JPMorgan Set To Enter Smart Beta ETFs

JPMorganJoe Mabel [CC BY-SA 3.0], via Wikimedia Commons

JPMorgan Global Equity ETF outlined its plans to enter the booming ‘smart beta’ ETF business, according to its regulatory filing.

JPMorgan Set To Enter Smart Beta ETFs

Brendan Conway of Barrons reports that despite the general feeling that the exchange-traded fund market is over-crowded, JPMorgan Asset Management announced its intention to enter the new ETF.

Index and expense details not revealed

In its regulatory filing with the Securities and Exchange Commission, JPMorgan Asset Management has neither disclosed the index its ETF would track nor an expense ratio or other key details.

Smart Beta, a more refined index-style investment strategy, is becoming more popular to some investors because of low interest or market returns. It allows investors to gain from alleged systemic anomalies, such as the super efficiency and low volatile stocks.

Recently in a white paper on the adoption and implementation of smart beta strategies—which have become increasingly popular over the past year as investors seek out tax and cost-efficient returns—Towers Watson & Co concluded that smart beta works best when implemented across a broad investment universe.

Recently, Nicholas A. Vardy of Marketwatch suggested The Guggenheim S&P SmallCap 600 Equal Weight ETF (NYSEARCA:EWSM), PowerShares FTSE RAFI US 1000 (ETF) (NYSEARCA:PRF) and The First Trust Capital Strength ETF as three smart-beta exchange traded funds that he invests for his clients.

JPMorgan’s ETF Details

In its regulatory filing, JPMorgan Chase & Co (NYSE:JPM) indicated its Global Equity ETF seeks investment results that closely correspond to the performance of an underlying index. The fund would invest at least 80 percent of its total assets in securities that comprise its benchmark index.

However, JPMorgan Chase & Co (NYSE:JPM) indicated that the underlying index would comprise of equity securities from developed global markets based on a multifaceted investment selection process.

This would imply the fund won’t follow a plain-vanilla market-weighted stock index. It would instead screen for certain desired investment characteristics as noted below.

JPMorgan indicated in the regulatory filing that the fund’s equity securities in the underlying index would comprise of large-cap and mid-cap equity securities of companies from developed countries, including common stock, preferred stock and real estate investment trusts.

By using a ‘passive’ or indexing investment approach, the fund would attempt to closely correspond to the investment performance of the underlying index. However, it is expected that over time, the correlation between the Fund’s performance before fees and expenses and that of the underlying index will be 95% or better.

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About the Author

Mani is a Senior Financial Consultant. He has worked in Senior Management role in large banking, financial and information technology organizations. He has provided solutions for major banking and securities firms across the globe in the area of retail, corporate and investment banking. He holds MBA (Finance) and Professional Management Accounting Qualifications. His hobbies are tracking global financial developments and watching sports

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