Daily ETF Watch: JPM Adds Hedged Funds

April 04, 2016

JPMorgan has rolled out currency-hedged versions of two of its existing multifactor ETFs on the NYSE Arca. The JPMorgan Diversified Return International Currency Hedged ETF (JPIH) hedges away the currency risk of the $188 million JPMorgan Diversified Return International Equity ETF (JPIN | D-51), while the JPMorgan Diversified Return Europe Currency Hedged ETF (JPEH) does the same for the portfolio of the $30 million JPMorgan Diversified Return Europe Equity (JPEU).

The currency hedge costs the investor 0.06% on both funds. The unhedged JPIN and JPEU come with net expense ratios of 0.43%, while JPIH and JPEH both cost 0.49%.

Multifactor smart-beta ETFs and currency-hedged ETFs have been trends in the ETF space for the past few years, with JPEH and JPIH just the latest funds to combine both trends into individual funds.

Elevation Debuts Combo ETF

Newcomer Elevation ETF Trust has rolled out a fund that combines three popular themes into one. The Dhandho Junoon ETF (JUNE) is advised by ALPS Advisors, and its 100-stock index targets companies that engage in significant share repurchases have just undergone a spinoff or are held by a value hedge fund manager.

The share buyback companies in the index must have repurchased up to 26% of their shares outstanding over the preceding year and have at least $1 billion in market capitalization. The index selects the top 33 companies based on the percentage of their buybacks, the prospectus said.

The 25-33 spinoff stocks in the index must have been spun off at least a year ago but no more than seven years ago. They also must have a market capitalization greater than $500 million. The index selects the companies in this category based on the recency of their spinoffs, targeting the newest ones.

Finally, the value manager holdings include 34 companies that have been selected for being the most widely held stocks in a group of 22 selected hedge funds. The hedge funds in the universe must have at least five years of 13-F filings as well as meet size and performance requirements.

Constituents are equally weighted within their respective categories, with the share buybacks category receiving a weight of 75% in the broad index. Spinoffs are weighted at just 5% in the broad index, while the hedge fund holdings are weighted at 20%.

JUNE comes with an expense ratio of 0.75%.

3 Highland Funds To Close

Highland Capital Management will shut down three of its four ETFs later this month. The following ETFs will see their last day of trading on April 11:

  • Highland HFR Equity Hedge ETF (HHDG)
  • Highland HFR Global ETF (HHFR)
  • Highland HFR Event-Driven ETF (DRVN)

The three funds all launched in June 2015 and have been trading less than a year. At the time of the closure announcement, none of the funds had more than $3 million in assets under management.

Once it shuts down its line of hedge-fund replication ETFs, Highland will have just one ETF trading. The Highland/iBoxx Senior Loan ETF (SNLN | C) has $293 million in assets and launched in late 2012.

Roughly 20 funds have announced closures so far in 2016.

Contact Heather Bell at [email protected].

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