JP Morgan Launching Managed Futures ETF

December 07, 2017

J.P. Morgan is rolling out another alternatives strategy in an ETF wrapper today. The JPMorgan Managed Futures Strategy ETF (JPMF) will be actively managed and seek to provide exposure—directly or via derivatives—to the performance of equities, debt securities, commodities and currencies.

The fund comes with an expense ratio of 0.59% and lists on the NYSE Arca.

As an alternatives strategy, managed futures approaches are intended to be a source of uncorrelated returns and offer distinct risk and return profiles. JPMF’s strategy will focus on gaining exposure to individual return factors, defined in the prospectus as momentum and carry trades.

To capture momentum, the fund will take long and short positions via futures or forward contracts across the fund’s targeted asset classes. With regard to carry trades, the fund will look to exploit differences in interest rate yields in the fixed-income space and the prices of futures contracts for commodities, while in the currencies space, it will invest in higher-yielding currencies while shorting those that have lower yields, according to the fund documentation.

The prospectus also notes the fund will access the commodity markets through a Cayman Islands subsidiary that can represent up to one-fifth of JPMF’s total assets.

Primary Competitor

Although there are a handful of managed futures ETFs on the market, the largest by far is the WisdomTree Managed Futures Strategy Fund (WDTI), which rolled out in early 2011 and has $165 million in assets under management. Interestingly, WDTI was originally based on an index, but switched to actively managed in 2016. The fund has an expense ratio of 0.65%, higher than that of JPMF.

J.P. Morgan has been staking out the alternatives space in ETFs lately. It started with the launch of the JPMorgan Diversified Alternatives ETF (JPHF) in September 2016. The fund has since accumulated $156 million in assets, and comes with an expense ratio of 0.85%. And just about a week ago, the firm rolled out the JPMorgan Event Driven ETF (JPED), also with an expense ratio of 0.85%. 

Alternatives represent a very small portion of the overall ETF industry, with only 63 of nearly 2,100 ETFs falling into that category. Compare that to equities, with more than 1,400 ETFs, and the asset class starts to seem very welcoming for companies looking to firm up their ETF foothold, especially ones with extensive experience offering such strategies in other wrappers.

Contact Heather Bell at [email protected]

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