Earlier this week, we learned of the pending launch of yet another (the 6th) Money Market Fund ETF, the second launch from a virtually unknown company. A press release titled, "Introducing the Simplify Government Money Market ETF (SBIL)," tells us, "Simplify Asset Management ('Simplify') ... announced a further expansion of its lineup of income-focused ETFs with the launch of the Simplify Government Money Market ETF (SBIL). SBIL seeks current income consistent with liquidity and stability of principal by investing at least 99.5% of its assets in cash, U.S. Government securities, and repurchase agreements fully collateralized by such obligations or cash. The fund maintains a portfolio dollar-weighted average maturity of 60 days or less and a dollar-weighted average life of 120 days or less. The fund is a true money market fund, in an ETF wrapper, and can be considered a 'cash' position of particular use for those investors seeking the stability of a money market fund." (See our July 10 Link of the Day, "JPMorgan Files for Money Market ETF," on the pending launch of the 5th Money Market ETF.)
David Berns, CIO and Co-Founder of Simplify, comments, "We're excited to expand our product lineup with a cash-equivalent solution that aligns with the marketplace's ongoing demand for income and stability of principal. We're also excited about how we have constructed SBIL as a Rule 2a-7 compliant holding, making this ETF potentially appealing for institutional investors as well, who may find utility in holding a low-cost government money market fund in the convenient ETF format."
The release explains, "As alluded to above, SBIL operates as a government money market fund pursuant to Rule 2a-7 under the Investment Company Act of 1940. Although SBIL is a money market fund, it will have a floating net asset value and share price. For more information on the Simplify Government Money Market ETF (SBIL), visit https://www.simplify.us/."
As we wrote last week, the registration statement for the pending JPMorgan 100% U.S. Treasury Securities Money Market ETF asks, "What are the Fund's main investment strategies?" It tells us, "Under normal conditions, the Fund invests its assets exclusively in obligations of the U.S. Treasury, including Treasury bills, bonds, and notes. These investments carry different interest rates, maturities and issue dates. The interest on these securities is generally exempt from state and local income taxes. Ordinarily, the Fund does not buy securities issued or guaranteed by agencies of the U.S. Government."
JPM explains, "The Fund is a money market fund managed in the following manner: The dollar-weighted average maturity of the Fund will be 60 days or less and the dollar-weighted average life to maturity will be 120 days or less. The Fund will only buy securities that have remaining maturities of 397 days or less or securities otherwise permitted to be purchased because of maturity shortening provisions under applicable regulation. The Fund seeks to invest in securities that present minimal credit risk. The Fund will generally hold a portion of its assets in cash, primarily to meet redemptions."
It states, "Although the Fund will seek to qualify as a 'government money market fund' (described below), it will not seek to maintain a stable net asset value (NAV) per Share using the amortized cost method of valuation. Instead, the Fund will calculate its NAV per Share based on the market value of its investments. In addition, unlike a traditional money market fund, the Fund operates as an exchange-traded fund (ETF). As an ETF, Shares of the Fund will be traded on the Exchange (as defined below) and will generally fluctuate in accordance with changes in NAV as well as the relative supply of, and demand for, Shares on the Exchange. You could lose money by investing in the Fund. Because the Share price and NAV of the Fund will fluctuate, when Shares are sold on the Exchange (or redeemed, in the case of an authorized participant), they may be worth more or less than what was originally paid for them."
JPM's filing says, "The Fund intends to qualify as a 'government money market fund,' as such term is defined in or interpreted under Rule 2a-7 under the Investment Company Act of 1940, as amended ('Investment Company Act'). 'Government money market funds' are required to invest at least 99.5% of their assets in (i) cash, (ii) securities issued or guaranteed by the United States or certain U.S. Government agencies or instrumentalities and/or (iii) repurchase agreements that are collateralized fully and are exempt from requirements that permit money market funds to impose a liquidity fee. While the J.P. Morgan Funds' Board of Trustees may elect to subject the Fund to liquidity fee requirements in the future, the Board has not elected to do so at this time."
It continues, "A government money market fund may also include investments in other government money market funds as an eligible investment for purposes of the 99.5% requirement above. The Fund's adviser seeks to develop an appropriate portfolio by considering the differences in yields among securities of different maturities and issue dates."
JPM's filing adds, "You could lose money by investing in the Fund. Because the share price and NAV of the Fund will fluctuate, when shares are sold (or redeemed, in the case of an Authorized Participant), they may be worth more or less than what was originally paid for them. An investment in the Fund is not a bank account and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund's sponsor is not required to reimburse the Fund for losses, and you should not expect that the sponsor will provide financial support to the Fund at any time, including during periods of market stress."
Discussing "Transactions Risk," they comment, "The Fund could experience a loss and its liquidity may be negatively impacted when selling securities to meet redemption requests. The risk of loss increases if the redemption requests are unusually large or frequent or occur in times of overall market turmoil or declining prices. Similarly, large purchases of Fund shares may adversely affect the Fund's performance to the extent that the Fund is delayed in investing new cash and is required to maintain a larger cash position than it ordinarily would."
Under "ETF Shares Trading Risk," JPM says, "Shares are listed for trading on [blank but we assume it will be the NYSE] and are bought and sold in the secondary market at market prices. The market prices of Shares are expected to fluctuate, in some cases materially, in response to changes in the Fund's NAV, the intraday value of the Fund's holdings and supply and demand for Shares. The adviser cannot predict whether Shares will trade above, below or at their NAV. Disruptions to creations and redemptions, the existence of significant market volatility or potential lack of an active trading market for the Shares (including through a trading halt), as well as other factors, may result in the Shares trading significantly above (at a premium) or below (at a discount) to NAV or to the intraday value of the Fund's holdings. During such periods, you may incur significant losses if you sell your Shares."
Finally, under "Authorized Participant Concentration Risk," they state, "Only an authorized participant may engage in creation or redemption transactions directly with the Fund. The Fund has a limited number of intermediaries that act as authorized participants and none of these authorized participants is or will be obligated to engage in creation or redemption transactions. The Fund has a limited number of institutions that may act as authorized participants on an agency basis (i.e., on behalf of other market participants). To the extent that these intermediaries exit the business or are unable to or choose not to proceed with creation and/or redemption orders with respect to the Fund and no other authorized participant creates or redeems, Shares may trade at a discount to NAV and possibly face trading halts and/or delisting. Authorized participant concentration risk may be heightened for ETFs that invest in securities issued by non-U.S. issuers."
For more on Money Market ETFs, see these Crane Data News articles, "Schwab Files for Govt Money Mkt ETF" (3/17/25), "BlackRock Money Market ETFs Go Live; Ondo Finance on Tokenized MMFs" (2/6/25), "VettaFi Discusses Money Market ETFs" (12/11/24), "Dec. MFI: Assets Break $7.0 Tril; Top 10 of 2024; BlackRock MM ETFs" (12/6/24), "BlackRock Debuts First Euro MM ETF" (12/5/24), "FT on BlackRock Money Market ETFs" (11/18/24), "November BFI: Bond Funds Hit by Election; ETF Trends MM Substitutes" (11/15/24), "BlackRock Files for Money Market ETFs" (11/12/24) and "Texas Capital Launches Govt MM ETF" (9/26/24). (See our latest Money Fund Intelligence XLS at the bottom for listings and performance of MM ETFs.)
