Odds & Ends: JPMorgan Switching 3 Active ETFs to Passive

In what was a quiet week for the exchange-traded fund industry, JPMorgan Chase signaled an interesting change to three of its ETFs. The currently actively managed funds will adopt indexes at the beginning of February 2023, among other changes.  

The $1.2 billion JPMorgan U.S. Aggregate Bond ETF (JAGG) will change its name to the JPMorgan BetaBuilders U.S. Aggregate Bond ETF, and it will adopt the Bloomberg U.S. Aggregate Bond Index. Its ticker will change to BBAG.  

JAGG’s performance has tracked closely with that of the $81.8 billion plain vanilla iShares Core U.S. Aggregate Bond ETF (AGG) over the last 12 months, and has actually trailed it slightly during that period. JPMorgan is additionally reducing JAGG’s expense ratio from 0.07% to 0.03%, bringing it into alignment with what AGG charges. 

The $43.3 million JPMorgan Corporate Bond Research Enhanced ETF (JIGB) will change its name to the JPMorgan BetaBuilders USD Investment Grade Corporate Bond ETF and adopt the Bloomberg U.S. Corporate Bond Index. It will also change its ticker to BBCB and lower its expense ratio from 0.14% to 0.09%.  

Although JIGB has outperformed the $37.7 billion plain vanilla iShares iBoxx USD Investment Grade Corporate Bond ETF (LQD) during the 12-month period, it has seen outflows during that time span, while LQD has pulled in $6.5 billion. LQD has an expense ratio of 0.04%.  

The $416.7 million JPMorgan High Yield Research Enhanced ETF (JPHY) will change its name to the JPMorgan BetaBuilders USD High Yield Corporate Bond ETF and its index to the ICE BofA U.S. High Yield Total Return Index. It also will switch its ticker to BBHY and reduce its expense ratio from 0.24% to 0.15%.  

The $18.1 billion iShares iBoxx USD High Yield Corporate Bond ETF (HYG), with an expense ratio of 0.48%, is twice as expensive as JPHY’s current management fees and it has underperformed JPHY slightly during the past 12 months. However, HYG has seen $2 billion in inflows during the same time period, while JPHY has lost nearly $975 million.  

JPMorgan looks to be tweaking these three fixed income funds to align more with its largest direct competitors, which are all passively managed, multibillion-dollar ETFs. 

Launches 

It was a fairly normal week for launches, with 10 new funds going live on U.S. exchanges. Among them was the Q3 All-Season Active Rotation ETF (QVOY), which rolled out on Thursday on Cboe Global Markets with an expense ratio of 1.10%.  

Newcomer Q3 Asset Management launched an actively managed multi-asset-class ETF that invests primarily in other investment companies such ETFs, mutual funds and closed-end funds. It uses a quantitative approach that selects holdings based mainly on relative strength for four equally weighted sleeves—core equity, active equity, bonds and alternatives—according to the fund’s prospectus.  

Invesco debuted four actively managed fixed income ETFs on Friday on Cboe Global Markets. The new funds are as follows:  

• Invesco Short Duration Bond ETF (ISDB) 
• Invesco AAA CLO Floating Rate Note ETF (ICLO) 
• Invesco Municipal Strategic Income ETF (IMSI) 

• Invesco High Yield Select ETF (HIYS) 

ISDB can invest in a range of fixed income securities and will target a dollar-weighted average portfolio maturity and duration between one and three years, according to its prospectus. It comes with an expense ratio of 0.35%.  

ICLO invests in very high quality floating rate note securities issued by collateralized obligations, its prospectus says. The fund comes with an expense ratio of 0.26%.  

IMSI focuses on income and invests primarily in municipal bonds that are exempt from federal income taxes. The fund will look to target a weighted average portfolio duration that is less than 7.5 years. Between half and 65% of the portfolio will be invested in low or medium quality municipal debt, though some of those can be considered investment grade by ratings agencies. The fund has an expense ratio of 0.50%. 

HIYS will invest primarily in junk bonds representing a range of types of debt securities. It has an expense ratio of 0.48%.  

Friday also saw the launch of the actively managed TrueShares Eagle Global Renewable Energy Income ETF (RNWZ), which will primarily invest in the equities of renewable energy infrastructure companies based on a wide range of criteria and analysis. The prospectus notes that the fund managers expect it to have significant exposure to Europe in its portfolio. RNWZ has an expense ratio of 0.75% and lists on the NYSE Arca. 

Closures 

The past week also saw the first closure announcements for next year, with PGIM looking to shutter its PGIM Quant Solutions Strategic Alpha International Equity ETF (PQIN) as of the close of trading on Jan. 9, 2023.  

IndexIQ will liquidate five of its smallest ETFs, including four of its hedge fund strategies, on or around Feb. 7. All of the funds in question launched between 2009 and 2017. They include the following: 

• IQ S&P High Yield Low Volatility Bond ETF (HYLV) 
• IQ Hedge Macro Tracker ETF (MCRO) 
• IQ Hedge Event-Driven Tracker ETF (QED) 
• IQ Hedge Long/Short Tracker ETF (QLS) 
• IQ Hedge Market Neutral Tracker ETF (QMN) 

Other Changes 

Vident will change the names of two of its funds as of Dec. 31. The Vident Core U.S. Bond Strategy ETF (VBND) will become the Vident U.S. Bond Strategy ETF, while the Vident International Equity Fund (VIDI) will become the Vident International Equity Strategy ETF. 

Finally,  on Thursday, the SPDR SSGA Gender Diversity Index ETF (SHE) changed its name to the SPDR MSCI USA Gender Diversity ETF and its index from the SSGA Gender Diversity Index to MSCI USA Gender Diversity Select Index SSGA Gender Diversity Index to the MSCI USA Gender Diversity Select Index. 

Contact Heather Bell at [email protected]