Q&A with J.P. Morgan
Published
Global Head of ETF Solutions, J.P. Morgan
This week we sit down with Bryon Lake at J.P. Morgan to discuss their rapid growth and position in the active ETF market.
JPMorgan has a history of innovation within the asset management industry, having launched the first U.S. investment trust in 1873, the firm’s first ETF in 2014 and first active ETF in 2016. The firm now manages over $80 billion in ETF assets, including nearly $50 billion in active ETF assets and the industry’s largest active ETF, NYSE Arca-listed JPST. In the last three years your firm has launched 15 new active ETFs that have accumulated nearly $22 billion. What opportunities for innovation are you seeing in today’s active ETF market?
When ETFs were first introduced 30 years ago, they were synonymous with passive investing, but the last five years have shown huge adoption and flows for active ETFs. In fact, 700 new active ETFs have launched since 2017, translating to over $324 billion in total assets. While active ETFs account for 5% of assets, they make up over 13% of flows YTD. With active flows at $67 billion year-to-date, it’s clear that this shift towards active strategies is not slowing down anytime soon.
In addition to active ETFs, the model’s ecosystem is also experiencing increased investor adoption. Models now represent a nearly five trillion-dollar industry in the United States and ETFs play an essential role in helping advisors and individuals customize and build all types of models.
As client needs evolve, J.P. Morgan is developing new solutions to address these needs as we continue to expand and innovate across our current capabilities. This is demonstrated by the fact that this year we completed four mutual fund to ETF conversions, resulting in $10B added AUM. We’re also exploring opportunities for additional conversions in the future.
As a global asset manager, what benefits and/or nuances come with operating an active ETF product line-up bring compared to other investment wrappers (i.e., Mutual Funds, CITs, etc.)?
As a global asset manager, J.P. Morgan Asset Management offers numerous strategies across many different product wrappers. One of our greatest differentiators is our ability to offer tailored strategies that give investors unique access to active manager portfolio strategies within the ETF vehicle.
In addition to active stock selection, active ETFs allow investors to leverage proprietary investment capabilities, mitigate market risk and achieve outperformance versus the benchmark, all within the ETF wrapper. This kind of unique flexibility delivers transparency, tax efficiency, diversification, liquidity benefits and externalized costs, especially compared to other investment wrappers.
JPMorgan recently filed for exemptive relief to launch ETFs that leverage the NYSE Active Proxy Structure to provide flexibility for managers. Why offer both transparent active ETFs and ETFs utilizing the NYSE Active Proxy Structure? Any early observations on how this part of the active ETF market is evolving?
Our preference is to deliver transparent ETFs when we can. While we have yet to launch a proxy ETF, as our business continues to grow and evolve, there may be opportunities to deliver strategies that are better suited in a proxy.
We have a wide variety of managers who have a strong track record managing multi-billion-dollar mutual funds or separately managed accounts that are looking to break into ETFs. We foresee the Active Proxy structure gaining a lot of traction going forward, allowing more managers to come into the ring without jeopardizing the secret sauce of their investment strategies.
While transparent active ETFs are still incredibly popular and successful for a myriad of reasons, semi-transparent ETFs are structured in a way to keep stock picks confidential, thus providing investors with access to active management while reducing the risk of front running. Active semi-transparent structures are initially limited to equity ETFs, but in the future, we foresee these capabilities extending to other asset classes.
What are the key considerations for investors looking into actively managed ETFs?
As previously mentioned, active ETFs are an innovative approach to delivering the intentional outcomes of active portfolio management such as income, outcome and alpha, while providing the numerous benefits offered by the ETF wrapper.
There are a number of reasons we believe active management adds value. At J.P. Morgan, we have over 1,100 investment professionals and dedicate over $250m annually to investment research, but at the heart of it, we seek to generate alpha by differentiating ourselves from both the benchmark and our peers. To us, one of the biggest considerations for an investor should be assessing the quality of the investment team and the track record of the strategy. Investors benefit from the skill of an experienced portfolio manager who can effectively maneuver positions, execute on fundamental research, and invest with intention.
Lastly, what guidance would you provide sponsors as they consider expanding their product offerings to include actively managed ETFs?
Actively managed ETFs are becoming more prevalent, but we are just getting started. There are more tools than ever for investors to build their ideal portfolio within the ETF landscape. Exchanges have always been the crucial meeting place for investors, and we are excited to continue our relationship with the NYSE, where we have 27 J.P. Morgan ETFs listed with nearly $50 billion in AUM, including our largest active fixed income ETF, JPMorgan Ultra-Short Income ETF (JPST) and our largest active equity ETF, JPMorgan Equity Premium Income ETF (JEPI).
