JPMorgan Emerging Markets Research Enhanced Index Equity Active ETF (Managed Fund) (Cboe: JREM)

The case for emerging markets *

We believe the macroeconomic stars are aligning for emerging market (EM) equities and we see reasons to be optimistic. Falling inflation, for example, may allow EM central banks to cut rates. Rate cuts by some EM central banks would support domestic growth, and in some cases, lower deposit rates may prompt domestic investors to pivot into domestic equities.

A softening US dollar is another potential support for EM, as are resilient growth projections – the International Monetary Fund forecasts emerging economies to grow at triple the rate of developed markets in both 2023 and 2024². This is partly due to robust EM fundamentals. Improved current account surpluses and stronger reserve positions in EM Asia and other exporters should mean these economies prove more resilient this time around.

Long-term growth in the emerging consumer should present a structural boost for EM equities. This is particularly the case in Asia, where over one billion people could be added to middle- and upper-income groups by 2030³. Favourable demographics, urbanisation and the growth of this ‘consumer class’ will likely see consumption grow and domestic markets expand. Spending patterns are already shifting as emerging economies continue to move away from low cost, labour intensive industries and towards service-oriented sectors. This growth in domestic demand via an expanding middle class is expected to provide a  tailwind for EM corporate profits, particularly those businesses with quality management, a robust long-term strategy and good execution. 

Indexed ETF strategies provide predictable, cost-effective core solutions for investors looking to build efficient broad market exposure. However, with equity returns expected to be lower over the long term than in the past, investors are seeking opportunities to earn excess returns as part of a diversified⁴ portfolio.

By blending active stock selection with passive-like index exposure the JPMorgan EM Research Enhanced Index Equity ETF (JREM) seeks positive alpha at low tracking error.

Small active positions

Our REI approach takes small active positions in stocks based on our proprietary fundamental insights, while also keeping regional, sector and style exposures close to the index at all times to maintain a consistently low tracking error.
The goal is to maximise stock-specific alpha opportunities and to minimise uncompensated market, sector and style risks—all while maintaining a competitive fee.

A hybrid approach

With JREM, investors don’t have to choose between passive index exposure and active security selection—they can explore both at the same time.

^* Provided for information only based on market conditions as of date of publication, not to be construed as offer, research, investment recommendation or advice. Opinions, estimates, forecasts, projections and other forward looking statements are based upon current beliefs and expectations, may or may not come to pass. They are for illustrative purposes only and serve as an indication of what may occur. Given the inherent uncertainties and risks associated with forecast, projections or other forward statements, actual events, results or performance may differ materially from those reflected or contemplated.

² Source: International Monetary Fund “World Economic Outlook Update January 2023”. Growth projections of advanced economies are 1.2% and 1.4% for 2023 and 2024, respectively, while those for emerging market & developing economics are 4.0% and 4.2%.

³ Source: Brookings Institute, J.P. Morgan Asset Management. Data as of 31.03.2023.

⁴ Diversification does not guarantee positive returns or eliminate risks of losses. Risk management does not imply elimination of risks. The fund seeks to achieve its stated objectives, there is no guarantee they will be met. Provided to illustrate team’s general process, not to be construed as offer, research or investment advice and does not taking into account any specific investor’s objectives.

To achieve a long-term return in excess of the Benchmark by actively investing primarily in a portfolio of emerging market companies.

This Fund is likely to be appropriate for an investor seeking capital growth, to be used as a satellite/small allocation within a portfolio where the investor has a very high risk-return profile and is seeking daily access to capital.

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Before investing, obtain and review the Product Disclosure Statement of the Fund and Target Market Determination (available from https://am.jpmorgan.com/au/) to understand the various risks associated with investing in the Fund and in making any investment decision. Past performance is not a reliable indicator of future performance and investors may not get back the full amount invested. Future performance and return of capital is not guaranteed. Information is considered correct at the time of issue but no liability for errors or omissions will be accepted by JPMorgan Asset Management (Australia) Limited or its affiliates. This document is intended solely for the person to whom it is provided by the issuer. ETFs have fees that reduce their performance, indexes do not. Investors cannot directly invest in an index. The market price is generally determined using the official closing price of the Fund. Provided for reporting purposes only and should not be considered as offer, research, advice or recommendations to purchase or sell any particular security. Each individual security is calculated as a percentage of the net assets. Holdings in actively managed portfolios are subject to change from time to time. The Fund seeks to achieve its stated objectives, there is no guarantee they will be met. Dividends or returns are not guaranteed. Please refer to offering documents for details on distribution policy. Due to rounding, values may not total 100%. Top holdings, sector and country or region excludes cash. Fund holdings and performance are likely to have changed since the report date. No provider of information presented here, including index and ratings information, is liable for damages or losses of any type arising from use of their information.

Fund information, including performance calculations and other data, is provided by J.P. Morgan Asset Management (the marketing name for the asset management businesses of JPMorgan Chase & Co and its affiliates worldwide). All data is as at the document date unless indicated otherwise.

Benchmark Source: MSCI. Neither MSCI nor any other third party involved in or related to compiling, computing or creating the MSCI data (the “MSCI Parties”) makes any express or implied warranties or representations with respect to such data (or the results to be obtained by use thereof), and the MSCI Parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to such data . Without limiting any of the foregoing, in no event shall any of the MSCI Parties have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

For further information please email us at jpmorgan.funds.au@jpmorgan.com, telephone 1800 576 468 or visit our website am.jpmorgan.com/au/en/asset-management/adv.