Investors seeking a mathematical edge on market averages have a new exchange-traded fund (ETF) to add to their watchlist.
On November 14, Simplify Asset Management released its new ETF, the Simplify U.S. Equity PLUS QIS ETF, on the New York Stock Exchange (NYSE) under the ticker “SPQ”.
The fund overlays a diversified basket of quantitative investment strategies over a core U.S. stock exposure.
So-called quantitative investment strategies use mathematical models, including statistical arbitrage, factor investing, risk parity, and artificial intelligence (A.I.) algorithms, to try to gain an edge on the market.
In the case of SPQ, it works like this: all of the funds’ assets will be invested in equity ETFs and futures targeting U.S. stocks. At the same time, roughly half of SPQ’s assets will be invested in Simplify Multi-QIS Alternative ETF (QIS) – another ETF the fund manager launched in July that leverages a collection of 10-20 quant-driven strategies. SPQ aims to realize long-term capital appreciation through this dual strategy.
“The goal of this 100% equity plus 50% QIS portfolio is to enhance both the absolute and risk-adjusted returns of a core equity investment,” said David Berns, PhD, Simplify’s Chief Investment Officer.
“We’ve spoken with a number of investors and advisors who have been seeking a simple way to gain exposure to an alternative return source without reducing equity exposure, and that is exactly what we have designed with SPQ.”
SPQ is just the latest fund to join the swelling ranks of Simplify’s ETF portfolio. In addition to QIS, the firm this year launched an actively managed opportunistic credit ETF, the Simplify Opportunistic Income ETF (CRDT), and a machine learning fund, the Simplify Market Neutral Equity Long/Short ETF (EQLS).
“Simplify has successfully brought institutional expertise into the ETF industry in recent years,” said VettaFi’s Todd Rosenbluth of the new launch. “It’s great to see them provide more tools for advisors in an accessible format.”
After a disappointing October, equities have performed strongly in the first half of November. Leading indexes have booked back-to-back weekly gains.
On Tuesday – the day of SPQ’s launch – stocks soared as investors delighted in a cooler-than-expected inflation print, further raising hopes the end is in sight for Fed rate hikes. The S&P 500 and Nasdaq posted their best single-day gains since April.
“The CPI report did basically everything that the market needed to do, which is to confirm disinflationary trend, cooling economy and ultimately put the final pin in the case for the Fed popping [interest rates] again in December,” Baird analyst Ross Mayfield, told CNBC of the rally.
The CNN Fear and Greed Index has now moved into ‘Neutral’ territory, where it had been in the ‘Fear’ zone one week and one month ago. If the improving mood on Wall Street is anything to go by, the bulls may be gearing up for another run before the year is out. Yet, as always with investing, it seldom pays to time the market.
SPQ doesn’t come cheap. The fund carries an expense ratio of 100 basis points.
This article was produced and syndicated by Wealth of Geeks.