JP Morgan Biggest Buyer Of Its ETFs

November 13, 2018

Late last week, J.P. Morgan filed its most recent 13-F, which revealed that the record inflows pouring into several of the firm's ETFs this past summer had come from the firm's existing clients.

Industry watchers had suspected—but not been able to confirm—that the billions of dollars flowing into three BetaBuilders ETFs were in fact due to J.P. Morgan shifting its existing client assets, in a phenomenon Bloomberg's Eric Balchunas calls "bring your own assets."

The firm's latest 13-F filings, which are dated Sept. 30 but were filed on Nov. 7, confirm that a "BYOA" shift is in fact exactly what happened.

96% Of ‘BBJP’ Owned In-House

This summer, J.P. Morgan made a splash when it accrued more than $1 billion in the JPMorgan BetaBuilders Japan ETF (BBJP) in just 10 days. The fund continued to pull in money throughout the second and third quarters, reaching almost $2 billion by Sept. 30 (read: "Massive Flows Into New JP Morgan ETFs").

According to WhaleWisdom, as of Sept. 30, J.P. Morgan Chase & Co. reported owning 76.1 million shares of BBJP. Those shares are worth $1.9 billion.

Meanwhile, J.P. Morgan's fact sheet for BBJP, which is dated the same day, reports assets under management for the fund of $1.97 billion. 

That means that as of Sept. 30, more than 96% of BBJP was owned by the fund's issuer.

JP Morgan Snaps Up ‘BBEU,’ ‘BBCA’

It's a similar story for the JPMorgan BetaBuilders Europe ETF (BBEU) and the JPMorgan BetaBuilders Canada ETF (BBCA), both of which attracted more than $1 billion over the summer. BBCA, in fact, remains the second-fastest ETF to cross $1 billion in assets ever (read: "New Canada ETF 2nd Fastest To $1B").

As of Sept. 30, J.P. Morgan Chase held 55.1 million shares of BBEU, worth $1.35 billion. The fund's fact sheet reported BBEU had $1.35 billion in assets under management as of the same date.

In other words, J.P. Morgan owns virtually all of BBEU, with some room for rounding differences.

In the case of BBCA, the firm's Canada ETF, J.P. Morgan reported owning 58.9 million shares worth $1.45 billion. The fund itself, meanwhile, was worth $1.49 billion, which means that as of Sept. 30, J.P. Morgan held 97% of BBCA.

Shifting From More Expensive Options

Why would J.P. Morgan move its clients to these ETFs? It's likely to get them out of competitors' funds, particularly more expensive offerings from iShares with similar portfolios.

For example, in the quarter ending Sept. 30, J.P. Morgan also sold roughly 4.3 million shares of the iShares MSCI Japan Index ETF (EWJ), a competitor to BBJP that costs more than twice as much. (BBJP has an expense ratio of 0.19%, while EWJ costs 0.49%.)

Despite the sale, J.P. Morgan still owns roughly 13% of EWJ's total shares outstanding, or 40.3 million shares worth $2.4 billion, according to WhaleWisdom.

Between June 30 and Sept. 30, the period the 13-F filing covers, BBJP took in $1.89 billion in new net assets, whereas EWJ lost $2.38 billion.

What Next?

Of course, 13-F filings are reported on a lag, meaning that by the time the data are published, it is already several months out of date. As such, there is no way to tell what J.P. Morgan has done with BBJP, BBEU or BBCA since Oct. 1.

For that information, we'll just have to wait until the next round of 13-F filings goes live.

Contact Lara Crigger at [email protected]

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