JPMorgan taps manager with solid track record to lead its first 'semi-transparent' ETF

Published Wed, Mar 8 20239:30 AM ESTUpdated Wed, Mar 8 20231:52 PM EST

Jesse Pound @/in/jesse-pound @jesserpound

JPMorgan is expanding its exchange-traded fund lineup with a new type of active fund, handing the reins to one of its highly rated mutual fund managers in hopes of building on its recent success in the ETF industry. The bank launches the JPMorgan Active Small Cap Value ETF (JPSV) on Wednesday with a goal to outperform the Russell 2000 index of small-cap companies. The fund will be led by portfolio manager Lawrence Playford, who has a long track record in mutual funds. Playford co-manages two other mutual funds — the JPMorgan Small Cap Blend Fund and the JPMorgan Mid Cap Value Fund — both of which sport four-star, silver ratings from Morningstar. Playford's small-cap fund, for example, was in the top quartile of small-cap growth funds in 2022, according to Morningstar. The new JPSV fund, with an expense ratio of 0.74%, will operate as a semi-transparent ETF. That means that instead of publishing its exact holdings every day, the fund will instead publish a proxy portfolio that shows investors most of what the fund owns, but not at exact weights and possibly omitting new additions or subtractions. The model is supposed to be a hybrid between an ETF and a mutual fund by allowing managers some secrecy to make changes while still giving market makers enough information to help keep trading costs down. "Active small cap value can be a compelling addition to investor portfolios. ... JPSV is our first ETF launched with the NYSE Active Proxy Model and we are confident this structure and portfolio will meet investor needs," Bryon Lake, head of Americas ETFs at J.P. Morgan Asset Management, said in a statement. Semi-transparent ETFs were first given the green light by the Securities and Exchange Commission in 2019, and there have been some modest successes. The Nuveen Growth Opportunities ETF (NUGO) , for example, has about $2 billion in assets under management and is outperforming in 2023. JPMorgan's ETF business has been a big winner in terms of gathering assets in recent months. The firm's BetaBuilders Europe ETF (BBEU) and Equity Premium Income ETF (JEPI) are the top two ETFs for inflows so far this year, according to FactSet, raking in more than $10 billion combined.