Core Viewpoint - Simplify Asset Management has launched the Simplify DBi CTA Managed Futures Index ETF (SDMF) to enhance its alternatives lineup, aiming to provide institutional-grade hedge fund replication to a broader audience [1] Group 1: Product Launch and Strategy - The SDMF ETF debuted on February 19 on the NYSE Arca and tracks the DBi CTA Managed Futures Index, which seeks to replicate the pre-fee performance of the largest managed futures funds in the industry [1] - The strategy employs a rules-based, 10-factor replication model designed to capture major themes in the CTA space, allowing for long and short positions across various asset classes including equities, rates, currencies, and commodities [1] - SDMF primarily utilizes total return swaps to achieve capital efficiency and potentially enhanced tax treatment for investors [1] Group 2: Market Demand and Advisor Support - The launch of SDMF addresses the increasing demand from advisors for absolute return strategies amid persistent market volatility [1] - By replicating a basket of funds instead of relying on a single manager, the strategy aims to reduce selection risk commonly associated with managed futures [1] Group 3: Innovation in Alternatives - The SDMF launch follows other innovative products from Simplify, such as the Simplify Private Credit Strategy ETF (PCR), which offers exposure to the private credit market through a liquid, indexed approach [1] - The distinction between SDMF and PCR underscores Simplify's commitment to equipping advisors with precise tools for modern portfolio construction, catering to both trend-following and income-generating investment strategies [1]

The Strategic Case for Private Credit in the Modern PortfolioETF Trends is now VettaFi. Read More --The term private credit is often reduced to its most literal meaning – lending money privately. While accurate, Chris Getter, managing director and portfolio manager at Simplify Asset Management, believes that definition does a disservice to the asset class. The real story is the influence on yields and returns. According to Getter, the private nature of these negotiated securities creates a yield profile tha ...

Core Insights - The article discusses the appeal of private credit for advisors in a low-yield environment, highlighting the potential for yield premiums over traditional investment-grade or high-yield corporates. The Simplify Private Credit Strategy ETF (PCR) is presented as a vehicle to capture these benefits while managing liquidity and volatility concerns [1]. Group 1: Key Considerations for Advisors - **Liquidity Management**: The ETF structure provides daily liquidity, but the underlying private credit assets are less liquid. PCR uses total return swaps (TRS) to track an index of publicly traded business development companies (BDCs) and closed-end funds (CEFs), which helps eliminate reporting of acquired fund fees and expenses (AFFE) [1]. - **Volatility Management**: Private credit's perceived stability can be misleading due to infrequent price discovery, leading to sharp drawdowns in market stress. PCR's underlying index, the VettaFi Private Credit Index, has realized volatility over twice that of high-yield bonds. PCR employs a proprietary quality-minus-junk credit hedge to mitigate severe drawdowns [1]. - **Diversification of Manager Risk**: The performance disparity among private credit managers can be significant. PCR offers diversified exposure across a 52-constituent index, allowing advisors to focus on asset allocation without the need for individual manager due diligence [1]. Group 2: Pure Private Credit Exposure - **Unadulterated Exposure**: Many competitors face SEC's 15% limit on illiquid holdings, resulting in diluted private credit exposure. PCR circumvents these caps to provide pure exposure, ensuring clients receive 100% of the intended asset class [1]. - **Direct Investment Strategy**: Unlike many private credit ETFs that manage marginal exposure due to regulatory constraints, PCR aims to deliver exclusive holdings in private credit investments, enhancing the purity of exposure [1].

