The exchange traded funds partnership between J.P. Morgan Chase (NYSE: JPM), the venerable Wall Street bank, and Global X, the ETF issuer known for its lineup of unique income and international funds went live Thursday with the debut of the Global X | JPMorgan Efficiente Index ETF (NYSEArca: EFFE) and the Global X | JPMorgan US Sector Rotator Index ETF (NYSEArca: SCTO).
As was expected, the Global X | JPMorgan US Sector Rotator Index ETF is taking an “ETF of ETFs” approach in that each of its three holdings are other ETFs. The new fund allocates almost 61% of its weight to the iShares Barclays 1-3 Year Treasury Bond Fund (NYSEArca: SHY) with the remainder of the portfolio allocated to the Consumer Staples Select Sector SPDR (NYSEArca: XLP) and the Health Care Select Sector SPDR (NYSEArca: XLV), according to Global X data.
SCTO’s index “rebalances monthly to reflect changing market conditions by tracking the performance of a portfolio of one to five ETFs selected out of a pool of ten U.S. sector ETFs and a U.S. treasury bond ETF. The sectors represented by the U.S. sector ETFs are: consumer discretionary, consumer staples, energy, financials, healthcare, industrial, utilities, materials, technology and real estate,” according to Global X.
The new ETF charges 0.86% per year. That expense ratio is somewhat high among ETFs, but favorable when compared to the fees charged by many of the companies that run ETF managed portfolios, a group that the new Global X/JP Morgan ETFs are looking to compete with.
Advisory firms manage all-ETF portfolios for some investors, but the catch is relatively high account minimums. As more individual investors show interest in ETFs, the higher account minimums are not suitable. In turn, some of the larger advisory firms are lowering account minimums to help target a bigger investor pool. The two Global X/JP Morgan ETFs, though somewhat pricey by ETF standards, give investors a cost-effective avenue for accessing ETF managed portfolio strategies. [A Look at ETF Managed Portfolios]