The Manhattan financial services firm J.P. Morgan
has launched a new fund intended to take advantage of proprietary research to make a "smarter" version of an index fund. J.P. Morgan is hoping that the research-enhanced index fund will appeal to 401(k) plans, as well as other institutional investors, by offering the consistency of an index fund coupled with the potential to outperform.
Morgan has been offering this type of investment to its clients for over 10 years, returning 1-2% above the S&P Index for the 3, 5 and 10 year periods.
"Our dedicated research has demonstrated over many years our ability to identify the winners and losers" said Rick Nelson, one of the fund's co-managers and head of J.P. Morgan's enhanced equity team. He feels that the strength of the fund is the 25 research analysts that the company employs, especially since the analysis is on the buy-side. He also stressed that the fund's strategy will nonetheless be quantitative enough to limit the fund's volatility, relative to the S&P Index. Nelson will be co-managing the fund with Mark Rostin, V.P. and member of Nelson's team since 1996.
There are presently few enhanced index mutual funds on the market, so as seems to be the trend, J.P. Morgan is seeking out the niches left in the maturing fund market. When asked about the timing of the launch, Nelson suggested that investors are becoming less and less satisfied with actively managed funds, and more attracted to index funds.
He also mentioned the recent alliance with American Century and the added emphasis that the new company was placing on the defined contribution market. The fund's low expense ratio should also appeal to sponsors. The expense ratio is capped at 35 basis points.
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