Syntax Advisors LLC president and chief operating officer Carly Arison told NYSE’s Judy Shaw for ETF Leaders, powered by the New York Stock Exchange, that the company’s “goal is to have diversified exposure to business risk” when investing in U.S. core equities. And the way Syntax provides that is through the Syntax Stratified LargeCap ETF (SSPY ), the Syntax Stratified MidCap ETF (SMDY ), the Syntax Stratified SmallCap ETF (SSLY ), “which are stratified weight versions” of the S&P 500, 400, and 600, respectively.
At Exchange: An ETF Experience 2022, Arison explained that Syntax uses “a clinical trials methodology called stratification,” which stratifies demographic data across groups and sub-groupings “to eliminate biases in your clinical trials grouping and have a drug trial that’s representative of the underlying population that you’re trying to measure.”
“So, with stratification it’s a very similar thing, but applying it to the investments,” Arison said.
This means that, rather than using demographic data, Syntax uses something called “related business risk,” the goal of which “is to eliminate biases in your portfolio, have a diversified portfolio, and really limit your exposure to one sector or sub-sector.”
Syntax has been applying the data it’s been developing for over 15 years to stratification and building these groupings to diversify its portfolios. Plus, in addition to focusing on that data, the ETF issuer is looking to apply this data to other applications, including building out customized and targeted exposures and thematics, custom research, and portfolio analytics.
“So, there’s definitely more to come from Syntax in the future,” Arison said.
Addressing Risk and Uncertainty
While there are many challenges facing investors in 2022, Arison said that “Syntax is poised to address risk and uncertainty.” Arison argued that “stratification and diversification across business risk is really designed to address that.”
Syntax is seeing a lot of “overexposure and concentration risk” in many major market indices and market cap-weighted portfolios “that Syntax stratification is designed to avoid.”
“So, by diversifying across groupings and sub-groupings, we’re really trying to have that unbiased exposure and build a portfolio performance that’s representative of the underlying companies in our universe,” said Arison.
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