Daily ETF Watch: JP Morgan ETF Launches

June 17, 2014

J.P. Morgan today is launching its first ETF, a smart-beta fund called the JPMorgan Diversified Return Global Equity ETF (JPGE). The rollout begins the bank’s long-awaited foray into the world of exchange-traded funds that’s widely expected to pump life into actively managed ETF portfolio management.

The bank made clear in an interview with ETF Report that its presence in the world of ETFs will build on its reputation as an active asset manager. It included in its definition of active management funds like the one that is launching today. JPGE is an index strategy, yet has a quasi-active tilt designed to outperform market-cap-weighted index funds.

The company’s first fund will track the FTSE Developed Diversified Factor Index, which comprises equity securities from developed global markets selected to represent a diversified set of factor characteristics, including relative valuation, price momentum, low volatility and specific market capitalization, according to the filing.

The launch comes at a time when many analysts reckon that the popularity of actively managed ETFs is possibly on the brink of growing dramatically. At the very least, there’s no doubt that J.P. Morgan has the marketing muscle to promote its lineup of funds as aggressively as any firm already established as an ETF issuer.

That marketing power alone should raise the profile of active ETFs. The vast majority of ETFs and ETF assets under management are in indexed strategies, though so-called smart-beta funds like the one J.P. Morgan is bringing to market today have been gaining in popularity in the past few years.

JPGE’s annual expense ratio will be 0.38 percent, or $38 for every $10,000 invested, according to a regulatory filing.

The fund launch was announced via a NYSE communique.

FTSE Index Launch

In connection with the launch of J.P. Morgan’s first ETF, FTSE Group has rolled out a new FTSE Global Diversified Factor Index Series, which it co-developed with J.P. Morgan. The index will serve as the underlying benchmark for the issuer’s first-ever ETF.

The J.P. Morgan Diversified Return Global Equity ETF (JPGE) will track the FTSE Developed Diversified Factor Index, a global developed-market equity index that measures the performance of securities from developed markets spanning 40 regional industries.

Russell Indexes Reconstitution

Russell Investments has posted its official preliminary lists of companies set to join or leave the Russell Global Index, Russell 3000Index and Russell Microcap Index when the annual reconstitution for its U.S. equity indexes concludes on June 27.

Each June, Russell completely realigns its family of global equity indexes to reflect market changes in the past year.

This year’s rebalance will impact approximately $5.2 trillion in assets benchmarked to and nearly $800 billion in assets invested in institutional and retail investment products based on the Russell Indexes, according to Russell.

The largest three companies in the Russell U.S. Indexes in terms of total market capitalization at this year’s reconstitution are Apple ($545.3 billion), ExxonMobil ($431.7 billion) and Google ($385.6 billion).

The largest company in the Russell Global ex-U.S. Index is now Netherlands-based Royal Dutch Shell PLC, with a total market cap of $254.5 billion, replacing PetroChina Co.

Of the 846 new additions to the Russell Global Index at reconstitution (41 of which are IPOs), the U.S. gained the largest number of new companies through the reconstitution process (148), followed by Taiwan (68), China (67), Japan (59) and the United Kingdom (56).

The U.S. led all Russell Global Index country constituents in IPO additions at reconstitution with 27, followed by the U.K. (7) and China (5). Also, as previously announced on March 3, Egypt, formerly classified as an emerging market, will enter the Russell Frontier Index effective June 27.

 

 

 

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