Flexibility and reliability are crucial when expanding product offerings and the NYSE’s model is a best-in-class solution that provides our portfolio managers with a simple and flexible approach to basket construction and portfolio protection, ultimately leading to superior market quality for our clients. Whether its active or passive, J.P. Morgan’s main priority is to offer premier solutions in a premier way.
Active ETF Stat Pack
| Firms | |||
|---|---|---|---|
| # of Issuers | 191 | ||
| # of New Issuers 2022 | 44 | ||
| Products | Assets | ||
| # of ETFs | 925 | AUM ($B) | $324.30 |
| # of New Launches 2022 | 203 | 3 Yr AUM CAGR | 52% |
| Avg. ER | 0.45% | 5 Yr AUM CAGR | 51% |
| Cash Flow | Trading | ||
| YTD Cash Flow ($B) | $66.67 | YTD ADV (Shares) | 132,628,934 |
| 3 Yr Cash Flow | $221.99 | YTD ADV ($) | $5.18 B |
| 5 Yr Cash Flow | $276.16 | YTD Avg. Spread (bps)* | 32.85 |
Source: Factset & NYSE Internal Database and Consolidated Tape Statistics as of 11/4/2022
*Simple average
Active, Semi-Transparent Update
| Ticker | Inception | Name | AUM | YTD Flows | 30 Day Median Spread (bps) | ADV (shares) | Structure | LMM | Expense Ratio | Listing Venue |
|---|---|---|---|---|---|---|---|---|---|---|
| EQOP | 9/17/20 | Natixis U.S. Equity Opportunities ETF | $8,820,146 | $1,421,079 | 8.31 | 777 | NYSE AMS | Citadel | 0.85% | NYSE |
| VNSE | 9/17/20 | Natixis Vaughan Nelson Select ETF | $9,538,049 | $6,456,324 | 8.43 | 1,842 | NYSE AMS | Citadel | 0.80% | NYSE |
| VNMC | 9/17/20 | Natixis Vaughan Nelson Mid Cap ETF | $7,401,957 | $602 | 12.12 | 525 | NYSE AMS | Citadel | 0.85% | NYSE |
| ESGA | 7/15/20 | American Century Sustainable Equity ETF | $101,984,139 | $(28,301,778) | 10.92 | 11,824 | NYSE AMS | Citadel | 0.39% | NYSE |
| MID | 7/15/20 | American Century Mid Cap Growth Impact ETF | $22,956,243 | $5,618,626 | 9.98 | 4,514 | NYSE AMS | Citadel | 0.45% | NYSE |
| ESGY | 7/1/21 | American Century Sustainable Growth ETF | $5,891,976 | $1,144,328 | 6.435 | 379 | NYSE AMS | Citadel | 0.39% | NYSE |
| NDVG | 8/5/21 | Nuveen Dividend Growth ETF | $7,487,904 | $1,928,166 | 7.78 | 3,791 | NYSE AMS | Citadel | 0.64% | NYSE |
| NSCS | 8/5/21 | Nuveen Small Cap Select ETF | $5,389,462 | $24,166 | 10.99 | 434 | NYSE AMS | Citadel | 0.85% | NYSE |
| NWLG | 8/5/21 | Nuveen Winslow Large-Cap Growth ESG ETF | $4,326,575 | $226,005 | 8.26 | 5,075 | NYSE AMS | Citadel | 0.64% | NYSE |
| NUGO | 9/28/21 | Nuveen Growth Opportunities ETF | $2,160,572,803 | $7,336,401 | 7.59 | 236,531 | NYSE AMS | Citadel | 0.55% | NYSE |
| SAEF | 11/16/21 | Schwab Ariel ESG ETF | $11,346,650 | $6,138,700 | 37.105 | 3,535 | NYSE AMS | Flow Traders | 0.59% | NYSE |
| IWLG | 6/23/22 | IQ Winslow Large Cap Growth ETF | $12,461,850 | $8,138,670 | 24.715 | 6,937 | NYSE AMS | Citadel | 0.60% | NYSE |
| IWFG | 6/23/22 | IQ Winslow Focused Large Cap Growth ETF | $5,468,320 | $1,036,600 | 24.565 | 3,151 | NYSE AMS | Citadel | 0.65% | NYSE |
