JP Morgan adds currency-hedged share classes to hedge fund strategy ETFs

Sep 13th, 2018 | By | Category: Alternatives / Multi-Asset

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JP Morgan Asset Management has introduced currency-hedged share classes for its long-short and managed futures hedge fund strategy ETFs, JPM Equity Long-Short UCITS ETF and JPM Managed Futures UCITS ETF.

Bryon Lake, International Head of ETFs at JP Morgan Asset Management

Bryon Lake, International Head of ETFs at JP Morgan Asset Management.

The new share classes, which incorporate pound sterling and euro hedging, have been listed on the London Stock Exchange, Xetra and Borsa Italiana markets and are scheduled to list on SIX Swiss Exchange.

Currency-hedged share classes can help minimise the impact of foreign exchange movements on investment returns when the base currency of the fund or underlying assets is different to the investor’s own preferred currency.

Bryon Lake, International Head of ETFs at JP Morgan Asset Management, said, “As we continue to broaden our reach across UK and continental Europe we’re both listening and responding to client needs.”

He added, “Currency hedging can help investors mitigate the impact of foreign exchange movements on their investment returns. Having access to home currencies, via these currency-hedged share classes, should help clients meet both their operational and/or legal requirements.”

Currency hedging is conducted in-house by JP Morgan’s London-based currency management team using forward contracts. The asset manager has adopted a tolerance-adjusted hedging model whereby currency hedges are adjusted whenever hedge ratios breach pre-set thresholds.

Both ETFs are actively managed and aim to provide returns similar to hedge fund strategies by using advanced factor-based investing techniques. The funds use a systematic, rules-based investment approach, with the goal of providing returns that are uncorrelated to traditional asset classes in a liquid, cost-effective and transparent vehicle.

The long-short fund provides exposure to developed equity market factors, such as value, quality and momentum. The portfolio is constructed bottom-up by taking long and short position in individual equity securities. The ETF has a return target of cash +4% (gross of fees), a risk target of 6-8% per annum, an expected beta of up to +0.3, and a total expense ratio (TER) of 0.67%.

The managed futures fund offers exposure to the carry and momentum factors across equities, fixed income, currencies and commodities. The strategy is constructed bottom-up by taking long and short positions in futures markets. The ETF has a return target of cash +4% (gross of fees), a risk target of 6-8% per annum and a TER of 0.57%.

The following share classes have listed on LSE and will list on SIX in due course:

JPM Equity Long-Short UCITS ETF – GBP Hedged (JLSP LN)
JPM Equity Long-Short UCITS ETF – EUR Hedged (JLSE LN)
JPM Managed Futures UCITS ETF – GBP Hedged (JMFP LN)
JPM Managed Futures UCITS ETF – EUR Hedged (JMFE LN)

The euro-hedged share classes have also listed on Xetra (Tickers: JLEE GY and JMFE GY) and Borsa Italiana (Tickers: JLSE IM and JMFE IM).

The new listings have been priced in line with their unhedged counterparts.

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