J.P. Morgan Asset Management Launches J.P. Morgan Small Cap Value ETF (JPSV) on NYSE Arca

Rhea-AI Summary

J.P. Morgan Asset Management has launched the JPMorgan Active Small Cap Value ETF (JPSV), aiming to outperform the Russell 2000 Value Index. This actively managed ETF utilizes the NYSE Active Proxy Model and targets high-quality small cap companies at attractive valuations. JPSV is managed by Lawrence Playford and his experienced team, priced at 74 basis points. The ETF is part of J.P. Morgan's expanding range of products, which now includes over $100 billion in assets under management. This offering brings new investment opportunities while also introducing unique risks due to its non-traditional structure.

Positive

• Launch of JPSV offers investors access to an actively managed small cap ETF.
• Utilizes NYSE Active Proxy Model to facilitate efficient trading.
• Managed by experienced team with a strong track record.
• Expands J.P. Morgan's ETF offerings to over $100 billion in AUM.

Negative

• The ETF provides less transparency than traditional ETFs, which can result in higher trading costs.
• Potential for wider premiums and discounts due to lack of daily portfolio disclosure.
• Trading halts may have a greater impact on the Fund compared to other ETFs.

First J.P. Morgan ETF utilizing NYSE Active Proxy Model

NEW YORK, March 8, 2023 /PRNewswire/ -- J.P. Morgan Asset Management today announced the launch of the JPMorgan Active Small Cap Value ETF (JPSV), an actively managed small cap ETF that seeks to outperform the Russell 2000 Value Index. The strategy employs a bottom-up approach and aims to identify high quality small cap companies at attractive valuations. The fund will utilize the New York Stock Exchange (NYSE) Active Proxy Model (the Model) and will be traded on NYSE Arca.

JPSV will provide investors access to J.P. Morgan Asset Management's expertise in the active management of U.S. small cap value equities. Lawrence (Larry) Playford, co-portfolio manager of the JPMorgan Mid Cap Value Fund and the JPMorgan Small Cap Blend Fund, will serve as lead portfolio manager for JPSV, priced at 74 basis points. Mr. Playford and his portfolio management team will be supported by a well-resourced group of dedicated value research analysts which average over 20 years of experience.

DISCLOSURE: THIS FUND IS DIFFERENT FROM TRADITIONAL ETFs. Traditional exchange-traded funds (ETFs) tell the public what assets they hold each day. This Fund will not. This may create additional risks for your investment. For example: You may have to pay more money to trade the Fund's shares. This Fund will provide less information to traders, who tend to charge more for trades when they have less information. The price you pay to buy fund shares on an exchange may not match the value of the Fund's portfolio. The same is true when you sell shares. These price differences may be greater for this Fund compared to other ETFs because it provides less information to traders. These additional risks may be even greater in bad or uncertain market conditions. The ETF will publish on its website each day a "Proxy Portfolio" designed to help trading in shares of the ETF. While the Proxy Portfolio includes some of the ETF's holdings, it is not the ETF's actual portfolio. The differences between this Fund and other ETFs may also have advantages. By keeping certain information about the Fund secret, this Fund may face less risk that other traders can predict or copy its investment strategy. This may improve the Fund's performance. If other traders are able to copy or predict the Fund's investment strategy, however, this may hurt the Fund's performance. For additional information regarding the unique attributes and risks of the Fund, see Proxy Portfolio Risk, Premium/Discount Risk, Trading Halt Risk, Authorized Participant Concentration Risk, Tracking Error Risk and Shares of the Fund May Trade at Prices Other Than NAV in the Principal Risks and Proxy Portfolio and Proxy Overlap sections of the prospectus and/or the Statement of Additional Information.

"Active small cap value can be a compelling addition to investor portfolios. As a leader in active management with a demonstrated track record of success, J.P. Morgan is uniquely positioned to deliver this strategy," said Bryon Lake, Head of Americas ETFs at J.P. Morgan Asset Management. "JPSV is our first ETF launched with the NYSE Active Proxy Model and we are confident this structure and portfolio will meet investor needs. This is an exciting addition to the rest of our actively managed range."

J.P. Morgan's application of the Model provides a daily proxy portfolio that is substantially similar to the actual portfolio, facilitating efficient trading of the ETF shares and maintaining the tax efficiency of the ETF structure.

The addition of JPSV brings a differentiated offering to J.P. Morgan Asset Management's full U.S. suite of ETFs which now boasts more than $100 billion in assets under management. J.P. Morgan Asset Management ranks as a top ten ETF issuer in the U.S. with respect to AUM and number two in net active flows across active ETFs in the U.S. for 2022.

