Bryon Lake, Head of International ETFs at J.P. Morgan Asset Management, explains why actively-managed ETFs are helping to fuel the rise of ETFs in institutional portfolios
What is driving uptake of active ETFs and what are the benefits to schemes?
Ultimately we think about the ETF as a wrapper - a technology - and that wrapper comes with a lot of benefits. It trades throughout the day and it's often transparent so you get good price discovery.
What's more most asset classes can be delivered through an ETF. So for example, some of our strategies are actually active strategies run by a portfolio manager and delivered through the ETF wrapper.
We also have smart beta capabilities, such as our JPM USD Emerging Markets Sovereign Bond Fund ETF (JPMB). Unlike some of the other emerging markets bond indices out there, we screen securities for liquidity and by duration times spread, which essentially helps to eliminate potential falling knives within the portfolio. Then we reorient the portfolio back towards a higher yield, which is what investors are looking for from the emerging market bond space.
So there are several innovative areas we see delivering both active and smart beta strategies through the benefit rich ETF wrapper.
Why did you decide to launch your ETF business in Europe?
Part of the appeal of ETFs is that they can be used in a variety of ways: for example, as the foundation of a portfolio, or to implement more tactical and sometimes very specific ideas.
With our wide ranging capabilities we are able to deliver, via the ETF wrapper, our proprietary investment capabilities helping institutional investors build more precise portfolios.
When we moved into the ETF space it was the case of building out our ETF platform to deliver some of our core capabilities rather than changing our overall strategy. As a very established player in the institutional market we are now able to offer institutional investors our strategies through the ETF wrapper. We observed that many of our institutional clients were embracing the ETF vehicle and so we are building out our ability to deliver our capabilities through the ETF wrapper to help meet these evolving client needs.
Click here to learn more about J.P. Morgan Asset Management's active ETFs