Skip to main content
JP Morgan Asset Management - Home
  • Products
    Overview

    Investment Vehicles

    • ETFs
    • Commingled Funds
  • Investment Strategies
    Overview

    Investment Options

    • Alternatives
    • Beta Strategies
    • Equities
    • Fixed Income
    • Global Liquidity
    • Multi-Asset Solutions
    • Commingled Funds

    Capabilities & Solutions

    • ETFs
    • Global Insurance Solutions
    • Liability-Driven Investing
    • Pension Strategy & Analytics
    • Outsourced CIO
    • Retirement Plan Solutions
    • Sustainable investing
  • Insights
    Overview

    Market Insights

    • Market Insights Overview
    • Eye on the Market
    • Guide to the Markets
    • Guide to China
    • Guide to Alternatives
    • Market Updates
    • 7 Essentials of ESG

    Portfolio Insights

    • Portfolio Insights Overview
    • Alternatives
    • Asset Class Views
    • Currency
    • DB Insights
    • Equity
    • Fixed Income
    • Long-Term Capital Market Assumptions
    • Portfolio Strategy
    • Strategic Investment Advisory Group

    Retirement Insights

    • Retirement Insights Overview
    • Guide to Retirement
    • Defined Contribution
  • Resources
    Overview
    • Center for Investment Excellence Podcasts
    • Events & Webcasts
    • Insights App
    • Library
    • Taft-Hartley
    • Market Response Center
    • NEW: Morgan Institutional
    • Artificial Intelligence
  • About Us
    Overview
    • Trusted Asset Manager
    • Diversity, Equity & Inclusion
  • Contact us
  • English
  • Role
  • Country
Morgan Institutional
Search
Menu
Search
You are about to leave the site Close
J.P. Morgan Asset Management’s website and/or mobile terms, privacy and security policies don't apply to the site or app you're about to visit. Please review its terms, privacy and security policies to see how they apply to you. J.P. Morgan Asset Management isn’t responsible for (and doesn't provide) any products, services or content at this third-party site or app, except for products and services that explicitly carry the J.P. Morgan Asset Management name.
CONTINUE Go Back
  1. What are Active Equity ETFs?

  • LinkedIn Twitter Facebook

What are Active Equity ETFs?

08/26/2020

Active equity management: The next wave in ETFs

With their low costs, intraday trading and potential for tax efficiencies, ETFs have made their way into nearly every corner of investor portfolios, with one notable exception – actively managed equity strategies. But that’s likely to change soon.

Recent regulatory rulings have laid the groundwork for active managers to start offering strategies once available only through mutual funds. Unlike passive ETFs designed to closely mirror market indices, active funds pursue other objectives by using research to identify those stocks considered most attractive.

Not just for bond ETFs anymore

Access to active equity platforms would be a welcome development for investors who prefer the ETF wrapper but not necessarily indexing. Until now, their active ETF choices have been mostly limited to fixed income strategies. In fact, according to ETF.com, active equity ETFs account for just 0.3% of total U.S. ETF assets, as managers remain reluctant to extend their offerings outside the mutual fund space.

The sticking point has been transparency. While mutual funds are required to publish their full portfolio holdings only once per quarter, most ETFs must do so every day. For many active managers, daily transparency raises red flags about revealing the “secret sauce” inside their portfolios or having that intellectual property misused by unethical traders.

Meet “semi-transparent” active equity ETFs

In response to manager concerns, the Securities and Exchange Commission has approved the industry’s first semi-transparent, actively managed ETF structures. The move is expected to usher in a wave of new equity ETFs that are required to disclose holdings less often than daily, but at least quarterly.

Semi-transparent ETFs will use different methods to protect the identity of their stock picks, while still providing enough information for shares to be accurately priced and efficiently traded throughout the day. From an investor’s perspective, most changes will occur behind the scenes. The process of buying, holding and selling shares will be the same, whether it’s semi-transparent ETFs or their traditional, fully transparent siblings (click here for more details).

What to look for in an active ETF

When evaluating active equity strategies, you’ll want to consider many of the same factors as any other ETF – investment objective, issuer and cost, to name just a few. Be sure, however, to also account for variables unique to active management, including:

  • Select an ETF manager that you value: When evaluating potential active ETFs, investors should consider the character and capabilities of the ETF manager. Investors should choose to invest with a manager they value, and that has history of delivering investment expertise and insights.

  • Understand the ETF investment engine: While active strategies strive to deliver potential excess returns over and above the benchmark return, the range of possible outcomes and performance deviations from traditional benchmarks will be much greater than with market cap ETFs. It’s important to understand their mechanisms for selecting stocks, constructing portfolios and managing risk.

  • Look at the liquidity of underlying securities: A good active ETF will maintain exposure to liquid and tradeable underlying stocks that enable the issuer to handle large inflows or outflows without major disruptions to the share price.

  • Focus on trading expertise: Before placing trades, you may find it helpful to contact the ETF issuer directly. At the J.P. Morgan Capital Markets Desk (844-CAP-MKTS or 844-227-6587), we maintain a keen eye on the market at all times and have proprietary trading models that can assist with understanding the costs involved in execution. Our strong relationships with market makers and APs, as well as our major presence in the marketplace, help deliver the trading expertise many investors seek.