"We are pleased to collaborate with J.P. Morgan Asset Management on the launch of JPSV," said Douglas Yones, Head of Exchange Traded Products at the NYSE. "By utilizing the NYSE Model, JPSV can provide investors greater access to this active strategy, while maintaining the intraday liquidity and tax efficiency they expect from ETFs."

Lawrence Playford, managing director, is the lead portfolio manager on the Fund and also a co-portfolio manager of the JPMorgan Mid Cap Value Fund and the JPMorgan Small Cap Blend Fund. Mr. Playford previously served as the Chief Investment Officer of the U.S. Equity Value team from 2016 to 2021. Mr. Playford joined the U.S. Equity Value team as a research analyst in 2003 and became a portfolio manager in 2004. Mr. Playford is also a CFA charterholder.

Jeremy Miller, executive director, is a co-portfolio manager on the Fund and also an investment analyst on the JPMorgan Mid Cap Value Fund and the JPMorgan Small Cap Blend Fund, currently covering industrials and materials. Before joining the firm, Mr. Miller was an industrial and materials specialist at Vertical Research Partners and an institutional equity salesperson at several other firms.

Ryan Jones, executive director, is a co-portfolio manager on the Fund and also an investment analyst on the JPMorgan Mid Cap Value Fund and the JPMorgan Small Cap Blend Fund, currently covering technology & communication services. Before joining the firm, Mr. Jones was in technology equity research at several other firms.

About J.P. Morgan Asset Management

J.P. Morgan Asset Management, with assets under management of USD 2.45 trillion (as of December 31, 2022), is a global leader in investment management. J.P. Morgan Asset Management's clients include institutions, retail investors and high net worth individuals in every major market throughout the world.

J.P. Morgan Asset Management offers global investment management in equities, fixed income, real estate, hedge funds, private equity and liquidity. For more information: www.jpmorganassetmanagement.com.

J.P. Morgan Asset Management is the marketing name for the asset management businesses of JPMorgan Chase & Co. and its affiliates worldwide.

JPMorgan Chase & Co. (NYSE: JPM) is a leading financial services firm based in the United States of America ("U.S."), with operations worldwide. JPMorgan Chase had $3.8 trillion in assets and $286.1 billion in stockholders' equity as of June 30, 2022. The Firm is a leader in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing and asset management. Under the J.P. Morgan and Chase brands, the Firm serves millions of customers in the U.S., and many of the world's most prominent corporate, institutional and government clients globally. Information about JPMorgan Chase & Co. is available at www.jpmorganchase.com.
J.P. Morgan ETFs are distributed by JPMorgan Distribution Services, Inc., which is an affiliate of JPMorgan Chase & Co. Affiliates of JPMorgan Chase & Co. receive fees for providing various services to the funds. JPMorgan Distribution Services, Inc. is a member of FINRA. More information is available at https://am.jpmorgan.com/us/en/asset-management/gim/adv/products/etfs.

Additional Risks

Proxy Portfolio Risk. Unlike traditional ETFs that disclose their portfolio holdings on a daily basis, the Fund discloses a Proxy Portfolio. The goal of the Proxy Portfolio, during all market conditions, is to track closely the daily performance of the Actual Portfolio and minimize intra-day misalignment between the performance of the Proxy Portfolio and the performance of the Actual Portfolio. The Proxy Portfolio is designed to reflect the economic exposures and the risk characteristics of the Actual Portfolio on any given trading day.

The Proxy Portfolio is intended to provide authorized participants and other market participants with enough information to support an effective arbitrage mechanism that keeps the market price of the Fund at or close to the underlying net asset value (NAV) per share of the Fund. The Proxy Portfolio methodology is novel and not yet proven as an effective arbitrage mechanism. The effectiveness of the Proxy Portfolio as an arbitrage mechanism is contingent upon, among other things, the Fund's factor model analysis creating a Proxy Portfolio that performs in a manner substantially identical to the performance of the Actual Portfolio and the willingness of authorized participants and other market participants to trade based on a Proxy Portfolio. There is no guarantee that this arbitrage mechanism will operate as intended. Further, while the Proxy Portfolio may include some of the Fund's holdings, it is not the Actual Portfolio. ETFs trading on the basis of a published Proxy Portfolio may exhibit wider premiums and discounts, bid/ask spreads, and tracking error than other ETFs using the same investment strategies that publish their portfolios on a daily basis, especially during periods of market disruption or volatility. Therefore, Shares of the Fund may cost investors more to trade than shares of a traditional ETF.

