JP Morgan Tackles Beta Space

Three launches signal a new dimension being added to the firm’s ETF lineup.

Today J.P. Morgan is taking a new direction with its ETF family by launching a lineup of plain-vanilla beta ETFs. The three funds offer broad, cap-weighted exposure to the U.S. REIT, Japan and Europe equity markets.

The funds, their tickers and expense ratios are as follows:

• JPMorgan BetaBuilders Japan ETF (BBJP), 0.19%
• JPMorgan BetaBuilders Europe ETF (BBEU), 0.09%
• JPMorgan BetaBuilders MSCI U.S. REIT ETF (BBRE), 0.11%

The ETFs list on the Cboe BZX exchange. Cboe Global Markets is the parent company of ETF.com.

Although J.P. Morgan is known primarily in ETFs for its alternative, smart-beta and active fixed-income strategies, this trio of plain-vanilla funds has been launched in response to client requests.

“We are fully committed to offering a diverse ETF lineup spanning across asset classes and leveraging our capabilities in beta, factor-based and active investing. These specific products have been developed to meet specific client demand,” said Jillian DelSignore, J.P. Morgan’s head of ETF distribution.

However, it does not appear that a full family of these types of funds is in the works.

“We see clients utilizing active, strategic beta and pure passive investments across their portfolios. Purely passive ETFs play an explicit role of limiting tracking error and minimizing cost,” she added. “The BetaBuilders ETFs will play that role, and are meant to complement our existing active and strategic beta ETFs. Any future product development would be based on client demand.”

International Funds

BBJP and BBEU both track indexes from Morningstar that are weighted by free-float-adjusted market capitalization and seek to cover 85% of each country’s markets. The Japan ETF’s index included 382 securities at the end of May, while the Europe ETF covers developed markets and had 533 securities as of the end of May, drawn from 16 countries.

BBJP is among the cheapest of the cap-weighted funds to cover Japan, but there are three that are cheaper by 10 basis points. The Franklin FTSE Japan ETF (FLJP), the Xtrackers Japan JPX-Nikkei 400 Equity ETF (JPN) and the Franklin FTSE Japan Hedged ETF (FLJH) all come with a price tag of 0.09%.

Meanwhile, BBEU matches the price of the Franklin FTSE Europe ETF (FLEE), the cheapest fund in the developed Europe space.

US REITs

BBRE covers publicly traded U.S.-listed equity REITs via an index from MSCI. Components must meet size and liquidity requirements. As of the end of March, the index included 152 securities. It should be noted that BBRE’s underlying index is specifically focused on REITs and not on real estate equities in general as some other funds are.

The new ETF is also among the cheapest in the space, with just three others coming in at lower price points. The Schwab U.S. REIT ETF (SCHH) charges an expense ratio of 0.07%, while the iShares Core U.S. REIT ETF (USRT) and the Fidelity MSCI Real Estate Index ETF (FREL) charge 0.08%.

BBRE is also 1 basis point cheaper than the $30 billion Vanguard Real Estate ETF (VNQ), which, until recently, tracked the exact same index before beginning to shift to a broader real estate focus.

“We always seek to offer access to our capabilities at a competitive price and this is no different,” DelSignore noted. “JPM can offer the advantage of our scale to deliver beta products like the BetaBuilder ETFs at a very competitive price.”

Contact Heather Bell at [email protected]