Why has JP Morgan launched a new hedge-like ETF?

The investment firm announced its first alternative and actively managed ETF

A recent news release from JP Morgan Asset Management announced its first alternative and actively managed ETF, the JPMorgan Diversified Alternatives ETF. According to the firm, it provides investors with diversified exposure to various hedge fund strategies, including equity long/short, event-driven, and global macro strategies.

The fund, which was designed and is managed by Global Head of Quantitative Beta Solutions Yazann Romahi, is touted as a way for investors to access an “institutional quality hedge fund strategy in a cost-efficient, tradeable ETF wrapper.” It boasts of a bottom-up approach that results in a purer capture of the hedge fund exposure and better diversification compared to strategies that replicate traditional hedge funds.

"JPHF helps to increase diversification, reduce overall portfolio volatility and deliver higher portfolio risk-adjusted returns," said Romahi.

"In the past, alternative investments have been an exclusive option only accessible by a small portion of investors; however, JPHF now makes these investment vehicles available to a wider array of investors," said Robert Deutsch, head of ETFs.  "Alternative beta strategies provide investors with true diversification with attractive liquidity, transparency and cost."

According to Financial News, JP Morgan has been somewhat slow in entering the ETF market, with its first being launched in June 2014. A spokeswoman reports the firm’s ETF assets at US$800 million over nine ETFs, compared to global ETF leader iShares’ total assets of US$1.2 trillion over 787 funds in June as reported by investment research outfit ETFGI.

With the launch of the new ETF, JP Morgan Asset Management’s Diversified Return ETF suite now features nine products. J.P. Morgan Asset Management is in the top 10 in ETF flows this year with US$400 million coming into their ETF range. The firm has also earned various other accolades, which include being named one of the “Most Trusted” ETF providers on Cogent Reports’ 2016 Advisor Brandscape report.

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