J.P. Morgan Asset Management's two actively managed equity ETFs began trading Tuesday on the Toronto Stock Exchange.Paige Taylor White/The Canadian Press
J.P. Morgan Asset Management (Canada) Inc. launched its first exchange-traded funds in Canada on Tuesday, part of an expansion plan into this country that includes new offices and private market funds.
The Canadian division of the US$3.3-trillion New York-based asset manager introduced two actively managed U.S. equity funds that use options strategies. JPMorgan US Equity Premium Income Active ETF JEPI-T and JPMorgan Nasdaq Equity Premium Income Active ETF JEPQ-T each have U.S. versions with more than US$51-billion combined in assets under management.
Travis Hughes, head of Canada for J.P. Morgan Asset Management, says the ETFs each hold between 65 and 80 names listed in the S&P 500 and the Nasdaq 100 indexes, respectively, and write covered calls to provide additional income and manage volatility.
“They’re active not only in the underlying portfolio, so the underlying securities we manage, but they’re also active in the option overlay we use,” he says.
The firm has Canadian clients invested in the U.S.-listed ETFs, he adds, but the Toronto Stock Exchange listings allow for more favourable tax treatment.
The move is part of a broader push into Canada. In addition to its offices in Toronto and Vancouver, J.P. Morgan Asset Management opened a Montreal office last year and is planning to open a Calgary office in 2025, Mr. Hughes says. Since he became head of Canada three years ago, the Canada team has grown to almost 25 people from nine.
Much of the new headcount is going to the client service side. Late last year, the firm hired Jay Rana, a former senior vice-president at Pacific Investment Management Co., to introduce advisors to the firm’s investment products. That will be important as the firm rolls out new private market products, Mr. Hughes says, beginning with a private equity fund later this year.
“It’s a terminology that’s a little bit overused in the industry, but the ‘democratization’ of access to private alternatives is really important, and that’s exactly what we’ll bring to Canada,” Mr. Hughes says. “So, it’s taking the same investment teams, the same calibre of research, of rigour, and putting it into a structure that makes sense for individual investors and their advisors.”
That means funds with lower minimum investments and more liquidity than traditional closed-end offering memorandum funds, he says.
Competition has increased in private markets as more asset managers introduce products targeting high-net-worth investors seeking diversification and less volatility than in public markets. Several Canadian asset managers have partnered with U.S. private equity and private credit giants to release open-ended “evergreen” funds with lower minimums that allow investors to buy whenever they want and to sell periodically, with certain restrictions.
Mr. Hughes says the forthcoming private equity fund will focus on the small- and mid-size market. The firm also has plans to eventually roll out infrastructure, real estate and private credit funds in Canada.
There are also plans for more ETFs in Canada. J.P. Morgan launched its first U.S. ETFs in 2014 and introduced products in Europe and Asia in 2018. The two Canadian launches are the first of what Mr. Hughes says will be a “broad suite” of actively managed ETFs.
“When we look at Canada as a strategic opportunity, the growth of the ETF industry here has been phenomenal,” he says.
More than $41-billion has flowed into ETFs in Canada this year as of Aug. 31, according to the Investment Funds Institute of Canada, compared with $3.6-billion in net sales for mutual funds over the same period.
There’s also stiff competition, with more than 1,200 ETFs in Canada competing for $464-billion in assets under management. J.P. Morgan will focus on actively managed ETFs in Canada, Mr. Hughes says, a space that has also become more crowded this year. As of June 30, 93 of the 122 new ETFs listings this year were actively managed.
Mr. Hughes says J.P. Morgan is looking to be a strategic partner to investment dealers in Canada and isn’t trying to compete in areas such as Canadian equity and fixed income.
“What we would bring to market would be things that would complement what’s already on their shelf,” he says.
J.P. Morgan doesn’t have an advisor business in Canada and doesn’t have any plans to start one, he adds. “The fact we don’t have competing advisors helps us in some of those conversations.”
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