JP Morgan Debuts Active Bond ETFs

December 17, 2018

On Friday, J.P. Morgan rolled out two new actively managed ETFs. The JPMorgan Corporate Bond Research Enhanced ETF (JIGB) and JPMorgan U.S. Aggregate Bond ETF (JAGG) both select their components from major bond benchmarks.

JAGG comes with an expense ratio of 0.07%, while JIGB charges 0.14%. Both list on the NYSE Arca.

JAGG essentially evaluates issuers based on quality, value and momentum factors using what the prospectus describes as a “systematic, multi-factor screening process.” The fund primarily selects its holdings from the Bloomberg Barclays U.S. Aggregate Index and seeks to match that index’s sector distribution and duration.

JIGB, on the other hand, is benchmarked to the Bloomberg Barclays U.S. Corporate Bond Index, aiming to offer a better risk/return profile relative to the index with higher returns but a similar level of risk.

The “Research Enhanced” part of the fund’s name comes into play as the managers overweight bonds from issuers with better credit scores from J.P. Morgan’s credit research operations, while excluding or underweighting those with poor credit scores.

Said scores are determined by fundamental credit metrics, the issuer’s competitive environment and the company’s risks, among other criteria. JIGB’s methodology indicates the fund will maintain a duration that falls within one year of the benchmark index.

The funds are notable for their low cost despite their active management. JAGG costs just 0.02% more than the largest fund in the aggregate space, the $55 billion iShares Core U.S. Aggregate Bond ETF (AGG), while JIGB is actually cheaper than the $30 billion iShares iBoxx USD Investment Grade Corporate Bond ETF (LQD), which charges 0.15%.

Contact Heather Bell at [email protected]

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