Core Insights - The Federal Reserve is expected to implement a shallow interest rate cut cycle in early 2026, prompting financial advisors to seek new income sources for portfolios [1] - The Secured Overnight Financing Rate (SOFR) is moderating towards 3.75%, while the yield on the Bloomberg U.S. Aggregate Bond Index has decreased to approximately 4.16% as of January 12, 2026, indicating a need for investors to look beyond traditional fixed income for yield generation [1] Group 1: Investment Opportunities - The Simplify Private Credit Strategy ETF (PCR) presents a strong alternative for maintaining high income in portfolios, targeting a distribution rate that exceeds standard credit benchmarks with a yield of 12.3% as of late 2025 [2] - PCR is based on the VettaFi Private Credit Index and offers a significant premium over core bond funds, making it an attractive option for income generation [2] Group 2: Structural Advantages - Traditional bonds carry significant duration risk in a changing rate environment, but PCR's underlying Business Development Companies (BDCs) utilize floating-rate senior secured loans, allowing the fund to capture wider spreads even as benchmark rates soften [3] - Major BDC holdings like Ares Capital (ARCC) maintain a conservative profile with a weighted average yield of approximately 9.5% on their debt portfolio, enhancing the attractiveness of PCR [4] Group 3: Strategic Shifts for Advisors - Advisors can strategically pivot from cash equivalents to PCR to generate diversified yield in portfolios, accessing the private credit premium through a diversified, institutional-grade vehicle while maintaining the flexibility of the ETF structure [5] - The ETF structure of PCR provides daily transparency and liquidity, which is crucial for advisors managing heightened market volatility [4]

Core Insights - Investors are increasingly seeking yield in the $3 trillion private credit market, moving beyond traditional fixed income benchmarks due to barriers such as high investment minimums and illiquidity [1] - The launch of the Simplify Private Credit Strategy ETF (PCR) aims to democratize access to private credit, offering a liquid solution that captures high-yield potential while mitigating risks [2] Investment Strategy - PCR does not invest directly in private loans but uses total return swaps to gain exposure to the VettaFi Private Credit Index, which includes publicly traded Business Development Companies (BDCs) and Closed-End Funds (CEFs) focused on private credit [3] - By leveraging BDCs and CEFs, PCR targets middle market lending, which typically yields more than traditional high-yield bonds, making it appealing for income-oriented portfolios [4] Risk Management - PCR incorporates a proprietary quality-junk credit hedge to manage downside risks associated with economic downturns and widening credit spreads, utilizing a long/short strategy on equities [5] - This approach aims to provide resilience during market stress, enhancing the investment experience for investors [5] Market Positioning - As traditional 60/40 portfolios face challenges, PCR is positioned as a sophisticated tool for advisors seeking to enhance income with liquidity and transparency provided by the ETF structure [6]

Core Insights - The Simplify Private Credit Strategy ETF (PCR) offers a yield of 12.27% and addresses key challenges in private credit investing, including liquidity, volatility, manager selection, and purity of exposure [1][2]. Group 1: Challenges in Private Credit - Liquidity is a concern as private credit is less liquid; PCR mitigates this by including Business Development Companies (BDCs) and Closed-end Funds (CEFs) that trade daily and utilizing Total Return Swaps (TRS) for flexibility [5]. - Volatility in private credit is often masked by infrequent trading, leading to "stored volatility" that can result in sharp drawdowns; PCR employs a proprietary Quality minus Junk credit hedge to cushion against these drawdowns [6]. - Manager selection is critical, as performance varies significantly among funds; PCR provides diversification across the VettaFi Private Credit Index, reducing the burden of due diligence for advisors [7]. - Purity of exposure is enhanced in PCR, which aims for consistent exposure to private credit, unlike many funds limited by SEC regulations on illiquid holdings [8]. Group 2: Role of Private Credit in Portfolios - Private credit is increasingly viewed as an alternative investment, with low correlations to traditional 60/40 asset allocations, making it a compelling option for advisors [9][10]. - The Quality minus Junk equity hedge is considered more effective for protecting against tail risk than traditional credit instruments, which can be costly and require precise timing [11][12]. - The hedge strategy involves long positions in Quality stocks and short positions in Junk stocks, which historically perform better during periods of credit market stress [13][14]. Group 3: Historical Context and Management Strategy - Current trends in private credit mirror historical emerging market debt cycles, driven by banks reducing lending due to regulatory changes; private credit fills this gap [16][17]. - The management of PCR focuses on building a resilient portfolio that targets structural stability across market cycles, leveraging index-like exposure combined with a credit hedge [19].