A New ETF Avenue To Europe

JPMorgan Chase & Co. JPM's JPMorgan Asset Management, the bank's mutual fund and exchange-traded funds unit, bolstered its ETF suite lineup earlier this month with the debut of its fifth ETF, the JPMorgan Diversified Return Europe Equity ETF JPEU.

The ETF And Its Index

The new ETF follows “the FTSE Developed Europe Diversified Factor Index, which is rebalanced on a quarterly basis and was thoughtfully constructed based on J.P. Morgan's active insights and risk management expertise,” according to a statement issued by New York-based JPMorgan Asset Management.

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JPEU 's underlying index is based on a methodology that targets multiple factors, including low volatility, attractive relative valuation, positive momentum and smaller market capitalization, according to FTSE Russell.

Holdings And Allocations

The UK commands over 26 percent of the index's weight, while Germany and France, the two largest eurozone economies, combine for over 27 percent of the benchmark's geographic weight. At 10.4 percent, Switzerland is the only other country to command a double-digit allocation in JPEU's underlying benchmark.

Top sector weights are consumer staples, consumer discretionary and healthcare, each of which command allocations north of 11 percent. Industrials also garner a double-digit weight.

Diverging monetary policies in developed markets increase the allure of JPEU. Some investors are still betting the Fed will raise interest rates in the coming months, perhaps as soon as next month. Conversely, the Bank of Japan and the European Central Bank are seen as having the room to add to their already massive easing programs. Add to that, eurozone blue-chips are delivering impressive earnings growth, which is being driven in part by the weaker currency.

JPEU is home to 289 stocks, including some well-known U.S.-listed names such as SAP SE (ADR) SAP, Novartis AG (ADR) NVS, Total SA (ADR) TOT and Eni SpA (ADR) E.

“Manufacturing momentum in the Eurozone has improved, and not just in Germany. Spain, Italy and even France have seen progress in the right direction,” according to JPMorgan.

“Importantly, more ECB easing has helped to push the Euro lower, which has helped to boost expectations for profits for European companies. Finally, credit conditions have been trending better, with loan demand from households and businesses growing – a key sign of economic improvement.”