In a somewhat surprising move, J.P. Morgan said it will be shutting down its four ETFs that implement alternative strategies, as well as two of its multifactor funds.
The three funds scheduled to cease trading on June 12 and their assets under management include the following:
- JPMorgan Diversified Return Europe Equity ETF (JPEU), $14.9 million
- JPMorgan Long/Short ETF (JPLS), $22.4 million
- JPMorgan Managed Futures Strategy ETF (JPMF), $38.7 million
Another three ETFs are scheduled to cease trading on June 19:
- JPMorgan Diversified Return Global Equity ETF (JPGE), $63.4 million
- JPMorgan Diversified Alternatives ETF (JPHF), $44.8 million
- JPMorgan Event Driven ETF (JPED), $25.5 million
Behind The Shutdowns
The first thing you might notice about these closures is that three of the funds have more than $50 million in assets under management. That’s generally the amount at which an ETF is considered safe from closure risk, which is why this move is surprising.
But keep in mind that JPMorgan Chase is the largest financial institution in the world, with trillions in assets under management. While $50 million is a victory for a small issuer trying to break into the market for the first time, these assets are essentially a rounding error to the firm’s big picture.
But also, J.P. Morgan has always been a prominent active manager, and the performance of the actively managed alternatives ETFs, frankly, has been less than great. All four trail the SPDR S&P 500 ETF Trust (SPY) significantly, lagging their respective segment benchmarks, and ranking in the bottom half of their segment—Alternatives: Absolute Return—when it comes to recent performance.
While the two multifactor ETFs have mostly kept up with comparable funds, it could be that J.P. Morgan is going in a different direction with its equity ETFs. Just this week, it rolled out its first two actively managed equity ETFs covering domestic income and international growth securities.
These ETF shutdowns further contribute to the unprecedented level of ETF closures seen in 2020. Completed closures stand at nearly 110 funds so far this year. In most years, that would be considered a usual number of shutdowns for a 12-month period.
But 2020 has been unusual in many ways. In February, Invesco shut down more than 40 of its ETFs after multiple acquisitions led to redundancies in its lineup. And then the market crashed spectacularly in March, with volatility prompting multiple leveraged and inverse exchange-traded products to abruptly shut down, with little warning to investors.
In the aftermath, additional ETFs have closed as assets have shrunk, with the overall ETF space losing roughly $400 billion in assets since the start of the year.
Contact Heather Bell at [email protected]