J.P. Morgan is building out its fixed-income exchange traded fund lineup with the addition of a new U.S. dollar-denominated emerging market sovereign debt strategy for those looking for attractive yield opportunities in the global market.
On Tuesday, J.P. Morgan launched the JPMorgan USD Emerging Markets Sovereign Bond ETF (NYSEArcaL: JPMB), which has a 0.39% expense ratio.
The JPMorgan USD Emerging Markets Sovereign Bond ETF tries to reflect the performance of the JPMorgan Emerging Markets Risk-Aware Bond Index, which is comprised of U.S. dollar-denominated sovereign and quasi-sovereign fixed and floating rate debt securities from emerging market issuers selected by a rules-based methodology, according to a prospectus sheet.
The underlying index starts out by selecting securities taken from the J.P. Morgan Emerging Market Bond Index Global Diversified and applies a proprietary methodology to filter for liquidity, for country risk and allocates risk based on credit rating.
“By using an alternative weighting approach, the index seeks to provide better risk-adjusted returns vs. market cap weighted indexes and potentially generate a competitive yield and lower levels of duration for clients,” according to J.P. Morgan.
Furthermore, the ETF may hold up to 20% of assets in exchange traded futures contracts, credit default swaps and other ETF to seek performance that corresponds to the Underlying Index, particularly in emerging markets where it is difficult to gain access.
The underlying index will rebalance its portfolio on a monthly basis within each country and semi-annually across countries.
“Fixed income ETFs continue to revolutionize investing by providing access to an often challenging asset class in a liquid, transparent and cost-effective vehicle,” Joanna Gallegos, U.S. Head of ETFs for J.P. Morgan Asset Management, said in a note. “With JPMB, clients can gain exposure to emerging market debt, which is a growing component of global bond markets, and it can serve as a diversifier to a core bond portfolio.”
For more information on new fund products, visit our new ETFs category.