Industry Updates

JP Morgan AM converts high-yield smart beta strategy to an active ETF

JGHY will aim to achieve excess returns over a new benchmark

Theo Andrew

travis2 article-image (1)

JP Morgan Asset Management (JPMAM) is converting its high yield bond multi-factor ETF into an actively-managed product.

As of 23 August, the $170m JPMorgan High Yield Corporate Bond Multi-Factor UCITS ETF (JGHY) )no longer tracks the JP Morgan Asset Management Global High Yield Multi-Factor index and now aims to outperform the ICE BofA Global High Yield index.

In a note to investors, JPMAM said the new “actively managed systematic strategy” will allow the investment managers to manage the ETF’s risk across markets, sectors and countries and respond to “liquidity and market events outside of the monthly index rebalance schedule”.

It added the investment strategy of the ETF would remain the same. JGHY invests in a diversified pool of global, below investment grade, fixed rate corporate debt securities with a multi-factor approach.

In addition to becoming an active ETF, JGHY will be classified as Article 8 under the Sustainable Finance Disclosure Regulation (SFDR).

JGHY includes ESG analysis on at least 75% of its non-investment grade and emerging market securities while at least 51% of the ETF’s assets will be invested in companies with good ESG practices, measured through its ESG scoring methodology.

Travis Spence (pictured), head of EMEA ETF distribution at JPMAM, said: “In addition to incorporating JPMAM’s sustainable framework to offer clients an SFDR Article 8 solution, we believe JGHY’s new investment objective will better demonstrate how the investment team’s continued systematic multi-factor approach can add flexibility to respond to changing issuer fundamentals, liquidity and market events outside of a monthly index rebalance schedule.”

Active ETFs have been tipped to be the next battleground in Europe after a recent global investor survey by Brown Brothers Harriman found 76% of European investors plan to increase or maintain their exposure to the strategies.

Last month, JPMAM launched two Paris-Aligned Benchmark (PAB) ETFs tracking US and global equities, 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).

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