JP Morgan Asset Management, the mutual and exchange-traded funds unit of JP Morgan Chase & Co, added the fifth ETF to its portfolio with the launch of JP Morgan Diversified Return Europe Equity ETF (JPEU).
The JPM Diversified Return ETF series are strategic beta funds that seek to improve risk-adjusted returns of diversified portfolios. Each fund is based on a FTSE Diversified Factor index designed to exclude low-quality and expensive stocks. The previous four funds seek to provide exposure in the US, global, international and emerging markets.
JPEU, as the name suggests, targets European companies and tracks the FTSE Developed Europe Diversified Factor Index, which is a subset of the larger FTSE Developed Europe Index comprising of large– and mid–cap stocks. The underlying index, co-developed by JPM with FTSE, is re-balanced quarterly and uses liquidity criteria along with JPM’s active insights and risk-management expertise.
Like its predecessors, JPEU’s index follows an investment strategy that follows a bottom-up approach by targeting multiple factors including quality, momentum and relative valuation of developed European market equities.
The new fund seeks to reduce volatility compared to more traditional market-cap weighted products by deploying a top-down risk allocation framework that equally distributes risk to all the 10 sectors.
Geographically, the UK receives maximum allocation followed by Germany, France and Switzerland. Among sectors, consumer staples, consumer discretionary and healthcare occupy the top three spots while industrials at number four manage to corner double-digit allocations. JPEU is home to such well-known US-listed names as Novartis AG (ADR), Eni SpA (ADR), Total SA (ADR) and SAP (ADR).
Given the diverging central bank policies across the Atlantic, many investors believe the broad based European recovery has just started to take root. Manufacturing momentum outside Germany has been improving with Spain, Italy and even France making substantial gains in the past few months.
Falling unemployment rate and improving GDP readings along with stronger demand for credit from households and businesses are tell-tale signs of improving economic conditions in Europe.
The fund charges 0.43 percent annually.
Disclosure: No holdings
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