The investment unit of J.P. Morgan Chase (NYSE:JPM) says it is making plans to offer exchange-traded funds in the near future, as the investment vehicles continue to surge in popularity, drawing large investment dollars to their coffers.
Exchange-traded funds being put together by J.P. Morgan will be actively managed, meaning they will have higher fees, which of course means more revenue in profits. Most exchange-traded funds are passive investments and require little watching over, the reason fees are so low and why investors have been attracted to them; all other things being equal.
Actively managed ETFs having caught on yet, as the simplicity and low cost of them has been what has driven investors to them. Once you get the managed ETFs into the picture, it takes on the flavor of a mutual fund more than what an ETF is. That will be a challenge for J.P. Morgan and other financial institutions who are looking to the fees as a new source of income. It’ll take a lot of performance, marketing and persuasion to get someone to invest heavily in them.
In recent filings, the company revealed they are seeking approval for both types of funds to begin with; both the normal index-based type of funds we usually think of with an ETF.
The index funds applied for would track U.S. municipal bonds with maturities up to 12 year. They will all be investment grade bonds being tracked by the ETF. The other fund will follow investment-grade U.S. corporate debt which is issued at $300 million or above.
In the filing for actively traded funds, they would hold stocks, bonds, unit investment funds and open- and closed-end funds.
At this time this is just a filing, which can take a long time to be approved by the SEC, sometimes in the years, although that’s doubtful in the case of J.P. Morgan.
