JP Morgan has launched two actively managed sustainable ETFs as part of its $7bn Research Enhanced Index equity ETF platform.
The JPMorgan Global Research Enhanced Index Equity SRI Paris Aligned UCITS ETF (JSEG) and JPMorgan US Research Enhanced Index Equity SRI Paris Aligned UCITS ETF (JSEU) meet EU Paris-aligned benchmark requirements and employ a best-in-class approach.
JSEG and JSEU have been custom created in partnership with MSCI and are classified as Article 9 under SFDR regulations, both at a benchmark and portfolio level.
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Controversial sectors and companies have been excluded from indices and the overall benchmark universe, and the active ETFs will have 50% less greenhouse gas intensity than the parent universe, as well as a target to decarbonise by 7% on average on an annual basis.
The 'starting universe' for JSEG and JSEU will be the MSCI World index and MSCI USA Index, respectively. After filtering the universe to focus on ESG leaders and PAB adjustments, the global portfolio will have 300-350 holdings at launch, while the US strategy will have 150-200.
Both portfolios will be similar to their respective indices but will also have an element of bottom-up stock selection within sectors or industry groups. Tracking error is expected to be between 0.75-1.25% or less over time and the allocation is region and sector neutral to the benchmark.
JSEG will be actively managed by Piera Elisa Grassi, Sebastian Wiseman and Raffaele Zingone and have a total expense ratio of 25bps, while JSEU will be actively managed by Zingone and Grassi and have a TER of 20bps.
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Travis Spence, head of ETF distribution in EMEA at JP Morgan Asset Management, said: "JSEG and JSEU are designed to deliver a dual outcome: to outperform a custom universe of sustainable companies by using our REI investment process, while achieving a decarbonisation objective in line with the Paris Agreement.
"These new ETFs can be used as building blocks for clients who want to implement a view on either global equity or US equity, as well as serving as a complement to a client's existing sustainable ETF investments for greater portfolio diversification."
JPMAM's REI equity range, currently the industry's largest active equity UCITS ETF suite, covers approximately 2,500 securities globally and seeks to enhance index returns by leveraging the firm's fundamental proprietary research.
The firm now offers 18 sustainable investing ETFs, with a total AUM of $9.8bn as of 30 June. JSEG and JSEU will be listed on the LSE, Deutsche Börse Xetra, SIX and Borsa Italiana.
