Markets have begun to rebound, but volatility has clearly awoken from its recent slumber.
On the upcoming webcast Tuesday, Feb. 27, Beyond Factor Fundamentals – and Why They Matter More than Ever Today, Josh Rogers Vice President and Beta Specialist for J.P. Morgan Asset Management, Gabriela D. Santos, Executive Director and Global Market Strategist for J.P. Morgan Asset Management, and Matthew Krajna, Director of Equity Research and Senior Portfolio Manager for Nottingham Advisors, will discuss the diversification benefits factors may provide, and the types of strategies investors can deploy to potentially enhance returns and limit volatility in an equity portfolio.
For instance, factor-specific smart beta ETF plays like the J.P. Morgan U.S. Value Factor ETF (NYSEArca: JVAL) are backed by historical and academic data and have revealed long-term benefits when incorporated in a diversified investment portfolio.
Specifically, JVAL was designed to provide domestic equity exposure with a focus on companies with attractive valuations and the potential to enhance returns. The ETF follows a rules-based approach that matches Russell 1000 sector weights and selects stocks based on relative valuation metrics in an attempt to provide exposure to less expensive securities while mitigating stock specific risk.
Beyond single factor-specific strategies, J.P. Morgan also offers diversified multi-factor smart beta ETFs, such as the JPMorgan Diversified Return US Equity ETF (NYSEArca: JPUS).
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 produce positive results.
The underlying customized FTSE Russell indexing methodology 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 Russell 1000 Diversified Factor Index has a track record of delivering better risk-adjusted returns and capturing less of the downside versus its corresponding market cap-weighted index,” according to J.P. Morgan.
Financial advisors who are interested in learning more about factor investing to hedge risks can register for the Tuesday, February 27 webcast here.