Simplify Volatility Premium ETF's Average Process Pillar and People Pillar ratings result in a Morningstar Medalist Rating of Neutral. Fees are a weakness here. The strategy's lofty fees are a high hurdle to clear, as it is priced within the most expensive quintile among peers.  

 The strategy earns an Average Process Pillar rating. The management team invests alongside the strategy's shareholders, which helps it earn an Average People Pillar rating. The strategy's parent organization doesn't stand out, earning the firm an Average Parent Pillar rating. It has displayed a handful of investor-friendly attributes including low portfolio manager turnover but is held back by a low success ratio across its lineup.

Analyst Rating

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Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. Simplify Volatility Premium ETF earns an Average Process Pillar rating. 

The most substantial contributor to the rating is the firm's five-year retention rate of 100% over the period. The size of the portfolio management team also bolsters the rating. With four portfolio managers, the fund is reasonably well-resourced. Lastly, the process is limited by being an actively managed strategy. Historical data, such as Morningstar's Active/Passive Barometer, finds that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons.

 The investment strategy as stated in the fund's prospectus is as follows:

The investment seeks to provide investment results, before fees and expenses, that correspond to approximately one-fifth to three-tenths the inverse (-0.2x to -0.3x) of the performance of a short-term volatility futures index while also seeking to mitigate extreme volatility.  In pursuing its investment objective, the fund primarily purchases or sells futures contracts, call options, and put options on VIX futures. The fund holds cash, cash-like instruments or high-quality fixed income securities (collectively, and “Collateral”). 

 In terms of portfolio turnover, on a year-over-year basis, 260% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Average

Process

Simplify Volatility Premium ETF earns an Average People Pillar rating. The most significant contributor to the rating is the firm's five-year retention rate of 100%. A low expense ratio also contributes to the rating, with costs ranking in its category's second-cheapest fifth. Fees reduce net returns, so the managers have a lower expense hurdle to overcome. Lastly, the rating is limited by the experience of the management team, which averages eight years at this fund.


The management team is invested in the fund, but the maximum investment by any manager is between $100,000 and $500,000. An investment of more than $1 million would be ideal to align managers' interests with those of the fund's investors.

People

In a competitive industry, Simplify Asset Management doesn't differentiate itself enough, leading to an Average Parent Pillar rating. Portfolio management turnover has been minimal at the firm since the firm's inception. Long-term stability signals a strong investment culture. The firm's lineup has had discouraging initial results. Its three-year risk-adjusted success ratio is 0%, indicating that of the strategies with a three-year track record, 0% have both survived and beaten their respective category median on a risk-adjusted basis. A low success ratio not only indicates weak performance but also provides insight into a firm’s discipline around investment strategy and product development. With an average three-year Morningstar Rating of 1.8 stars, the risk-adjusted performance of Simplify Asset Management's open-end and exchange-traded funds falls short of competitors.

Parent

Simplify Volatility Premium ETF

SVOL is an actively managed portfolio that aims to provide income via short exposure to S&P 500 VIX short-term futures, reset daily. The fund also utilizes an option overlay strategy to protect against adverse moves in VIX.

The Simplify Volatility Premium ETF aims to generate income by selling futures on the CBOE Volatility Index. SVOL has experienced some NAV erosion but has maintained a relatively stable level and outperformed the S&P 500 total return since its inception. The fund has made significant changes to its holdings, reducing exposure to the aggregate bond index and increasing investments in high yield credit, T-Bills, and new-issue mortgages.

SVOL: I Am Pleased With The New Holdings (Upgrade)

Simplify Volatility Premium ETF is a popular income-generating ETF with an yield of 16% by betting against VIX. Many people are concerned that it may not be relevant to "short" VIX when VIX is so low as it is. The fund continues to outperform the overall market in total returns as well as risk-adjusted returns.

SVOL: Still Relevant In A Low Volatility Environment

SVOL is a complex ETF that uses the volatility index, not stocks, as a primary driver of returns and cash distribution.

