JPMorgan Goes Low In Search Of ETF Growth

JPMorgan Chase & Co.'s JPM JPMorgan Asset Management (JPAM) unit entered the exchange traded funds business late relative to larger rivals. The firm's willingness to compete with entrenched players on fees and populate its funds with existing client assets has helped the issuer ascend to the tenth spot among U.S. ETF sponsors.

On Wednesday, JPAM reiterated to investors and the ETF industry at large it's serious about competing when it comes to costs.

What Happened

The JPMorgan BetaBuilders U.S. Equity ETF BBUS debuted Wednesday with an annual fee of 0.02 percent, or $2 on a $10,000 investment, making the fund the least expensive ETF in the U.S. BBUS is a traditional, cap-weighted domestic equity fund.

Barring fee cuts by rival issuers and until the launch of zero-fee ETFs, BBUS will be the least expensive ETF trading in the U.S., undercutting a handful of funds with annual expense ratios of 0.03 percent.

The new ETF holds 619 stocks. Technology is the new fund's largest sector weight at 20.7 percent while the healthcare and financial services sectors combine for 27.5 percent. Microsoft Corp. MSFT, Apple Inc. AAPL and Amazon.com Inc. AMZN are the largest individual holdings in BBUS.

Why It's Important

JPAM also expanded its suite of fixed income ETFs with the launch of the JPMorgan BetaBuilders 1-5 Year U.S. Aggregate Bond ETF BBSA. BBSA has an annual fee of 0.05 percent, or $5 on a $10,000 investment.

While that's not low enough to make BBSA the cheapest bond ETF, it's fairly close and, more importantly, BBSA is undercutting some rival short-term bond ETFs on fees. For example, the Vanguard Short-Term Bond ETF BSV, one of the largest short-term bond ETFs, charges 0.07 percent per year.

BBSA holds nearly 450 bonds and tracks the Bloomberg Barclays Short-Term U.S. Aggregate Bond Index. All components of that index have maturities ranging from one to five years.

What's Next

It remains to be seen if JPAM will populate its new ETFs with existing assets, a strategy that has helped the firm amass $23.28 billion in ETF assets under management. The firm's largest ETFs are the JPMorgan Ultra-Short Income ETF JPST and the JPMorgan BetaBuilders Japan ETF BBJP. Those funds have $5.88 billion and $3.47 billion in assets under management, respectively.

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Photo credit: Joe Mabel, Wikimedia