J.P. Morgan Asset Management expanded its line up with its first single-strategy liquid alternative beta ETF to help investors achieve lower beta exposure to global equities, build a liquid alts allocations complement a core hedge fund allocation or provide targeted exposure for a portfolio.
On Friday, J.P. Morgan launched the actively managed JPMorgan Event Driven ETF (NYSEArca: JPED), which has a 0.85% total expense ratio.
The event-driven investment theme tries to capture pricing inefficiencies that may occur before or after a corporate “event,” which includes earnings announcements, mergers, spinoffs or bankruptcies. JPED uses a rules-based, bottom up selection process to capture a range of these so-called event driven hedges.
The active ETF is managed by J.P. Morgan Investment Management team, including Managing Director Yazann Romahi, Executive Director Wei (Victor) Li, Vice President Jonathan Msika and Associate Joe Staines.
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JPED will try to generate long-term total return by employing an event-driven investment strategy or invest in companies that the managers believe will be impacted by pending or anticipated corporate or special situation events, according to a prospectus sheet.
For example, the return factors that may utilized include merger arbitrage, which seeks to capitalize on reactions and returns generated by a corporate transaction. The ETF will purchase the common stock of the company being acquired and short the common stock of the acquirer in expectation of profiting from changes in prices resulting from merger.
Activism tracking, which invests in companies that are the target of activist investors. Share buybacks, which attempts to exploit the outperformance of a company engaged in a share buyback program. Parents and spinoffs, which attempts to capture positive performance of a parent company after the spinoff announcement – this typically leads to a revaluation of the company. Index arbitrage, which attempts to profit from the price changes of assets as they are added to or deleted from indices. Lastly, post-reorganization equities, which attempts to profit from the mispricing of companies as they emerge from bankruptcy.
“Hedge fund strategies can be an important diversifier but have historically only been available to a small group of investors,” Joanna Gallegos, U.S. Head of ETFs for J.P. Morgan Asset Management, said in a note. “The addition of JPED to our Alternatives ETF range provides our clients with access to targeted hedge fund strategies that have typically been out of reach, and can help enhance portfolios by capitalizing on corporate events and providing diversification to traditional asset classes.”
For more information on new fund products, visit our new ETFs category.