The Challenges Faced by JPMorgan’s New All-in-One ETF in a Historical Market

The initial multi-asset exchange-traded fund from JPMorgan Asset Management is venturing into a frequently neglected segment of the $15 trillion global market.

Launched on Thursday, the actively managed JPMorgan Flexible Income ETF (ticker JFLI) represents the firm’s inaugural entry into the multi-asset sector through this investment vehicle. According to a press release, the fund will consist of about 75% equities and 25% fixed income.

JPMorgan perceives the multi-asset market as a $500 billion opportunity, even though such strategies have had difficulty gaining momentum within the ETF landscape. This category currently encompasses around $50 billion worldwide, in contrast to more than $12 trillion in equity ETFs and approximately $2.6 trillion in fixed-income funds, as per Bloomberg Intelligence data.

Traditionally, financial advisors have preferred single-asset funds that they can customize through various combinations. Additionally, a period of positive correlation between stocks and bonds has diminished the appeal of all-in-one funds, given that bonds are typically utilized to mitigate equity losses.

Except for a brief period in 2024, the SPDR S&P 500 ETF Trust (SPY) and the iShares Core US Aggregate Bond ETF (AGG) have maintained a positive correlation over a 21-day basis since mid-2023. Nevertheless, JPMorgan anticipates that these dynamics will shift.

“The positive correlation of stock and bond returns in 2022 posed challenges for multi-asset investors by not offering the expected diversification benefits,” said Michael Schoenhaut, a portfolio manager at JPMorgan Asset Management, in an email. “However, with inflation concerns now diminished, we expect stock-bond correlation to trend back negative, or at least approach zero.”

JFLI has an annual fee of 35 basis points and is aiming for a yield between 6% and 8%.

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