combines exposure to U.S. small-cap stocks with the potential for monthly income through an options overlay strategy.
“Small cap equities can enjoy periods of strong growth but have always been more sensitive to the economic cycle than large cap stocks,” said Simplify CIO and co-founder of Simplify David Berns.
The fund’s sub-advisor Piper Sandler uses a proprietary multi-factor stock selection methodology.
“Piper Sandler’s unique economic overlay seeks to add value by selecting the stocks that are best positioned to succeed in the current environment, while providing investors with current income,” Berns added.
According to the prospectus, LITL has an expense ratio of 0.91%. The fund is actively managed by Berns alongside Michael Kantrowitz, and Stephen Gregory, who serve as portfolio managers.
Piper Sandler’s Macro-Driven Model
The strategy begins with the Russell 2000 Index, filtering out the least liquid names. LITL continuously assesses economic indicators to determine the current business cycle. This data is then used to help identify the 3 to 4 factors such as value, sales stability, earnings revisions, profitability, and earnings growth.
The selected factors are combined and used to rank the stocks, resulting in a portfolio of approximately 200 equally-weighted stocks. Rebalancing happens when the business cycle framework signals a change, not on a set schedule.
Additionally, the risk-managed options overlay aims to generate extra income by selling put spreads on various instruments like equity, fixed income, and commodity indices or ETFs. Unlike covered call funds, this strategy doesn’t limit upside potential.
“Simplify continues to bring innovative ETFs to market leveraging their in-house expertise. It is great to see them expand their lineup,” said Todd Rosenbluth, head of research at Vetta-Fi.
Simplify has 36 ETFs listed in the United States. The largest fund, Simplify MBS ETF (MTBA ) has $1.5 billion in assets under management.
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