3 min readBy Ron Koren ETF Insider
How does the JMBS ETF work?
The JMBS ETF is a specialized investment fund that focuses on a specific sector. This exchange-traded fund offers investors exposure to a range of companies in this sector.
The JMBS Issuer, which stands for the JPMorgan Mortgage-Backed Securities ETF, is an investment vehicle managed by J.P. Morgan Asset Management. This ETF seeks to achieve its investment objective by primarily investing in mortgage-related fixed income instruments, including residential and commercial mortgage-backed securities, collateralized mortgage obligations, stripped mortgage-backed securities, and other related assets. JMBS primarily focuses on securities issued by the U.S. government and its agencies, such as Ginnie Mae, Fannie Mae, and Freddie Mac. The fund may also allocate up to 20% of its net assets to non-agency residential and commercial mortgage-backed securities and other non-agency mortgage-related assets. JMBS aims to provide investors with exposure to the mortgage market, while its experienced portfolio managers actively manage the fund's holdings and may use derivatives to hedge risks or enhance returns.
The iShares MBS ETF (JMBS) incorporates a dividend distribution strategy within the realm of mortgage-backed securities (MBS). Although the primary focus lies in MBS exposure, JMBS aims to provide investors with regular income through periodic dividend distributions. Investors can anticipate these distributions, influenced by the interest income generated from the underlying mortgage-backed securities. JMBS's dividend approach complements its fixed-income strategy, making it an attractive option for investors seeking both stability and income in the realm of mortgage-backed securities.
Tracking the performance of mortgage-related fixed income instruments is the primary objective of the JMBS Tracking ETF. JMBS aims to maintain a portfolio consisting mainly of mortgage-backed securities (MBS), collateralized mortgage obligations, and other related securities, with an emphasis on those issued by the U.S. government and its agencies. Additionally, the fund may invest in non-agency residential and commercial MBS, asset-backed securities, and even employ leverage through to be announced (TBA) commitments to enhance returns. JMBS may also utilize derivatives for risk management while actively selecting investments based on bottom-up analysis and target risk allocations. This ETF offers investors exposure to the mortgage-related fixed income market with an actively managed approach.
The correlation aspect of the JMBS ETF, or the Fund seeking to achieve its investment objective by mainly investing in mortgage-related instruments, is essential in understanding its performance concerning the broader U.S. fixed-income market. Given its focus on mortgage-backed securities and related instruments, JMBS exhibits a strong correlation with factors affecting the mortgage market, such as interest rates and credit conditions. This correlation can provide investors with insights into the Fund's sensitivity to changes in these factors and help them make informed decisions about their fixed-income portfolios.
The JMBS (JPMorgan Mortgage-Backed Securities) ETF primarily focuses on the mortgage-related fixed income sector. This sector includes various instruments such as residential and commercial mortgage-backed securities (MBS), collateralized mortgage obligations, stripped mortgage-backed securities, mortgage pass-through securities, credit risk transfer securities (CRTs), and other securities related to mortgages. JMBS predominantly invests in mortgage-related securities issued by the U.S. government and its agencies, including Ginnie Mae, Fannie Mae, and Freddie Mac. Additionally, the fund may allocate up to 20% of its net assets to non-agency, privately-issued residential and commercial MBS, as well as other non-agency mortgage-related and asset-backed securities. JMBS actively manages its portfolio and may use derivatives, such as swaps, futures, forward contracts, and options, to manage or hedge portfolio risk, including interest rate risk. It seeks to provide investors with a competitive return while maintaining a substantial correlation to its benchmark, the Bloomberg US MBS Index Total Return Value Unhedged USD. However, investors should be aware that the fund's use of leverage and focus on mortgage-related securities may entail higher risks.
The exposure characteristic of the JMBS ETF emphasizes its focus on mortgage-related fixed income instruments, particularly those issued by the U.S. government and its agencies, such as GNMA, FNMA, and FHLMC. This ETF primarily invests in residential and commercial mortgage-backed securities (MBS), collateralized mortgage obligations, credit risk transfer securities (CRTs), and other securities related to mortgages, providing investors with exposure to the housing market. Additionally, the JMBS ETF may utilize derivatives, including swaps, futures, forward contracts, and options, to manage or hedge portfolio risk and actively seeks to earn income by lending its securities to qualified broker-dealers and institutions.
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