The smart or strategic beta movement that is sweeping the exchange traded funds industry has its roots in U.S.-focused products, but as more advisors and investors have embraced smart beta ETFs, issuers have extended the concept to international funds.
Some of the newest members of the crop of international smart beta ETFs come courtesy of JP Morgan Asset Management, the ETF arm of the giant New York-based bank. The firm’s lineup of international smart beta products includes the JPMorgan Diversified Return International Equity ETF (NYSEArca: JPIN), which debuted in the fourth quarter of 2014.
JPIN tracks a multi-factor index, which can help investors avoid the challenge of trying to time when a particular factor is in or out of favor. The FTSE Developed ex North America Diversified Factor Index is a multi-factor index that includes monthly rebalancing, liquidity screens, and turnover constraints, according to J.P. Morgan.
Specifically, the underlying index utilizes a top-down approach in risk allocation to equally distribute the portfolio’s risk across 40 regional sectors, along with its bottom-up four-factor ranking process, which screens and ranks developed country stocks by value, size, momentum and low volatility factors.
JPIN’s “strategy is to target exposure to equities that demonstrate qualitative factors that historically equate to higher returns. At the same time, the fund attempts to spread its risk across different geographical regions and industries. In particular, the fund screens for small-cap value stocks showing positive price action and low volatility. The fund then divides its investment into 30 segments: three geographic regions with 10 sectors in each region. Each of these 30 segments contributes an equal amount of risk to the fund, based on historic volatility,” reports Investopedia.
[related_stories]At a time when low volatility ETFs are increasingly popular with advisors and investors, JPIN is making good on reducing volatility.
“The ETF has realized much lower volatility than its peer group since the fund’s inception. The fund’s 50-day volatility of 19.92% and its 200-day volatility of 17.2% are in the lowest quarter of the stocks in the global equities group,” according to Investopedia.
JPMorgan’s other smart beta ETFs include the JPMorgan Diversified Return Emerging Markets Equity ETF (NYSEArca: JPEM), JPMorgan Diversified Return Global Equity ETF (NYSEArca: JPGE) and the JPMorgan Diversified Return US Equity ETF (NYSEArca: JPUS).
JPMorgan Diversified Return International Equity ETF
