ETF Of The Week: JPMorgan's Japan Fund

Newly launched 'BBJP' continues to see massive inflows.
 

On Wednesday, we covered the breathtaking flows that have entered two J.P. Morgan ETFs, the JPMorgan BetaBuilders Japan ETF (BBJP) and the JPMorgan BetaBuilders Europe ETF (BBEU), over the past week rRead: "Massive Flows Into New JPMorgan ETFs").

Turns out, BBJP wasn't quite done attracting new money. That same day, BBJP brought in another $173 million, bringing the total amount of new investment assets for the fund for the seven days prior to $827 million.

If this pace keeps up, BBJP could soon be on track to become the second-fastest ETF to reach $1 billion in assets under management. The current record is held by the Pimco Total Return ETF (BOND), which hit $1 billion in three months.

BBJP launched in June and now has $844.6 million in assets, meaning BBJP has two months and only $155.4 million left to go before breaking the psychological $1 billion barrier.

EWJ Bleeding Assets

At least some of BBJP's new money has likely come out of the other major vanilla Japanese equity ETF on the market. The iShares MSCI Japan ETF (EWJ), which has a portfolio remarkably similar to BBJP's but which costs 0.30% more, lost $345 million since the massive inflows into BBJP began last week.

Since BBJP's inception on June 15, EWJ has lost $1.4 billion.

Yet cost does not seem to be BBJP's only draw for investors. The Franklin FTSE Japan ETF (FLJP), which is 0.10% cheaper than BBJP, has attracted no new net assets since the big inflows into BBJP began.

Nor are BBJP's inflows tied to some greater influx into Japanese ETFs. Aside from BBJP, Japan ETFs as a whole have seen outflows of $470 million over the past week.

Rather, BBJP's mega flows are likely a case of one or a handful of big asset managers rotating their allocation from a more expensive instrument and into the cheaper, yet still fairly liquid BBJP. 

Vanilla Japan Exposure

BBJP tracks a market-cap weighted index of Japanese stocks listed on both the Tokyo and Nagoya Stock Exchanges, covering about 85% of the investible universe.

It can also use futures, forwards and other derivatives to help track its index more closely. That helps the portfolio managers somewhat mitigate the potential for large premiums and discounts, which can arise since Tokyo and New York's trading hours don't overlap.

The largest portion of BBJP's portfolio (22%) is in industrials, followed by consumer discretionary firms (20%) and information technology companies (12%). The fund's top three holdings are Toyota Motor Corp. (5%), Mitsubishi UFJ Financial Group (2%) and Softbank Group (2%).

BBJP does not have much of a track record yet, but on a one-month basis, it has underperformed both EWJ and FLJP, dropping 2.6%, compared to EWJ's 2.4% drop and FLJP's 2.5%.

Contact Lara at [email protected]