Reuters
2 min read
(Reuters) -J.P. Morgan Asset Management launched its largest active exchange-traded fund on Wednesday, anchored by a $2 billion investment from an external client, as the company expands its push into a strategy that is making a strong comeback.
The JPMorgan Active High Yield ETF, wich will be trading on the Cboe BZX Exchange, will invest at least 80% of its assets in bonds and other debt securities rated below investment grade, the company said.
Active funds fell out of favor during the equities rally fueled by near-zero interest rates, as passively-managed index funds were often enough to deliver healthy returns.
But as the era of loose monetary policy comes to an end, investors are shifting back to actively managed alternatives, favoring a more hands-on strategy in contrast to the set-and-forget approach that has defined asset management over the past decade.
"This is just the beginning of a trend that should see active fixed ETF AUM quadruple in the next five years," said George Gatch, CEO of J.P. Morgan Asset Management, which is the largest U.S. active fixed income ETF provider, with $55 billion in AUM.
Securities rated Baa3/BBB- or above are generally referred to as investment grade. High yield ETFs such as the one unveiled by J.P. Morgan target investments below this threshold — carrying a higher risk but also offering the potential for greater returns.
The ETF is benchmarked against the ICE BofA US High Yield Constrained Index and is priced at 45 basis points, the company said. It declined to name the external client behind the $2 billion anchor investment.
J.P. Morgan Asset Management is an arm of JPMorgan Chase, the largest U.S. bank. It has a strong foothold in the fund management industry.
The firm also launched the JPMorgan Equity Premium Income ETF in 2020, another actively-managed heavyweight that has since become a "blockbuster success," according to Morningstar.
(Reporting by Pritam Biswas and Niket Nishant in Bengaluru; Additional reporting by Suzanne McGee; Editing by Maju Samuel, Shailesh Kuber and Alan Barona)
