Simplify Launches Actively Managed Currency Strategy ETF (FOXY): A New Tool for Diversified Portfolio Building
Simplify Asset Management, a leader in innovative Exchange Traded Funds (ETFs), has announced the launch of its latest offering: the Simplify Currency Strategy ETF. This actively managed fund is designed to provide investors and financial advisors with a powerful tool for portfolio diversification. By taking long and short positions in foreign currencies, FOXY seeks to deliver returns that are largely uncorrelated with traditional asset classes like equities and bonds. The fund’s unique dual-strategy approach combines emerging market carry trades with G10 mean-reversion techniques, offering exposure to two distinct yet complementary sources of potential profit.
How FOXY Works: Two Core Strategies
At the heart of FOXY’s strategy are two primary approaches to currency trading: an Emerging Markets carry strategy and a G10 mean-reversion strategy. Together, these strategies aim to capitalize on both interest rate differentials and price momentum while mitigating risks through diversification.
1. Emerging Markets Carry Strategy
The first component of FOXY’s strategy focuses on eight currency pairs from emerging markets, each paired against the U.S. dollar. In this approach, the fund identifies the four currencies with the highest interest rates and takes long positions in them. Conversely, it shorts the four currencies with the lowest interest rates. The difference in yields—or “carry”—between these positions serves as one source of potential profit. Additionally, changes in the value of the currencies themselves contribute to the fund’s overall performance.
This carry strategy leverages the principle that higher-yielding currencies tend to outperform lower-yielding ones over time. By focusing on emerging markets, where interest rate spreads can be significant, FOXY aims to capture compelling opportunities for return generation.
2. G10 Mean-Reversion Strategy
The second pillar of FOXY’s methodology centers on six currency pairs from the G10 group, which includes major developed-market currencies such as the euro, yen, and British pound. Here, the fund employs a momentum-based approach, identifying the three currencies with the strongest upward yield momentum and holding them long. Simultaneously, it shorts the three currencies exhibiting the weakest momentum.
This strategy capitalizes on the tendency of G10 currencies to exhibit mean-reverting behavior—that is, their propensity to revert to prior levels after periods of deviation. By combining this approach with the emerging markets carry strategy, FOXY reduces correlation between its two core components, thereby enhancing risk management.
Why FOXY Stands Out
Historically, currency-focused ETFs have predominantly been passive vehicles, often tracking the movement of a single currency relative to the U.S. dollar. While these products have served a purpose, they lack the sophistication and flexibility required to navigate today’s complex global markets. Sophisticated institutional investors, hedge funds, and large-scale asset managers have long recognized the benefits of active currency strategies, particularly those involving carry trades and mean reversion. However, until now, retail investors and financial advisors have had limited access to such tools within a liquid and transparent structure.
“With FOXY, we’re democratizing access to advanced currency strategies,” said David Berns, Chief Investment Officer and Co-Founder of Simplify. “Institutional players have understood the power of active carry strategies for managing currency exposure and generating uncorrelated returns. Now, individual investors and advisors can implement these same principles in their own portfolios using a simple, single-ticker solution.”
Addressing Market Volatility and Uncertainty
Currency markets are inherently volatile, influenced by factors ranging from geopolitical events to central bank policies and macroeconomic trends. Predicting the future direction of the U.S. dollar or any other major currency is notoriously challenging. However, volatility itself can present opportunities when managed effectively.
“Where the U.S. dollar is headed—and what lies ahead for major currencies in both developed and emerging markets—is anyone’s guess,” noted Berns. “But rather than viewing this uncertainty as a challenge, we see it as an opportunity. An actively managed approach allows us to harness volatility and turn it into a source of potential returns.”
By incorporating FOXY into a diversified portfolio, investors can potentially benefit from non-correlated returns during times of market stress. For example, if equity markets experience turbulence or bond yields fluctuate unpredictably, FOXY’s currency-focused strategy may continue to perform independently, providing a stabilizing effect.
Expanding Simplify’s Active ETF Suite
The introduction of FOXY marks another milestone in Simplify’s mission to expand its lineup of active ETFs. Over the years, the firm has gained recognition for its innovative solutions that blend cutting-edge technology with deep investment expertise. From options-based strategies to thematic investing, Simplify has consistently pushed the boundaries of what ETFs can achieve.
FOXY represents the next step in this evolution, bringing active currency management to a broader audience. As part of its commitment to investor education, Simplify plans to engage with financial professionals and retail investors alike to highlight the importance of currency exposure in building resilient portfolios.
“Currency is an underappreciated asset class,” Berns explained. “It plays a critical role in global finance, yet many investors overlook its potential as a diversifier. With FOXY, we’re not just launching a new product—we’re opening up a conversation about how currency strategies can enhance portfolio construction.”
Key Benefits of FOXY
For investors considering FOXY, several key advantages stand out:
- Diversification: By targeting returns that are uncorrelated with stocks and bonds, FOXY offers a valuable complement to traditional asset classes.
- Active Management: Unlike passive currency ETFs, FOXY employs a dynamic, rules-based approach to adapt to changing market conditions.
- Transparency and Liquidity: As an ETF, FOXY provides daily transparency into its holdings and trades on major exchanges, ensuring ease of access for all types of investors.
- Risk Mitigation: The combination of emerging market carry and G10 mean-reversion strategies helps reduce concentration risk and enhances stability.
