The most recent addition in the Bitcoin ETF market is Simplify Asset Management’s Simplify Bitcoin Strategy PLUS Income ETF (MAXI). The company was co-founded by CEO Paul Kim and CIO David Burns in February 2020 and focuses on options-based investing strategies for advisers.
Brian Kelleher, the firm’s Chief Revenue Officer explains “we saw an opportunity to provide exposures in a transparent ETF that had only been available to institutional and high-end retail investors via expensive alternative vehicles and structured products.”
Simplify Asset Management’s first strategies were introduced on the market in September of 2020. Less than three years later, the company has around $1.7 billion under management in the U.S. MAXI is one of the 23 ETFs the firm introduced and four more are expected to launch by the end of 2022.
Kelleher states that the primary goal of Simplify Asset Management is to offer exposure to various non-traditional asset classes. “Our goal is to provide superior building blocks for allocators and investors to build better modernized portfolios,” he adds.
MAXI is an active strategy ETF with an expense ratio of 0.97% that uses Bitcoin futures to provide 100% exposure to Bitcoin in a tax-efficient manner. Additionally, the ETF invests any excess cash in U.S. Treasuries and sells put or call option spreads that aim to generate income in the 10% to 15% range.
How the Fund Operates
According to the company’s press release, the fund’s primary investment strategy involves front month (buying contracts with early expiration dates) CME Bitcoin futures contracts. The fund will then sell close-to-the-money, near-dated options that are deemed “overpriced” on a liquid equity index. At the same time, the fund purchases a similarly dated but further out-of-the-money option on an equity index that is determined to be priced more fairly.
For that spread position, the strategy offers the fund a defined expected rate of return. In the best-case scenario, the fund is able to collect the premium and even if the options are exercised (the worst-case scenario) the fund will still be able to have a defined loss for that position.