ASYMmetric ETFs has launched two passive US equity funds that harness the firm’s trademark investment approach to deliver greater income or return than the S&P 500 but with less overall risk.
ASYMmetric utilizes a proprietary risk management model to determine when to enter or exit the market.
The ASYMmetric Smart Income ETF (MORE US) and ASYMmetric Smart Alpha S&P 500 ETF (ZSPY US) have been listed on NYSE Arca with expense ratios of 0.75% and 0.95%, respectively.
Former hedge fund manager Darren Schuringa, Founder and CEO of ASYMmetric ETFs, developed the firm’s proprietary risk management model which combines price momentum and volatility indicators to measure overall market risk.
The model is used to dynamically manage net equity exposure in different market environments with the ultimate goal of creating and protecting investor wealth regardless of the direction of the market.
Investment approach
The ASYMmetric Smart Income ETF seeks to generate more than twice the income of the S&P 500 with less risk without using derivatives or leverage.
The fund is linked to the ASYMmetric Smart Income Index which applies ASYMmetric’s proprietary risk management model to three high-income equity sectors: master limited partnerships (MLPs), real estate investment trusts (REITs), and utility stocks.
The ETF will equally allocate to any of the three sectors that are determined to be in a ‘risk-on’ environment (characterized by rising prices). As such, in risk-on environments, a sector may receive a weight of 33.3%, 50%, or 100% of the fund’s total assets.
If none of the sectors are risk-on, ASYMmetric applies its model to three fixed income sectors: US Treasury bills, 10-year US Treasury bonds, and 30-year US Treasury bonds. The ETF will allocate its entire exposure to the risk-on sector that is currently offering the highest yield, regardless of how many sectors are determined to be risk-on.
If none of the fixed income sectors are risk-on, the ETF will allocate its entire exposure to cash or cash-equivalent securities.
The model and the ETF’s asset allocation are reviewed on a monthly basis.
The ASYMmetric Smart Alpha S&P 500 ETF, meanwhile, seeks to generate twice the return of the S&P 500 with no additional risk over a full market cycle.
The fund is linked to the ASYMmetric Smart Alpha 500 Index which utilizes a slightly different model that 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 with 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 seeks to achieve its objective by using leverage so as to be 200% exposed to the S&P 500 Index during risk-on environments, protecting capital by paring back net exposure and being market neutral during risk-elevated environments, and profiting in bear markets by being 25% net short during risk-off environments.
Commenting on the new listings, Darren Schuringa, Founder and CEO of ASYMmetric ETFs, said: “At ASYMmetric, we believe all investors should have the opportunity to preserve and compound their wealth, not just those with access to expensive trading tools and institutional investment teams. Current market volatility is making investors seasick. Smoothing out returns and minimizing risk is good for everyone; investors are able to sleep better at night and advisors will have happier clients and less volatile fees.”