Institutional and high-net-worth individuals are now able to invest in an index, called IncomeEM, designed to provide risk-tailored access to emerging market currencies though JPMorgan.
“IncomeEM enables investors to benefit from the attractive carry opportunities offered by emerging markets, taking into consideration the riskier nature of these markets,” says Tim Owens, JPMorgan’s global head of currency and commodities solutions.
Owens says that the index offers good diversity because of its focus on EM currencies and it uses an innovative way to manage risk. IncomeEM uses an algorithm to select five currency pairs to trade in from a universe of 20 emerging markets currencies on a monthly basis and selects those currencies that offer the best carry opportunities for the least amount of risk; the algorithm also seeks to reduce the strategy’s leverage in times of higher volatility. On the flip side, it increases leverage when vol is low to a maximum leverage of 300%.