Today, Measured Risk Portfolios unveiled the MRP SynthEquity ETF (SNTH). The actively managed fund looks to provide investors with access to capital appreciation over the long term. It operates with a net expense ratio of 95 basis points.
This fund uses a two-pronged approach to achieve its investment goals. When used in tandem, these strategies should allow for market participation with a blend of risk management.
First, SNTH invests in options contracts on the S&P 500 Index. By doing so, the fund seeks to generate returns through synthetic long exposure. Options employed by the fund may be standardized exchange-traded or FLEX options.
Tapping Into Treasuries
The fund’s options strategy is then paired with a U.S. Treasury portfolio. This portfolio focuses on protecting SNTH’s investments by investing in short-duration U.S. Treasuries. These Treasuries can also be used to bolster overall income for the fund.
SNTH builds its portfolio of U.S. Treasuries through a quarterly laddered strategy. This ladder largely consists of high-yielding Treasuries that reach maturity on or around the 15th of March, June, September, and December. The overall portfolio duration for this strategy is expected to sit around six months.
By blending an options strategy with U.S. Treasuries, SNTH is able to provide a floor against potential loss. Ideally, this floor will be able to limit losses to about 15% across each one-year rolling period.
SNTH’s risk-adverse strategy could be a valuable option for investors who remain wary of where the market may head this year. Its strategy enables it to stay engaged with the S&P 500, while blunting the impact that volatility could have on its investments.
This risk management is only made stronger through the fund’s active management team. An actively managed ETF can be in a better position to adapt to changing macroeconomic conditions than a passive strategy can.
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