JP Morgan adds European volatility product to ETF range
JP Morgan and Source are including European markets in the second ETF from the US bank that aims to protect investors against volatile markets, after its first such product focused on American markets raised more than $200m in barely two months since its February inception.
The JP Morgan Macro Hedge Dual TR Source ETF is euro-denominated and in times of market stress can take up to 25% exposure to European equity volatility, a thinner market though one of growing interest.
The product aims, in the firm’s words, to benefit from spikes in volatility when markets fall, but also to make money when they rise – being when volatility typically calms.
It does this by taking both long and short positions on volatility of share markets.
Many competitors take only long positions, often on the Vix ‘fear index’ of expected short-term volatility of S&P 500 shares.
These funds face criticism on two primary fronts. First, that they can lose much of the gains they have made as volatility can fall as quickly as it rose. And second, that they can cost more to hold in calm markets than the returns they can make in the more benign conditions.
Of the latest ETF with partial European exposure, Rui Fernandes, head of equity and funds dervatives structuring at JP Morgan, said: “This product could be particularly interesting for investors with focus on European markets.”
Source CEO Ted Hood said the products was “another step forward in the development of efficient volatility tools for investors”.
The earlier JP Morgan Macro Hedge US TR Source ETF was launched in February.
The latest product is listed on the London Stock Exchange and is registered for sale in Austria, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Norway, Sweden and the UK.