JP Morgan unveils smart beta ETF

Jun 23rd, 2014 | By | Category: Equities

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JP Morgan Asset Management has made its much-anticipated debut in the fast-growing exchange-traded fund space with the launch the JP Morgan Diversified Return Global Equity ETF (JPGE) on the NYSE Arca.

JP Morgan unveils smart beta ETF on NYSE Arca

JP Morgan has launched its debut ETF, the JP Morgan Diversified Return Global Equity ETF (JPGE), on the NYSE Arca. (© Ben Hider/NYSE Euronext)

Defined by JP Morgan as ‘strategic beta’, a broad classification of next-generation index products also known as ‘smart beta’, the fund aims to deliver global developed market equity returns from four distinct return factors, along with reduced volatility by diversifying risks across regions and sectors.

It is linked to the FTSE Developed Diversified Factor Index, an index co-developed with London-based index provider FTSE Group.

The fund starts with the premise that traditional market-cap weighted and single-factor indices expose investors to excessive risk concentrations and a systematic bias toward overvalued securities. Therefore, the fund seeks to reallocate risk by weighting stocks according to four factors:  value, size, momentum and low volatility. Research has shown that these factors, when combined, may offer better risk-adjusted returns.

The fund is managed by an experienced JP Morgan team, with 18-year veteran Beltran Lastra as the lead portfolio manager. Lastra’s team currently manages $12 billion in AUM globally (as of April 30, 2014).

“We believe that JP Morgan has unique investment insights and global capabilities that will be attractive to ETF investors, and this product is an important first step in delivering those capabilities,” said Robert Deutsch, head of the ETF business for JP Morgan Asset Management.  “JP Morgan has grown to one of the largest global mutual fund managers and our ETF offering will be a natural extension our product line-up.”

“We believe that the custom index co-developed with FTSE sets this fund apart and reflects a next-generation-style ETF that will be attractive to US investors,” Deutsch said.

“We are delighted that JP Morgan has chosen FTSE as the index provider for launching their new ETF business in the United States,” said Jonathan Horton, president of FTSE North America. “Electing to work with FTSE to co-develop the methodology behind this ground-breaking multi-factor index series is a great example of combining JP Morgan’s research and investment process know-how with our index expertise creating customized solutions in partnership with clients.”

The fund has net annual operating expenses of 0.38%.

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