| TSME | 10/5/22 | Thrivent Small-Mid Cap ESG ETF | $32,893,381 | $30,313,121 | 13.3 | 67,218 | NYSE AMS | RBC | 0.65% | |
| FDG | 4/2/20 | American Century Focused Dynamic Growth ETF | $119,800,624 | $(15,707,742) | 10.8 | 23,686 | ActiveShares | Citadel | 0.45% | Cboe BZX |
| FLV | 4/2/20 | American Century Focused Large Cap Value ETF | $218,007,018 | $(3,843,319) | 10.995 | 8,087 | ActiveShares | Citadel | 0.42% | Cboe BZX |
| FBCG | 6/4/20 | Fidelity Blue Chip Growth ETF | $333,134,565 | $24,511,456 | 23.025 | 127,663 | Fidelity Proxy | GTS | 0.59% | Cboe BZX |
| FBCV | 6/4/20 | Fidelity Blue Chip Value ETF | $116,100,849 | $20,001,943 | 29.885 | 25,752 | Fidelity Proxy | GTS | 0.59% | Cboe BZX |
| FMIL | 6/4/20 | Fidelity New Millennium ETF | $80,885,759 | $19,510,415 | 36.12 | 14,491 | Fidelity Proxy | GTS | 0.59% | Cboe BZX |
| FGRO | 2/4/21 | Fidelity Growth Opportunities ETF | $69,751,655 | $39,191,328 | 14.195 | 161,376 | Fidelity Proxy | Citadel | 0.59% | Cboe BZX |
| FMAG | 2/4/21 | Fidelity Magellan ETF | $40,814,773 | $2,134,056 | 13.22 | 15,500 | Fidelity Proxy | RBC | 0.59% | Cboe BZX |
| FPRO | 2/4/21 | Fidelity Real Estate Investment ETF | $15,917,571 | $(314,917) | 10.665 | 5,378 | Fidelity Proxy | Citadel | 0.59% | Cboe BZX |
| FSMO | 2/4/21 | Fidelity Small/Mid-Cap Opportunities ETF | $25,514,739 | $(535,431) | 9.915 | 6,897 | Fidelity Proxy | RBC | 0.59% | Cboe BZX |
| FSST | 6/17/21 | Fidelity Sustainability U.S. Equity ETF | $6,508,608 | $1,869,656 | 13.905 | 1,329 | Fidelity Proxy | RBC | 0.59% | NYSE |
| FDWM | 6/17/21 | Fidelity Women's Leadership ETF | $2,451,929 | $235 | 16.15 | 503 | Fidelity Proxy | RBC | 0.59% | NYSE |
| TCHP | 8/5/20 | T. Rowe Price Blue Chip Growth ETF | $237,166,753 | $97,507,622 | 11.775 | 121,158 | T Rowe Proxy | Virtu | 0.57% | NYSE |
| TDVG | 8/5/20 | T. Rowe Price Dividend Growth ETF | $187,722,574 | $84,381,157 | 11.24 | 30,737 | T Rowe Proxy | RBC | 0.50% | NYSE |
| TEQI | 8/5/20 | T. Rowe Price Equity Income ETF | $99,604,644 | $50,803,368 | 11.36 | 17,520 | T Rowe Proxy | Virtu | 0.54% | NYSE |
| TGRW | 8/5/20 | T. Rowe Price Growth Stock ETF | $34,502,841 | $6,365,599 | 11.65 | 13,767 | T Rowe Proxy | RBC | 0.52% | NYSE |
| TSPA | 6/8/21 | T. Rowe Price U.S. Equity Research ETF | $21,306,313 | $3,540,992 | 11.275 | 2,478 | T Rowe Proxy | RBC | 0.52% | NYSE |
| IVDG | 12/22/20 | Invesco Focused Discovery Growth ETF | $589,690 | $(310,730) | 10.65 | 322 | Invesco Model | Citadel | 0.59% | Cboe BZX |
| IVSG | 12/22/20 | Invesco Select Growth ETF | $921,709 | $(1,820) | 10.685 | 335 | Invesco Model | Citadel | 0.48% | Cboe BZX |
| IVLC | 12/22/20 | Invesco US Large Cap Core ESG ETF | $5,381,511 | $(24,960) | 16.955 | 1,542 | Fidelity Proxy | Citadel | 0.48% | Cboe BZX |
| IVRA | 12/22/20 | Invesco Real Assets ESG ETF | $2,959,883 | $1,085,240 | 34.48 | 1,562 | Fidelity Proxy | Citadel | 0.59% | Cboe BZX |
| LOPP | 2/1/21 | Gabelli Love Our Planet & People ETF | $12,412,380 | $3,319,190 | 86.34 | 679 | ActiveShares | GTS | 0.90% | NYSE |
