JP Morgan unveils value-driven active bond ETF

Oct 16th, 2023 | By | Category: Fixed Income

JP Morgan Asset Management has launched a new actively managed fixed income ETF in the US that seeks to capture alpha across investment-grade bond markets by utilizing a bottom-up, value-oriented approach.

Bryon Lake, Global Head of ETF Solutions, JP Morgan Asset Management.

Bryon Lake, Global Head of ETF Solutions at JP Morgan Asset Management.

The JPMorgan Active Bond ETF (JBND US) has been listed on NYSE Arca with an expense ratio of 0.30%.

Commenting on the new listing, Bryon Lake, Global Head of ETF Solutions at JP Morgan Asset Management, said: “Listening to investors, they are looking for active fixed income solutions to navigate a tricky fixed income environment. Being able to deliver our strong Core Bond investment team capabilities through the ETF wrapper is an excellent innovation for our clients. JBND is a flagship addition to our active ETF capabilities.”

Investment approach

The ETF leverages the expertise of JP Morgan Asset Management’s Global Fixed Income, Currency & Commodities (GFICC) portfolio managers, a seasoned team with over 70 years of collective experience, in a bid to outperform the Bloomberg US Aggregate Bond Index over a three to five-year market cycle.

The Bloomberg US Aggregate Bond Index is a broad-based benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. It consists of more than 10,000 fixed income securities across Treasury, government-related, corporate, mortgage-backed, and asset-backed sectors.

JBND targets a total return by investing broadly across all eligible fixed income sectors while tilting portfolio weights, compared to the benchmark, in favour of intermediate-term securities and securitized debt.

Specifically, securitized sectors (mortgage-backed and asset-backed securities) account for a minimum of 20% above these sectors’ representation in the benchmark. Conversely, allocations to corporate bonds will be capped at 10% below the sector’s benchmark representation.

Furthermore, the fund aims to maintain an average weighted maturity within 20% of the benchmark as well as a dollar-weighted average quality of A- or higher.

In terms of risk management, JBND employs a team of dedicated credit analysts and utilizes derivatives to manage various portfolio exposures. For liquidity and defensive purposes, the fund may also invest a portion or all of its assets in cash and cash equivalents.

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