JPMorgan Launches US, Global Paris-Aligned Active ETFs

JPMorgan Launches US, Global Paris-Aligned Active ETFs

The two new funds expand the group’s $7 billion Research Enhanced Index range.

Reviewed by: Lisa Barr
Edited by: Staff

LONDON – JP Morgan Asset Management (JPMAM) has unveiled two Paris-Aligned Benchmark (PAB) ETFs tracking US and global equities, ETF Stream can reveal.

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) are listed on the London Stock Exchange, Deutsche Boerse, SIX Swiss Exchange and Borsa Italiana with total expense ratios (TERs) of 0.25% and 0.20%, respectively.

The two new ETFs expand the group’s $7bn Research Enhanced Index (REI) equity range which now houses 10 ETFs.

JPMAM’s REI range employs an active strategy in managing the active ETFs, seeking to return alpha by leveraging the group’s fundamental proprietary research to take “small” overweight and underweight positions in stocks relative to the index.

JSEG and JSEU will use the MSCI World and the MSCI USA as a starting point, before filtering using ESG and PAB criteria, and will hold roughly 350 and 200 holdings, respectively.

The US giant said a tracking error of 0.75-1.25% is to be expected, which could become “less over time”.

JPMAM already offers global and US equity exposures via its REI range in the form of the $3.2bn JPMorgan US Research Enhanced Index Equity ESG UCITS ETF (JREU) and the $2.4bn JPMorgan Global Research Enhanced Index Equity ESG UCITS ETF (JREG).

The New Active ETFs Exclude Controversial Sectors

However, the two new active ETFs offer a “best-in-class” approach to sustainable investing, complying with PAB criteria and are classified as Article 9 under the Sustainable Finance Disclosure Regulation (SFDR).

Under PAB requirements, the ETFs must generate 50% less greenhouse gas intensity than the parent universe as well as decarbonising by 7% on average year-on-year.

The ETFs will also exclude controversial sectors and companies including fossil fuels, gambling, tobacco and companies considered as UN Global Compact violators.

Travis Spence, head of ETF distribution EMEA at JPMAM, said: “Clients are increasingly seeking solutions to meet their sustainability objectives, and JSEG and JSEU are designed to deliver a dual outcome: to outperform a custom universe of sustainable companies by using our REI investment process, while achieving a decarbonisation objective in line with the Paris Agreement.

“These new ETFs can be used as building blocks for clients who want to implement a view on either global equity or US equity, as well as serving as a complement to a client’s existing sustainable ETF investments for greater portfolio diversification.”

It means JPMAM now has five ‘dark green’ Article 9 ETFs following its first PAB launch. In March, the firm launched the JPMorgan Green Social Sustainable Bond UCITS ETF (JGRN) and in December it unveiled the JPMorgan Carbon Transition China Equity CTB UCITS ETF (JCCT).

JPMAM is one of five issuers to classify their PAB and Carbon Transition Benchmark (CTB) ETFs as Article 9 following a wave of reclassifications to Article 8 earlier this year.

Since then, asset managers have been cautious in reclassifying their PAB and CTB ETFs as Article 9 despite clarifications stating they would qualify from the European Commission in April.

[This article originally appeared on ETF Stream]

Theo Andrew joined ETF Stream as a senior reporter in September 2021. He has over four years of investment writing experience spanning pensions and retail investments, most recently at Citywire, where he was a senior reporter covering environmental, social and governance investing.