Since its inception, the ETF industry has welcomed more than 2,000 innovative products in the U.S. to help investors diversify and enhance their portfolios. With more investors looking into these innovative products like smart beta, many will have questions on the best ways to incorporate these investments into a traditional portfolio mix.
“We’ve evolved in terms of the types of products but also the types of usage,” Jillian DelSignore, Executive Director and head of ETF Distribution for J.P. Morgan Asset Management, said at the 2018 Morningstar Investment Conference.
J.P. Morgan has a line of U.S. smart beta ETFs, including broad strategies like the JPMorgan Diversified Return US Equity ETF (NYSEArca: JPUS), 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).
Investors can also target global opportunities through smart beta options like the JPMorgan Diversified Return Emerging Markets Equity ETF (NYSEArca: JPEM), JPMorgan Diversified Return International Equity ETF (NYSEArca: JPIN) and JPMorgan Diversified Return Global Equity ETF (NYSEArca: JPGE).
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.
“Those products in particular have lent themselves to really productive conversations about portfolio construction. Not just, ‘What is your product? And how does it differ from the next product?’, but where does it fit inside my portfolio,” DelSignore added.
For example, DelSignore explained how advisors may look to something like JPIN for a smarter way to capture international stock exposure, but they would look to providers like J.P. Morgan to help explain how the new smart beta strategy can affect the overall risk return characteristics of an investment portfolio.
“One of the things that has been so exciting for us at J.P. Morgan is being able to bring J.P. Morgan’s investment capabilities – long-term investment capabilities we’ve had at the organization for many, many years – and bring that into the ETF industry,” DelSignore added.
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