SVOL: Enough Complexity, Not Enough Benefits

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SVOL utilizes a volatility selling strategy by selling VIX futures one month out instead of the front month future.

The SVOL Advantage: Smarter Exposure To Market Volatility

Simplify Volatility Premium ETF receives a buy rating after addressing concerns regarding dividend distributions and underlying holdings changes. Return of capital distributions have ended, signaling a shift in strategy by portfolio managers. SVOL has reduced its holdings of CYA and added VIX call options, improving its position in the market.

SVOL: Trends Reverse, Reinstating My Buy Rating (Upgrade)

SVOL is a well-designed income ETF that hedges out black-swan convexity risk. The ETF sells VIX futures to generate yield, producing a similar income but a superior risk profile to other income ETFs. While we expect the yield to remain solid, the AUM of the strategy may decline in coming weeks and months, potentially impacting absolute returns.

SVOL: It's Time To Trim (Rating Downgrade)

Volatility funds have become popular for gaining exposure to the S&P 500 volatility index, but there are risks involved. The Simplify Volatility Premium ETF offers a different approach to shorting the VIX with a hedging strategy and lower risk exposure. Recent distribution trends and the low VIX make SVOL less attractive for investment at the moment.

SVOL: Looking To Generate Income From The VIX? Look Elsewhere

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NEW YORK--(BUSINESS WIRE)--Simplify announced today that it expects to deliver capital gains distributions across six Simplify ETFs.

Simplify Provides Estimated Capital Gain Distribution Information for 2023

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Imagine stocks or funds that pay out their dividends once a month! Unlike waiting for quarterly, semi-annual or (ugh) annual payouts, your angst awaiting money is reduced by 300% or more! These December U.S. exchange-traded monthly-paid (MoPay) dividends, upsides, and net gains include: 1. Stocks by yield (79); 2. Stocks by price upside (30); 3. Closed-End-Investments, Exchange-Traded Funds & Notes (CEICs/ETFs/ETNs) by yield >9.5% (80). Items: 1. Top MoPay stock gains; 2. Overall best MoPay gainers; 3. Funds vs. Equities; 4. Fund risks/rewards. All per prices as of 12/8/23.

79 Monthly-Paying Dividend Stocks And 80 Funds For December

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Recreating Simplify Volatility Premium ETF's strategy using short volatility ETFs is possible and provides us insight into SVOL's potential flaws. ProShares Short VIX Short-Term ETF and Volatility Shares' -1x Short VIX Futures ETF offer investors access to ETF-only portfolio strategies that can provide short volatility exposure. These strategies are unique because they give investors access to gains via capital gains, not current income. The strategies perform wildly different based on varied backtests.

Composing Your Own Short Volatility Strategy With ETFs

Simplify Volatility Premium ETF has changed its dividend distribution to primarily return of capital distributions, indicating a struggle to meet consistent income targets. My rating has changed to hold over concerns of these RoC distributions continuing moving forward. SVOL has changed its hedging strategy to incorporate the Simplify Tail Risk Strategy ETF, which may introduce additional risks to the fund's strategy and prove as an inefficient hedge.

SVOL: Downgrading Due To Concerning Trends

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I decided to sell my entire position in the Simplify Volatility Premium ETF due to recent changes in its portfolio and strategy. SVOL has deviated from its core strategy by adding significant positions in the Simplify Aggregate Bond ETF and the iShares iBoxx $ Investment Grade Corporate Bond ETF. Furthermore, in the short-term, an escalating Israel/Hamas war risks causing volatility to spike. So caution is warranted.

SVOL: Downgrade To Sell On Strategy Drift

SVOL ETF has made major changes to its core bond holdings, shifting away from T-Bills and short-term corporate bond ETFs. The fund has increased its holdings in AGGH, LQD, and TIPS, indicating a change in strategy and macro outlook. The managers potentially expect reduced volatility, steady rates, and strength in corporate debt. The move to TIPS allows the managers to shift risks.

