JPMAM launches fixed income multi-factor ETF
JP Morgan Asset Management (JPMAM) has launched its first fixed income multi-factor UCITS ETF in Europe, the JPMorgan Global High Yield Corporate Bond Multi-Factor UCITS ETF (JGHY) which is now available on the London Stock Exchange, Deutsche Börse Xetra and the Borsa Italiana.
JGHY is designed to track the JP Morgan Asset Management Global High Yield Multi-Factor Index, a new rules-based index created by JPMAM’s self-indexing unit based on research from the Quantitative Beta Solutions (QBS) team. The index selects issuers based on metrics like the quality of their balance sheet, current valuations, and recent price momentum, investing in a sub-set of the broader starting universe of global high yield bonds.
The JPMAM index provides exposure to global corporate high yield markets, across developed and emerging markets, but will emphasise exposure to high yield securities which exhibit strong value, quality and momentum characteristics. Investing in a combination of securities with these characteristics intends to provide investors with a yield comparable to traditional debt-weighted bond indices, the firm writes. The multi-factor approach also gives JGHY the potential to improve diversification, lower volatility and reduce exposure to the unrewarded risks that are inherent in traditional debt-weighted bond indices. JGHY will have a TER of 35 basis points.
Yazann Romahi, PhD, Chief Investment Officer of Quantitative Beta Solutions at JPMAM, says: “We believe we’re reaching a tipping point for factor investing in fixed income. The investment industry has, for the most part, tended to gravitate towards factor investing within cash equity markets and long-short alternative futures strategies where data has been more readily available. Based on our research, factors like value, quality and momentum are asset class agnostic and very much alive and present in credit markets. Bringing JGHY to market is evidence of that.”
Olivier Paquier, Head of ETF Distribution EMEA, says: “In response to the growth of interest in fixed income factor investing and the ongoing demand for fixed income ETFs, we’ve come up with a solution which offers liquid exposure to the yield and diversification benefits of high yield markets, along with the potential for more attractive risk-adjusted returns. JGHY seeks to offer investors thoughtful exposure to the yield and return potential of global high yield, following several years of innovative research by our QBS team.”