The new exchange-traded funds (ETFs) are a welcome addition to investors who want to increase their profits incrementally.
Tuesday, September 26th, JP Morgan Avantis US Large Cap ETF launched It is listed on the New York Stock Exchange Arca under the friendly-sounding ticker “HELO.”
HELO provides hedged exposure to large-cap stocks in the United States. We are developing a “ladder-type option strategy” to protect investors from downside risk.So-called ladder type option It’s kind of an exotic option This allows the holder to lock in a partial profit when the underlying stock reaches a predetermined price level (called a “rung”). HELO’s ladder-type overlay consists of three hedges, each of which runs for three months and runs at one-month intervals.
HELO says “”maintain similar characteristics.” It aims to match most of the gains of the S&P 500 while limiting volatility and downside risk. It currently holds 170 stocks, with Information Technology being the largest sector (27.4%). Microsoft and Apple are the largest holdings with over 7% each.
The ETF is co-led by portfolio managers Hamilton Reiner and Raffaele Zingone, who both have nearly 70 years of professional experience.
“Regardless of the environment, equity investors are focused on risk management,” Reiner said. “We expect strong demand for HELO as investors seek outcome-driven solutions that provide a hedging experience through an ETF wrapper.”
This sentiment is echoed by Bryon Lake, JPMorgan’s global head of ETF solutions.
“We listen to our clients,” Lake said. “And their desire is to make strategies like this available in an ETF wrapper. Hamilton and the team have had great success with active ETFs like JEPI and JEPQ.”
JPMorgan already owns the world’s largest active ETF. In April, the JPMorgan Equity Premium Income ETF (“JEPI”) usurped its peer JPMorgan Ultra-Short Income ETF (“JPST”), which previously held the title of largest active ETF. It reached nearly $25 billion annually. Assets under management.
ladder type option
Other “ladder” strategies include: CD (negotiable certificate of deposit) ladder, which allows investors to schedule future fixed income through CDs of different maturities. So-called bond ladders use the same concept, but use government or corporate bond instruments instead.
If leveraged correctly, laddering can generate high yields from long-term investments while providing some liquidity.
However, investors should remember that fixed-rate investments, where interest and principal are guaranteed, have lower expected returns than higher-risk investments.
HELO’s prospectus states that “some upside may be foregone in certain market conditions as a result of selling call options to offset costs associated with option overlay strategies.” The same applies to ladder strategy stocks.
The ladder effect is also accompanied by higher costs due to passive index funds.
While most passive index funds have annual fees well below 0.20%, HELO’s expense ratio is 0.50%.
