BBEU’s Mysterious Flows Dominance
As of March 20, the $8.6 billion JPMorgan BetaBuilders Europe ETF (BBEU) was the top U.S.-listed exchange-traded fund for inflows in 2023, but it’s not exactly clear why.
Consider that the competing $16.6 billion Vanguard Europe ETF (VGK) has only pulled in $1.1 billion so far this year. It’s been around for 18 years, while BBEU is almost five years old. BBEU is also 1 basis point more expensive than VGK, and its portfolio of 466 securities has roughly one-third the holdings of its competitor. VGK’s trading data is even slightly better than that of BBEU.
The two funds essentially move in lockstep with each other. Right now, according to Morningstar data, VGK is up 7% while BBEU is up 6.8%. That’s not really surprising, as the two funds have the same top 10 holdings, representing roughly one-fifth of their total portfolios.
Distribution Issue?
After the dismal performance of the U.S. market last year, many have suggested looking abroad, with Europe seen as a promising area. Early in 2023, Lazard Asset Management published a report that suggested that while both the U.S. and Europe were facing recession, the headwinds for Europe had already been priced into its markets.
Flows into Europe have been mostly positive, but BBEU and VGK claim the top two spots year to date.
Aniket Ullal, head of ETF data and analytics at CFRA says that the 28% ownership by BBEU’s issuer is not insignificant and could be contributing to the flows. However, he also thinks that J.P. Morgan’s distribution network is a possible reason for BBEU’s lead in flows.
“It is likely that JPM has made quite a strong distribution push in ETFs this year, especially in segments like ex-U.S. equities that were quite attractive valuation-wise at the end of 2022,” Ullal said in an email to etf.com.
Certainly, JPMorgan Chase has an impressive distribution network and caters to a far broader audience than Vanguard, which is primarily a fund provider. JPMorgan Chase is the largest bank in the country, operating in retail banking, investment banking and asset management, among other businesses.
Meanwhile, Vanguard’s focus is primarily on the provision of funds and investment management. It has far fewer channels through which it can reach its audience.
Contact Heather Bell at heather.bell@etf.com
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