JP Morgan launches four new fixed income ETFs on LSE

Jun 13th, 2018 | By | Category: Fixed Income

JP Morgan has expanded its European offering with the launch of four new fixed income ETFs – two actively managed and two passively managed funds – on London Stock Exchange.

Bryon Lake, head of international ETFs, JP Morgan Asset Management.

Bryon Lake, head of international ETFs, JP Morgan Asset Management.

The four ETFs are:

  • JPMorgan GBP Ultra Short Income UCITS ETF (JGST LN)
  • JPMorgan EUR Ultra Short Income UCITS ETF (JEST LN)
  • JPMorgan BetaBuilders UK Gilts 1-5yr UCITS ETF (JG15 LN)
  • JPMorgan BetaBuilders US Treasury Bond 1-3yr UCITS ETF (JU13 LN)

Bryon Lake, head of international ETFs at JP Morgan Asset Management, commented, “We are very pleased to be offering clients access to our industry-leading liquidity capabilities through the benefit-rich ETF wrapper. We see particular opportunities for growth and adoption of fixed income strategies within ETFs which is why we’re heavily investing in this space.”

Of the four new ETFs, JEST and JU13 have also listed on Xetra and Borsa Italiana, and are expected to list on the SIX Swiss Exchange on 10 July 2018.

Having launched the JP Morgan USD Ultra-Short Income UCITS ETF (JPST US) on Cboe ETF Marketplace in May last year, JP Morgan is now offering similar ultra-short duration income strategies with bonds denominated in two more currencies via JGST (pounds sterling) and JEST (euros).

Through active management, both JGST and JEST seek to provide diversified exposure to very short maturity bonds and debt instruments across investment-grade corporate bonds and government debt. The strategies will take a conservative approach in order to mitigate volatility and limit duration exposure, with a duration target of less than one year.

JGST and JEST each have return targets of 0.20 – 0.40% (net of fees) over money market funds. Each has a total expense ratio (TER) of 0.18% due to a contractual fee waiver in place until at least February 2021. The funds’ gross expense ratios are 0.22% each.

Neil Hutchinson, lead portfolio manager for JP Morgan’s managed reserves portfolios in Europe, said, “For clients that don’t need the same level of liquidity, ultra-short solutions can provide an incremental return over AAA-rated liquidity funds, in a low risk framework.”

Lake added, “Following discussions with asset allocators across Europe, two trends have come to our attention with respect to how they’re seeking to incorporate our ultra-short suite into client portfolios. Asset allocators are finding that, firstly, for only a few months more duration they can increase their yield by 45%. Secondly, they’ve found they can capture 82% of the US Aggregate Bond Index yield with only 8% of the duration. In a rising rates environment, employing strategies such as these can help with monitoring and controlling duration.”

JP Morgan is also building out its “BetaBuilder” range – low cost, passively managed ETFs which JP Morgan is marketing as ‘building blocks’ for investors’ portfolios.

Having previously launched the JPM BetaBuilders Eur Govt Bond 1-3yr UCITS ETF (JE13 LN) in February this year, investors will now also be able to access UK government bond and US Treasury bond indices through JG15 and JU13 respectively.

JG15 tracks the JP Morgan Government Bond Index United Kingdom 1-5 Year Index to offer exposure to shorter-dated UK Gilts, while JU13 tracks the JP Morgan Government Bond Index United States 1-3 Year to cover an even lower maturity range, but for US Treasuries.

Both of the new BetaBuilder ETFs have TERs of 0.10%.

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