Lyxor and J.P. Morgan Launch Risk Factor ETFs

Lyxor ETF is working with J.P. Morgan to launch a range of risk factor ETFs, which should be listed in the course of the coming month.

This partnership reflects Lyxor’s involvement in developing Smart Beta ETFs that offer investors targeted tools and risk diversification solutions to help boost long-term portfolio performance.

The indices were developed by J.P. Morgan, as part of its investible indices business, which has focused on equity smart beta over the past few years. Research provided by J.P. Morgan’s quantitative and derivatives strategy team has further supported these developments.

Having launched its first Smart Beta ETF (J.P. Morgan’s Diversified Return Global Equity ETF) one year ago, as an extension of its mutual fund business, J.P. Morgan has already established itself within the ETF market.

“These products will be based on J.P. Morgan’s smart beta indices, which are designed to allow investors to isolate specific sources of risk and return within their portfolios in an effort to maximize performance,” explains Rui Fernandes, head of EMEA equities structuring and fund linked products at J.P. Morgan.

“The growing interest for risk factor investing stems from investors’ need for portfolio allocation tools focusing on the core drivers of equity markets performance,” says Arnaud Llinas, head of Lyxor ETFs and indexing. “Lyxor’s approach focuses on five factors (low size, value, momentum, low beta and quality).” This multi-factor approach should complement J.P. Morgan’s indices development, as its initial ETF approach incorporated similar factors.