If You Invested in Simplify US Equity PLUS Managed Futures Strategy ETF (CTAP)

Simplify US Equity PLUS Managed Futures Strategy ETF (CTAP) is an exchange-traded fund launched by Simplify Asset Management. According to Simplify, the fund seeks long-term capital appreciation by combining exposure to large-cap U.S. equities with exposure to a systematic managed futures strategy. CTAP is part of Simplify’s "Equity PLUS" lineup, which is designed to give investors access to more than one return stream within a single ETF.

Investment objective and core approach

The fund’s stated objective is to pursue long-term capital appreciation. It does this by pairing 100% exposure to U.S. large-cap equities with 100% exposure to a systematic managed futures strategy. The structure is described as a capital-efficient way for investors to obtain exposure to both traditional equities and an alternative strategy without needing additional capital beyond their equity allocation.

Equity exposure

On the equity side, CTAP delivers exposure to U.S. large-cap stocks. The fund description states that this is implemented via a market capitalization-weighted, passive exposure to stocks, obtained primarily through a low-cost, liquid ETF. This design is intended to mirror the performance of the large-cap U.S. equity market while CTAP layers the managed futures exposure on top.

Managed futures exposure

CTAP provides 100% exposure to a systematic long/short managed futures strategy. The strategy referenced in the fund information is designed by Altis Partners, which is described as having two decades of experience in the managed futures category. The managed futures component is designed to invest across global commodities and interest rates, using futures contracts to take long or short positions based on the underlying strategy.

The fund obtains this managed futures exposure via a total return swap. The swap is based on the performance of the Simplify Managed Futures Strategy ETF (CTA), which is described as being designed for absolute return and portfolio diversification. The use of a total return swap allows CTAP to reference the performance of the CTA ETF while maintaining its own structure as a separate fund.

Role within a portfolio

In the fund sponsor’s description, CTAP is positioned as a way for investors to combine equity exposure with an alternative strategy in a single ETF. The sponsor notes that, historically, stocks and managed futures have exhibited low correlation with each other, and presents CTAP as a vehicle that can be used to substitute for a portion of an equity allocation. The stated intent is to allow investors to seek diversification benefits from managed futures while maintaining exposure to other asset classes and without needing to allocate additional capital beyond their equity position.

Key concepts referenced by the fund

The CTAP materials reference several investment concepts that are central to understanding the fund’s design:

• Managed futures: An investment approach in which a portfolio of futures contracts is actively managed by professionals. The description notes that managed futures are considered an alternative investment and are often used by funds and institutional investors for portfolio and market diversification.
• Long and short positions: The fund’s managed futures component can take long positions, which benefit from rising prices, and short positions, which benefit from falling prices. These are opposite investment strategies based on anticipated price movements.
• Total return swap: A derivative contract in which one party transfers the total economic performance of an underlying asset to another party. CTAP uses a total return swap referencing the Simplify Managed Futures Strategy ETF (CTA) to obtain its managed futures exposure.
• Correlation: A statistic that measures the degree to which two variables move in relation to each other. The sponsor highlights the historically low correlation between equities and managed futures as part of the rationale for combining them.

Risk considerations

The fund documentation emphasizes that an investment in CTAP involves risk, including possible loss of principal. It notes that the fund is actively managed and subject to the risk that the strategy may not produce the intended results. The fund’s use of futures introduces risks that can differ from investing directly in securities, including leverage risk, potential mispricing of contracts, and the impact of rolling futures positions, particularly during extended periods of contango or backwardation.

The description also highlights that investments linked to commodity or currency futures, including exposure to non-U.S. currencies, can be highly volatile and affected by market movements, changes in interest rates, or factors affecting particular industries or commodities. Changes in currency exchange rates are described as unpredictable and capable of affecting the value of the fund. Additional risks mentioned include equity securities risk, total return swap risk, and non-diversified fund risk, where a greater portion of assets may be invested in fewer issuers than in a diversified fund.

About Simplify Asset Management

The CTAP fund is launched by Simplify Asset Management Inc., which is described as a Registered Investment Adviser founded to help advisors address portfolio challenges with options-based strategies. The firm states that it incorporates real-world investor needs, market behavior, and the non-linear characteristics of options in its strategies to seek tailored portfolio outcomes.

How CTAP fits within Simplify’s lineup

The launch information notes that CTAP augments Simplify’s existing "Equity PLUS" ETFs and joins the Simplify Managed Futures Strategy ETF (CTA) in delivering managed futures exposure. CTA is described as having been live for several years and having accumulated significant assets. CTAP uses CTA’s performance as the reference for its managed futures exposure via a total return swap, while also embedding a large-cap U.S. equity allocation.

Investor information

The fund materials emphasize that investors should carefully consider the investment objectives, risks, charges, and expenses of exchange-traded funds before investing, and that this information is contained in the ETF’s prospectus or summary prospectus. The documentation stresses the importance of reading the prospectus carefully and notes that Simplify ETFs are distributed by Foreside Financial Services, LLC, which is not related to Simplify.