Investment banking giant J.P. Morgan, the sponsor of the largest exchange traded note, is planning to launch its first exchange traded fund in the first half of 2014.
“As much as anything, what drives us is we’ve got clients that would like to see us manage ETFs,” Bob Deutsch, head of the ETF business at JPMorgan, said, reports Jackie Noblett for Ignites. “It just makes sense for us as a large and successful money manager to participate in ETFs.”
According to a Securities and Exchange Commission filing, J.P. Morgan is expected to receive regulatory approval to begin marketing ETFs.
As the seventh-largest mutual fund manager in the U.S. by assets with a focus on active investing, the financial firm has taken an interest in actively managed ETFs and is watching the nontransparent active ETF space, but Deutsch noted that they aren’t waiting for the SEC make up its mind before dipping into the ETF space.
For instance, J.P. Morgan has filed for a smart-beta global equity ETF in October, 2013. [JPMorgan Eyes ‘Smart-Beta’ Developed Global ETF]
“We’ve got a broad set of capabilities and some of those capabilities we are very comfortable in putting into a rules-based application,” Deutsch said in the article, pointing to smart-beta funds as an avenue for providing an alternative to traditional market-cap-weighted ETFs.
Nevertheless, Deutsch stated that J.P. Morgan’s long-term focus will be in active ETFs. He also singles out the fixed income market as “fairly wide open” since portfolio transparency is less of an issue there. [Actively Managed ETF Nears Turning Point]
“While nascent today, we think active ETFs will grow,” Deutsch said last year. “A couple of years ago, there were questions on a lot of people’s minds about active ETFs because it was an idea, and now there are a number of active ETFs in the marketplace and it is more than an idea.”
J.P. Morgan currently offers the JPMorgan Alerian MLP Index ETN (NYSEArca: AMJ). The ETN is an unsecured debt instrument that replicates the return of the MLP index. Unlike ETFs, ETNs are subject to credit risk of the underwriting bank or issuer.
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Max Chen contributed to this article.