A new opportunity exists for investors looking to diversify their fixed income portfolios. JPMorgan Asset Management recently launched its newest mutual fund conversion, the JPMorgan Mortgage-Backed Securities ETF (JMTG), on the NYSE Arca.
The firm is the largest active U.S. fixed income ETF asset manager, with over $55 billion in AUM. JMTG joins the newly launched JPMorgan Active High Yield ETF (JPHY ). JPHY came to market with the largest external institutional investment on record. The $2 billion in assets at launch made it the largest active ETF launch on record.
“It is great to see JPMorgan continue to bring their best and brightest into the fixed income ETF landscape,” Todd Rosenbluth, head of research at VettaFi, said of JPHY’s launch last week.
Investing for the Long Term Within Mortgage-Backed Securities
JMTG expands the firm’s active fixed income ETF lineup even further. The fund is a mutual fund conversion that invests mostly in mortgage-backed securities (MBS), a pool of real estate mortgage loans bundled together and sold to investors. They are often pass-through investments where investors receive regular payments, akin to bond coupons. In the case of JMTG, the fund invests primarily in pools of investment grade residential and/or commercial MBS. It also invests in unrated mortgage-backed securities of comparable quality, private placements, and zero-coupon securities.
The strategy offers diversified exposure to the MBS category. It invests in securities issued by government agencies such as Fannie Mae or Freddie Mac, as well as non-government entities. Payments may include interest only, principal only, or interest and principal. At any given time, the JMTG will be comprised of at least 65% bonds.
When selecting securities for inclusion, the fund manager considers those most likely to generate performance across a variety of market environments and cycles. As such, the securities included offer a long-term approach to MBS investing. A number of factors are taken into account when selecting securities, including interest rate risk, duration, credit risk, liquidity, and the structure of the individual transaction.
While the average weighted maturity may vary, the target range is between two and 10 years. At launch, the portfolio contained 2,425 securities. JMTG carries an expense ratio of 0.24%.
For more news, information, and strategy, visit ETFdb.
