J.P. Morgan has launched the J.P. Morgan Macro Hedge Dual TR Source ETF in conjunction with Source. The Dublin-domiciled fund combines US and European volatility exposure in a single product.
The J.P. Morgan Macro Hedge Dual TR Source ETF takes exposure to US equity volatility, switching from long to long/short exposure depending on market conditions. During times of market stress, it can also add up to 25% exposure to European equity volatility. Although liquidity in European volatility markets still lags the US, the Euro-zone debt crisis has prompted more investors to include European volatility in their hedging strategies.
“This product could be particularly interesting for investors with focus on European markets,” says Rui Fernandes, Head of Equity and Funds Derivatives Structuring at J.P. Morgan.“ By combining US and European volatility exposure in a single product, we can offer some regional diversification without compromising on liquidity.”
Volatility is an attractive hedge in times of macro-economic stress - it tends to spike when equities and other risky assets crash. However, volatility exposure can be costly over the long term. J.P. Morgan’s Macro Hedge indices aim not only to capture spikes in volatility in times of market stress, but also, when markets are calmer, to generate a positive return.
Source CEO, Ted Hood, said: “Source’s existing volatility products already account for over 70% of the assets in European-listed volatility ETPs. This new ETF, with its combination of US and European exposure, represents another step forward in the development of efficient volatility tools for investors.”
Domiciled in Dublin and listed for sale on the London Stock Exchange, the euro-denominated fund is designed to provide cost-effective volatility exposure, for sophisticated investors.
The fund is registered for sale in Austria, Finland, France, Germany, Ireland, Italy (for institutional investors only), Luxembourg, the Netherlands, Norway, Sweden and the UK. There is an annual management fee of 0.25%. An index cost of 0.75% per annum and certain notional rebalancing costs are included in the calculation of the benchmark.
This is the second ETF in the J.P. Morgan Macro Hedge series - the J.P. Morgan Macro Hedge US TR Source ETF was launched in February and now has assets of over US$ 200 million.
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