For registered investment advisors, market volatility is rarely just a portfolio issue, it’s a client behavior issue.
During periods of drawdowns and heightened uncertainty, advisors often spend as much time managing emotions as managing allocations. History consistently shows that investor outcomes are heavily influenced by behavior, particularly the tendency to sell during periods of stress and re-enter after markets have recovered.
From the Global Financial Crisis to the pandemic-driven selloff, many investors exited equities near market lows, locking in losses and missing subsequent rebounds. While education and communication remain critical, portfolio construction itself can play a meaningful role in helping clients stay invested.
That’s where guardrails come in.
Hedged equity strategies may offer an additional tool to help mitigate downside risk while maintaining equity exposure. Rather than relying solely on client discipline during volatile markets, these strategies aim to embed a degree of risk management directly into the portfolio structure.
The Stratified LargeCap Hedged ETF (SHUS) is designed with this challenge in mind. SHUS seeks to provide diversified exposure to U.S. large-cap equities while incorporating a systematic options-based hedge intended to potentially reduce the impact of market pullbacks. The objective is not market timing or downside elimination but a possibly more controlled investment experience that may help reduce behavioral pressure during market stress.
Addressing Portfolio Creep and Concentration Risk
One growing challenge for investors is portfolio creep - the gradual drift toward higher concentration in a small number of stocks, sectors, or styles. In recent years, market-cap-weighted benchmarks such as the S&P 500 have become increasingly dominated by a handful of mega-cap names. While these companies have driven performance during certain periods, the resulting concentration has left many portfolios less balanced than intended.
For investors, this concentration may go unnoticed during rising markets. However, when volatility increases or leadership shifts, the risks associated with overexposure can become more apparent. Advisors seeking to maintain diversified allocations may find that traditional benchmarks no longer align with their risk management objectives.
SHUS is designed to help address this issue through its stratified-weighting approach, which aims to distribute exposure more evenly across sectors and individual stocks. The goal isn’t to avoid large-cap leaders, but to avoid letting any single stock or sector dominate the portfolio. By avoiding excessive reliance on any single company or sector, SHUS seeks to support a more balanced large-cap allocation particularly for investors concerned about benchmark concentration and unintended risk exposure.
A Systematic Approach to Staying Invested
In addition to its equity structure, SHUS employs a rules-based S&P 500 put spread strategy. By buying and selling put options in a systematic manner, the fund seeks to provide a potential layer of downside protection during periods of elevated volatility. Income generated through option sales may help offset the cost of the hedge, though this approach may limit upside participation in certain market environments.
For advisors, this combination of diversified equity exposure and embedded hedging may help create a more consistent risk profile - one that may align with long-term planning goals rather than short-term market reactions.
SHUS is designed to limit risk and mitigate losses. It seeks to offer a framework that acknowledges both market unpredictability and investor behavior. It may serve as a core large-cap allocation or as a complement to traditional equity exposure, particularly for investors who are sensitive to drawdowns or concerned about concentration risk.
In an environment where volatility, benchmark concentration, and client emotions often intersect, SHUS provides advisors with an approach designed to help keep portfolios and clients on track when markets become unpredictable.
When markets get unpredictable, portfolios need more than optimism. They may need guardrails.
Learn More About SHUS here. >>
SHUS. Large-Cap Exposure. Thoughtfully Hedged.
Investors should consider the investment objectives, risks, charges and expenses carefully before investing. For a prospectus or summary prospectus with this and other information about the Fund, please call (866) 972-4492 or visit our website at https://stratifiedfunds.com/investor-materials. Read the prospectus or summary prospectus carefully before investing.
The Funds are distributed by Foreside Fund Services, LLC. Exchange Traded Concepts, LLC serves as the investment advisor. Foreside Fund Services, LLC. is not affiliated with Exchange Traded Concepts, LLC or any of its affiliates.
