Syntax Advisors Launches Syntax Stratified LargeCap ETF
Syntax Advisors LLC has launched its first exchange-traded fund (ETF), the Syntax Stratified LargeCap ETF, on NYSE Arca Exchange (Ticker: SSPY). Syntax’s Stratified LargeCap ETF seeks to track Syntax’s Stratified LargeCap Index (the Index), a Stratified Weight™ version of the S&P 500, calculated by S&P Dow Jones Indices and maintained by Syntax LLC, Syntax Advisors’ parent company. The ETF started trading on January 4th from an existing private fund vehicle, thereby launching with four years of live performance history.
“The breakthrough of the Stratified LargeCap ETF is that an investor can now own a passively managed portfolio of the same companies as the S&P500 but using a weighting methodology designed to maintain diversified exposures to related business risks. This is a first in a low-cost, passively managed ETF,” said Founder and CEO Rory Riggs.
“We built the Stratified LargeCap strategy to provide an alternative to the capitalization weighting methodology used by the major indices which concentrates portfolio risk in the largest, most momentum-driven names” added Riggs. “For example, the top 10 names in the S&P 500 made up approximately 21% of the index at year-end 2018; not surprisingly, most of these were well-known technology companies. Rather than heavily weight to the largest companies and momentum-driven sectors, our goal is to capture a diversified market return representative of the entire business universe included in the S&P 500.”
The Syntax Stratified LargeCap ETF holds the exact same companies as the S&P 500, but weights those companies using Syntax’s patented Stratified Weight methodology, which diversifies the related business risks that frequently occur in major market indices like the S&P 500. The cap weighting used by these traditional indices causes large companies with related businesses to exert a disproportionate impact relative to the other types of businesses held by the index. Related business risks are not based on companies’ capitalization or past performance, but rather, are based on each company’s current business functions and the functional economic relationships between them. The Index uses technology that makes it possible to control for risks shared by groups of related companies by: 1) organizing companies that share related business risks into well-defined functional groups; and 2) weighting these groups to spread exposure across these underlying risks.
“We built a new classification system that lets us identify and map related business risk. Syntax believes that managing business risks should be an essential part of any investor’s risk strategy. Companies with similar business characteristics (i.e. same products, customers, suppliers, regulatory environment, and others) should react similarly when shocks hit the equity markets,” Riggs continued. “The key to risk management is to maintain a diversified exposure to related business risk.”
Recent market volatility highlights the potential dangers posed by the over-concentration of related business risk in cap-weighting. Currently, the S&P 500 has outsized exposure to technology business risk: as of 12/31/18, the FAANG stocks (Facebook, Amazon, Apple, Netflix, and Google) represented 11.4% of the S&P 500 weight and 14.4% of its total volatility. By controlling for these overexposures, the SSPY ETF seeks to maintain a balanced exposure to the underlying related business risks. In contrast to the S&P 500 index, the FAANG stocks were 0.8% of the Stratified LargeCap Index and 1.0% of the volatility.
“As someone who was a part of developing the very first exchange-traded vehicle, the SPDR® S&P 500 ETF, back in 1993, I am excited to launch a new product that provides investors with the same S&P 500 constituents in a more diversified way,” says Kathy Cuocolo, President of Syntax Advisors. “The Stratified Weight methodology has the opportunity to radically disrupt index-investing.”
In the development and distribution of SSPY, Syntax Advisors is pleased to be working with the leading professionals in the ETF ecosystem, including State Street, Foreside Fund Services, NYSE Arca, and Cantor Fitzgerald as Lead Market Maker.
“We are pleased to be involved in the launching of a uniquely designed equity market index. We have high hopes for our partnership,” said Reggie Browne, Senior Managing Director - ETF Group at Cantor Fitzgerald.
The Syntax Stratified LargeCap Index is a product of Syntax Indices, a division of Syntax, LLC. The Syntax LargeCap ETF (Ticker: SSPY) is the first ETF to track a Stratified-Weight Index.
About Syntax Advisors, LLC
Syntax Advisors LLC provides investors with rules-based, diversified exposure to business risks via products that track Syntax Stratified Weight Indices. Syntax Indices are a new class of indices that reweight the most widely-used benchmarks, including the S&P 500, S&P 400, and MSCI EAFE using the Stratified-Weight methodology. Their objective is to deliver a diversified return across all the business opportunities in a benchmark rather than just the largest.
Disclaimers:
Before investing, consider the fund’s investment objectives, risks, charges and expenses. To obtain a prospectus which contains this and other information, please visit www.syntaxadvisors.com, call (866) 972-4492, or talk to your financial advisor. Read it carefully before investing.
The ETF is subject to certain other risks, including but not limited to, equity securities risk, large-capitalization risk, index tracking risk, passive strategy/index risk, and market trading risk. Investing involves risk, including possible loss of principal.
Past performance does not guarantee future results, which may vary.
This communication is for informational purposes and is not intended to be, nor should it be construed or used as an offer to purchase, sell, recommend, acquire or dispose of any security, commodity, investment or to engage in any other transaction. Additionally, the information herein is not intended to provide, and should not be relied upon for tax advice, legal advice or investment recommendations. Nothing in this communication should be construed as constituting advice or recommendations as to the suitability of any particular investments, securities, products or services.
You should make an independent investigation of the matters described herein, including consulting your own advisor(s) on the matters discussed herein. While information in this communication is believed to be, such information has not been independently verified by Syntax Advisors, LLC and Syntax Advisors, LLC does not assume any responsibility with respect to the accuracy and completeness of such information.
The Syntax Stratified LargeCap IndexTM is the property of Syntax, LLC, the Fund’s index provider. Syntax®, Stratified®, Stratified Indices®, Stratified-WeightTM, and FISTM are trademarks or registered trademarks of Locus LP. Performance of an index is not illustrative of any particular investment. It is not possible to invest directly in an index.
The Syntax Stratified LargeCap Index™ is the property of Syntax, LLC, which has contracted with S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC) to calculate and maintain the Index. The Index is not sponsored by S&P Dow Jones Indices or its affiliates or its third-party licensors (collectively, “S&P Dow Jones Indices”). S&P Dow Jones Indices will not be liable for any errors or omissions in calculating the Index. “Calculated by S&P Dow Jones Indices” and the related stylized mark(s) are service marks of S&P Dow Jones Indices and have been licensed for use by Syntax, LLC, the parent of Syntax Advisors, LLC. S&P® is a registered trademark of Standard & Poor's Financial Services LLC (“SPFS"), and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”).
Foreside Fund Services, LLC is the distributor of the Syntax ETF Trust, and not affiliated with Syntax Advisors, LLC Syntax Advisors, LLC (“Syntax Advisors”) is a SEC-registered investment adviser with its principal place of business in New York, New York.
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