JP Morgan Launches Managed Futures ETF

JP Morgan has launched a new fund focused on providing long-term return through exposure to managed futures strategies.

JPMorgan (NYSE:JPM) Managed Futures Strategy ETF (JPMF) is an active fund and does not track any particular index.

Fund Characteristics

The fund utilizes a rules-based bottom-up methodology to select assets across a wide range of asset classes to provide diversified exposure adopting managed futures strategies. It seeks to provide high diversification benefits in order to reduce the exposure to risk by offering returns uncorrelated with the overall markets. It has AUM of $50.4 million and charges 59 basis points as fee per year. It has top holdings in USD currency contract, ZAR currency contract and Coffee commodity futures, with 0.1% exposure each (as of Dec 18, 2017).

Market Impact

The Senate voted 51-49 in favor of the tax reform. The legislation was finalized in a conference report last week and is poised to become law this week and hand President Donald Trump his first legislative victory. This is expected to lead to a rally in U.S. equities.

The Fed recently hiked interest rates in its December meeting. Moreover, Wall Street expects Fed to raise U.S. interest rates thrice in 2018. However, the outlook for the greenback is still quite uncertain.

Although the OPEC has extended its production cut plans, the outlook for crude is still uncertain. U.S. shale output has been rising and weighing on crude prices. Therefore, it is difficult to predict if oil inventories will be stabilized owing to the OPEC deal and whether prices will be given support.

Competition

It faces high competition from other funds focused on providing exposure to the same space. However, WDTI offers the maximum competition, as the other two funds discussed are relatively less popular in the space. Below we discuss a few ETFs that seek to provide exposure to this corner (see all Hedge Fund ETFs here).

WisdomTree Managed Futures Strategy Fund WDTI

This fund seeks to provide exposure to the global managed futures space.

It has AUM of $166.1 million and charges a fee of 65 basis points a year. From a sector look, the fund has high exposures to Commodities and Financials with 51.6% and 31.6% allocation, respectively (as of Dec 15, 2017). The fund has lost 3.7% in a year and 3.4% year to date (as of Dec 15, 2017).

First Trust Morningstar Managed Futures Strategy Fund (WA:FMF)

This fund seeks to provide returns that exceed the Morningstar Diversified Futures Index, while adopting an actively managed strategy of selecting investments.

It has AUM of $11.9 million and charges a fee of 102 basis points a year. It has 22.9% allocated to Cash and 77.1% to U.S. Treasury bills (as of Sep 29, 2017). The fund’s top three holdings are S&P 500 equity futures, Euro Dollar currency futures and Brent crude commodity futures with 13.0%, 12.7% and 4.9% allocation, respectively (as of Sep 29, 2017). The fund has returned 3.3% in a year and 1.2% year to date (as of Dec 15, 2017).

Pro Shares Managed Futures Strategy ETF FUT

This fund seeks to provide returns that exceed the S&P Strategic Futures Index, while adopting an actively managed strategy of selecting investments.

It has AUM of $5 million and charges a fee of 76 basis points a year. Its top long holdings are U.S. Treasury bond, Euro currency futures and Live cattle with 6.1%, 5.9% and 5.9% allocation, respectively (as of Dec 18, 2017). The fund has lost 3.1% in a year and 4.0% year to date (as of Dec 15, 2017).

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