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Q&A with J.P. Morgan

November 10, 2022
Bryon Lake

Global Head of ETF Solutions, J.P. Morgan

This week we sit down with Bryon Lake at J.P. Morgan to discuss their rapid growth and position in the active ETF market.

JPMorgan has a history of innovation within the asset management industry, having launched the first U.S. investment trust in 1873, the firm’s first ETF in 2014 and first active ETF in 2016. The firm now manages over $80 billion in ETF assets, including nearly $50 billion in active ETF assets and the industry’s largest active ETF, NYSE Arca-listed JPST. In the last three years your firm has launched 15 new active ETFs that have accumulated nearly $22 billion. What opportunities for innovation are you seeing in today’s active ETF market?

When ETFs were first introduced 30 years ago, they were synonymous with passive investing, but the last five years have shown huge adoption and flows for active ETFs. In fact, 700 new active ETFs have launched since 2017, translating to over $324 billion in total assets. While active ETFs account for 5% of assets, they make up over 13% of flows YTD. With active flows at $67 billion year-to-date, it’s clear that this shift towards active strategies is not slowing down anytime soon.

In addition to active ETFs, the model’s ecosystem is also experiencing increased investor adoption. Models now represent a nearly five trillion-dollar industry in the United States and ETFs play an essential role in helping advisors and individuals customize and build all types of models.

As client needs evolve, J.P. Morgan is developing new solutions to address these needs as we continue to expand and innovate across our current capabilities. This is demonstrated by the fact that this year we completed four mutual fund to ETF conversions, resulting in $10B added AUM. We’re also exploring opportunities for additional conversions in the future.

As a global asset manager, what benefits and/or nuances come with operating an active ETF product line-up bring compared to other investment wrappers (i.e., Mutual Funds, CITs, etc.)?

As a global asset manager, J.P. Morgan Asset Management offers numerous strategies across many different product wrappers. One of our greatest differentiators is our ability to offer tailored strategies that give investors unique access to active manager portfolio strategies within the ETF vehicle.

In addition to active stock selection, active ETFs allow investors to leverage proprietary investment capabilities, mitigate market risk and achieve outperformance versus the benchmark, all within the ETF wrapper. This kind of unique flexibility delivers transparency, tax efficiency, diversification, liquidity benefits and externalized costs, especially compared to other investment wrappers.

JPMorgan recently filed for exemptive relief to launch ETFs that leverage the NYSE Active Proxy Structure to provide flexibility for managers. Why offer both transparent active ETFs and ETFs utilizing the NYSE Active Proxy Structure? Any early observations on how this part of the active ETF market is evolving?

Our preference is to deliver transparent ETFs when we can. While we have yet to launch a proxy ETF, as our business continues to grow and evolve, there may be opportunities to deliver strategies that are better suited in a proxy.

We have a wide variety of managers who have a strong track record managing multi-billion-dollar mutual funds or separately managed accounts that are looking to break into ETFs. We foresee the Active Proxy structure gaining a lot of traction going forward, allowing more managers to come into the ring without jeopardizing the secret sauce of their investment strategies.

While transparent active ETFs are still incredibly popular and successful for a myriad of reasons, semi-transparent ETFs are structured in a way to keep stock picks confidential, thus providing investors with access to active management while reducing the risk of front running. Active semi-transparent structures are initially limited to equity ETFs, but in the future, we foresee these capabilities extending to other asset classes.

What are the key considerations for investors looking into actively managed ETFs?

As previously mentioned, active ETFs are an innovative approach to delivering the intentional outcomes of active portfolio management such as income, outcome and alpha, while providing the numerous benefits offered by the ETF wrapper.

There are a number of reasons we believe active management adds value. At J.P. Morgan, we have over 1,100 investment professionals and dedicate over $250m annually to investment research, but at the heart of it, we seek to generate alpha by differentiating ourselves from both the benchmark and our peers. To us, one of the biggest considerations for an investor should be assessing the quality of the investment team and the track record of the strategy. Investors benefit from the skill of an experienced portfolio manager who can effectively maneuver positions, execute on fundamental research, and invest with intention.

Lastly, what guidance would you provide sponsors as they consider expanding their product offerings to include actively managed ETFs?

Actively managed ETFs are becoming more prevalent, but we are just getting started. There are more tools than ever for investors to build their ideal portfolio within the ETF landscape. Exchanges have always been the crucial meeting place for investors, and we are excited to continue our relationship with the NYSE, where we have 27 J.P. Morgan ETFs listed with nearly $50 billion in AUM, including our largest active fixed income ETF, JPMorgan Ultra-Short Income ETF (JPST) and our largest active equity ETF, JPMorgan Equity Premium Income ETF (JEPI).

