Simple but powerful: Research Enhanced Index Equity ETF
A conversation with Piera Elisa Grassi
In this interview Piera Elisa Grassi, co-manager of our JPM JPMorgan Global Research Enhanced Index Equity ETF (JREG) *, explains why active ETFs can level up a passive core.
1. Can you please briefly explain what Research Enhanced Indexing is?
While the name might sound complicated, the concept is actually quite simple. Research Enhanced Indexing (REI) means that you combine the best qualities of passive – index-like regional, sector and style exposures – with active management. We achieve the “enhancement” by applying the insights of our global team of 90+ research analysts. This is a process we have successfully used for over 30 years. What’s new, however, the strategies are now available in an ETF wrapper, with our first REI ETF launched in November 2022 JREG is a core building block that employs our proven investment process that goes beyond passive exposures and seeks to outperform the index.
2. The alpha component makes REI different from traditional passive ETFs. How do you generate alpha?
What we do is simple but very powerful. Our objective is to translate our stock specific insights into our REI portfolios while keeping the structure of the portfolios index-like. We do so by combining best in class fundamental research with robust risk management1. We have a large team of career analysts who carry out in-depth research on over 2,500 stocks, utilising a disciplined valuation framework, which is used across the whole firm. These insights are then packaged into an index-like portfolio, by applying small overweight or underweight position in certain stocks. The end result is a style-neutral, sector-neutral and regionally neutral ETF portfolio, which has the same shape and feel as the index and is very diversified at the same time.
3. How are investors using these ETFs in portfolios?
We find that most investors use JREG as a replacement for their passive core. They seek the index-like exposure, and the opportunity to outperform an index and enhance performance. JREG also appeals to investors looking for a broadly diversified ETF portfolio, which can provide exposure to a market cap standard benchmark . Globally, the range is now the largest active UCITS equity ETF range. 2
Provided for information only based on market conditions as of date of publication, not to be construed as offer, research or investment recommendation or advice. Forecasts, projections and other forward looking statements are based upon current beliefs and expectations, may or may not come to pass. They are for illustrative purposes only and serve as an indication of what may occur. Given the inherent uncertainties and risks associated with forecast, projections or other forward statements, actual events, results or performance may differ materially from those reflected or contemplated.
1 There can be no assurance that any fund will achieve its investment objective, the target return or any other objectives. Before investing, obtain and review the Product Disclosure Statement of the Fund and Target Market Determination (available on https://am.jpmorgan.com/au) to understand the various risks associated with investing in the Fund and in making any investment decision.
2 Source: Bloomberg as at 31 December 2022.
Diversification does not guarantee investment return and does not eliminate the risk of loss. The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
© All Rights Reserved - JPMorgan Asset Management (Australia) Limited ABN 55 143 832 080, AFSL No. 376919 The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Therefore, before you decide to buy any product or keep or cancel a similar product that you already hold, it is important that you read and consider the relevant JPMorgan fund Product Disclosure Statement (PDS) and Target Market Determination, which are available to download on this website and make sure that the product is appropriate for you. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice.
091x220807142637