JP Morgan unveils event-driven hedge fund ETF

Dec 1st, 2017 | By | Category: Alternatives / Multi-Asset

JP Morgan Asset Management has launched the JP Morgan Event Driven ETF (JPED US), an actively managed fund offering diversified exposure to returns historically accessed by event-driven hedge fund strategies.

JP Morgan unveils event-driven hedge fund ETF

JP Morgan’s US-listed ETF suite now features nineteen product offerings with over $2 billion in assets under management.

Event-driven investing seeks to capture pricing inefficiencies that may happen before or after a corporate “event,” such as earnings announcements, mergers, spinoffs or bankruptcies. JPED uses a rules-based, bottom-up security selection process to capture a wide range of these event-driven strategies. The fund typically captures event-driven factor exposures through a combination of long and short equity positions across developed markets.

“Hedge fund strategies can be an important diversifier but have historically only been available to a small group of investors,” said Joanna Gallegos, US head of ETFs for JP Morgan Asset Management. “The addition of JPED to our Alternatives ETF range provides our clients with access to targeted hedge fund strategies that have typically been out of reach, and can help enhance portfolios by capitalizing on corporate events and providing diversification to traditional asset classes.”

According to JP Morgan, the fund may be used in a variety of strategic ways:  to complement core hedge fund allocations, provide targeted exposure within a portfolio, achieve lower beta exposure to the global equity market, or build a liquid alternatives allocation.

JPED is listed on the NYSE Arca and has a total expense ratio (TER) of 0.85% due to a contractual fee waiver in place until at least 30 November 2020. Its gross expense ratio is 1.12%.

JP Morgan’s US-listed ETF suite now features nineteen product offerings with over $2 billion in assets under management.

There are several passive funds currently listed in Europe that seek to provide hedge fund-like returns by exploiting factors and making short and leveraged plays.

The ETF offering the broadest exposure to hedge fund returns is the $75 million UBS ETF HFRX Global Hedge Fund Index UCITS ETF (HFEUAS SW) tracking the HFRX Global Hedge fund Index, which is designed to be representative of the overall composition of the global hedge fund universe. It is comprised of all eligible hedge fund strategies, including but not limited to: convertible arbitrage, distressed securities, equity hedge, equity market neutral, event driven, macro, merger arbitrage, and relative value arbitrage. The strategies are asset-weighted based on the distribution of assets in the hedge fund industry.

The ETF synthetically replicates the performance of the index with the use of swaps and costs 0.34% per annum. Such fees are considerably lower than the average cost for a hedge fund, found to be 1.48% per annum in 2016 (down one basis point from the previous year) according to Hedge Fund Research. This represents almost double the average UK-based actively managed equity fund and more than four times the average fee of an equity ETF in Europe.

ETFs also provide daily liquidity and allow users to adopt these strategies without the usual high minimum investment amounts required by hedge funds.

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