Active management returns to action.
JP Morgan Asset Management recently launched two new actively managed exchange-traded funds, a sign that issuers are looking to take advantage of more out-of-the-box strategies as the market faces unprecedented volatility.
Launched on May 21, the JPMorgan Equity Premium Income (JEPI) ETF and the JPMorgan International Growth (JIG) ETF represent ways to “deliver the best of JP Morgan through technology, the ETF’s profit-rich vehicle”, Bryon Lake, the head of ETF distribution for the Americas at JP Morgan Asset Management, told CNBC’s “ETF Edge” on Monday.
JEPI is up about 2% since its launch date, while JIG has shot up nearly 12.5%. Both ETFs are actively managed and transparent, which means they disclose their holdings on a daily basis.
JEPI “is an option overlay strategy, hopefully dampening investor income in these markets while managing their volatility downward,” Lake said.
The strategy depends on the sale of options and the purchase of large-cap stocks in the United States, “seeking to deliver a monthly revenue stream of associated option premiums and stock dividends,” says the JEPI website. JEPI has an expense ratio of 0.35%.
JIG is more focused on growth in developed and emerging international markets, Lake said. The ETF has 58 shares and has an expense ratio of 0.55%. Its top five properties in order of weight are Alibaba, Tencent, Nestle, Taiwan Semiconductor and Roche.
“This goes back to putting the investor at the center of the equation and what investors are trying to accomplish in their portfolios,” Lake said. “We have seen persistent flows to liabilities for the past decade or so, backed by strong markets, but we have seen extremely strong flows to assets, bond assets in particular. At JP Morgan, we have an ultrashort strategy, JPST, which is also It has benefited from that, offering a great result for investors. And now, we are starting to offer capital strategies through the ETF package. “
Todd Rosenbluth, senior director of mutual fund research and ETFs at CFRA, said investors appear to be embracing the idea that active managers could outperform passive funds.
“We certainly believe that there is an active management demand in the ETF wrapper,” he said, noting that Ark Invest, which offers five transparent and actively managed ETFs, has had the 10th highest number of entries so far in 2020, ” ahead of some of the much bigger and more established asset managers. “
Add issuers that launch actively managed semi-transparent ETFs, which allow managers to disclose their holdings quarterly rather than daily, and it is becoming clear that “there is demand” for these products, Rosenbluth said.
“There are people who want to outperform the market in general, want the benefits of fiscal efficiency and low-cost structure with ETFs,” he said. “This is not going to appeal to someone who is excited that they got a three basis point product from iShares and Vanguard that follow the S&P 500. But for people who want to try and outdo, … some of the tried and tested strategies now exist. in an ETF container. “
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