J.P. Morgan Debuts JPGE, a Smart Beta ETF - ETF News And Commentary

The exchange traded industry has grown by leaps and bounds over the past two decades. There are currently over 1,600 exchange traded products listed in the U.S., with more than $1.8 trillion in assets under management.

In fact, the popularity of ETFs is not confined to the U.S. markets, but it has seen a rise all over the world. The global ETF industry size now stands at $2.5 trillion, as per an article by

.

While undoubtedly the space is being dominated by issuers like State Street, Vanguard and BlackRock, the popularity of ETFs is driving new players into the ETF world (read:

).

In line with this trend,

, a leading global financial services firm, has recently launched its first ETF –

– under the ticker “JPGE”.  Though J.P. Morgan has some exchange traded notes

listed in the market, JPGE is the firm's first ETF, thereby expanding its product portfolio.

The fund seeks to track the FTSE Developed Diversified Factor Index, following the so called “Smart Beta” strategy. The fund combines the two approaches under a single umbrella – a top down risk allocation framework and a bottom up multi-factor stock ranking process.

The bottom up approach results in selecting stocks based on four factors: value, size, momentum and low volatility. Moreover, the top down approach results in an equally weighted portfolio of stocks selected across different regions and sectors (read:

).

This approach results in the fund holding a large portfolio of 459 stocks from the developed markets. Due to the fund's focus on an equal weighted strategy, JPGE holds a well diversified portfolio of stocks with no stock forming more than 0.6% of total fund assets.

Hutchison Whampoa, Samsung Electronic and Hynix Semiconductor Inc. are currently the top three holdings of the firm. The fund charges 37 basis points as annual fees.

The fund is an intriguing option for investors willing to invest in products that follow a smart beta strategy. After a five-year bull run, U.S. markets are expected to remain subdued this year. Returns might not be as spectacular as last year's amid the continued Fed taper and lower GDP growth forecast.

This strategy adopts a “middle path” between passive investing and active investing. Though not so popular with retail investors, these strategies have become quite popular among institutional investors.

The index attempts to choose stocks that have a better chance of risk-return performance, based on certain fundamental characteristics or a combination of these characteristics (read:

).

The fund gives investors an opportunity to own a basket of stocks from the developed markets filtered through multiple criteria including relative valuation, price momentum, low volatility, and specific market capitalization.   

The “Smart Beta” space has a number of products including funds which follow the simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies (read:

).

(

) are some of the products that might pose competition to the newly launched product.

Nonetheless, the recently launched product might still manage to make room for itself in this niche segment and might attract more assets especially from investors who want to add a quality touch to their portfolios.

Want the latest recommendations from Zacks Investment Research? Today, you can download

.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.