Syntax Advisors has entered the ETF game with a new smart beta strategy that aims to re-weight widely observed benchmarks, like the S&P 500, based on the components’ business risks instead of the usual capitalization size.
The newly launched Syntax Stratified LargeCap ETF (NYSEArca: SSPY) comes with a 0.30% expense ratio.
“Syntax takes the world’s most widley used benchmarks and reweights them to diversify business risk,” according to Syntax Advisors. “Instead of concentrating in the largest companies and the most popular sectors, we provide investors with a more balanced exposure across all available business opportunities.”
The Syntax Stratified LargeCap ETF will try to reflect the performance of the Syntax Stratified LargeCap Index, which follows the stratified-weight version of the widely used S&P 500 Index and holds the same constituents as the S&P 500, according to the fund’s prospectus.
The so-called Stratified-weight refers to the weighting methodology of the underlying index where Syntax groups and distributes the weight of constituent companies that share “Related Business Risks”.
The Related Business Risk factor occurs when two or more companies’ earnings are affected by the same fundamental drivers. Specifically, the process of identifying, grouping, and diversifying across related business risk is called stratification.
Consequently, the portfolio is broken down into eight broad sectors, including consumer, energy, financials, food, health care, industrials, information and information tools. Components are then “equally allocated” across those sectors, and rebalancings of the index occur on a quarterly basis.
SSPY aims to provide exposure to the “same stocks as the S&P 500, providing access to constituents that are the leading proxy for the market,” and it is “reweighted to diversify related business risk and provide a more balanced exposure than cap-weighting,” according to Syntax.
Current top holdings include Yum Brands (NYSE: YUM) 0.8%, Walmart (NYSE: WMT) 0.8%, Costco Wholesale (NYSE: COST) 0.8%, McDonalds (NYSE: MCD) 0.8% and Sysco (NYSE: SYY) 0.8%.
For more information on new fund products, visit our new ETFs category.