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JP Morgan in tie-up with Source to launch ETF
JP Morgan and Source have teamed up to launch a hedged exchange-traded fund for sophisticated investors, which aims to provide low-cost, long-term exposure to volatility, the head of equity and funds derivatives structuring for JP Morgan has said.
According to Rui Fernandes, the JP Morgan Macro Hedge US TR Source ETF is designed for sophisticated investors, to either use as a hedging tool or as a way to take stand-alone volatility exposure.
He said that, since volatility tends to spike when equity markets crash, it is seen as a potential hedge to long-equity positions.
Mr Fernandes said: “Our macro hedge indices combine long volatility exposure with a transparent source of absolute return.
“With more than a year of live track record and significant client investments in note and derivative format, the macro hedge family of indices has proven able to provide a robust tail hedge through equity market sell-offs, while mitigating the usual negative carry associated with traditional outright long volatility instruments.”
He added the new JP Morgan Macro Hedge US TR Index takes both long and short exposure to futures on US equity volatility, switching from long, to long or short depending on market conditions.
Ted Hood, chief executive of Source, said: “We see escalating interest in volatility in today’s markets, but the challenge is always the high cost, which makes this product particularly interesting.”
The ETF fund is listed on the London Stock Exchange and trades in US dollar.
Kevin Tooze, managing director of Essex-based IFA Equity Partners UK Ltd, said: “The product may bring good gains but I will not recommend it to my clients. Hedging volatility is highly risky and the fund also has currency risk.”
