Global X Launches Two New Rules-Based ETFs

ETF providers have been focusing this year on introducing new active and rules-based offerings designed to lower risk or enhance returns. With that goal in mind, Global X has recently launched two unique funds based on J.P. Morgan indexes.

The Global X JPMorgan Efficiente Index ETF EFFE seeks to provide superior returns through exposure to five asset classes in developed and emerging market nations. This ETF will employ a “fund of funds” approach that selects underlying ETFs as its core constituents. EFFE will then be re-balanced on a monthly basis and shift exposure according to a variety of market conditions.

This multi-asset approach includes allocations to stocks, real estate, bonds and commodities in an effort to reduce overall volatility through an alternative investment strategy. EFFE will charge an expense ratio of 0.69 percent and will have minimal acquired fund expenses added as well.

Released along with EFFE, the Global X JPMorgan US Sector Rotator Index ETF SCTO will provide exposure to five underlying U.S. sector ETFs that have demonstrated recent positive performance. The fund will be re-balanced and evaluated on a monthly basis according to a pool of 10 sector choices. 

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In addition, SCTO has the ability to move up to 100 percent of its portfolio to the iShares Barclays 1-3 Year Treasry Bnd Fd SHY during adverse conditions. This will likely be an attractive quality for risk-adverse investors that are seeking to minimize exposure to market corrections.

SCTO will also employ an expense ratio of 0.69 percent, and at launch had exposure to the Health Care SPDR (ETF) XLV, the Consumer Staples Select Sect. SPDR (ETF) XLP and the Barclays bond fund.

As noted in the press release, “We regularly hear about the need for investment vehicles that manage downside risk” said Greg King, executive vice president at Global X Funds. “With these new funds, we can now offer two potential solutions to investors who want the liquidity and transparency of an ETF wrapper and a rules-based index approach.”

Both new ETFs from Global X are immediately available for trading and will compete with other established smart beta offerings, such as the First Trust Dorsey Wright Focus 5 ETF FV. It will be interesting to note how these ETFs adapt and perform in varying conditions based on their separate rules-based indexes.