The first 'semi-Transparent'  ETF From JPMorgan Is Led By A Manager With a Strong Track Record

With the aim of building on its recent success in the ETF market, JPMorgan is now adding an additional type of ETF to its portfolio, an active fund. One of the bank's highly-rated mutual fund managers will be overseeing the new active fund.

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JPMorgan launched the JPMorgan Active Small Cap Value ETF (JPSV) on Wednesday with the goal of outperforming the Russell 2000 small cap index.

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This fund will be managed by Lawrence Playford, who has a long track record in the field of mutual funds as a portfolio manager. There are two other mutual funds that Playford also manages - the JPMorgan Small Cap Blend Fund and the JPMorgan Mid Cap Value Fund. Both of these funds have been rated four stars by Morningstar, a silver rating. Based on Morningstar reports, Playford's small-cap fund, for instance, was in the top quartile of small-cap growth funds in 2022, according to Playford.

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It is planned that the new JPSV fund, which will be an ETF with an expense ratio of 0.74%, will operate as a semi-transparent fund. The advantage of this is that rather than 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 excluding any new additions or subtractions to its holdings.

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A hybrid model is intended to be a midway point between an ETF and a mutual fund, in that it allows managers some discretion to make changes, while still providing market makers with enough information to keep trading costs to a minimum.

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"Investors can add active small-cap value assets to their portfolios as a compelling addition to their portfolios. ... The JPSV ETF is the first we have launched that uses the NYSE Active Proxy Model, and we are confident that the structure and portfolio will meet the needs of investors,” Bryon Lake, head of JP Morgan Asset Management's Americas ETFs, said in a statement.

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The Securities and Exchange Commission has given the green light to semi-transparent ETFs for the first time in 2019, and there have been some modest successes to date. Nuveen Growth Opportunities ETF (NUGO), for example, has about $2 billion in assets under management and is expected to outperform the market in 2023, according to Nikkei indices.

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Over the past few months, JPMorgan has seen a huge increase in assets gathered by its ETF business. Among the firm's ETFs, BetaBuilders Europe ETF (BBEU) and Equity Premium Income ETF (JEPI) have seen the most inflows so far this year, according to FactSet, with both raking in more than $10 billion.