JPMorgan Files to Launch Money Market ETF

Money doesn’t grow on trees — it grows in money markets, a resource that JPMorgan plans to help ETF investors access more easily as markets seek shelter from increasing volatility.

The bank applied last month for SEC approval of the actively managed JPMorgan 100% US Treasury Securities Money Market ETF, which would invest exclusively in Treasury bills, bonds and notes, according to the filing. The move, along with recent money market ETF launches by Schwab and BlackRock, shows how issuers are capitalizing  on investors’ appetite for lower-risk options amid geopolitical uncertainty and ETF hype.

Still, inflows have yet to match the rapidity of recent money market ETF launches, according to Matthew Bartolini, State Street’s head of Americas ETF research. “They’re really new,” Bartolini said. “With any new thing, you want to see how it does, how its performance is, and if the use case is valuable enough to rotate from what you’re doing right now.”

Money (Markets) to Be Made

Money market funds — which invest in short-term, low-risk securities like US Treasury bills, municipal debt or corporate bonds — have been around as long as ETFs have existed. JPMorgan’s Prime Money Market Fund (VMVXX), a mutual fund that invests in both US government securities and debt issued by American and foreign corporations, began trading in 1993. Money market ETFs let clients who want an all-ETF portfolio include a cash management vehicle in it. “That same client could have been like, ‘Well, for my cash purposes, I’ll hold an ultra-short, active strategy.’ There’ve been those options, just not within a money market wrapper,” Bartolini said. “With that money market wrapper, you might get different clients to use it who prefer money markets for their cash sweep vehicle.”

Other big players in the money market fund space include:

• Vanguard’s Federal Money Market Fund (VMFXX), which invests in cash and short-term securities issued by the US government and is up 2.2% year-to-date;
• Schwab’s Value Advantage Money Fund (SWVXX), which invests in US and foreign entity-issued short-term securities and is up 2% year-to-date;
• And Invesco’s Government Money Market Fund (INAXX), which invests in cash, government securities and repurchase agreements. It’s up 1.7% year-to-date.

A Sea Change. The recent launches are also representative of what experts describe as a shift toward mutual fund strategies being used in ETFs. Bartolini said JPMorgan’s move is unsurprising given the recent boom in other structured note products, like buffer ETFs. “This is another proof point of the ETF industry maturing,” he said, “and entering into different markets for investors to utilize strategies typically confined to mutual funds.”