New York-based investment adviser ASYMmetric ETFs has listed its debut product, a hedge fund-style ETF targeting an absolute return profile within US large-cap equities.
Darren Schuringa, CEO and Founder of ASYMmetric ETFs.
The ASYMshares ASYMmetric 500 ETF (ASPY US) utilizes a quantitative long/short hedging strategy in a bid to generate positive returns in all market environments. It aims to capture the majority of bull market gains and hedge exposure during bear markets.
The fund trades on NYSE Arca and comes with an expense ratio of 0.95%.
Methodology
The fund is referenced to the ASYMmetric 500 Index, a custom long/short index powered by a proprietary risk management model.
The model combines price momentum and volatility indicators to dynamically manage net exposure in three market environments: risk-on, risk-elevated, and risk-off.
A risk-on environment is defined as a period when prices are trending upwards and have low volatility; a risk-elevated environment is reflected by prices that are trending downwards with low volatility, and a risk-off environment is indicated by prices that are trending downwards with high volatility.
The index comprises a long component, a short component, and a cash balance, which may be invested in US Treasury bills or notes having less than three months to maturity or money market funds. Across all market environments, the index maintains a gross long position.
The long component targets 50 stocks from the S&P 500 with representation commensurate of each GICS sector. The stocks selected for inclusion are the stocks that exhibit the lowest price volatility within each sector, with the number of constituents in each sector determined by and proportional to the sector’s weight in the S&P 500. The weight of each sector in the long component is set equal to its weight in the S&P 500, and the stocks within each sector are equally weighted.
The short component consists of a short position in the SPDR S&P 500 ETF (SPY US). The size of the long and short components, along with a cash component, is determined by the portfolio’s target net exposure, which is dependent on the market environment prevailing at the time. This is 75% net long during risk-on environments, 0% net market neutral during risk-elevated environments, and 25% net short during risk-off environments.
The gross long position can range from 20% in risk-off environments to 100% in risk-on environments. The short component can range from 0% in risk-on environments to as much as 45% in risk-off environments. The cash component can range from 0% in risk-on environments to 125% in risk-off scenarios where the gross long component is 20% and the gross short position is 45%.
The precise weightings of the long component and the short component to achieve the desired net exposure are determined utilizing a calculation of the net beta-adjusted exposure of the long component. Then, the targeted net exposure is subtracted from the net beta-adjusted long exposure to establish the actual short weight.
The index is rebalanced each month in conjunction with a new determination of the prevailing market environment.
Level playing field
ASYMmetric ETFs is led by CEO and Founder Darren Schuringa, a veteran of both the ETF and hedge fund industries. Prior to founding ASYMmetric ETFs, Schuringa launched two successful ETF businesses: Exchange Traded Concepts and Yorkville ETF Advisors.
Commenting on the ASYMmetric’s debut product, Darren Schuringa said: “For decades, institutional investors have had a leg up when it comes to access to next-generation investment solutions. Our goal is to level the playing field for retail investors by delivering well-researched, tech-enabled ETF strategies to help investors mitigate risk and improve returns across their portfolio.
“We’re excited to introduce ASPY into the market and look forward to helping investors successfully navigate the challenges and risk of today’s equity markets.”
ASYMmetric recently closed a Series A private equity funding round.