Bringing Factor Investing to High-Quality Core Bonds | ETF Trends

After a three-decade long bull run in the fixed-income space and recent volatility in equity markets, bond investors should be thinking about ways to adapt to a changing landscape.

On the upcoming webcast, Bringing Factor Investing to High-Quality Core Bonds, Josh Rogers, Executive Director, Investment Beta Specialist for J.P. Morgan Asset Management, and Jack Manley, Vice President, Global Market Strategist at J.P. Morgan Asset Management, will look at a smarter way to get core fixed income exposure.

For example, the factor-based JP Morgan US Aggregate Bond ETF (NYSEArca: JAGG) holds a diversified portfolio of high-quality fixed income securities, including corporate bonds, U.S. Treasuries and government and agency securities. Unlike the traditional market cap-weighted bond index funds, the ETF applies a multi-factor credit screening process that seeks exposure to corporate debt issuers with attractive value, quality and momentum characteristics.

The portfolio managers will seek to invest in assets based on a systematic investment process focusing on security selection. First, within the corporate sub-sectors of the Bloomberg Barclays U.S. Aggregate Index, the manager will apply a systematic multi-factor screening process that finds exposure to debt issuers that have attractive “factor” characteristics. The three “factors” used include Value, Quality, and Momentum.

The Advisor identified a set of these three fixed income investment return sources that have distinct risk and return profiles, and each factor represents a potential source of investment return that results from, among other things, assuming a particular risk or taking advantage of a behavioral bias.

Secondly, the portfolio manager tries to realign the duration and sectors of the Fund to match the duration and sectors of the Bloomberg Barclays U.S. Aggregate Index. JAGG shows a 5.74 year duration and a 3.00% 30-day SEC yield.

Financial advisors who are interested in learning more about core fixed-income exposures can register for the Thursday, May 30 webcast here.