JPMorgan Launches Active Bond ETF in Europe

JPMorgan Asset Management has expanded its fixed-income range with the launch of an active global aggregate bond ETF, according to ETF Stream.

The JPMorgan Active Global Aggregate Bond UCITS ETF (JAGG) is listed on the London Stock Exchange, Deutsche Boerse, Six Swiss Exchange and Euronext Milan with a total expense ratio of 0.30%.

Benchmarked against the Bloomberg Global Aggregate Total Return USD Unhedged index, JAGG offers investors exposure to government, corporate, government-related, emerging-market and securitized bonds across 25 local currency markets.

The ETF uses JPMorgan Asset Management’s global aggregate bond strategy which first launched in 2009 and has amassed $11 billion in assets under management, as of the end of August.

According to JPMorgan, the benefit of an active strategy for fixed-income ETFs is that a manager can allocate toward higher-quality sectors.

Bond indexes are driven by the largest bond issuers, not necessarily the highest quality, meaning a passive strategy will drift toward these issuers “irrespective of the quality of their balance sheet”.

Being able to rotate away from those at risk of downgrades “can help preserve capital and returns in times of economic or market stress”, JPMorgan Asset Management said.

Managed by Myles Bradshaw, Iain Stealey and Linda Raggi, JAGG aims to outperform its benchmark over the long-term by selecting a bottom-up security selection and top-down sector allocation.

Sector Rotation

Furthermore, it will attempt to take advantage of value opportunities by rotating between sectors.

JAGG is labelled Article 8 under the Sustainable Finance Disclosure Regulation.

“Active fixed-income ETFs can capitalize on numerous factors that impact bond prices and move markets including economic and market cycles and central bank actions across both government and corporate securities,” Travis Spence, head of EMEA, or Europe, Middle East and Africa, distribution at JPMorgan Asset Management, said.

“An active strategy can adjust interest rate exposure and sector allocation through the cycle, enabling investors to own cheaper securities and underweight expensive ones while maintaining a stable bond beta,” he added.

He also said the strategy retains the key features of a core bond portfolio including “low volatility, limited drawdowns and no market bias.”

JAGG is Europe’s first active global aggregate bond ETF. The iShares Global Aggregate Bond UCITS ETF (AGGG) is Europe’s largest global aggregate bond ETF with $7.4 billion in assets under management.

It takes JPMorgan’s fixed-income offering to 18 ETFs, which includes nine active strategies.

In August, JPMorgan Asset Management launched the JPMorgan Global Research Enhanced Index Equity SRI Paris Aligned UCITS ETF (JSEG) and the JPMorgan US Research Enhanced Index Equity SRI Paris Aligned UCITS ETF (JSEU).

The issuer also recently converted its high-yield bond multi-factor ETF into an actively managed product, allowing it to manage the fund’s risk across markets, sectors and countries.