Flexibility and reliability are crucial when expanding product offerings and the NYSE’s model is a best-in-class solution that provides our portfolio managers with a simple and flexible approach to basket construction and portfolio protection, ultimately leading to superior market quality for our clients. Whether its active or passive, J.P. Morgan’s main priority is to offer premier solutions in a premier way.

Active ETF Stat Pack

# of Issuers191
# of New Issuers 202244
# of ETFs925AUM ($B)$324.30
# of New Launches 20222033 Yr AUM CAGR52%
Avg. ER0.45%5 Yr AUM CAGR51%
Cash FlowTrading
YTD Cash Flow ($B)$66.67YTD ADV (Shares) 132,628,934
3 Yr Cash Flow$221.99YTD ADV ($)$5.18 B
5 Yr Cash Flow$276.16YTD Avg. Spread (bps)*32.85

Source: Factset & NYSE Internal Database and Consolidated Tape Statistics as of 11/4/2022

*Simple average

Active, Semi-Transparent Update

TickerInceptionNameAUMYTD Flows30 Day Median Spread (bps)ADV (shares)StructureLMMExpense RatioListing Venue
EQOP9/17/20Natixis U.S. Equity Opportunities ETF$8,820,146$1,421,0798.31777NYSE AMSCitadel0.85%NYSE
VNSE9/17/20Natixis Vaughan Nelson Select ETF$9,538,049$6,456,3248.431,842NYSE AMSCitadel0.80%NYSE
VNMC9/17/20Natixis Vaughan Nelson Mid Cap ETF$7,401,957$60212.12525NYSE AMSCitadel0.85%NYSE
ESGA7/15/20American Century Sustainable Equity ETF$101,984,139$(28,301,778)10.9211,824NYSE AMSCitadel0.39%NYSE
MID7/15/20American Century Mid Cap Growth Impact ETF$22,956,243$5,618,6269.984,514NYSE AMSCitadel0.45%NYSE
ESGY7/1/21American Century Sustainable Growth ETF$5,891,976$1,144,3286.435379NYSE AMSCitadel0.39%NYSE
NDVG8/5/21Nuveen Dividend Growth ETF$7,487,904$1,928,1667.783,791NYSE AMSCitadel0.64%NYSE
NSCS8/5/21Nuveen Small Cap Select ETF$5,389,462$24,16610.99434NYSE AMSCitadel0.85%NYSE
NWLG8/5/21Nuveen Winslow Large-Cap Growth ESG ETF$4,326,575$226,0058.265,075NYSE AMSCitadel0.64%NYSE
NUGO9/28/21Nuveen Growth Opportunities ETF$2,160,572,803$7,336,4017.59236,531NYSE AMSCitadel0.55%NYSE
SAEF11/16/21Schwab Ariel ESG ETF$11,346,650$6,138,70037.1053,535NYSE AMSFlow Traders0.59%NYSE
IWLG6/23/22IQ Winslow Large Cap Growth ETF$12,461,850$8,138,67024.7156,937NYSE AMSCitadel0.60%NYSE
IWFG6/23/22IQ Winslow Focused Large Cap Growth ETF$5,468,320$1,036,60024.5653,151NYSE AMSCitadel0.65%NYSE
TSME10/5/22Thrivent Small-Mid Cap ESG ETF$32,893,381$30,313,12113.367,218NYSE AMSRBC0.65%
FDG4/2/20American Century Focused Dynamic Growth ETF$119,800,624$(15,707,742)10.823,686ActiveSharesCitadel0.45%Cboe BZX
FLV4/2/20American Century Focused Large Cap Value ETF$218,007,018$(3,843,319)10.9958,087ActiveSharesCitadel0.42%Cboe BZX
FBCG6/4/20Fidelity Blue Chip Growth ETF$333,134,565$24,511,45623.025127,663Fidelity ProxyGTS0.59%Cboe BZX
FBCV6/4/20Fidelity Blue Chip Value ETF$116,100,849$20,001,94329.88525,752Fidelity ProxyGTS0.59%Cboe BZX
FMIL6/4/20Fidelity New Millennium ETF$80,885,759$19,510,41536.1214,491Fidelity ProxyGTS0.59%Cboe BZX
FGRO2/4/21Fidelity Growth Opportunities ETF$69,751,655$39,191,32814.195161,376Fidelity ProxyCitadel0.59%Cboe BZX
