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]
The Global X | JPMorgan Efficiente Index ETF also charges 0.86% per year. Like SCTO, EFFE employs the ETF of ETFs approach.
EFFE’s five holdings, which range in weight from 19.2% to 20.6%, are the Vanguard REIT ETF (NYSEArca: VNQ), iShares 20+ Year Treasury Bond ETF (NYSEArca: TLT), Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO),Vanguard S&P 500 ETF (NYSEArca: VOO) and the iShares J.P. Morgan USD Emerging Markets Bond ETF (NYSEArca: EMB).
“We regularly hear about the need for investment vehicles that manage downside risk,” said Global X Vice Executive Vice President Greg King in a statement. “With these new funds, we can now offer two potential solutions to investors who want the liquidity and transparency of an ETF wrapper and a rules-based index approach.”
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of EMB and TLT.