JP Morgan launches two actively managed fixed income ETFs

Dec 15th, 2018 | By | Category: Fixed Income

JP Morgan Asset Management has launched two new actively managed fixed income ETFs on NYSE Arca: the JPMorgan US Aggregate Bond ETF (JAGG US) and JPMorgan Corporate Bond Research Enhanced ETF (JIGB US).

Joanna Gallegos JP Morgan

Joanna Gallegos, US Head of ETFs at JP Morgan Asset Management.

“Historically, fixed income ETF investors have had limited options beyond traditional indexing,” said Joanna Gallegos, US Head of ETFs at JP Morgan Asset Management. “With the launch of these two ETFs, investors now have more choice and the tools necessary to navigate the complexities of today’s bond markets while building stronger portfolios.”

JAGG aims to provide long-term total return by investing across all sectors represented by its benchmark – the Bloomberg Barclays US Aggregate Bond Index. The index covers USD investment grade bonds including Treasuries, government agency bonds, mortgage-backed bonds, corporate bonds, as well as a small number of foreign bonds traded in US dollars. Municipal bonds and Treasury Inflation-Protected Securities (TIPS) are excluded.

Most of the fund’s active management will occur within the corporate bond segment, as the managers utilize a multi-factor screening process to identify issuers with attractive value, quality and momentum characteristics.

Outside of corporate debt, the ETF seeks to align sector and duration exposures relative to the benchmark index.

JIGB also seeks to generate total return within the universe defined by the Bloomberg Barclays US Corporate Bond Index, which consists of investment grade corporate bonds denominated in USD. The managers utilize data from JP Morgan’s credit research analysts to identify the most attractive risk-adjusted sectors and securities while seeking to maintain an overall risk profile similar to the benchmark.

The strategy takes overweight positions in names the credit analysts find attractive and underweight positions in the names they find less attractive. As a result, the strategy maintains index-like characteristics while seeking incremental positive excess returns, compounded over time.

JAGG comes with an expense ratio of 0.07%, while JIGB costs 0.14%. These price tags position the funds right at the bottom end of the cost scale for similar actively managed fixed income ETFs. In fact, JAGG is just two basis points more expensive than the $55 billion iShares Core US Aggregate Bond ETF (AGG US), the largest passive fund in this space.

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