Although the Fund seeks to benefit from keeping its portfolio information secret, market participants may attempt to use the Proxy Portfolio to identify the Fund's trading strategy, which if successful, could result in such market participants engaging in certain predatory trading practices that may have the potential to harm the Fund and its shareholders. The Proxy Portfolio and any related disclosures have been designed to minimize the risk of predatory trading practices, but they may not be successful in doing so.

Premium/Discount Risk. Publication of the Proxy Portfolio does not have the same level of transparency as the publication of the Actual Portfolio by a fully transparent ETF. Although the Proxy Portfolio is intended to provide authorized participants and other market participants with enough information to allow for an effective arbitrage mechanism that is intended to keep the market price of the Fund at or close to the underlying NAV per share of the Fund, there is a risk (which may increase during periods of market disruption or volatility) that market prices will vary significantly from NAV per share ofthe Fund. This means the price paid to buy Shares on an exchange may not match the value of the Fund's portfolio. The same is true when Shares are sold.

Trading Halt Risk. If securities representing 10% or more of the Actual Portfolio do not have readily available market quotations, the Fund will promptly request that the listing exchange halt trading in the Fund's Shares which means that investors would not be able to trade their Shares. Trading halts may have a greater impact on the Fund compared to other ETFs due to the Fund's structure. If the trading of a security held in the Fund's Actual Portfolio is halted, or otherwise does not have readily available market quotations, and the investment adviser believes that the lack of any such readily available market quotations may affect the reliability of the Proxy Portfolio as an arbitrage vehicle, or otherwise determines it is in the best interest of the Fund, the investment adviser will promptly disclose on the Fund's website the identity and weighting of such security for so long as such security's trading is halted or otherwise does not have readily available market quotations and remains in the Actual Portfolio.

Tracking Error Risk. Although the Proxy Portfolio is designed to reflect the economic exposure and risk characteristics of the Actual Portfolio on any given trading day, there is a risk that the performance of the Proxy Portfolio will diverge from the performance of the Actual Portfolio, potentially materially. If the Tracking Error becomes too large, the Fund will have disclose its securities on a daily basis until it is able to reduce its Tracking Error. This would result in the Fund losing the protection of the Proxy Portfolio strategy for some period of time or require the Board to consider other actions for the Fund.

ETF Shares Trading Risk. Shares are listed for trading on the NYSE Arca and are bought and sold in the secondary market at market prices. The market prices of Shares are expected to fluctuate, in some cases materially, in response to changes in the Fund's NAV, the intraday value of the Fund's holdings and supply and demand for Shares. The adviser cannot predict whether Shares will trade above, below or at their NAV. In addition, due to the Fund's novel and unique structure, Shares of the Fund may trade at a larger premium or discount to the NAV of shares of traditional ETFs that disclose their portfolio holdings daily. Disruptions to creations and redemptions, the existence of significant market volatility or potential lack of an active trading market for the Shares (including through a trading halt), as well as other factors, may result in the Shares trading significantly above (at a premium) or below (at a discount) to NAV or to the intraday value of the Fund's holdings. During such periods, you may incur significant losses if you sell your Shares.

Authorized Participant Concentration Risk. Only an authorized participant may engage in creation or redemption transactions directly with the Fund. The Fund has a limited number of intermediaries that act as authorized participants and none of these authorized participants is or will be obligated to engage in creation or redemption transactions. To the extent that these intermediaries exit the business or are unable to or choose not to proceed with creation and/or redemption orders with respect to the Fund and no other authorized participant creates or redeems, Shares may trade at a discount to NAV and possibly face trading halts and/or delisting. The fact that the Fund is offering a novel and unique structure may affect the number of entities willing to act as authorized participants.

NOT FDIC INSURED | NO BANK GUARANTEE | MAY LOSE VALUE

Related Links: http://www.jpmorganchase.com

 

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SOURCE J.P. Morgan Asset Management

FAQ

What is the JPMorgan Active Small Cap Value ETF (JPSV)?

JPSV is an actively managed ETF launched by J.P. Morgan that aims to outperform the Russell 2000 Value Index by investing in small cap value companies.

What unique model does JPSV utilize for trading?

JPSV utilizes the NYSE Active Proxy Model to facilitate efficient trading while maintaining tax efficiency.

Who manages the JPMorgan Active Small Cap Value ETF?

The ETF is led by Lawrence Playford, supported by a team of experienced value research analysts.

What are the risks associated with JPSV?

The ETF has unique risks including less transparency, potential for wider trading price discrepancies, and risks of trading halts.

How much assets does J.P. Morgan's ETF range manage?

J.P. Morgan's ETF offerings now manage over $100 billion in assets.