Simplify Asset Management, a New York City-headquartered provider of exchange-traded funds (ETFs), has launched the Simplify MBS ETF (MTBA) fund.
MTBA invests in mortgage-backed securities (MBS) issued in 2023. MTBA will initially invest in the Federal National Mortgage Association (Fannie Mae) 6.0% coupon bonds, and the company stated MTBA is expected to deliver a monthly distribution and will do so with no lockups or K-1 tax forms.
“MBS issued this year have larger coupons and shorter durations in comparison to previous vintages, providing a potential cushion against losses if the Federal Reserve keeps rates ‘higher for longer,’ which is something I have been suggesting will be the case for some time,” said Harley Bassman, managing partner at Simplify. “Approaches that only mimic the broad MBS universe are bound to disappoint since more than 70% of all 30-year MBS have coupons between 2% and 3.5% with an average price near 79, meaning investors are left with small distributions, large durations, and poor positioning in the event of a hard landing.”
Bassman added, “In my opinion, newly issued MBS are the best risk-adjusted bonds in the market, and my colleagues and I are thrilled to be rolling out this fund at what is such a crucial time for income-focused investors.”
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