Financial Advisors Look to Smart Beta ETFs to Manage Volatility

DelSignore pointed out that J.P. Morgan’s multi-factor ETFs help solve for that “volatility problem, help keep their clients invested, despite volatility that we certainly did experience and will continue to experience, moving into 2017.”

J.P. Morgan offers a suite of Diversified Return Equity ETFs, including the JPMorgan Diversified Return Emerging Markets Equity ETF (NYSEArca: JPEM), JPMorgan Diversified Return Global Equity ETF (NYSEArca: JPGE), JPMorgan Diversified Return US Equity ETF (NYSEArca: JPUS), JPMorgan Diversified Return Europe Equity ETF (NYSEArca: JPEU), JPMorgan Diversified Return Europe Currency Hedged Equity ETF (NYSEArca: JPEH), JPMorgan Diversified Return International Equity ETF (NYSEArca: JPIN) and JPMorgan Diversified Return International Currency Hedged Equity (NYSEArca: JPIH).

DelSignore also explained that these multi-factor ETFs provide advisors and investors direct access to hedge fund exposure inside an ETF vehicle.

The underlying indices diversify risks that are less likely to be rewarded while overweighting areas that are more likely to be rewarded. The underlying customized FTSE Russell index selects components based on a diversified set of factor characteristics, such as relative valuation, price momentum and quality. The enhanced indexing process would allow the ETFs to exclude expensive, low quality companies with poor momentum, which could help the ETFs diminish drawdowns without sacrificing too much from any potential upside of a market recovery.

The multi-factor process has “served to be a really nice volatility dampener for advisors as they’re trying to keep clients invested,” DelSignore said. “We take it that one step further and advisors talking to us about diversification needs; we’ve actually been able to really leverage the research at J.P. Morgan and take, essentially, our hedge fund strategy into an ETF structure.”