Source unveils third JP Morgan Macro Hedge volatility ETF

Aug 11th, 2014 | By | Category: Alternatives / Multi-Asset

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Source, a leading European provider of exchange-traded funds, has launched its third volatility ETF in collaboration with investment bank JP Morgan.

Source unveils third JP Morgan Macro Hedge volatility ETF

Source has unveiled its third volatility ETF in partnership with investment banking giant JP Morgan.

Listed on the London Stock Exchange, the Source JP Morgan Macro Hedge Dual Vega Target 4% TR UCITS ETF (MHVT) aims to provide cost-effective exposure to volatility and is designed for sophisticated investors.

Volatility is an attractive hedge in times of macro-economic stress – it tends to spike when equities and other risky assets crash. However, volatility exposure can be costly over the long term. JP Morgan’s Macro Hedge indices aim to capture spikes in volatility and, when markets are calmer, to generate a positive return.

This latest addition to the Source/JP Morgan Macro Hedge series takes exposure to US equity volatility, switching from long to long/short exposure depending on market conditions. During times of market stress, it adds long exposure to European equity volatility.

The ETF’s index, the JP Morgan Macro Hedge Dual Vega Target 4% TR Index, also uses a “vega target” mechanism, adjusting its leverage between 0% and 100% depending on the absolute level of volatility.

“This is a new feature for the JP Morgan Macro Hedge index series,” said Rui Fernandes, Head of Equity and Funds Derivatives Structuring at JP Morgan. “Investors need a hedging instrument that will capture the big spikes in volatility but doesn’t see large gains and losses when market conditions are more normal. By reducing exposure in these circumstances, we aim to generate more stable performance.”

“Exposure to alternative assets such as volatility continues to evolve,” added Source CEO Ted Hood. “Source has become a market leader in this segment, by offering efficient, transparent and innovative products.”

The ETF trades in USD and comes with a management fee of 0.25% per annum. An index fee of 0.75% per annum, plus notional costs of implementation, is included in the index calculation.

It is registered for sale in Austria, Finland, France, Germany, Ireland, Italy (for institutional investors only), Luxembourg, the Netherlands, Norway (for institutional investors only), Switzerland (for institutional investors only), Sweden and the UK.

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