A Safe-Haven, Active Bond ETF for a Rising Rate Environment

J.P. Morgan Asset Management has rolled out an actively managed short-term bond exchange traded fund to help investors generate income beyond that of traditional money market funds while diminishing volatility and duration exposure.

On Friday, J.P. Morgan launched the JPMorgan Ultra-Short Income ETF (JPST).

The active bond ETF leverages the expertise of J.P. Morgan’s Global Liquidity business and will be managed by the J.P. Morgan Investment Management team, including James McNerny, Ioana Martin, David Martucci, Cecilia Junker and Kyongsoo Noh.

“J.P. Morgan is a leading global fixed income manager with deep experience in all areas of the market,” Martucci said in a note. “The JPMorgan Ultra-Short Income ETF is a natural extension of our well-established Global Liquidity platform and offers our clients another smart option.”

“JPST taps into J.P. Morgan’s deep bench of talent and investment capabilities,” Bob Deutsch, U.S. Head of ETFs for J.P. Morgan Asset Management, said in a note. “In a rising interest rate environment, investors are increasingly looking for a safe haven to park their cash and mitigate risk, and we are proud to offer an innovative solution to help our clients build stronger portfolios.”

JPST will try to provide current income while seeking to maintain a low volatility of principal by investing in investment-grade, U.S.-dollar-denominated short-term fixed, variable and floating rate debt.

Additionally, the fund may include corporate securities, asset-backed securities, mortgage-backed and mortgage-related securities, and high quality money market instruments such as commercial paper and certificates of deposit.

The active ETF may also invest in U.S. Treasury securities, including Separate Trading of Registered Interest and Principal of Securities (STRIPS), securities issued or guaranteed by the U.S. government or its agencies and instrumentalities, securities issued or guaranteed by foreign governments, repurchase agreements, when-issued securities, delayed delivery securities, forward commitments, zero-coupon securities and privately placed securities, according to a prospectus sheet.

The ETF will normally focus investments in the banking industry or hold more than 25% of assets in securities issued by companies in the banking industry. The fund, though, may also invest less than 25% of assets in this industry as a temporary defensive measure.

The bond ETF’s will seek to maintain a duration of one year or less, but it may be exposed to duration longer than one year under certain market conditions such as periods of significant volatility in interest rates and spreads.

For more information on new fund products, visit our new ETFs category.

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