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Friday, January 11, 2019

A Biotech Vet Enters the ETF Biz

Reported by Neil Anderson, Managing Editor

A biotech and investment banking veteran is entering the ETF business. Watch for his startup to roll out more ETFs, indices and even mutual funds.

Rory Balfour Riggs
Syntax Advisors / Syntax / Locus Analytics / New Ventures Funds
CEO / CEO / CEO / Managing Partner
On Tuesday Rory Riggs, founder and CEO of Syntax Advisors, unveiled the New York City-based firm's first ETF, the Syntax Stratified LargeCap ETF (SSPY on the NYSE Arca). The fund, launched on January 4 and converted from a private strategy, tracks the Stratified LargeCap Index maintained by Syntax Advisors' parent, Syntax LLC, and calculated by S&P Dow Jones Indices as an alternative weighting of the components of the S&P 500.

Vantage Consulting Group subadvisors the new fund, and Vantage director Jim Wolfe PMs. State Street serves as the fund's administrator, custodian, and transfer agent. Foreside is the fund's distributor. Ernst & Young is the independent accounting firm for the fund and the indices. ANd Chapman and Cutler is the fund's legal counsel.

Riggs is the CEO of Syntax Advisors (the ETF firm) and of Syntax (the index provider), which combined have about 20 employees. He is also the CEO and founder of Locus Analytics, through which he developed the Locus Model for organizing business and economic data (which underlies Syntax's indices). And he remains involved in biotech: as chairman and co-founder of Royalty Pharma, managing partner of New Ventures Fund, chairman and co-founder of Cibus Global, and board member and co-founder of FibroGen.

The inspiration for the model, Riggs says, comes from his time in the biotech sector.

"In biotechnology we have always taken populations and stratified them to take biases out of the performance," Riggs says. "I was always amazed that nobody had ever done this in finance."

Riggs worries about the "inherent bias at the end of a bull-market" when it comes to traditional, market cap-weighted indices. So Syntax weights indices differently, by dividing, say, the S&P 500 into eight different sectors (and then each of those into sub-sectors). The index is then equally weighted among each of those eight sectors (and each sub-sector within a given sector is also equally weighted).

"I invented a new way of classifying business. We have 14 patents," Riggs says. "We've created a map of an economy, and we place businesses into that map. We think that it's a better predictor of whether businesses correlate."

"This is what an active managers says they'll do for you: 'I'll fix the biases in the S&P 500,'" Riggs adds.

Working with S&P Dow Jones, Syntax already offers 11 different Stratified Weight versions of S&P's indices. They also have teamed up with other index providers like FTSE Russell and MSCI. So, Riggs has a number of different indices to choose from when planning more ETFs. And he's working on stratified weight versions of more indices, too.

"Our hope is to role out at first a family of ETFs," tracking stratified weight versions of the most widely used indices. "We do also hope to have mutual fund products out by the end of 2019."

An alumnus of Middlebury College and of Columbia University, Riggs previously served as president and director of Biomatrix, as president and CEO of RF&P Corporation, and as a managing director in Paine Webber's M&A department. He's worked with New Ventures Funds since 2006 and he founded Locus in 2010. 

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