FMAG2/4/21Fidelity Magellan ETF$40,814,773$2,134,05613.2215,500Fidelity ProxyRBC0.59%Cboe BZX
FPRO2/4/21Fidelity Real Estate Investment ETF$15,917,571$(314,917)10.6655,378Fidelity ProxyCitadel0.59%Cboe BZX
FSMO2/4/21Fidelity Small/Mid-Cap Opportunities ETF$25,514,739$(535,431)9.9156,897Fidelity ProxyRBC0.59%Cboe BZX
FSST6/17/21Fidelity Sustainability U.S. Equity ETF$6,508,608$1,869,65613.9051,329Fidelity ProxyRBC0.59%NYSE
FDWM6/17/21Fidelity Women's Leadership ETF$2,451,929$23516.15503Fidelity ProxyRBC0.59%NYSE
TCHP8/5/20T. Rowe Price Blue Chip Growth ETF$237,166,753$97,507,62211.775121,158T Rowe ProxyVirtu0.57%NYSE
TDVG8/5/20T. Rowe Price Dividend Growth ETF$187,722,574$84,381,15711.2430,737T Rowe ProxyRBC0.50%NYSE
TEQI8/5/20T. Rowe Price Equity Income ETF$99,604,644$50,803,36811.3617,520T Rowe ProxyVirtu0.54%NYSE
TGRW8/5/20T. Rowe Price Growth Stock ETF$34,502,841$6,365,59911.6513,767T Rowe ProxyRBC0.52%NYSE
TSPA6/8/21T. Rowe Price U.S. Equity Research ETF$21,306,313$3,540,99211.2752,478T Rowe ProxyRBC0.52%NYSE
IVDG12/22/20Invesco Focused Discovery Growth ETF$589,690$(310,730)10.65322Invesco ModelCitadel0.59%Cboe BZX
IVSG12/22/20Invesco Select Growth ETF$921,709$(1,820)10.685335Invesco ModelCitadel0.48%Cboe BZX
IVLC12/22/20Invesco US Large Cap Core ESG ETF$5,381,511$(24,960)16.9551,542Fidelity ProxyCitadel0.48%Cboe BZX
IVRA12/22/20Invesco Real Assets ESG ETF$2,959,883$1,085,24034.481,562Fidelity ProxyCitadel0.59%Cboe BZX
Gabelli Love Our Planet & People ETF
GGRW2/16/21Gabelli Growth Innovators ETF$2,051,000$(252,075)62.235474ActiveSharesGTS0.90%NYSE
GAST1/5/22Gabelli Asset ETF$4,219,740$244,38053.21117ActiveSharesGTS0.90%NYSE
GABF5/11/22Gabelli Financial Services Opportunities ETF$5,215,140$261,40081.045264ActiveSharesGTS0.00%NYSE
FRTY3/1/21Alger Mid Cap 40 ETF$28,855,000$7,128,25041.58518,874ActiveSharesVirtu0.60%NYSE
ATFV5/4/21Alger 35 ETF$8,958,125$268,25041.0751,668ActiveSharesVirtu0.55%NASDAQ
REIT2/26/21ALPS Active REIT ETF$16,331,047$(4,502,900)43.0855,139Blue TractorGTS0.68%NYSE
STNC3/16/21Stance Equity ESG Large Cap Core ETF$43,356,250$10,175,84627.2152,517Blue TractorGTS0.85%NYSE
PFUT5/26/21Putnam Sustainable Future ETF$6,559,758$927,05336.1652,001Fidelity ProxyVirtu0.64%NYSE
PLDR5/26/21Putnam Sustainable Leaders ETF$5,745,040$6,66311.645303Fidelity ProxyRBC0.59%NYSE
PGRO5/26/21Putnam Focused Large Cap Growth ETF$8,857,490$2,263,70711.3051,859Fidelity ProxyRBC0.55%NYSE
PVAL5/26/21Putnam Focused Large Cap Value ETF$124,129,735$99,733,27431.68525,604Fidelity ProxyVirtu0.55%Cboe BZX
HFGO11/9/21Hartford Large Cap Growth ETF$68,786,685$78,501,75131.15120,312Fidelity ProxyCitadel0.59%NYSE
SEMI3/30/22Columbia Seligman Semiconductor and Technology ETF$11,829,567$9,448,10036.359,132Fidelity ProxyVirtu0.75%NYSE
CAPE4/5/22DoubleLine Shiller CAPE U.S. Equities ETF$168,382,060$178,955,60016.898,808ActiveSharesCitadel0.65%NYSE
FMCX4/25/22FMC Excelsior Focus Equity ETF$67,485,600$708,70052.13923ActiveSharesGTS0.70%NYSE
BYRE5/19/22Principal Real Estate Active Opportunities ETF$4,742,012$5,497,34824.1051,861Fidelity ProxyVirtu0.65%NYSE

