Syntax completes US risk-stratified range with small-cap ETF

Jun 8th, 2020 | By | Category: Equities

Syntax Advisors has introduced its third ETF with the launch of the Syntax Stratified SmallCap ETF (SSLY US) on NYSE Arca.

Syntax completes US risk-stratified range with small-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 small-cap equities while using a smart beta weighting methodology to better diversify business risk compared to similar market-cap-weighted indices.

It is linked to the Syntax Stratified SmallCap Index which consists of S&P 600 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 small-cap opportunity set as opposed to concentrating portfolio risk in the companies with the largest capitalizations. Index reconstitution and rebalancing occur quarterly.

The fund complements the firm’s existing two ETFs which use the same risk-stratified methodology to seek better diversification for the US large-cap (based on the S&P 500) and mid-cap (S&P 400) markets. The funds are the $40 million Syntax Stratified LargeCap ETF (SSPY US) and $20m Syntax Stratified MidCap ETF (SMDY US).

Each of the three ETFs comes with an expense ratio of 0.30%.

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

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