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JP Morgan Launches Minimum Volatility ETF

JP Morgan has launched a new fund focused on providing exposure to the U.S. equity space. It invests in companies with low volatility.
 
JPMorgan U.S. Minimum Volatility ETF JMIN tracks the JP Morgan US Minimum Volatility Index. 
 
Fund Characteristics
 
The fund utilizes a rules-based methodology to select stocks based on volatility. It has AUM of $25.7 million and seeks to provide exposure to low risk equities, while minimizing unsystematic risk. It charges 12 basis points as fee per year and has top holdings in NVR Inc, Walmart Stores Inc and Brownforman Corp, with 0.8%, 0.7% and 0.7% exposure, respectively (as of Dec 6, 2017). It bears less concentration risk as all, just a little over 7.0%, is allocated to the top 10 holdings.
 
From a sector look, the fund has high exposure to Health Care, Consumer Goods and Utilities, with 20.4%, 19.4% and 17.0% exposure, respectively (as of Dec 6, 2017). 
 
Market Impact
 
The Senate voted 51-49 in favor of the tax reform. Although there are multiple hurdles for the tax reform to become a law, Trump called the Senate vote a major victory and the Republican Party unbeatable. “Unless they have somebody that we don’t know about, right now we’re unbeatable,” said Trump.
 
The House and Senate differ radically on what they want to establish from the tax reform. Multiple compromises might be needed to come to a conclusion. For instance, the House wants to abolish the estate tax, whereas the Senate wants to raise it. If there are significant negotiations made in reconciling the two plans, appeal for low volatility funds might increase.
 
There is increased uncertainty with regard to Trump’s deregulation plans. This might increase investors’ appeal for safety and in turn make them shift to low volatility funds.
 
Competition
 
The fund faces high competition from other funds focused on providing exposure to the same space. Below we discuss a few ETFs that seek to provide exposure to this corner (see all Total Market (U.S.) ETFs here).
 
iShares Edge MSCI Min Vol USA ETF USMV
 
This fund seeks to provide exposure to U.S. companies that are more or less immune to volatility. 
 
It has AUM of $15.0 billion and charges a fee of 15 basis points a year. From a sector look, the fund has high exposure to Information Technology, Health Care and Consumer Staples with 19.6%, 16.6% and 13.3% allocation, respectively (as of Dec 6, 2017). The fund’s top three holdings are Mcdonalds Corp MCD, Johnson & Johnson JNJ and Visa Inc. V, with 1.5% allocation each (as of Dec 06, 2017). The fund has returned 19.0% in a year and 16.4% year to date (as of Dec 7, 2017). It has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
 
PowerShares S&P 500 Low Volatility Portfolio SPLV
 
This fund seeks to provide exposure to U.S. companies that are more or less immune to volatility. 
 
It has AUM of $7.3 billion and charges a fee of 25 basis points a year. From a sector look, the fund has high exposure to Utilities, Financials and Industrials with 21.5%, 20.6% and 17.4% allocation, respectively (as of Dec 7, 2017). The fund’s top three holdings are Honeywell International Inc HON, Coca-Cola Co KO and Pepsico Inc PEP, with 1.3% allocation each (as of Dec 7, 2017). The fund has returned 18.2% in a year and 15.2% year to date (as of Dec 7, 2017). It has a Zacks ETF Rank #3 with a Medium risk outlook.
 
SPDR Russell 1000 Low Volatility Focus ETF ONEV
 
This fund seeks to provide exposure to U.S. companies that are more or less immune to volatility. It tracks the Russell 1000 Low Volatility Focused Factor Index. 
 
It has AUM of $474.0 million and charges a fee of 20 basis points a year. From a sector look, the fund has high exposure to Financial Services, Consumer Discretionary and Producer Durables with 23.5%, 20.1% and 16.3% allocation, respectively (as of Dec 6, 2017). The fund’s top three holdings are Equity Residential EQR, Sysco Corporation SYY and Baxter International Inc. BAX, with a respective allocation of 1.1%, 1.0% and 1.0% allocation (as of Dec 6, 2017). The fund has returned 14.0% in a year and 15.4% year to date (as of Dec 7, 2017). It has a Zacks ETF Rank #3.
 
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Johnson & Johnson (JNJ): Free Stock Analysis Report
 
Coca-Cola Company (The) (KO): Free Stock Analysis Report
 
Pepsico, Inc. (PEP): Free Stock Analysis Report
 
Honeywell International Inc. (HON): Free Stock Analysis Report
 
SPDR-R1000 LVF (ONEV): ETF Research Reports
 
POWERSH-SP5 LVP (SPLV): ETF Research Reports
 
ISHARS-MS US MV (USMV): ETF Research Reports
 
Sysco Corporation (SYY): Free Stock Analysis Report
 
Baxter International Inc. (BAX): Free Stock Analysis Report
 
McDonald's Corporation (MCD): Free Stock Analysis Report
 
Equity Residential (EQR): Free Stock Analysis Report
 
Visa Inc. (V): Free Stock Analysis Report
 
JPM-US MIN VOL (JMIN): ETF Research Reports
 
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