European exchange-traded products (ETPs) provider Source has launched the Source JPMorgan Macro Hedge Dual Vega Target 4% TR UCITS ETF, the third ETF in the JPMorgan Macro Hedge series designed for sophisticated investors that aims to provide cost-effective exposure to volatility.
The JPMorgan Macro Hedge Dual Vega Target 4% TR Index takes exposure to US equity volatility, switching from long to long/short exposure depending on market conditions. During times of market stress, it adds long exposure to European equity volatility. The index also uses a “vega target” mechanism, adjusting its leverage between 0% and 100% depending on the absolute level of volatility.
“This is a new feature for the JPMorgan Macro Hedge index series,” said Rui Fernandes, head of equity and funds derivatives structuring at JPMorgan. “Investors need a hedging instrument that will capture the big spikes in volatility but doesn’t see large gains and losses when market conditions are more normal. By reducing exposure in these circumstances,we aim to generate more stable performance.”
Volatility continues to be an attractive hedge in an environment of macro-economic stress – it tends to spike when equities and other risky assets crash. However, volatility exposure can be costly over the long term.
“Exposure to alternative assets such as volatility continues to evolve,” said Source’s chief executive Ted Hood.
The Source JPMorgan Macro Hedge Dual Vega Target 4% TR UCITS ETF will trade on the London Stock Exchange in US dollars. It is registered for sale in Austria, Finland, France, Germany, Ireland, Italy (for institutional investors only), Luxembourg, the Netherlands, Norway (for institutional investors only), Switzerland (for institutional investors only), Sweden and the UK.
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