After weathering a difficult 2015, when its performance was down by nearly 7%, JP Morgan's Efficiente index and strategy family has returned to positive territory, with the Efficiente Plus DS 5 up 5.3%, which compares favourably to the 4% rise in the S&P 500 since January.
The improved performance has been met with sales volumes that are 7.5% higher on the year and the creation of 156 new structured products based on the index family this year.
The strategy captures the contemporary benefits of multiple asset classes and momentum. With multi-asset strategies aiming to deliver diversity, greater liquidity and reduced volatility, the Plus DS 5 attracted a large number of investors in the US with more than US$550m invested in 2016. The Efficiente Index family has been live for over five years and has brand recognition in the US and good historical performance, according to JP Morgan.
The improvement in uptake and performance contrast starkly with last year, when the index recorded a fall of 6.8% over the year. "Overall, 2015 proved to be a tough year for momentum-based strategies," said a source from the US bank.
A good example of the type of products based on the index family offered by the bank is the Variable Annual Income CD - JP Morgan Efficiente Plus DS 5 Index, a seven-year certificate of deposit with seven uncapped call options and a variety of maturities. At end of each year, the product offers participation in the rise of the index floored at 0.25%, starting with 100% participation at the end of the first year and decreasing thereafter by the number of years passed until it gives a 14% participation in the last year. A full return of capital is promised at maturity. "Many investors that prefer capital protection are not only concerned about their principal, but also the consistency of their returns over time," said the source.
Other distinguishing features include the low volatility and correlation with the equity markets. According to the bank's Strategy Guide, the historical correlation between the index and the S&P 500 performance is only 29%. As to volatility, the index has a vol cap of 5%, which is only a third of the S&P 500 average volatility over the last year.
Efficiente has been used in over 700 structured products marketed in the US by JP Morgan, with a touch above $3bn of structured retail note and certificate of deposit issuance in the US market linked to the main varieties of the ETF Efficiente strategies since the first family index launch at the end of 2010, according to SRP data.
Product snapshot: Mattioli delivers 129% after three years, new structured fund on track
Product snapshot: Accumulators strengthen Standard issuance in South Africa
Product snapshot: Nordea's bet on Northern Europe and smoothing effect of Asian options delivers