Source: FactSet & NYSE Internal Database and Consolidated Tape Statistics as of 11/4/2022

*Simple average

October and November MTD Active ETF Launches

TickerNameIssuerLaunch DateAsset ClassAUM
TSMEThrivent Small-Mid Cap ESG ETFThrivent Financial10/5/22Equity$32,893,381
BRLNBlackRock Floating Rate Loan ETFBlackrock10/6/22Fixed Income$20,178,000
NSPLNightShares 500 1x/1.5x ETFAlphatrai Funds, Inc.10/6/22Equity$1,546,825
DSMCDistillate Small/Mid Cash Flow ETFDistillate Capital10/6/22Equity$9,944,438
YALLGod Bless America ETFToroso Investments10/11/22Equity$23,470,260
HFNDUnlimited HFND Multi-Strategy Return Tracker ETFToroso Investments10/11/22Alternatives$3,055,470
SDSIAmerican Century Short Duration Strategic Income ETFAmerican Century Investments10/13/22Fixed Income$20,136,000
BRNYBurney U.S. Factor Rotation ETFAlpha Architect10/14/22Equity$136,358,585
XCORFundX ETFFundX Investment Group, LLC10/17/22Equity$149,436,022
XNAVFundX Aggressive ETFFundX Investment Group, LLC10/17/22Equity$27,190,743
BBLUEA Bridgeway Blue Chip ETFAlpha Architect10/17/22Equity$209,340,269
SHDGSoundwatch Hedged Equity ETFSoundwatch Capital LLC10/24/22Equity$95,843,572
NBCMNeuberger Berman Commodity Strategy ETFNeuberger Berman10/24/22Commodities$214,648,098
IQHIIQ MacKay ESG High Income ETFIndexIQ10/25/22Fixed Income$25,336,300
UYLDAngel Oak UltraShort Income ETFAngel Oak Capital Advisors, LLC10/25/22Fixed Income$10,017,180
THYFT. Rowe Price U.S. High Yield ETFT. Rowe Price Group, Inc.10/26/22Fixed Income$21,653,070
CGMUCapital Group Municipal Income ETFThe Capital Group Companies10/27/22Fixed Income$30,204,720
CGSDCapital Group Short Duration Income ETFThe Capital Group Companies10/27/22Fixed Income$30,162,000
CGMSCapital Group U.S. Multi-Sector Income ETFThe Capital Group Companies10/27/22Fixed Income$50,330,610
BUCKSimplify Stable Income ETFSimplify Asset Management Inc.10/28/22Fixed Income$1,255,000
HIGHSimplify Enhanced Income ETFSimplify Asset Management Inc.10/28/22Fixed Income$1,255,000
DVALBrandywineGLOBAL - Dynamic US Large Cap Value ETFFranklin Templeton10/31/22Equity$180,810,111
JUCYAptus Enhanced Yield ETFAptus Holdings LLC11/1/22Fixed Income$2,493,000
NVBTAllianzIM U.S. Large Cap Buffer10 Nov ETFAllianz11/1/22Equity$4,893,440
NVBWAllianzIM U.S. Large Cap Buffer20 Nov ETFAllianz11/1/22Equity$4,942,000
DFSUDimensional US Sustainability Core 1 ETFDimensional Holdings11/2/22Equity$19,480,800
DFSIDimensional International Sustainability Core 1 ETFDimensional Holdings11/2/22Equity$20,426,880
DFSEDimensional Emerging Markets Sustainability Core 1 ETFDimensional Holdings11/2/22Equity$10,568,840
BKGIBNY Mellon Global Infrastructure Income ETFThe Bank of New York Mellon Corp.11/3/22Equity$10,188,025
INCVanEck Dynamic High Income ETFVanEck11/3/22Asset Allocation$501,590
EIPXFT Energy Income Partners Strategy ETFFirst Trust11/3/22Equity$1,006,625
RVRBReverb ETFPenserra Capital Management LLC11/4/22Equity$974,120
ADPVAdaptiv Select ETFClient First Investment Management LLC11/4/22Equity$250,250
Total - 33 New ETFs$1,370,791,224

Source: Factset as of 11/4/2022

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