JP Morgan Japan ETF Raking In Record Assets

July 23, 2018

The race to $2 billion is on.

On Friday, the JPMorgan BetaBuilders Japan ETF (BBJP) took in $144 million in new investor assets, bringing the total net inflows into the fund over the past 10 days to $1.16 billion.

 

 

The influx of new money has led to a tremendous 10,900% growth in assets under management for BBJP over the past week, which now stand at $1.18 billion.

As we reported Friday, BBJP is the second-fastest ETF to reach $1 billion, after the SPDR Gold Trust (GLD), which struck that record in three days (read: "ETF Of The Week: JPMorgan's Japan Fund").

But while GLD took another two months to reach $2 billion in assets under management, if the supercharged pace of flows into BBJP continues, then J.P. Morgan's fund could hit $2 billion by the end of next week.

Brisk Flows In 2 Weeks

Though somewhat overshadowed by BBJP, flows into the JPMorgan BetaBuilders Europe ETF (BBEU) have been no less impressive. That ETF has brought in $325 million in net flows over the past two weeks.

BBJP and BBEU both launched in June, along with a third fund, the JPMorgan BetaBuilders MSCI U.S. REIT ETF (BBRE). None of the funds had attracted many assets beyond seed capital, however, until July 12, when BBEU saw inflows of $73 million (read: "Massive Flows Into New JPMorgan ETFs").

The next day, $198 million of new money entered BBJP, then $456 million the following Monday. Over the next week, $509 million flowed into the ETF.

BBEU, meanwhile, saw $252 million in new net money since this stretch of mega-flows began.

Intriguingly, though, the third BetaBuilder ETF, BBRE, has seen no inflows over the same time period.

EWJ Bleeding Cash

Meanwhile, the iShares MSCI Japan ETF (EWJ) has bled cash since the inflows into JPMorgan's BetaBuilders ETFs has begun. Since July 13—the day money first started pouring into BBJP—EWJ has seen net outflows of $693 million.

 

Charts sources: ETF.com, FactSet; data as of July 23, 2018

 

BBJP and EWJ hold very similar portfolios of Japanese large and midcap equities. But BBJP's expense ratio, 0.19%, clocks in at 30 basis points less than EWJ's.

With $17.7 billion in assets under management, EWJ is still substantially larger than BBJP. Yet its continued dominance in the segment is by no means guaranteed. After all, it wouldn't be the first time a much cheaper rival chipped away at an established fund's market share.

For example, GLD, once the dominant gold fund on the market, has seen its piece of the market steadily eroded by substantially cheaper competitors from iShares and GraniteShares. In 2010, GLD accounted for roughly 88% of all gold ETF assets; today, it accounts for just 56%.

Why Japan?

Still, the question remains: Of the 27 funds in J.P. Morgan's stable, why is it a Japanese equity ETF has attracted such supersized inflows?

One possible clue: On July 19, J.P. Morgan strategists published a note describing how the Japanese yen was increasingly trading in lockstep with U.S. equities, a correlation that resembles a similar relationship that emerged in September 2017, just before the Japanese stock market surged 13%.

Contact Lara Crigger at [email protected]

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