First 130/30 Exchange-Traded Product Debuts

Date: Friday, May 30, 2008
Author: Heather Bell, Seekingalpha.com

May 22 marked the debut of the first exchange-traded product to track a 130/30 strategy.

The First Trust Enhanced 130/30 Index (AMEX: JFT) has launched in the form of exchanged-traded notes. JP MorganChase is the issuer of the notes, but ETF provider First Trust Advisors was responsible for the benchmark.

ProShares has a similar type of 130/30 portfolio in registration. But it hasn't come out yet. That means JP Morgan has captured first-mover status among exchange-traded products in the popular hedge fund strategy.

The portfolio is a modified equal-weighted total return index designed to offer 130% long and 30% short exposure to selected large-capitalization U.S. publicly traded equity securities. The index’s long positions will be chosen from top stocks in a universe of 2,500 large-caps ranked based on liquidity and a variety of growth and value factors. The short positions will simply reflect the lowest-ranked stocks in the methodology.

No ADRs, REITs or limited partnerships will be included, and the index will be rebalanced quarterly.

JFT charges an expense ratio of 0.95%