J.P. Morgan is about to launch the lowest-fee US stock market ETF yet
div > div.group > p:first-child"> J.P. Morgan isn't going to zero fee, but it is about to launch the lowest-fee exchange-traded fund yet offering exposure to the U.S. stock market.
Todd Rosenbluth, head of ETF and mutual fund research at CFRA, said the limited revenue generated by a zero-fee ETF would barely impact the financial institution's income statement, but he added that going to a new low of 2 basis points still highlights how deep-pocketed firms can be a later entrant and still succeed.
The Wall Street Journal reported on Monday that JPMorgan's ETFs raised $15.6 billion last year, most of it from J.P. Morgan affiliates. By the end of 2018, J.P. Morgan affiliates owned 53 percent of the firm's ETF assets, and the bank was the top shareholder of 23 of its ETFs. While other ETF providers also offer their own portfolios to captive client channels, including Charles Schwab, BlackRock and Vanguard, J.P. Morgan has by far the largest percent of ETF assets sold in-house.
"They disclose that they own their own funds, so it's not a problem," Rosenbluth said. He added as one recent example that Northern Trust owns the FlexShares family of ETFs, which has a sizable percentage of its total assets through Northern Trust, so the JP Morgan approach to growing the business is not unique.
That's an important point, as investors should not stop at fees when choosing funds. Differences in the underlying indexes used by the ETFs can lead to performance variation, as can liquidity and trading costs. For long-term investors, it is the underlying index methodology that defines the ETFs investable universe and the expense ratio that matter the most.
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