- JPMorgan is selling investment products that allow clients to augment their bets on high-flying tech stocks.
- The notes track three exchange-traded funds from Ark Investment Management leveraged 1.5 times over a six-year period, Bloomberg reported Monday.
- The underlying ETFs have all rallied at least 150% in 2020. Two reaped the benefits of Tesla’s 660% year-to-date surge.
- The product’s rollout comes as investors shift out of tech stocks and into cyclical sectors amid hopes for a vaccine-fueled recovery.
- Visit the Business Insider homepage for more stories.
Tech stocks have already led the stock market to several record highs in 2020. JPMorgan thinks investors want to double down on the sector.
The bank is letting investors in on a new trade that amplifies bets on three tech-focused exchange-traded funds, Bloomberg reported Monday. The product tracks three ETFs from Ark Investment Management leveraged 1.5 times over a six-year period. JPMorgan has already sold $589,000 of the notes.
The funds – Ark’s Innovation, Genomic Revolution, and Next Generation Internet ETFs – are among the year’s best performers. Large stakes in Tesla boosted the Innovation and Next Generation Internet funds in 2020, as the automaker’s shares have rallied more than 660% throughout the year.
The Genomic Revolution ETF is up 194% year-to-date. The Innovation and Next Generation Internet ETFs have rallied 154% and 153%, respectively.
JPMorgan has debuted the product as investors begin to rotate out of tech stocks. The sector’s insulation from the virus fallout led them to outperform through much of the year, but hopes for a vaccine-fueled recovery in 2021 have prompted mass shifts into value stocks and previously neglected sectors. A prolonged rotation could drag tech stocks lower and weigh heavily on the new products’ gains.
The structured products also only track the worst-performing of the three ETFs, meaning one’s plunge would cancel out any gains across the other two funds. Still, those holding the notes are protected against the first 20% decline in any of the ETFs, Bloomberg reported.
Ark’s Innovation, Genomic Revolution, and Next Generation Internet ETFs trade under the tickers ARKK, ARKW, and ARKG, respectively. Though all three broadly track tech themes, the Genomic Revolution fund focuses on innovations in health care including CRISPR, gene editing, and agricultural biology.
Read more: ‘We are very confident that the stupid is currently alive and well in this market’: Jeremy Grantham’s heir apparent Ben Inker breaks down how GMO plans to profit from the growth bubble through a new long/short equity strategy