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JPMorgan Declares Debt the New Frontier in Battle for ETF Assets

The bank plans to start at least six bond ETFs next year, according to Bob Deutsch, head of ETFs at the lender’s asset management unit

By Rachel Evans

(Bloomberg) -- JPMorgan Chase & Co. is opening a new front in Wall Street’s battle for domination of the market for exchange-traded funds: debt.

The bank plans to start at least six bond ETFs next year, according to Bob Deutsch, head of ETFs at the lender’s asset management unit. Two active debt funds -- focused on global opportunities and on short duration -- will begin trading in early 2017, and JPMorgan plans to unveil another four or five fixed-income ETFs in the second half of the year, Deutsch said in an interview.

The New York-based firm is aggressively expanding its ETF business as it looks to win assets ahead of peers such as Goldman Sachs Group Inc., which this year lured almost twice as much cash to its ETFs as JPMorgan. The asset management group tripled its ETF-focused salesforce to nine this year and plans to add another six to the team in 2017, according to Deutsch. It also hired Mike Camacho from the investment bank to lead its beta strategies business, which houses ETFs.

“We definitely keep tabs on the competitive environment and where the gaps in the market are,” Deutsch said. “But our emphasis is on where we’re capable and where we’re uniquely capable. We obviously also map it to whether there’s demand.”

JPMorgan and Goldman Sachs have one bond ETF each, while BlackRock Inc., the world’s largest money manager, has 211.

Almost $120 billion has flowed into debt ETFs this year, boosting assets to about $660 billion globally. Yet that’s less than 20 percent of the $3.7 trillion market for exchange-traded products.

JPMorgan’s global bond opportunities ETF will buy bonds in emerging- and developed-markets, following a strategy similar to one of its mutual funds. The money manager also plans to win over investors with a suite of debt-focused smart-beta ETFs, which shun indexes weighted by market capitalization in favor of other factors.

When bond funds are skewed toward bigger issuers, “effectively you’re buying more of the companies that are borrowing more,” said Deutsch. “It leads you to lower credit unless you put in other parameters.”

To contact the reporter on this story: Rachel Evans in New York at [email protected] To contact the editors responsible for this story: Nikolaj Gammeltoft at [email protected] Faris Khan

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