As the market environment shifts, fixed-income ETF investors will have to take a hard look at their portfolios and consider ways to grapple with the challenges ahead.
“Advisors are looking for a way to shorten up duration, and so one of the most successful conversations we’ve had this year is around JPST – our ultra-short duration fixed-income ETF. There’s really almost a dual use case: somebody trying to pull in and shorten duration in a portfolio or take that one step out from cash to earn a little bit more than what they had been holding as cash on a portfolio,” Jill DelSignore, Executive Director and Head of ETF Distribution at J.P. Morgan, said at the Charles Schwab IMPACT 2018 conference.
In a rising interest rate environment, investors are increasingly looking for a safe haven to park their cash and mitigate risk. The JPMorgan Ultra-Short Income ETF (BATS: JPST) can help investors shorten their duration exposure and provide an alternative for money market exposure. The bond ETF 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.
JPST shows a 2.63 percent 30-day SEC yield and comes with a 0.18% net expense ratio.
“If you’re looking at JPST, you’re getting about 70% of the yield of the ‘Agg’ for a fraction of the duration – less than 10% of the duration, so it’s been a really great story for advisors who’re look to pull that in but not lose a lot of the yield that they were getting,” DelSignore said.
J.P. Morgan also has a line of U.S. smart beta ETFs, including broad strategies like the JPMorgan Diversified Return US Equity ETF (NYSEArca: JPUS), JPMorgan Diversified Return International Equity ETF (NYSEArca: JPIN) and JPMorgan Diversified Return Global Equity ETF (NYSEArca: JPGE), along with single-factor strategies, including the J.P. Morgan U.S. Value Factor ETF (NYSEArca: JVAL), J.P. Morgan U.S. Quality Factor ETF (NYSEArca: JQUA), J.P. Morgan U.S. Momentum Factor ETF (NYSEArca: JMOM), J.P. Morgan U.S. Minimum Volatility ETF (NYSEArca: JMIN) and J.P. Morgan U.S. Dividend ETF (NYSEArca: JDIV).
When considering factor-based investments or smart beta ETF strategies, investors may take broad strokes that cover multiple investment factors for a diversified approach or pick and choose individual factor exposures.
“We’ve been able to see them react during real life market scenarios, and what we’re seeing now is in this new spurt of volatility is these products performing exactly as designed – so being able to provide that lower downside volatility while again capturing a lot of the upside we’ve seen in markets,” DelSignore added.
For more market-related commentary from Tom Lydon and other industry experts, visit our video category.