J.P. Morgan Launches Strategic Beta ETF
The J.P. Morgan ETF is designed to provide market participation with lower volatility, and starts with the premise that traditional market-cap weighted and single-factor indices expose investors to excessive risk concentrations and a systematic bias toward overvalued securities. Therefore, the fund seeks to reallocate risk by weighting stocks according to four factors: value, size, momentum and low volatility. Research has shown that these factors, when combined, may offer better risk-adjusted returns.
The fund is managed by an experienced J.P. Morgan team, with 18-year veteran Beltran Lastra as the lead portfolio manager. Lastra’s team currently manages $12 billion in asset under management globally as of April 30, 2014.
“We believe that J.P. Morgan has unique investment insights and global capabilities that will be attractive to ETF investors, and this product is an important first step in delivering those capabilities,” says Robert Deutsch, head of the ETF business for J.P. Morgan Asset Management, based in New York. “J.P. Morgan has grown to one of the largest global mutual fund managers and our ETF offering will be a natural extension our product lineup.”
JPMorgan Diversified Return Global Equity is a strategic beta, developed market equity ETF that tracks an index co-developed with FTSE Group, the FTSE Developed Diversified Factor Index. According to Deutsch, the fund represents the next generation of strategic beta ETFs. More institutional investors are using strategic or smart beta ETFs, many in an effort to reduce portfolio volatility (see “Smart Beta ETFs Can Be Used to Reduce Volatility”).
“We are delighted that J.P. Morgan has chosen FTSE as the index provider for launching their new ETF business in the United States,” says Jonathan Horton, president of FTSE North America. “Electing to work with FTSE to co-develop the methodology behind this ground-breaking multi-factor index series is a great example of combining J.P. Morgan’s research and investment process know-how with our index expertise creating customized solutions in partnership with clients.”