Playing many roles in diversified portfolios

Active equity ETF uses range from long-term strategic core holdings, to complementary pieces, to shorter-term tactical allocations. Investors might own them to pursue specific outcomes, such as outperforming a passive index, generating income or reducing risk. As diversification tools, they can round out existing holdings, fill gaps or provide exposure to asset classes not easily replicated with passive approaches.

Finally, active ETFs bring more flexibility to passive-centric portfolios. In periods of uncertainty, for example, managers can take defensive measures aimed at reducing volatility and limiting losses versus a benchmark.


Risk summary: The prices of equity securities are sensitive to a wide range of factors, from economic to company-specific news, and can fluctuate rapidly and unpredictably, causing an investment to decrease in value. International investing involves a greater degree of risk and increased volatility. Changes in currency exchange rates and differences in accounting and taxation policies outside the U.S. can raise or lower returns. Also, some overseas markets may not be as politically and economically stable as the United States and other nations.

Opinions and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable but should not be assumed to be accurate or complete. The views and strategies described may not be suitable for all investors.

0903c02a828bf8a5

Explore more

What are semi-transparent ETFs?

Non-transparent ETFs are new and innovative to the ETF space. Discover the 3 types of non-transparent ETFs and how they differ from transparent ETFs.

Read more

ETFs

Discover our institutional ETFs, comprising of low-cost, liquid, and transparent solutions for building well-diversified, well-priced portfolios.

Read more

Equities

Delivering consistent investment results across a broad range of actively-managed equity strategies is at the heart of everything we do.

Read more
J.P. Morgan Asset Management

  • About us
  • Investment stewardship
  • Privacy policy
  • Cookie policy
  • Sitemap
  • Accessibility
J.P. Morgan

  • J.P. Morgan
  • JPMorgan Chase
  • Chase
Opens LinkedIn site in new window

This website is a general communication being provided for informational purposes only. It is educational in nature and not designed to be a recommendation for any specific investment product, strategy, plan feature or other purposes. By receiving this communication you agree with the intended purpose described above. Any examples used in this material are generic, hypothetical and for illustration purposes only. None of J.P. Morgan Asset Management, its affiliates or representatives is suggesting that the recipient or any other person take a specific course of action or any action at all. Communications such as this are not impartial and are provided in connection with the advertising and marketing of products and services. Prior to making any investment or financial decisions, an investor should seek individualized advice from personal financial, legal, tax and other professionals that take into account all of the particular facts and circumstances of an investor's own situation.

Opinions and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable but should not be assumed to be accurate or complete. The views and strategies described may not be suitable for all investors.

INFORMATION REGARDING INVESTMENT ADVISORY SERVICES:   J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. Investment Advisory Services  provided by J.P. Morgan Investment Management Inc.

INFORMATION REGARDING MUTUAL FUNDS/ETF: Investors should carefully consider the investment objectives and risks as well as charges and expenses of a mutual fund or ETF before investing. The summary and full prospectuses contain this and other information about the mutual fund or ETF and should be read carefully before investing. To obtain a prospectus for Mutual Funds: Contact JPMorgan Distribution Services, Inc. at 1-800-480-4111 or download it from this site. Exchange Traded Funds: Call 1-844-4JPM-ETF or download it from this site.

J.P. Morgan Funds and J.P. Morgan ETFs are distributed by JPMorgan Distribution Services, Inc., which is an affiliate of JPMorgan Chase & Co. Affiliates of JPMorgan Chase & Co. receive fees for providing various services to the funds. JPMorgan Distribution Services, Inc. is a member of FINRA  FINRA's BrokerCheck

INFORMATION REGARDING COMMINGLED FUNDS: For additional information regarding the Commingled Pension Trust Funds of JPMorgan Chase Bank, N.A., please contact your J.P. Morgan Asset Management representative.

The Commingled Pension Trust Funds of JPMorgan Chase Bank N.A. are collective trust funds established and maintained by JPMorgan Chase Bank, N.A. under a declaration of trust. The funds are not required to file a prospectus or registration statement with the SEC, and accordingly, neither is available. The funds are available only to certain qualified retirement plans and governmental plans and is not offered to the general public. Units of the funds are not bank deposits and are not insured or guaranteed by any bank, government entity, the FDIC or any other type of deposit insurance. You should carefully consider the investment objectives, risk, charges, and expenses of the fund before investing.

INFORMATION FOR ALL SITE USERS: J.P. Morgan Asset Management is the brand name for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide.

NOT FDIC INSURED | NO BANK GUARANTEE | MAY LOSE VALUE

Telephone calls and electronic communications may be monitored and/or recorded.

Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our privacy policies at https://www.jpmorgan.com/privacy.

If you are a person with a disability and need additional support in viewing the material, please call us at 1-800-343-1113 for assistance.

READ IMPORTANT LEGAL INFORMATION. CLICK HERE >

The value of investments may go down as well as up and investors may not get back the full amount invested.

Diversification does not guarantee investment returns and does not eliminate the risk of loss.

Copyright 2023 JPMorgan Chase & Co. All rights reserved.