Diversified ETFs are capitalizing on the recent flare-up in volatility levels. This thin slice of the broad ETF world often beats the benchmark index. Though at present there are plenty of positive drivers in the global backdrop including the stepped-up stimulus in Japan, prospective launch of QE program in the Euro zone and steady growth in the U.S. economy, reasons to worry about cannot be ignored.
Sluggish revenue growth in U.S. corporate earnings, rising rate concerns, geo-political worries, continued soft display of Chinese economic data and deceleration in emerging markets left investors anxious about their stock as well as bond portfolios. On the other hand, most commodities are out of favor due to a soaring greenback and the demand-supply imbalance.
As a result, the growing uncertainty and policy differentiation in the global market sharpened the appeal for multi-asset or diversified portfolios which are low-volatility in nature and bring about stability in the portfolio.
Keeping this in mind, J.P. Morgan launched a diversified ETF – JPMorgan Efficiente Index ETF (EFFE) – recently. Let’s delve a little deeper into the ETF and find out its prospects in the market:
EFFE in Focus
This ETF intends to deliver the return of the JPMorgan ETF Efficient 10TR Series X index. The fund’s strategy is to generate returns by investing in diverse asset classes with low correlation to the broader markets. EFFE has 5 holdings in its basket right now. The fund has amassed about $2.5 million in assets since inception.
The benchmark index mainly takes into account 11 ETFs and two ETPs which are based on both equities and bonds from developed and emerging markets. This exposure isn’t exactly cheap though, as the fund looks to charge investors 86 basis points a year in fees.
As of November 7, 2014, the fund allocated assets to iShares 20+Yrs Treasury ETF, Vanguard FDS S&P 500 ETF, iShares S&P Small Cap ETF, Vanguard REIT ETF and Vanguard Emerging Market ETF each accounting for about 20% of the portfolio.