JP Morgan has launched the JP Morgan Asia Diversified (Jade) suite of indices. The Jade range is targeted at investors seeking exposure to a "robust and diversified" benchmark that tracks local currency government bonds issued by emerging and developed Asian countries (excluding Japan).
Although no structured products referenced to the index have been deployed by the US bank, creating "some sort of total return swap, exchange-traded fund (ETF) or note is definitely something we are considering", said a senior member of JP Morgan's index team which is led by Gloria Kim, head of global index research, and Jarrad Linzie, head of index research product management.
"Typically, this sort of product peeks client interest as it allows them to put funds to work in the market quickly and the ability to access leverage in the space," said the index specialist. "Having one security to replicate a segment of an asset class is always appealing as long as there are not massive amounts of execution cost or tracking error."
According to the JP Morgan official, this sort of product will also help mitigate many of the logistical nuances investing in the region such as local account set-up. The two main composite series of the index are the Jade Broad and the Jade Global. The Jade Broad contains all eligible countries within the Asia region (excluding Japan) that meet the index criteria regardless of capital controls or taxation hurdles. Countries that are closed to foreign investors will not be eligible. The Jade Global excludes countries with capital controls as well as those inaccessible to foreign investors.
Countries are capped at 20% in both versions. Additionally, countries in the Jade Broad with capital controls will be restricted to: 1) half their eligible debt stock or 2) a maximum of 10% (whichever is lower). Eligibility criteria for bonds include a minimum size requirement of US$1 billion equivalent for local currency bonds and US$500 million equivalent for global bonds.
"Jade extends the JP Morgan index product suite with a focus on regional investor preferences and nuances," said Kim, in a statement. "The diversification approach accomplishes both a broad inclusion of Asian countries as well as a balanced allocation of weights."
Over 2,000 structured products featuring JP Morgan indices have been marketed across jurisdictions of which 1,434 are still live products, according to SRP data. The US market with 1,300 structured notes holds the highest number of products linked to JP Morgan underlyings followed by Sweden (28), Germany (25) and Belgium (25). The most popular JP Morgan indexes by issuance are the JPMorgan ETF Efficiente 5 which has been featured in over 500 products, followed by the JPMorgan ETF Efficiente DS 5 (274 products), and the JPMorgan Efficiente Plus DS 5 (178).
Other popular JP Morgan indices in the structured products market include the JP Morgan Optimax Market-Neutral Index (112 products), the JP Morgan Mozaic Fixed Income Index (50 products), JP Morgan Alternative Index Multi-Strategy 5 -USD (43), the JPMorgan Balanced Capital Strength Index 8.5% (30), and the JPMorgan Dorsey Wright Focus 5 Balanced Index (24).
JP Morgan's global index research group is responsible for the bank's index products range which comprises a number of tradable strategies, ETFs/ETNs, credit, and commodities covering emerging markets, government debt, and corporate debt asset classes. JP Morgan's index range includes the JP Morgan Global Aggregate Bond Index (JPM Gabi), a US dollar denominated, investment-grade index spanning asset classes from developed to emerging markets; the JP Morgan Emerging Market Bond Index (EMBI); the JP Morgan Government Bond Index (GBI) series and the Economic and Monetary Union (EMU) Government Bond Index; and a family of credit indices comprising the
JP Morgan US Liquid Index (Juli) and the JP Morgan Aggregate Index Europe (Maggie) which encompass fixed rate high-grade coverage across the US and Europe.
JP Morgan is the leading provider of structured products in the US market. In 2015, the bank sold over US$7.9bn and took a 15% market share.
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