Syntax’s Stratified-Weight Indices re-weight the most widely-used benchmarks to maintain diversified exposure to related business risk. Stratified-Weight Indices insulate investors from related business concentrations that traditional indices overlook.
Related business shocks, such as those seen in the 2000 tech bubble or 2008 financial crisis, can affect the fundamentals of similar companies at the same time. By stratifying business risk, Syntax Stratified-Weight Indices dampen the effects of related business shocks and enhance portfolio returns.
The face of related business risks are bubbles and crashes. At the peak of the tech bubble, technology-associated stocks were approximately 47% of the S&P 500. Over the next 10 years, this group, on a cap. weighted basis, lost 45% of its value for an annualized loss of 5.8%. Excluding this group, all the other sectors were up 58% a gain of 4.7% per year. By better diversifying business risks instead of naively market weighting, the stratified-weight index was up 140% over this time period - an annualized return of 9.2%.
Diversifying business risk through stratification can make a material difference. For our major stratified-weight domestic benchmarks, we publish 25 years of history calculated by S&P Dow Jones Indices. Explore different periods. Explore how a stratified-weight methodology performs relative to capitalization-weight for the same universe at different time periods.
Rory Riggs, Founder and CEO of Syntax,
discussing our application of clinical sciences
techniques to index development.
Syntax featured in CMG Capital CEO Steve Blumenthal's weekly debriefing On My Radar, which analyzes the most relevant market events and approaches.
Announcing the publication of our paper in the Journal of Index Investing. This paper, which details our stratified-weight methodology, is an important breakthrough in risk identification and passive indexing.
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