When it comes to ETFs, fixed income is hot. And JPMorgan Asset Management is pouring a little more gas on the fire.
JPMorgan Chase’s investment arm is launching two new ETFs Friday. One deploys a factor lens for a twist on the classic Bloomberg Barclays U.S. Aggregate Bond Index (AGG) and the other focuses exclusively on investment-grade credit. Both are actively managed.
“We’re continuing to expand our opportunity set within fixed income,” said Jillian DelSignore, head of ETF distribution at JPMorgan Asset Management. “We don’t have an AGG product and we don’t have investment grade. This is continuing to round out our suite of fixed income to help provide building blocks for our clients who want to use those.”
JPMorgan Asset Management, which oversees $1.8 trillion, runs 31 ETFs with $15 billion in assets, $5 billion of which are in fixed income funds. Its JPMorgan U.S. Aggregate Bond ETF, which will trade under the ticker JAGG, will use a quantitative spin and is expected to be viewed as a core fixed-income holding. Starting with the AGG index, the fund will strip out any private-issuer debt and then determine top debt issuers based on characteristics including value, quality and momentum.
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Investors have grown cautious following October’s rout in global markets.
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The firm has parted ways with its CEO Alex Friedman and launched a restructuring plan.
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Investors in higher-beta credit funds are shunning longer-duration debt following recent equity turmoil.
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“Those three factors together in doing their respective work, if you will, can actually lead to that smoother ride which is what we’re trying to achieve at the end of the day — better downside risk characteristics in volatile markets,” DelSignore said.
The second product launching is the JPMorgan Corporate Bond Research Enhanced ETF, or JIGB, which can offer a compliment to the firm’s high-yield ETF (JPHY). Using credit research, the fund’s managers will select the sectors and securities to include.
Factors including low interest rates may have contributed to success.
Fixed income is one area of the fund landscape where active management has gained traction. A quarter of inflows for U.S.-listed debt ETFs this year have been into active products, according to data compiled by Bloomberg. For equity ETFs, that figure is less than 2%.
To JPMorgan, it’s clear where the appetite is.
“Particularly in a time like right now where we’re in the face of rising rates, it gets very challenging,” DelSignore said. “Clients are telling us they really value active management within fixed income.”
