JPM AM has decided to avoid the crowded, low-margin world of plain vanilla, index-tracking ETFs, attempting instead to carve itself a niche in the alternative beta space. The company’s two new ETFs are factor-based, actively managed strategies which aim to bring “the diversification benefits of hedge funds” to a wider audience in a more liquid ETF-wrapper.
Whether the new ETFs also come with ETF-like management charges is anyone’s guess, as JPM AM didn’t give any information about the fees it will charge.
The JPM Equity Long-Short Ucits ETF aims to provide exposure to value, quality, and momentum within developed global equity markets using a rules-based bottom-up approach, taking long and short positions in individual equity securities.
Meanwhile, the JPM Managed Futures Ucits ETF seeks to provide “systematic exposure to carry and momentum factors” across four asset classes: equities, fixed income, currency, and commodities.
The strategy will also be constructed bottom-up by taking long and short positions in futures markets, aiming to provide returns uncorrelated to traditional asset classes.
Hedge fund rivals
While traditional ETFs can be understood as competing with traditional, long/only funds, JP Morgan’s active ETFs are to challenge hedge funds, said Yazann Romahi, chief Investment officer of quantitative beta strategies at JPM AM.
“When we started doing research on alternatives more than a decade ago, we built on the academic research which suggested that a large portion of hedge fund returns could actually be accessed using a bottom-up, systematic, rules-based approach – the same way traditional passive investing in long-only markets works.
“Now we’re looking to bring the same benefits of diversification, reduced overall portfolio volatility, and higher portfolio risk-adjusted returns to the ETF wrapper through the launch of these two ETFs.”
Bryon Lake, international head of ETFs at JPM AM, said: “This first wave of ETF listings is the next step in our commitment to building out our active, strategic beta and alternative beta ETF capabilities, with a view to serving the needs of clients globally. We intend to build on this momentum going into 2018 as we introduce more of JPM AM’s investment capabilities into the ETF vehicle.”
The two ETFs will launch on the London Stock Exchange within the next few weeks, JPM AM said.