This article was originally published on ETFTrends.com.
The acronym of "BYOA," which stands for "bring your own assets" is quickly gaining traction in the exchange-traded fund (ETF) issuer space, and JP Morgan is leading the charge for steering its own clients to its ETF products.
According to a report in the Wall Street Journal, it's a practice that does not cut corners with regulations as long as proper disclosure is made. To in-house clients, ETF products can also come at a lower cost compared to its respective competitors.
“There is robust disclosure provided to wealth management clients relating to conflicts arising from the investment of client assets in JPMorgan managed strategies,” said JPMorgan spokeswoman Kristen Chambers.
Bringing in-house client capital can also balloon an ETF's assets quickly. For an issuer looking to increase the profile of a newly-launched ETF, it can simply look to within for a fresh injection of capital.
Case in point is JP Morgan's own JPMorgan BetaBuilders Japan ETF (BBJP) , which was able to garner assets to the tune of $1.7 billion in a matter of six weeks. BBJP eventually became one of the fastest ETFs to race to $1 billion in total assets.
In totality, according to regulatory filings and FactSet data compiled by The Wall Street Journal, JP Morgan raised $15.6 billion in assets from in-house affiliates last year. By the end of 2018, clients accounted for 53 percent of JP Morgan's ETF assets.
JP Morgan isn't the only firm leveraging this practice. Others like Charles Schwab and Northern Trust Corporation are quick to snatch up its own ETF products on the behalf of its clients.
The end of 2018 saw Northern Trust clients owning of 23 of its 26 FlexShares ETFs. Furthermore, in-house clients amounted to 67 percent of the $15 billion invested in funds, according to a Wall Street Journal analysis.
“They’re clearly doing it to get their own products off the ground,” said Nicole Boyson, a finance professor at Northeastern University who studies conflict-of-interest disclosures. “These are brand new products, and the way they’re raising money is by putting client money into them.”
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