Syntax builds out risk-stratified range with US mid-cap ETF

Jan 17th, 2020 | By | Category: Equities

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Syntax Advisors has introduced its second ETF with the launch of the Syntax Stratified MidCap ETF (SMDY US) on NYSE Arca.

Syntax builds out risk-stratified range with US mid-cap ETF

The fund seeks to better diversify related business risk compared to similar market-cap-weighted indices.

The fund, which harnesses the firm’s proprietary risk-stratified investment approach, provides exposure to US mid-cap equities while using a smart beta weighting methodology to better diversify business risk compared to comparable market-cap-weighted indices.

It is linked to the proprietary Syntax Stratified MidCap Index which consists of S&P 400 constituents that have been organized into different buckets based on the firm’s patented business classification system.

The index organizes companies that share related business risks into functional groups and then weights these groups so as to spread exposure across these underlying risks.

According to the fund’s prospectus, this organizational structure translates into eight unconventional sectors: consumer, energy, financials, food, health care, industrials, information and information tools.

Each sector receives an equal weight with Syntax using an undisclosed, custom methodology to weight individual securities within each sector. According to Syntax, this weighting methodology allows investors to better diversify their exposure across the US mid-cap opportunity set as opposed to concentrating portfolio risk in the companies with the largest capitalizations. Index reconstitution and rebalancing occur quarterly.

The ETF comes with an expense ratio of 0.30%.

The fund comes one year after Syntax debuted the Syntax Stratified LargeCap ETF (SSPY US) which uses the same risk-stratified methodology to seek better diversification for the US large-cap market compared to the parent S&P 500. SSPY houses $27m in AUM and also comes with an expense ratio of 0.30%.

Syntax’s indexing division has also developed risk-stratified indices for the US small-cap (based on the S&P 600), international developed (MSCI EAFE), and US sector equity markets, highlighting the potential for Syntax to further develop its ETF suite.

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