Investing involves risk, including loss of principal. The Funds are subject to certain other risks, including but not limited to, equity securities risk, large-capitalization risk, index tracking risk, passive strategy/index risk, and market trading risk. Investing involves risk, including possible loss of principal. There can be no guarantee the Fund will meet its investment objectives.
SSPY Risks: The Fund is subject to certain other risks, including but not limited to, equity securities risk, large-capitalization risk, index tracking risk, passive strategy/index risk, and market trading risk. Investing involves risk, including possible loss of principal.
SHUS Risks: The Fund is actively managed using a proprietary process, and there can be no guarantee that the Fund's investment strategies will be successful. The Fund may invest in Underlying Funds or Securities that are managed with a passive investment strategy, attempting to track the performance of an unmanaged index of securities. This differs from an actively-managed fund, which typically seeks to outperform a benchmark index. Maintaining investments in securities regardless of their individual performance or market conditions could negatively affect the Fund's return. The Fund is subject to certain other risks, including but not limited to, equity securities risk, large-, mid-, and small-capitalization risk, and market trading risk. Investing in securities of small and mid-sized companies may involve greater volatility than investing in larger and more established companies. Certain investments may be subject to restrictions on resale, trade over-the-counter or in limited volume, or lack an active trading market. Purchased put options may expire worthless and may have imperfect correlation to the value of the Fund’s sector based investments. Written call and put options may limit the Fund’s participation in equity market gains and may amplify losses in market declines. The Fund’s losses are potentially large in a written put or call transaction. If unhedged, written calls expose the Fund to potentially unlimited losses. The Fund invests in derivatives. Derivatives are financial instruments that derive their performance from an underlying reference asset, such as an index. The return on a derivative instrument may not correlate with the return of its underlying reference asset. Derivatives can be volatile and may be less liquid than other securities.
Shares are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Investors may purchase or sell individual shares on an exchange on which they are listed. The market price returns are based on the official closing price of an ETF share or, if the official closing price isn’t available, the midpoint between the national best bid and national best offer (“NBBO”) as of the time the ETF calculates current NAV per share, and do not represent the returns you would receive if you traded shares at other times. NAVs are calculated using prices as of 4:00 PM Eastern Time.
The Syntax Stratified LargeCap Index™ is the property of Syntax, LLC, which has contracted with S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC) to calculate and maintain the Index. The Index is not sponsored by S&P Dow Jones Indices or its affiliates or its third-party licensors (collectively, “S&P Dow Jones Indices”). S&P Dow Jones Indices will not be liable for any errors or omissions in calculating the Index. “Calculated by S&P Dow Jones Indices” and the related stylized mark(s) are service marks of S&P Dow Jones Indices and have been licensed for use by Syntax, LLC, the parent company of Syntax Advisors, LLC. S&P® is a registered trademark of Standard & Poor’s Financial Services LLC (“SPFS”), and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”).
The Syntax Stratified LargeCap Index™ is the property of Syntax, LLC, the Fund’s index provider. Syntax®, Stratified®, Stratified Indices®, Stratified Weight™, and FIS™ are trademarks or registered trademarks of Locus LP. Performance of an index is not illustrative of any particular investment. It is not possible to invest directly in an index.
Stratified Weight™ is the weighting methodology by which Syntax diversifies an index’s constituent companies that share “Related Business Risks.” Related Business Risk occurs when two or more companies provide similar products and/or services or share economic relationships such as having common suppliers, customers or competitors. The process of identifying, grouping, and diversifying holdings across Related Business Risk groups within an index is called stratification, and was designed by Syntax to seek to correct for business risk concentrations that regularly occur in capitalization-weighted indices and equal-weighted indices.
The Stratified Hedged Strategy combines the benefits of exposure to a Stratified Weight™ equity portfolio with a rules-based downside hedge program managed by Exchange Traded Concepts to reduce the risk of losses due to market downturns.
Diversification does not ensure a profit or guarantee against a loss.
The S&P 500® Index is a market-capitalization-weighted index of the 500 leading publicly traded companies in the U.S.
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