ETC co-founder Darren Schuringa returns with ASYMmetric ETFs
US ETF white labelling firm ETC’s co-founder-turned hedge fund manager, Darren Schuringa, has turned to private equity to raise financing to launch his new ETF firm, ASYMmetric ETFs.
Schuringa returns to the ETF issuer game with a product that comes from his background both in ETFs and hedge funds, designed to deliver positive returns regardless of market conditions.
“ASYMmetric is risk management technology with one objective,” Schuringa says. “It’s a long/short strategy, meaning that if we do our job well, we should be able to make money in down markets.”
ASYMmetric Risk Management Technology was picked up to power one of the largest hedge fund seeds of 2015, Schuringa explains. It is an institutionally vetted, quantitative long/short hedging strategy that seeks to provide protection against bear market losses without sacrificing equity returns.
Schuringa launched and grew both Exchange Traded Concepts (ETC) and Yorkville ETF Advisors. ETC was the first and remains the largest white label ETF platform in the world. Yorkville ETF Advisors was the only independent sponsor to make the league tables with its first ETF in 2012. Yorkville was sold to Van Eck in 2015.
Schuringa explains that he started his financial career at a registered investment adviser (RIA) business, focusing on Master Limited Partnerships, producing record returns but with assets stuck at around USD100 million, largely drawn from friends and family money.
"We were producing record numbers, and no one was coming to us,” Schuringa says. “That was my first lesson in asset management - if you build it, they won’t come. No one is looking for the undiscovered gem out there.”
The rest of his career has been focused on helping leverage their investment products, at first his own firm and then others, getting them to a wider audience.
Around 2010, he discovered ETFs. The sector had about USD700 billion in it and was seeing steady growth.
“I looked at the industry as an analyst and found it really interesting because ETFs enabled our business to reach a global audience. Anyone who can trade securities on the NYSE can reach our investment solutions with added brand recognition as the products will appear in stock tables in The Wall Street Journal or on-line,” he says. “It was an easier buy for investors with no managed account agreements paperwork - they just had to go to their local broker and buy a share or two.”
In 2010, Schuringa raised capital through private equity and founded Yorkville ETF Advisors, with the intention of launching rules-based ETFs based on MLPs. “We didn’t want to lose the first mover advantage as we knew that the first mover normally captures 50 per cent of that asset class and maintains it, even when cheaper and larger competition comes in.”
Determined to get a head start, Schuringa went to Oklahoma City to meet J. Garrett Stevens, currently still CEO of ETC, who at the time was an ETF issuer of faith-based ETFs and had been thinking of creating a white label platform for ETFs. The pair joined forces and did exactly that, with the MLP ETF as the first ETF on the new platform and emerging in the top 10 of fund launches in 2011.
“This was my introduction to both private equity and the ETF industry,” Schuringa says. In 2015, he sold his interests in ETC and Yorkville Advisors, but maintained Yorkville Capital, which was still offering active management in the energy infrastructure space and entering the hedge fund industry.
The hedge fund of fund firm Pacific Alternative Asset Management Company (PAAMCO) came calling, looking for investment managers working in that space who had a long/short approach. “Our actively managed strategy had produced 25 per cent per annum over five years, which put us into the top of all investment strategies,” Schuringa says.
The firm had been developing technology to provide protection against catastrophic loss because they had observed that MLPs had begun to display different return characteristics than they had in the past.
In 2015, they won a mandate for USD250 million from PAAMCO to seed a hedge fund based on that technology and its back-tested results, and it is that technology that they are now applying to indices.
“We have found that we can integrate ASYMmetric Risk Management Technology™ into indices and that it transforms all indices, creating something completely new,” Schuringa says.
Coming out of his non-compete with ETC, he is now able to create a new ETF firm, bringing something of a hedge fund strategy to retail investors. “We are bringing the benefits of hedge funds to the masses,” he says. “And we hope to revolutionise how people manage their portfolios. The tools available to RIAs are largely long only and these tools aren’t sufficient to meet the challenges of today’s markets.”
“Delivering disruptive risk management tools to retail investors is where our hearts lie, and we are also addressing wealth inequality – bringing solutions that were only available to 1 per cent of the investing public to the 99 per cent.”
ASYMmetrics ETFs hopes to launch its new suite of ETF products by the end of the first quarter of 2021.