Latest: J.P. Morgan unveils second options-enhanced tracker

The fund is the second options-enhanced US equity ETF from the asset management arm of the US bank.

The J.P. Morgan Nasdaq Equity Premium Income ETF (JEPQ US) is available for trading on Nasdaq with an expense ratio of 0.35%. The new ETF is actively managed by Hamilton Reiner (pictured), head of US equity derivatives at J.P. Morgan, serving as lead portfolio manager.

JEPQ is an active solution for investors looking to drive portfolio allocations while maximizing risk-adjusted expected returns - Hamilton Reiner, J.P. Morgan

The fund targets a significant portion of Nasdaq 100 returns with less volatility, in addition to monthly income. It primarily invests in Nasdaq 100 securities, although other US equities may also be selected. The ETF’s managers focus on building a portfolio with lower volatility compared to the Nasdaq 100.

‘Investors are looking for yield which is proving particularly challenging given the current economic backdrop,’ said Reiner. ‘JEPQ is an active solution for investors looking to drive portfolio allocations while maximizing risk-adjusted expected returns.’

To boost income, the ETF may invest up to 20% of its assets in equity-linked notes (ELNs) which according to the fund’s prospectus are derivative instruments that combine the economic characteristics of the Nasdaq 100 and short call options in a single note.

The premiums from the call options provide regular monthly income. However, the call options also limit the fund’s ability to fully participate in potential increases in the value of the equity portfolio.

The ETF is like the JPMorgan Equity Premium Income ETF (JEPI US) which debuted in May 2020. This fund delivers a similar strategy of seeking enhanced income and lower volatility relative to the S&P 500. It houses $9 billion in assets and also comes with an expense ratio of 0.35%.

Allianz SE books another US$2bn provision in Q1 2022 for Structured Alpha

Allianz SE has added a new multi-million provision in Q1 2022 for Structured Alpha to address the remaining financial exposure in relation to compensation payments and under any resolution of the governmental proceedings.

Allianz Global Investors U.S. has achieved additional settlements as it looks to compensate investors in the Structured Alpha Funds. However, in light of ‘progressing discussions with the US Department of Justice and the US Securities and Exchange Commission (SEC) the group has decided to book an additional provision of €1.9 billion in Q1 2022 before tax.

‘Allianz SE believes that this provision booked is a fair estimate of its remaining financial exposure in relation to compensation payments to investors and to payments under any resolution of the governmental proceedings,’ it said.

The provision will negatively impact the Q1 Group net income by €1.6 billion after tax, resulting in a net income attributable to shareholders of €0.6 billion. Group operating profit in the first Quarter 2022 amounts to €3.2 billion, while the Solvency II capitalisation ratio stands at 199%.

Net income attributable to shareholders will be adjusted for the Structured Alpha provision for the calculation of the dividend payout. Allianz SE policy to offer a dividend per share which is the higher of a 50% payout ratio or a 5% increase from the preceding year’s dividend remains unchanged.

Luma enters Canadian market

Multi-issuer structured products and annuities platform Luma Financial Technologies has announced new funding deals with the wholesale banking division of the Toronto-Dominion (TD) Bank and CIBC.   

The funding and relationships from these two Canadian banks will enable the platform to expand its reach to the Canadian market.

For over a decade, Luma has been utilised by financial advisors to better. Through its open architecture, the

Luma provides access to a wide array of alternative solutions tailored to address specific client goals and risk profiles and will facilitate access to Canadian providers to alternative product offerings from the initial design stage through ongoing lifecycle support, said Luma CEO Tim Bonacci.

‘What attracted us to Luma is their fully customisable and multi-product technology platform with its end-to-end workflow capabilities, as well as the user-friendly experience they provide to issuers and end-users,’ said Vanessa Simonetti, managing director at TD Securities.

TD Securities is seeking to expand the structured notes and annuities business ‘with a view to enhancing both the firm's and our clients' engagement and experience’, said Simonetti.

Elliot Scherer, managing director and global head, wealth solutions at CIBC said the platform ‘will be key for the growing alternative investment marketplace’ in Canada.

CUSIP certificate of deposit volumes surge

CUSIP Global Services (CGS) which tracks the issuance of new security identifiers in the US as an early indicator of debt and capital markets activity over the next quarter, found a monthly decrease in request volume for new municipal identifiers, while requests for new corporate identifiers rose on a monthly basis.

According to the CUSIP Issuance Trends Report for April 2022, North American corporate requests totalled 5,613 in April 2022, which is up 6.4% monthly.

On a year-over-year basis, corporate requests were up 9.3%. The monthly increase was driven primarily by a 36.7% increase in requests for new Canadian corporate identifiers, a 23.0% increase in requests for short-term certificates of deposit and an 11.8% increase in requests for long-term certificates of deposit. This is the fourth-straight month of significant increases in short- and long-term CD request volume.

Requests for international equity and debt CUSIPs both declined in April. International equity CUSIP requests were down 32.6% versus March. International debt CUSIPs were down 13.0% monthly.

‘The one asset class that’s showing a clear-cut, consistent trend has been short- and long-term CDs, where we’re seeing our fourth-straight month of increased request volume. Clearly, CD investors are banking on rising rates,’ said Gerard Faulkner, director of operations for CGS.

Nest partners with Amundi on new mandate

The UK National Employment Savings Trust (Nest), the workplace pension scheme set up by the government in 2008, has launched a new mandate in collaboration with asset manager Amundi.

The mandate was set up to enhance government-backed master trust's ability to manage its portfolio more efficiently. Through the mandate, Amundi will provide Nest with access to the use of derivative contracts for two main objectives in the scheme's portfolio.

These objectives are to rebalance Nest's portfolio to target exposures when it's proving difficult to do through equity and credit markets, and to reduce drag on performance by equitising cash set aside for private market deployment.

Nest head of public markets and real estate Anders Lundgren said the contract will play a "crucial role" for Nest in specific circumstances.

‘We saw during the pandemic that when markets are volatile it can be very difficult to quickly rebalance portfolios,’ Lundgren said. ‘Derivatives provide a great solution, allowing us to quickly reach target exposures and ensure our members benefit when markets recover.’

Nest previously partnered with Amundi in 2016 when it selected the firm to manage its active emerging market debt portfolio, and in 2019 the firms partnered on a private credit mandate.