JP Morgan converts $1.1bn REIT-focused mutual fund to an ETF

May 27th, 2022 | By | Category: Alternatives / Multi-Asset

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JP Morgan Asset Management has converted a $1.1 billion mutual fund focused on the US property market into an actively managed fully transparent ETF.

JP Morgan converts $1.1bn REIT-focused mutual fund to an ETF

The ETF takes a purely bottom-up approach to investing in the US real estate market.

The JPMorgan Realty Income ETF (JPRE US) has been listed on NYSE Arca with an expense ratio of 0.50% which is 28 basis points cheaper than the fees charged under the mutual fund structure.

The fund is managed by portfolio managers Scott Blasdell and Jason Ko who collectively bring 48 years of financial industry experience including 43 years at JP Morgan.

The strategy continuously screens the entire universe of US-listed real estate investment trusts (REITs), selecting REITs that show superior financial strength, operating revenues, and attractive growth potential. Both equity REITs and mortgage REITs are eligible for inclusion.

The portfolio managers focus purely on a bottom-up approach to security selection rather than considering top-down factors such as sector and thematic strengths.

Individual REITs are selected based on a comparison of current price to long-term value which is determined based on the REIT’s normalized earnings (projected earnings adjusted to reflect what the company should earn at the midpoint of an economic cycle) and growth potential.

The ETF’s introduction follows last month’s conversion by JP Morgan of an inflation-managed core fixed income fund, also housing around $1.1bn in assets, into an ETF. The firm has further announced plans to move another two mutual funds housing $7bn to the ETF structure in June.

The conversions highlight a growing trend amongst large asset managers to repurpose popular mutual fund strategies into the more tax-efficient, typically lower-cost ETF vehicle.

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