Today J.P. Morgan is rolling out its second ETF, six months after the launch of its first one. A smart-beta ETF targeting emerging markets, it is not the only fund to have hit the exchanges recently. Yesterday, Direxion and ETF Series Solutions both launched some ETFs of their own, including four leveraged funds and an income-oriented fund.
All of the newly launched funds are listed on the NYSE Arca exchange.
JP Morgan’s EM ETF
The JPMorgan Diversified Return Emerging Markets Equity ETF (JPEM) has a similar multilayered methodology to that of the JPMorgan Diversified Return Global Equity ETF (JPGE | F-49). Like JPGE, according to its prospectus, JPEM aims for diversification across regions and industries, and it selects its components based on their exposure to the momentum, value and quality factors.
The fund sits squarely in the smart-beta wheelhouse, which is an area of major focus for ETF providers and investors these days. Yet despite J.P. Morgan’s massive brand power and its smart-beta methodology, JPGE has only gathered about $43 million in six months of trading, so JPEM has an uncertain future. However, one thing in its favor is the fact that J.P. Morgan has the resources to keep the funds open past their three-year mark, which is the level of trading history required by many investors.
Still, there are any number of funds that accumulate a healthy amount of assets in a short period of time after their launches. The complex methodology of the J.P. Morgan funds could be holding them back given its three-pronged approach—diversifying across industries; diversifying across regions; and selecting components based on three factors. Investors may want to see how much those features add to—or detract from—returns.
Certainly, JPEM’s expense ratio of 0.45 percent is competitive. The well-established PowerShares FTSE RAFI Emerging Markets ETF (PXH | F-46) charges 49 basis points.
A ‘Master Income’ Fund
ETF Series Solutions on Jan. 7 rolled out a fund subadvised by Penserra Capital Management that tracks the TFMS HIPS 300 Index created by Trust & Fiduciary Management Services.
The Master Income ETF (HIPS) invests in, as its ticker and index name imply, HIPS—or high-income pass-through securities. That category includes a variety of REIT types, as well as closed-end funds, master limited partnerships and business development companies. It comes with an expense ratio of 87 basis points.
With investors hungry for income in the current low-rate environment, HIPS could find an eager audience.
Direxion Adds To Leveraged Lineup
Direxion launched four funds on Jan. 7; they are the first funds in the ETF provider’s lineup to offer 1.25x exposure to their underlying indexes. Direxion has referred to them as “lightly leveraged,” which could appeal to investors looking for a little less risk and volatility than in a 2x or 3x fund but still want some leverage.
The four funds cover some very basic asset classes—large- and small-cap domestic equities, and developed- and emerging market equities. Each comes with an expense ratio of 0.52 percent, which is markedly cheaper than the 0.95 percent charged by most of Direxion’s leveraged ETFs. The funds are as follows:
- Direxion Daily S&P 500 Bull 1.25X Shares (LLSP)
- Direxion Daily Small Cap Bull 1.25X Shares (LLSC)
- Direxion Daily FTSE Emerging Markets Bull 1.25X Shares (LLEM)
- Direxion Daily FTSE Developed Markets Bull 1.25X Shares (LLDM)