Higher alpha approach based on a long-established investment process
As the ETF landscape continues to evolve beyond passive and low tracking error strategies, investors are increasingly looking for higher alpha equity opportunities within the ETF wrapper to sit at the core of their portfolios.
Demand for core global equity exposure is strong, with flows into Morningstar's Global Large-Cap Blend Equity category hitting $116 billion so far this year (to the end of June), which is more than the total inflows into the next four most popular Morningstar categories combined. Tapping into this demand, JGLE provides the broad, core global equity exposure that investors are looking for, while offering a higher tracking error and alpha target than enhanced index strategies, such as our research enhanced index (REI) ETFs.
Just like our REI ETFs, JGLE is backed by an investment approach with a long track record. However, unlike our REI ETFs, which provide access to low tracking error, fundamental research-driven equity portfolios, JGLE leverages the best of our quantitative as well as fundamental analysis to drive a higher alpha return target. This combination uses J.P. Morgan’s data and technology advantage to go beyond the coverage of our fundamental research alone, allowing our portfolio managers to seek alpha opportunities from an expanded investment universe of around 8,000 companies, including emerging market stocks and companies from across the market cap spectrum.
Quant research supplemented by deep fundamental analysis
When investing in an ETF with a higher tracking error and higher active share, it’s even more important to choose a manager with the ability to pick winning stocks. JGLE is fortunate in this respect to be able to draw on the stock level insights of J.P. Morgan’s proprietary quantitative and fundamental research.
JGLE’s portfolio is based on a simple, but powerful philosophy – that attractively valued, high quality stocks with positive momentum outperform the market over time. In practice, this means scouring global markets in search of well-managed companies that have the ability to deliver a return on investment for shareholders, that have a strong operational outlook, and whose future prospects are not fully appreciated by the market.
To find these stocks, JGLE uses the systematic insights provided by our rigorous and repeatable quantitative analysis, which looks for signals in the data – the potential catalysts – that highlight the most attractive opportunities from across the full spectrum of global markets. But JGLE doesn’t just stop there. Every potential investment is subjected to a fundamental deep dive by our experienced portfolio managers, which provides the forward-looking and context-aware analysis needed to ensure each stock we invest in reflects our investment philosophy.
We favour companies with strong growth prospects that are supported by a robust core business but that have been overlooked by the market. Often these opportunities are found well beyond the mega cap stocks that dominate the global benchmark. Stocks such as TD Synnex, an American IT infrastructure business that you won’t find in the MSCI All Country World Index benchmark, but where our analysis has identified a strong growth opportunity. This is a stock we think is well positioned to deliver strong returns on its investments, and has an attractive sales outlook supported by increased corporate IT hardware spending, but is still trading at a material valuation discount to its peer group.
All-weather performance at the core of an investment portfolio
By combining rigorous bottom-up stock selection with a relatively high tracking error, typically in the region of 2% to 4%, JGLE can provide enhanced exposure to the value, quality and momentum characteristics that we believe are the drivers of long-term returns, while still controlling sector, market, macro and style risks.
JGLE’s focus on data-driven research, grounded in fundamentals, also provides investors with access to a differentiated portfolio within the global equity ETF space. When looked at relative to the global equity ETF universe, JGLE maintains a more concentrated portfolio, at around 100 to 300 stocks, with a meaningful difference in portfolio holdings compared to the MSCI All Country World Index benchmark, and a significant uplift in active share.
The result is a higher alpha, core global equity ETF, that is well balanced across countries, sectors and style characteristics, and that also has the ability to perform in a variety of market conditions.
JGLE: A higher alpha global equity allocation
JGLE expands our range of higher alpha active ETFs, building on a 30-year time-tested investment approach that combines quantitative and fundamental research. Find out more about how our active stock selection drives the excess return potential that is increasingly important in today’s markets.