The JPM Global IG Corporate Bond Active UCITS ETF (JIGG) brings the best of global fixed income active management to a rapidly expanding active ETF market.
JIGG is benchmarked to the Bloomberg Global Agg Corporate Index, with an alpha target of 30-50 basis points (bps) over the index. It sits within the Global Corporate Bond Morningstar category, which is the seventh largest category by assets at $182bn, and fifth largest by three year flows, gathering over $29bn.1
JIGG is the first of its kind as a fundamental, active, fixed income strategy in an ETF wrapper. It leverages the same repeatable investment process of the J.P. Morgan Asset Management Global Investment Grade (IG) Corporate Credit team, which currently manages over $200 billion in assets across the Global Fixed Income Currency and Commodities (GFICC) platform.
Why active versus passive for IG credit?
In today’s credit markets, volatility, dispersion, and policy divergence are exposing the limits of index-tracking investment strategies. Passive investing has played a transformational role in expanding access to markets, global IG corporate credit included. Investors have enjoyed low-cost, scalable exposure to the asset class but there are limits to simply owning the market via rules-based exposure to the largest issuers. We think JIGG offers a more resilient approach to a core fixed income allocation through active management.
Part of the limitation with passive investing in fixed income is structural. The Bloomberg Global Aggregate Corporate Index is debt-weighted, meaning the most indebted issuers, rather than the best performing credits as is the case in equity indices, are the largest components of the benchmark.
Today, the top 20 issuers account for over 15% of the index.2 Passive funds are forced into replicating the weightings of these most indebted issuers, which creates an opportunity for active investors to selectively weight the best relative value credits instead. Alongside this structural concern, passive indexing rules are unable to differentiate credits on a liquidity profile, downgrade concerns, or an ESG basis, all providing a window of opportunity for active managers to build portfolios to client demand and market
The investable IG corporate bond universe is broad, deep, and inefficient. The Bloomberg Global Aggregate Corporate Index comprises over 17,000 securities issued by more than 2,100 corporate borrowers across 12 currencies. This diversity in holdings creates dispersion and sectors with low correlations, providing relative value opportunities for active managers to exploit. While passive investing strategies have to replicate index exposure regardless of fundamentals, valuations, or forward outlook, active managers have a plethora of opportunities for alpha generation via a range of levers.
Regional policy divergence adds further complexity. While the Federal Reserve, European Central Bank, and Bank of England pursue different policy paths, credit markets in their respective currencies respond differently to inflation, growth expectations, and risk sentiment. This divergence creates tactical crosscurrency opportunities for active managers, and where they see cyclical market weakness in different regions, they can allocate towards higher-quality issuers and away from those that could be at risk for downgrades, which can help preserve capital and returns in times of economic or market stress.
The benefits of active ETF investing
ETFs offer daily liquidity and intra-day pricing through exchange trading, greater transparency with daily portfolio holdings published, and increased operational efficiency, including in-kind creation/redemption. These benefits accrue while also providing a more cost-effective vehicle that does not compromise on investment quality – investors retain the flexibility and forward-looking risk management of an active strategy, while benefitting from the scale, access, and cost control of the ETF ecosystem.
Demand is increasingly being directed towards actively managed fixed income ETFs, with active bond strategies receiving about a third of all flows into fixed income ETFs last year, up from just 16% in 2023.3 By 2030, we forecast the global fixed income ETF market to grow to $30 trillion (13% growth from 2024 year-end) and the active fixed income ETF market to grow to $6 trillion (33% growth from 2024 year-end),4 with investors increasingly using active ETFs not as satellite strategies, but as core fixed income holdings.
In a recent J.P. Morgan client survey, over 60% of institutional investors cited “targeted alpha within fixed income” and “benchmark inefficiency” as the top reasons for rotating into active fixed income ETFs. The structure enables:
- Complementing or replacing passive IG holdings with more selective exposure.
- Enhancing risk-adjusted returns through sector rotation and security selection through varying market conditions.
- Reducing crowding risk from benchmark replication. During the sharp rates sell-off in 2022, the more indebted issuers such as some REIT companies that are disproportionately represented in passive indices, underperformed other higher quality sectors with stronger balance sheets.
Adding value through active management
At J.P. Morgan Asset Management, our global IG credit strategy is built on three pillars:
1. Fundamental research
Our global research analyst platform covers over 90% of the Bloomberg Global Agg Corporate Index by market value. We assess not only credit metrics, but management behaviour, industry positioning, and ESG trajectory; and our access to top tier management often gives us a leading advantage before events are reflected in market pricing.
2. Robust and repeatable investment process
Our global IG credit process combines top-down macroeconomic direction with fundamental research for idea generation. Our credit bias from our macro outlook is combined with an investment matrix containing sector and security scores to determine portfolio construction.
3. Strong track record of consistent, risk-adjusted returns
Our flagship funds show consistent outperformance of their benchmarks, gross of fees, over three-year rolling periods; underpinning the quality of the investment process across the three largest regional markets in the US, Europe, and UK.
With a focus on fundamental research and a disciplined investment process, JIGG is positioned to deliver targeted alpha and offers a compelling alternative to traditional passive investing strategies. As the demand for actively managed fixed income ETFs continues to grow, JIGG provides institutional investors with a valuable tool to complement or replace passive holdings, ensuring a more selective and resilient approach to global IG corporate credit.