Best New Alternatives ETF
WINNER: JPMorgan Managed Futures ETF (JPMF)
Few ETFs have offered truly compelling takes on managed futures, a multi-asset-class strategy long used by institutional investors; that is, until the J.P. Morgan Managed Futures ETF (JPMF).
JPMF isn’t the only—or even the first—managed futures ETF: WisdomTree, First Trust and ProShares all have their own products. But JPMF is a better mousetrap in a few key ways.
To start, JPMF offers exposure to the most assets of any managed futures ETF: It can hold derivatives on equities, bonds, commodities and currencies. Other managed futures ETFs omit one or more of these asset classes.
JPMF’s portfolio managers also have fewer restrictions in how they may implement these contracts. Within each asset class, JPMF may take positions in contracts of any expiry or segment to create net-long, net-short or neutral exposure.
Best of all, JPMF is the cheapest-in-class: Its expense ratio clocks in at 0.59%, compared with 0.65% for WisdomTree’s offering, the next cheapest product.
As an active fund, however, JPMF’s success ultimately hinges on its portfolio managers and their process. J.P. Morgan, which currently manages $120 billion in alternatives investments, has a long pedigree in alternatives; and JPMF’s portfolio managers have strong credentials in the space.
Best New Asset Allocation ETF
WINNER: WisdomTree Balanced Income Fund (WBAL)
Asset allocation ETFs are typically multi-asset-class portfolios that offer in one ticker exposure to various assets. Among the newcomers in this segment in 2017, the WisdomTree Balanced Income Fund (WBAL) stood out.
WBAL is an ETF of ETFs designed to offer a 60/40 mix of global equities and fixed income. The equity part of the portfolio comprises developed and emerging market ETFs selected for higher yield, while the fixed-income allocation is diversified across sectors and credit, with a focus on duration. Ultimately, the mix, which tracks a proprietary WisdomTree index and is rebalanced annually, looks to capture income-generating assets globally in one ticker.
The fund mainly invests in WisdomTree’s own ETFs, but can include other firms’ funds when necessary. At launch, WBAL’s fixed-income portfolio included two iShares ETFs covering mortgage-backed securities and long-term Treasuries, since WisdomTree does not offer products in those spaces.
The issuer has set up WBAL as an alternative to existing balanced mutual funds that are actively managed. Those funds usually underperform their benchmarks, so investors get subpar performance while paying active fees. WisdomTree has sought to address that problem by offering an index-based multi-asset product at the lower price point fans of passive management have come to expect.
WBAL is still pretty new, having come to market at the end of December 2017, but it’s slowly making inroads, amassing some $2.5 million in assets.