| GGRW | 2/16/21 | Gabelli Growth Innovators ETF | $2,051,000 | $(252,075) | 62.235 | 474 | ActiveShares | GTS | 0.90% | NYSE |
| GAST | 1/5/22 | Gabelli Asset ETF | $4,219,740 | $244,380 | 53.21 | 117 | ActiveShares | GTS | 0.90% | NYSE |
| GABF | 5/11/22 | Gabelli Financial Services Opportunities ETF | $5,215,140 | $261,400 | 81.045 | 264 | ActiveShares | GTS | 0.00% | NYSE |
| FRTY | 3/1/21 | Alger Mid Cap 40 ETF | $28,855,000 | $7,128,250 | 41.585 | 18,874 | ActiveShares | Virtu | 0.60% | NYSE |
| ATFV | 5/4/21 | Alger 35 ETF | $8,958,125 | $268,250 | 41.075 | 1,668 | ActiveShares | Virtu | 0.55% | NASDAQ |
| REIT | 2/26/21 | ALPS Active REIT ETF | $16,331,047 | $(4,502,900) | 43.085 | 5,139 | Blue Tractor | GTS | 0.68% | NYSE |
| STNC | 3/16/21 | Stance Equity ESG Large Cap Core ETF | $43,356,250 | $10,175,846 | 27.215 | 2,517 | Blue Tractor | GTS | 0.85% | NYSE |
| PFUT | 5/26/21 | Putnam Sustainable Future ETF | $6,559,758 | $927,053 | 36.165 | 2,001 | Fidelity Proxy | Virtu | 0.64% | NYSE |
| PLDR | 5/26/21 | Putnam Sustainable Leaders ETF | $5,745,040 | $6,663 | 11.645 | 303 | Fidelity Proxy | RBC | 0.59% | NYSE |
| PGRO | 5/26/21 | Putnam Focused Large Cap Growth ETF | $8,857,490 | $2,263,707 | 11.305 | 1,859 | Fidelity Proxy | RBC | 0.55% | NYSE |
| PVAL | 5/26/21 | Putnam Focused Large Cap Value ETF | $124,129,735 | $99,733,274 | 31.685 | 25,604 | Fidelity Proxy | Virtu | 0.55% | Cboe BZX |
| HFGO | 11/9/21 | Hartford Large Cap Growth ETF | $68,786,685 | $78,501,751 | 31.15 | 120,312 | Fidelity Proxy | Citadel | 0.59% | NYSE |
| SEMI | 3/30/22 | Columbia Seligman Semiconductor and Technology ETF | $11,829,567 | $9,448,100 | 36.35 | 9,132 | Fidelity Proxy | Virtu | 0.75% | NYSE |
| CAPE | 4/5/22 | DoubleLine Shiller CAPE U.S. Equities ETF | $168,382,060 | $178,955,600 | 16.8 | 98,808 | ActiveShares | Citadel | 0.65% | NYSE |
| FMCX | 4/25/22 | FMC Excelsior Focus Equity ETF | $67,485,600 | $708,700 | 52.13 | 923 | ActiveShares | GTS | 0.70% | NYSE |
| BYRE | 5/19/22 | Principal Real Estate Active Opportunities ETF | $4,742,012 | $5,497,348 | 24.105 | 1,861 | Fidelity Proxy | Virtu | 0.65% | NYSE |
| Total/Average | $4,603,500,089 | $764,329,697 | 23.46 | 1,217,149 | 0.61% |
Source: FactSet & NYSE Internal Database and Consolidated Tape Statistics as of 11/4/2022
*Simple average
October and November MTD Active ETF Launches
| Ticker | Name | Issuer | Launch Date | Asset Class | AUM |
|---|---|---|---|---|---|
| TSME | Thrivent Small-Mid Cap ESG ETF | Thrivent Financial | 10/5/22 | Equity | $32,893,381 |
| BRLN | BlackRock Floating Rate Loan ETF | Blackrock | 10/6/22 | Fixed Income | $20,178,000 |
| NSPL | NightShares 500 1x/1.5x ETF | Alphatrai Funds, Inc. | 10/6/22 | Equity | $1,546,825 |
| DSMC | Distillate Small/Mid Cash Flow ETF | Distillate Capital | 10/6/22 | Equity | $9,944,438 |
| YALL | God Bless America ETF | Toroso Investments | 10/11/22 | Equity | $23,470,260 |
| HFND | Unlimited HFND Multi-Strategy Return Tracker ETF | Toroso Investments | 10/11/22 | Alternatives | $3,055,470 |
