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