JP Morgan launches active multi-sector bond ETF

Nov 5th, 2021 | By | Category: Fixed Income

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JP Morgan Asset Management has introduced an actively managed fixed income ETF that seeks to generate higher income with lower volatility compared to the US aggregate bond universe.

JP Morgan launches active multi-sector bond ETF

JP Morgan has launched a fully transparent, actively managed aggregate bond ETF.

The JPMorgan Income ETF (JPIE US) has been listed on NYSE Arca with an expense ratio of 0.41%.

The fund, which is fully transparent, replicates the strategy behind the JPMorgan Income Fund, a $13.5 billion mutual fund established in June 2014.

This fund has notably outperformed its benchmark since inception, delivering an annual return of 4.22% compared to 3.15% for the Bloomberg Barclays US Aggregate Index.

Bryon Lake, Global Head of ETF Solutions at JP Morgan Asset Management, said: “This current cycle has shown that passive fixed income investing has some limitations and may not be able to deliver the full range of portfolio stabilization, diversification, and return enhancement benefits most investors now expect. In this environment, investors can benefit from intentional exposure to securities and sectors that active management can provide.”

He added: “For when our clients need the active expertise to navigate macro and micro market challenges, JPIE uses a flexible, opportunistic approach that combines strategy and sector rotation, delivering a liquid, cost-effective and efficient way to build and manage a diversified fixed income portfolio.”

Investment approach

Like its mutual fund counterpart, JPIE is managed by portfolio managers Andrew Norelli, Andrew Headley, and Thomas Hauser who collectively have 75 years of industry experience including 42 years with JP Morgan.

The strategy aims to deliver an attractive dividend every month while utilizing a flexible allocation approach that allows for significant shifts based on changing market conditions.

The fund may invest in fixed and floating rate debt securities issued in both US and foreign markets, including in emerging markets. Eligible securities include government bonds, corporate debt, mortgage-backed securities, asset-backed securities, municipal securities, loan participations and unfunded commitments, convertible securities, preferred stock, real estate investment trusts, and money market instruments.

Up to 10% of the fund may be invested in securities issued in currencies other than the US dollar and as much as 65% may be allocated to debt rated below investment grade. The fund is unconstrained in its allocation across maturities but will typically maintain a portfolio duration of ten years or less.

While the fund is diversified across multiple bond segments, the managers strategically target attractive income-producing sectors whose correlations can help lower overall volatility. Buy and sell decisions are based on fundamental, quantitative, and technical analysis, incorporating both an ESG lens and an income filter.

JP Morgan also offers the $18.2bn JPMorgan Ultra-Short Income ETF (JPST US) which follows a similar investment approach but targets a portfolio duration of less than one year. JPST comes with an expense ratio of 0.18%.

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