JP Morgan Asset Management has launched a new actively managed US equity ETF for investors seeking to navigate market volatility – the JPMorgan Hedged Equity Laddered Overlay ETF (HELO US).
HELO delivers downside risk management through employing a laddered options overlay.
Listed on NYSE Arca, HELO invests broadly across US large-cap stocks while providing a measure of downside protection through a laddered options strategy overlay.
The fund’s equity portfolio is designed to maintain sector allocation and average market capitalization characteristics similar to the S&P 500 while simultaneously harnessing insights from JP Morgan’s equity research analysts to select and tilt constituent weights in favour of stocks considered to be undervalued.
The ETF’s downside risk management, meanwhile, involves staggering three hedges lasting three months each, one month apart – each hedge consists of long put and short call options referenced to the S&P 500. According to JP Morgan, this ‘laddered’ hedging technique is geared towards mitigating potential risks associated with only one hedge period.
The combination of HELO’s equity portfolio and laddered option hedges produces an investment strategy that aims to capture a significant portion of long-term US stock market returns but with lower volatility compared to traditional equity strategies.
Hamilton Reiner, portfolio manager and Head of US Equity Derivatives at JP Morgan Asset Management, emphasized that the company’s primary objective has always been to assist investors in staying invested.
According to Reiner, equity investors are primarily focused on risk management, regardless of the market environment. He anticipates a high demand for HELO, as investors require outcome-oriented solutions that offer a hedged experience via the ETF wrapper.
HELO comes with an expense ratio of 0.50%.
As of 6 October, HELO’s equity portfolio contained 170 holdings with the most notable positions being Apple (7.3%), Microsoft (7.2%), Alphabet (4.1%), Amazon (3.7%), Nvidia (3.4%), Meta Platforms (2.3%), and Tesla (1.8%).
The portfolio’s leading sector exposures included Information Technology (27.7%), Health Care (13.4%), Financials (13.3%), Consumer Discretionary (11.5%), and Industrials (8.5%).