Simplify launches a risk parity ETF
ETF issuer Simplify Asset Management has launched the Simplify Risk Parity Treasury ETF (TYA).
TYA is designed to provide significant duration via modest capital allocation, while simultaneously seeking to harvest yield curve benefits from the middle of the curve. It does so by investing in a combination of US Treasuries and US Treasury futures from the middle of the curve, and targets fund-level duration equal to that of the ICE 20+ Year US Treasury Index.
“In the current low yield environment, it is more important than ever to be mindful of how you invest in duration. Capital efficiency and yield curve efficiency are key to a successful Treasury investment strategy,” says David Berns, PhD, CIO and Co-Founder with Simplify. “Unfortunately, all too often efficient Treasury investing requires leverage, which can be a significant operational and compliance hurdle for most investors and advisors. That’s an issue we’ve designed TYA to solve, and we’re very excited to be bringing this new fund to market.”
The firm writes that TYA can help solve for a number of portfolio needs. “For some investors, the fund can be used as a core long duration asset with the potential for excess carry relative to cash investments in long-term Treasuries. The fund can also be used as a capital-efficient replacement for intermediate duration assets, as investors only need a fraction of the capital required by an unlevered position. Additionally, with its dual goals of capital and yield curve efficiency, TYA can be a key building block in more innovative portfolio systems such as risk parity.”