Why JMST: Solve Income Challenges With an Ultra-Short Municipal Bond ETF

By J.P Morgan Asset Management

As investors grapple with the ongoing impacts of COVID-19, we’re seeing more appetite for yield but less stomach for risk. With rates down and volatility up, the Ultra-Short Municipal Income ETF (JMST) offers an opportunity to deliver tax-exempt income while actively managing credit and duration exposures.

It’s high time for low duration

In targeting portfolio duration of less than one year, JMST invests in ultra-short municipal bonds at a particularly favorable time for the asset class:

  • Cash rates likely to hover near zero. The longer the Fed leaves rates unchanged, the greater the need to pursue higher yields than cash without the higher risks of long-term bonds.
  • Yield curve remains flat. Investing along the front end of the current curve allows us to generate similar after-tax income as longer-dated issues, with a fraction of the duration risk.
  • Tax-exempt yields are compelling. With tax reform a possibility in the wake of COVID-19 and November elections, tax-exempt income may become even more attractive going forward.
  • Elevated volatility is expected to continue. Our emphasis on high-quality, ultra-short municipals helps meet investor demands for stable returns and low risk in uncertain times. When markets sold off sharply in the first quarter of 2020, for example, JMST delivered positive results.

Related: Webcast – No Time for Passive: The Case for Active Muni Bonds

JMST is a fully active solution for 18 basis points*

Passive municipal bond ETFs tend to be inefficient even in the best of circumstances. But with the pandemic now putting a premium on credit research and bond selection, active management takes on added importance in uncovering opportunities and avoiding obstacles as they arise.

As part of J.P. Morgan’s $70-plus billion municipal platform, JMST combines macro views with fundamental analysis and ESG considerations to create a bottom-up, value-driven investment process. The result is a conservative portfolio consisting primarily of investment-grade securities managed by experienced professionals, backed by career analysts and priced below many passive peers.

Higher income? Lower risk? Seek both needs with JMST

  1. Step up from cash to seek higher income. Stepping out from cash on the yield curve is an opportunity to both increase monthly income and take advantage of active investing in the broader ultra-short space.
  2. Step down from longer-term bonds to reduce risk. In today’s volatile environment, ultra-short strategies can help cushion risk without sacrificing yield potential.

Prepare now for the road ahead

As COVID-19 continues to reshape the investment landscape, our active team will monitor the effects on municipalities and their bond issues. As always, we’ll manage the ETF conservatively, pursuing returns from research-driven security selection rather than macroeconomic bets or passive market exposures.

Learn more about JPMorgan Ultra-Short Municipal Income ETF (JMST) ►

JMST RISK SUMMARY – The risk of a municipal obligation generally depends on the financial and credit status of the issuer. Changes in a municipality’s financial health may make it difficult for the municipality to make interest and principal payments when due. Under some circumstances, municipal obligations might not pay interest unless the state legislature or municipality authorizes money for that purpose. Municipal obligations may be more susceptible to downgrades or defaults during recessions or similar periods of economic stress.

You could lose money by investing in the Funds. Because the share price of the Fund will fluctuate, when you sell your shares they may be worth more or less than what you originally paid for them. The Fund may impose a fee upon the sale of your shares or may temporarily suspend your ability to sell shares if the Fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time.

Click here for JMST standardized performance

The performance quoted is past performance and is not a guarantee of future results. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than original cost. Current performance may be higher or lower than the performance data shown. For performance current to the most recent month end please call 1-844-4JPM-ETF.

*Ordinary brokerage commissions apply.