Scalper1 News
The global economy is presently caught in a vicious cycle of volatility with the sole star U.S. (in the developed market pack) also finding itself trapped. Instead of leaning on policy tightening, the domestic economy is now backtracking on the issue. This was especially true given the slowing momentum in the labor market and muted inflation. In this backdrop, volatility has taken center stage. Still, several other economic indicators at home are sturdy enough for investors to bet on U.S. stocks. Plus, a dovish Fed eased tensions over the sudden cease or shrinkage in cheap money inflows. All in all, risky assets regained some lost ground but volatility prevailed. Probably keeping this in mind, issuers look to deploy quality factors as much as possible. After all, be it developed economies, emerging nations or commodities and currencies, shocks were felt everywhere. Thanks to this, J.P. Morgan’s new factor-based ETF targeted on the U.S. market – J.P. Morgan Diversified Return U.S. Equity (NYSEARCA: JPUS ) – deserves a detailing. JPUS in Focus The fund looks to track the performance of the Russell 1000 Diversified Factor Index and has exposure to domestic multi-cap stocks. The fund seeks to score high on basic factors like quality and momentum to mitigate risks and tack on capital appreciation. The 561-stock portfolio is equally weighted resulting in minimal company-specific concentration risk. No stock accounts for more than 0.65% of the basket at present. Xcel Energy Inc. (NYSE: XEL ), TECO Energy Inc. (NYSE: TE ) and Henry Schein Inc. (NASDAQ: HSIC ) are the top three holdings. Consumer discretionary (17%), health care (16%), utilities (13%), consumer staples (13%) and technology (12%) get double-digit exposure in the fund. Large caps rule the basket with about 60% focus followed by 35% of assets invested in the mid caps and 5% in the small caps. The fund charges 29 bps in fees. How Will it Fit in a Portfolio? Several academic researches indicated that the risk-adjusted returns from quality stocks outperform the broader market over long term. Thus, this ETF could be an intriguing pick for investors looking to invest in stocks that have high quality and are rich in momentum factors. This way the fund appears to stay afloat in a booming as well as in a volatile market. ETF Competition The craze for smart-beta or high-quality products is high of late especially given the heightened volatility in the market. Issuers are increasingly coming up with multi-factor ETFs, though the space is yet to be jam-packed. However, J.P. Morgan has been quite proactive with this technique and bet on the trend last year with the launch of a global equity ETF (NYSEARCA: JPGE ) which focuses on factors like value, size, momentum and low volatility. State Street is also ramping up its multi-factor lineup. Apart from these, a few products including PowerShares S&P 500 High Quality Portfolio (NYSEARCA: SPHQ ), MSCI USA Quality Factor ETF (NYSEARCA: QUAL ), MSCI USA Value Factor ETF (NYSEARCA: VLUE ) or Arrow QVM Equity Factor ETF (NYSEARCA: QVM ) could put pressure on this new J.P. Morgan ETF. There is also iShares MSCI USA Momentum Factor ETF (NYSEARCA: MTUM ) which is a notable momentum play. Despite these threats, we do not expect J.P. Morgan’s Russell 1000 Diversified Factor ETF to face much problem in garnering assets given a unique index, the strong brand name of the issuer and multi-factor techniques. Within just a few days of its launch, JPUS has accumulated over $10.5 million of assets which gives an idea about its forthcoming success. Original Post Scalper1 News
Scalper1 News