J.P. Morgan Asset Management (JPMAM) will launch three new fixed income ETFs in Europe, including an innovative Emerging Markets Debt strategy.
JPMorgan ETFs (Ireland) Icav – USD Emerging Markets Sovereign Bond Ucits ETF (JPMB), JPMorgan ETFs (Ireland) Icav – USD Ultra Short Income ETF (JPST), and JPMorgan ETFs (Ireland) Icav – BetaBuilders Eur Govt Bond 1-3yr Ucits ETF (JE13) will list on the London Stock Exchange on the 22 February 2018. Further European listings will follow in due course.
Bryon Lake, international head of ETFs at JPMAM said: “We’re focused on launching products which will serve specific investor needs. Sophisticated investors, across Europe, are saying they want to see innovation in the fixed income arena whether that be our beta builder, smart beta and/or active capabilities.”
“Fixed income ETFs continue to be amongst the fastest growing areas of the ETF industry, a momentum which we expect to continue as these products mature and evolve. Fixed income ETFs offer lower-cost, convenience, transparency and intra-day access and can be used to help build more robust portfolios and solve for a variety of investment needs,” concluded Lake.
JPMorgan USD Emerging Markets Sovereign Bond ETF
JPMB will track the investment results of a newly created bond index, JPM Emerging Market Risk-Aware Bond index, created by JPMAM’s Quantitative Beta Strategies team and published by JPMorgan’s investment bank. Derived from the long-established flagship JPMorgan EMBI Global Diversified Index, JPMB provides exposure to USD denominated sovereign debt across emerging markets.
Niels Schuehle and Eric Isenberg, co-portfolio managers of the JP Morgan USD Emerging Markets Sovereign Bond ETF, said: “Investors who embraced the smart beta approach to investing in equities are increasingly aware of the inadequacies of their traditional fixed income benchmarks. We expect alternatively weighted fixed income strategies to be a significant growth area for bond investors.”
The index construction seeks to address three key considerations of investors in emerging market sovereign debt. Namely investability, tail/event risk, and accessing the credit component of emerging market debt. We seek to reduce risk by screening out countries that may be at greater risk of default.
The index is then weighted to provide clients with more consistent risk exposure to EM credit over time. The result is a product that provides investors improved access to the credit component of the asset class without exposure to the riskiest countries.
JPMorgan USD Ultra Short Income Ucits ETF
JPST will seek to provide diversified exposure to very short maturity bonds and debt instruments across investment-grade corporate bonds and government debt. The strategy will take a conservative approach in order to mitigate volatility and limit duration exposure. The ETF will seek to target portfolio duration of less than one year. While the strategy can invest across sectors, the 5-strong investment team – led by David Martucci, global head of the J.P. Morgan Global Liquidity Managed Reserves team and portfolio manager – will primarily focus on corporate and investment grade credit.
JPMorgan BetaBuilders Eur Govt Bond 1-3yr Ucits ETF
JE13, also designed by JPMAM’s Quantitative Beta Strategies team, aims to track the J.P. Morgan EMU Government Bond 1-3 Year Index and will have a TER of up to 10 basis points. “For those investors in search of a defensive play and portfolio diversifier, who may be increasingly concerned about an interest rate rise in an environment of potentially rising rates, JPMorgan BetaBuilders Eur Govt Bond 1-3yr Ucits ETF offers a cost-efficient, liquid and transparent way to access relatively short-duration fixed income,” said Massimo Greco, head of European Funds at JPMAM.