Syntax Advisors launches risk-hedged stratified US total stock market ETF

Jun 17th, 2021 | By | Category: Equities

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Syntax Advisors has announced the launch of the Syntax Stratified US Total Market Hedged ETF (SHUS US) on NYSE Arca.

Syntax Advisors launches risk-hedged stratified total US stock market ETF

Syntax Advisors has launched an equity risk-hedged version of its stratified-weighted total US stock market ETF.

Debuting with over $43 million in assets, the fund marks the fifth and latest ETF in New York-based Syntax’s growing family of stratified weight funds.

SHUS combines the issuer’s hallmark stratified weighting approaching with an actively managed defined risk overlay.

Stratified weighting is designed to maintain diversified business risk exposure and capture a fuller range of market opportunities for investors.

The approach has been developed by Syntax over a 10-year period and is based on a significant re-evaluation of traditional market-capitalization-weighted indices.

In recent years, conventional cap-weighted approaches to index design have resulted in the over-concentration in many portfolios of a small group of large-cap companies operating in highly correlated industries.

An example of this is the so-called FAANGs (Facebook, Apple, Amazon, Netflix, and Google (Alphabet)) which dominate many widely tracked large-cap US equity indices and even exert significant influence over performance in global benchmarks.

The Syntax approach seeks to redress this imbalance. It does so by taking a widely used benchmark – in the case of SHUS, this is the broad-cap S&P Composite 1500 Index – and reweights the constituents to reflect diversified business risk across numerous industries.

Instead of concentrating exposure in the largest companies and the most popular sectors, Syntax determines the common risks companies and industries face, then equally divides these stocks within carefully defined segments. The process seeks to provide investors with more balanced exposure across available business opportunities while still engaged in indexing.

For the new fund, Syntax additionally utilizes what it calls a ‘defined risk hedging process’, developed in partnership with Swan Global Investments, to hedge equity exposure with the goal of achieving risk-managed growth.

Essentially, the fund buys S&P 500 Index put options to limit overall portfolio downside loss. It also buys and writes options on equity indices, including with different expiration dates, and engages in various option spread strategies in an effort to generate additional returns whilst ensuring that the fund is not exposed to significant losses on written options.

The ultimate overall objective of this combined strategy is to obtain capital growth that meets or exceeds the performance of the S&P Composite 1500 Index over a full market cycle with reduced risk.

The fund currently comes with a net expense ratio of 0.65%.

Other funds in the suite include the Syntax Stratified LargeCap ETF (SSPY US), the Syntax Stratified MidCap ETF (SMDY US), the Syntax Stratified SmallCap ETF (SSLY US), and the Syntax Stratified US Total Market ETF (SYUS US), the original unhedged counterpart to SHUS.

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