| SDSI | American Century Short Duration Strategic Income ETF | American Century Investments | 10/13/22 | Fixed Income | $20,136,000 |
| BRNY | Burney U.S. Factor Rotation ETF | Alpha Architect | 10/14/22 | Equity | $136,358,585 |
| XCOR | FundX ETF | FundX Investment Group, LLC | 10/17/22 | Equity | $149,436,022 |
| XNAV | FundX Aggressive ETF | FundX Investment Group, LLC | 10/17/22 | Equity | $27,190,743 |
| BBLU | EA Bridgeway Blue Chip ETF | Alpha Architect | 10/17/22 | Equity | $209,340,269 |
| SHDG | Soundwatch Hedged Equity ETF | Soundwatch Capital LLC | 10/24/22 | Equity | $95,843,572 |
| NBCM | Neuberger Berman Commodity Strategy ETF | Neuberger Berman | 10/24/22 | Commodities | $214,648,098 |
| IQHI | IQ MacKay ESG High Income ETF | IndexIQ | 10/25/22 | Fixed Income | $25,336,300 |
| UYLD | Angel Oak UltraShort Income ETF | Angel Oak Capital Advisors, LLC | 10/25/22 | Fixed Income | $10,017,180 |
| THYF | T. Rowe Price U.S. High Yield ETF | T. Rowe Price Group, Inc. | 10/26/22 | Fixed Income | $21,653,070 |
| CGMU | Capital Group Municipal Income ETF | The Capital Group Companies | 10/27/22 | Fixed Income | $30,204,720 |
| CGSD | Capital Group Short Duration Income ETF | The Capital Group Companies | 10/27/22 | Fixed Income | $30,162,000 |
| CGMS | Capital Group U.S. Multi-Sector Income ETF | The Capital Group Companies | 10/27/22 | Fixed Income | $50,330,610 |
| BUCK | Simplify Stable Income ETF | Simplify Asset Management Inc. | 10/28/22 | Fixed Income | $1,255,000 |
| HIGH | Simplify Enhanced Income ETF | Simplify Asset Management Inc. | 10/28/22 | Fixed Income | $1,255,000 |
| DVAL | BrandywineGLOBAL - Dynamic US Large Cap Value ETF | Franklin Templeton | 10/31/22 | Equity | $180,810,111 |
| JUCY | Aptus Enhanced Yield ETF | Aptus Holdings LLC | 11/1/22 | Fixed Income | $2,493,000 |
| NVBT | AllianzIM U.S. Large Cap Buffer10 Nov ETF | Allianz | 11/1/22 | Equity | $4,893,440 |
| NVBW | AllianzIM U.S. Large Cap Buffer20 Nov ETF | Allianz | 11/1/22 | Equity | $4,942,000 |
| DFSU | Dimensional US Sustainability Core 1 ETF | Dimensional Holdings | 11/2/22 | Equity | $19,480,800 |
| DFSI | Dimensional International Sustainability Core 1 ETF | Dimensional Holdings | 11/2/22 | Equity | $20,426,880 |
| DFSE | Dimensional Emerging Markets Sustainability Core 1 ETF | Dimensional Holdings | 11/2/22 | Equity | $10,568,840 |
| BKGI | BNY Mellon Global Infrastructure Income ETF | The Bank of New York Mellon Corp. | 11/3/22 | Equity | $10,188,025 |
| INC | VanEck Dynamic High Income ETF | VanEck | 11/3/22 | Asset Allocation | $501,590 |
| EIPX | FT Energy Income Partners Strategy ETF | First Trust | 11/3/22 | Equity | $1,006,625 |
| RVRB | Reverb ETF | Penserra Capital Management LLC | 11/4/22 | Equity | $974,120 |
| ADPV | Adaptiv Select ETF | Client First Investment Management LLC | 11/4/22 | Equity | $250,250 |
| Total - 33 New ETFs | $1,370,791,224 |
Source: Factset as of 11/4/2022
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