JPMorgan to start converting $9bn in mutual funds to ETFs in April
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JPMorgan will in April begin converting $9.1bn in mutual funds to ETFs, the company has disclosed.
The $1.3bn Inflation Managed Bond Fund is expected to convert on April 8 into the Inflation Managed Bond ETF, filings show. The $1.2bn Market Expansion Enhanced Index Fund will switch over on May 6 into the Market Expansion Enhanced Equity ETF, and the $1.8bn Realty Income Fund will convert on May 20 into the Realty Income ETF. The $4.8bn International Research Enhanced Equity Fund will become the International Research Enhanced Equity ETF in June.
The funds’ boards approved the conversions on January 13, the filings show. The four funds have closed to new investors and ended charges for subscriptions and redemptions, both of which were previously disclosed.
JPMorgan has also begun waiving 12b-1 distribution fees — charges levied on mutual funds for marketing and distribution — on each of the four funds, the filings show.
JPMorgan could have begun waiving its 12b-1 fees as early as August, when it announced that the group would convert the four mutual funds to ETFs, but it is unclear if it was required to do so, Andrew Davalla, a partner at Thompson Hine, told Ignites.
It is also unclear whether JPMorgan is permitted to use the distribution fees of a mutual fund to market or advertise for the ETF to which it will convert, he added. ETFs do not charge 12b-1 fees.
JPMorgan declined to comment on why the company approved the 12b-1- fee waivers this month.
More than 60 per cent of each of the four converting mutual funds have assets owned by affiliated JPMorgan mutual funds and target-date retirement funds, filings show. The vast majority of those affiliated fund assets are in institutional-grade share classes and therefore do not charge 12b-1 fees, filings show.
The four funds bled a combined $2bn during the 12 months ended November 30, according to data from Morningstar Direct.
*Ignites is a news service published by FT Specialist for professionals working in the asset management industry. It covers everything from new product launches to regulations and industry trends. Trials and subscriptions are available at ignites.com.