SVOL: Changes In Bond Holdings Are A Boon

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Imagine stocks or funds that pay out their dividends once a month! Unlike waiting for quarterly, semi-annual or (ugh) annual payouts, your angst waiting for money is reduced by 300%, or more! These October U.S. exchange-traded monthly-paid (MoPay) dividends, upsides, and net-gains include: 1. Stocks by-yield (82); 2. Stocks by price-upside (30); 3. Closed-End-Investments, Exchange-Traded-Funds & Notes (CEICs/ETFs/ETNs) by-yield >9.5% (80).

82 Monthly Paying Dividend Stocks And 80 Funds For October

SVOL is an income-oriented ETF that sells VIX futures to generate revenue. The fund takes advantage of the mean-reverting tendencies found in volatility markets and profits when the VIX is flat or going down. SVOL hedges the downside with VIX call options, making it much less susceptible to black-swan events.

SVOL: The Best Income ETF On The Market Sells VIX Futures

SVOL continues to outperform the markets and is one of my favorite income ETFs. I've been asked about what happens to SVOL under different scenarios including several black swan events like what we saw in 2018 & 2020 where several funds shorting VIX blew up. I will look under the hood of the fund and demonstrate how exactly different scenarios would affect the fund. The risk of the fund blowing up is extremely small.

Here Is What Happens To SVOL In Different Scenarios (Including Worst Case Scenario)

SVOL generates yield by shorting VIX futures and hedging its short position with call options. SVOL has low volatility, high yield, and a low correlation with most other assets. Over the last year, the fund has suffered a price decline of 3.11% but is up 15.34% on a total return basis.

SVOL: High Yield And Low Correlation To Other Assets

Simplify Volatility Premium ETF is a high-yielding income generating fund that sells VIX premiums to generate income. SVOL has been holding up well in the last month despite VIX being up 20%, with a 0.34% increase in the last month. SVOL has outperformed the overall market since its inception, with a total return of 24% compared to SPY's 11%.

SVOL: Holding On Strong Despite Rising Volatility

The Simplify Volatility Premium ETF seeks to offer investment results that align with approximately -0.2x to -0.3x the inverse performance of the Cboe Volatility Index short-term futures index. SVOL stands out as the first ETF to combine inverse VIX exposure with a dynamic hedge. By leveraging the common occurrence of contango and the concept of mean reversion, SVOL offers investors an opportunity for enhanced yield, though not without inherent risks.

SVOL: Unveiling The Strategy And Enhancing Investor Diversification With Income Potential

The Simplify Volatility Premium ETF has gained popularity among investors seeking current income and inversely correlated exposure to the VIX. The growth in AuM has been propelled by the recent outperformance of the S&P 500 and very attractive yield of 17%. SVOL offers income generation, tactical tools for negative correlation to the VIX, and asset class diversification through one instrument.

SVOL: Enhanced Version Of Short Volatility

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The Simplify Volatility Premium ETF has seen its total assets under management triple this year to over $300M as investors clamor over ultra-high yield funds. SVOL is a short volatility fund that acts as a risk-insurance provider on the S&P 500, earning high premiums in good periods but potentially facing huge losses during significant market drawdowns. Despite its design to limit downside risk, SVOL could still suffer a quick loss should the VIX index rise rapidly.

SVOL: Market Risk Perception Too Low Compared To Economic Reality

SVOL provides -0.2 to -0.3 VIX exposure while hedging tail risks with VIX calls. It is a high-yielding fund, currently with a 16.8% forward yield. SVOL can still generate high yields in a low vol environment, as long as the VIX curve remains in contango.

SVOL: Shorting Vol Still Works In Low Vol Environment

Simplify Volatility Premium ETF (SVOL) is a fund that short sells VIX to collect premiums and offers a 17% dividend yield, making it a potential addition to income-oriented portfolios. The fund's strategy involves selling VIX futures contracts and buying VIX call options as a hedge, generating income from time premiums even when VIX remains flat or low. Although the fund has performed well during its short existence, it should be considered a complementary addition to a well-diversified portfolio due to its derivative nature.

News for Simplify Volatility Premium ETF ETF (SVOL)