JP Morgan Asset Management (JPMAM) has expanded its REI ETF range by launching the industry's first actively managed China equities ETF.
The new ETF, named JPM China A Research Enhanced Index Equity (ESG) UCITS ETF (JREC), was listed on the London Stock Exchange this morning (21 February).
The move represents an expansion of the firm's flagship range of active Research Enhanced Index (REI) Equity (ESG) ETFs. It will be benchmarked against the MSCI China A index.
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JREC will be managed by Lina Nassar and Sonal Tanna and have a Total Expense Ratio of 40 basis points.
JPMAM head of ETF distribution in EMEA Oliver Paquier (pictured) said: "Despite being one of the fastest-growing economies in the world, investors' exposure to onshore Chinese equities remains relatively low.
"With the average international investor's total China exposure currently 4.6% of total assets, and a large part of this is likely to be in offshore Chinese equities through emerging markets equities strategies, JREC can help investors fund a balance in the representation of Chinese equities in their portfolios."
The new ETF will integrate ESG considerations into its investment decision-making process from its inception. Companies involved in certain sectors, like controversial weapons and tobacco, will be excluded from the fund's holdings.
According to JPMAM, sustainability is an area where active ETFs can be advantageous compared to passive peers. This is particularly the case for A-shares, it said, where ESG disclosure in China can often be in Mandarin only.
The asset manager said its local, Mandarin-speaking analysts are therefore well placed to delve into the data and actively engage with company management where necessary.
Second ETF launched
In addition to JREC, today JPMAM listed JPM AC Asia Pacific ex Japan Research Enhanced Index Equity (ESG) UCITS ETF (JREA), which will be benchmarked against the MSCI AC Asia Pacific ex Japan index.
JREA will also be managed by Nassar and Tanna. The second new ETF also joins the asset manager's existing range of REI ETFs, which have a combined $2.5bn in assets.
"Our range of Research Enhanced Index Equity ETFs have been designed to offer investors a cost-effective solution which blends active stock selection with passive index exposure, within a robust ESG framework, making them an attractive option for investors looking to earn incremental excess returns on their equity exposure at low active risk," Paquier added.