What changed and why it matters
Rob Arnott parted with the index franchise that helped put him on the map, selling RAFI Indices to TMX Group for $490 million. TMX struck the deal in June and finished it on Aug. 18. He retained the investment-management arm overseeing about $30 billion and reintroduced it as Syzygy Asset Management with 28 employees. The remaining business adopted the Syzygy name the same day the sale closed.
Arnott launched Research Affiliates in 2002 in Newport Beach, California, and spent years challenging how indexes are built. The Research Affiliates Fundamental Index selects and sizes holdings based on business metrics such as sales and cash flow, rather than allocating the most to the largest companies by market cap. TMX Group's VettaFi unit supplies indexes and ETF data, which lines up with what it bought.
The team, the tilt toward active, and the name
The plan now is more active. Working with Research Affiliates veterans Jim Masturzo and Katy Sherrerd, Arnott, 72, is building new equity and multi-asset approaches and putting together a platform focused on tax-aware long-short investing. "We're good at active management," said Arnott, 72. "Our best new thinking will continue to flow first into our existing clients' strategies, in parallel with creating some high-octane active strategies, involving concentration and leverage." Syzygy will also continue overseeing assets for organizations such as Pacific Investment Management Co., carrying forward ties established at Research Affiliates.
The name Syzygy refers to the alignment of celestial bodies and nods to Arnott's eclipse-chasing streak. He spoke following a trip to Mallorca to witness August's total solar eclipse.
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Product design and the tax-aware push
A top expansion area is tax-aware long-short portfolios. These take long positions in certain stocks and short others, potentially generating losses that can be used to counterbalance clients' taxable gains in other accounts. Interest has jumped, and Bloomberg recently reported that about $1 trillion is allocated to the wider family of approaches designed to lessen or postpone investors' tax liabilities.
Syzygy is finalizing the packaging for its tax-aware long-short lineup, considering an exchange-traded fund, a limited partnership, all of the above, or another format. "We know how to do it," Masturzo said.
What this means for your portfolio
Expect Syzygy's newest ideas to first show up inside existing client mandates, while more concentrated and leveraged offerings are built in parallel. If you follow Research Affiliates' work or invest with managers like Pacific Investment Management Co., the menu is likely to include more active, tax-aware choices from a team with a head start and a full contact list.
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