Travis Spence, Global Head of ETFs at J.P. Morgan Asset Management, has been with the firm for the last 21 years, working across the business, having spent 12 years in Asia running its Global Liquidity business, and then broader retail distribution for the firm.
He came to London in 2016 and has spent the last three years in the dedicated ETF business, initially to run the distribution team in EMEA and then last year, expanded his role by becoming the global head of ETFs.
His background with JPMAM gives him an international perspective on product and distribution at a firm that has seen its ETF business grow significantly.
“ETFs is one of our top strategic priorities,” Spence says. “We started launching ETFs in 2014 and from 2017 our main focus has been on active ETFs, firstly in the US and in the UCITS structure from 2018.”
The firm now has 149 ETFs globally,101 of which are active, and total assets USD319 billion in ETFs. “Some 75 per cent of our assets are active,” Spence says. “If you think back to 2023, we had USD100 billion in total assets and USD10 billion in UCITS and now we have over USD300 billion and USD50 billion in UCITS.
“It took us 100 months to get to the first USD100 billion and we have raised our last USD100 billion within the last 18 months.”
Spence says that the firm has approached the ETF industry in a different way, especially on the active side.
“We have an exclusive focus on active, and we are fully integrated. We have never run our ETF business on the side. We have always taken the approach to bring the same portfolio managers, analysts and processes into ETFs.
“This means that our portfolio managers became comfortable very early in the development of our ETF business running fully transparent vehicles alongside other vehicles. And this was critical for us to be able to bring the best of our active investment capabilities into the ETF wrapper.”
In terms of launches, Spence says that JPMAM looks at “the largest investment categories where we also have an active advantage and capability to bring into the ETF wrapper,” following a three-step model: assessing market opportunity, leveraging differentiated capability, and ensuring client alignment.
He finds there are significant differences between the US and UCITS products because the investor base is very different.
“In Europe it’s an asset allocator owner market looking for more granular building blocks to build their portfolios while there is much more of a retail drive in the US. We have leaned into the differences but there is more convergence with Europe as the retail market is expanding at a faster rate. The kind of solutions they are looking for are changing and evolving. We have brought our equity premium income range to Europe and found that as the retail market is growing, they are looking for similar solutions.”
He believes that there are three areas that the European ETF industry is leading into.
“We have outcome-oriented demand, not just derivative income but persistent hedged solutions. Our hedged overlay laddered overlay (HELO) ETF is a USD3.5 billion ETF in the US with more than USD1 billion in flows this year and we brought it to the UCITS market [in October]. People are seeing equity valuations are high and they want downside protection which that product provides,” Spence says.
“It was difficult for the investor to achieve before and now you get it in a simple access ETF. It’s a unique outcome that the market starts to think about.”
Spence also reports that the firm is starting to see demand through the retail channels in Europe and Asia in the derivative space, with products that offer lower volatility but a consistent income of 7-9 per cent on a global equity portfolio using the UCITS vehicle.
The trio of actively managed Equity Premium Income products, JEPI, JEPQ and JEPG, now have assets of USD4 billion in UCITS, and have raised USD2.6 billion year to date.
“We launched JEPI in the US as one of the first derivative outcome strategies in 2020, so we have been running it for five years as an ETF in the US and then brought it here. The experience we have had is that the active ETF market in the US grew through non-traditional exposures, such as derivative income, to over USD120 billion. We have an early mover advantage.”
Spence reports that there are two major ways people use these products. “One is for income – income is outcome as we say – but the second way clients are using them is as a low volatility way to access the equity market. This works for investors who are nervous but still want to get the income. We have great experience in running these active ETFs and that’s what we are bringing and offering to the UCITS space.
“When people are thinking about how they construct portfolios, they have different sets of tools than five years ago and can build more resilient portfolios. It’s the really unique feature of the ETF.”
Spence doesn’t believe that it’s a pricing game but about finding better investment outcomes for the end investor.
“Derivative-based solutions before were structured portfolios which required a relationship with a private bank or another similar bank counterparty. This made them a heavier lift to access,” he says. “ETFs can be a strong access point and priced in a reasonable way. The Equity Premium Income trio are 35 basis points, they are an attractively priced solution.”
With his global view of the ETF industry, Spence notes that he is seeing even faster growth in Asia, which is now touted to overtake Europe.
“As a global firm, our strategy has been twofold: firstly, to look at what markets we want to have issuance in and that has been Canada, where we launched our first ETFs in October last year and now have eight in the market; Australia where we started launching in 2022 and now have nine ETFs in the market and China, where we have had a joint venture that became a wholly owned subsidiary since 2024.”
The firm has also focused on Taiwan, with its first ETF in October and, as the regulators there start to allow active ETFs, it’s become one of the fastest growing with two thirds of total pooled fund assets in active ETFs.
“Our second strategy has been focusing on some of the markets in which it is easier to invest in offshore ETFs such as Japan or Hong Kong. It’s a combination of making sure we have availability of different ETFs across different markets and that we also create feeder funds with partners.”
Spence also reports that he is seeing a global generational shift helping to fuel how people are accessing investment and part of that is driven by neobrokers and robo-advisers.
“Even in places where ETFs are disadvantaged such as Spain, ETF adoption is still growing. There is huge growth potential in retail overall and a lot of that is coming through these new channels and the pick-up in demand from retail investors for active ETFs is driving a lot of the volume for us.
“Europe is a few years behind, but we are seeing increased demand as investors move from pure passive to active. Savings plans are growing in popularity, and the average client is investing for five to seven years. We would expect them to want active to have a better outcome over this length of time.”
“In Europe, model portfolios are also relatively new. Rather than going into a savings plan, where most investors today hold a single passive global equity ETF, there is an increasing awareness that complete portfolios can be constructed that include multiple asset classes to achieve a wider range of outcomes…from your traditional 60/40 stock/bond portfolio to income generating portfolios. Model portfolios in the US are the biggest trend in the wealth industry, and we expect they will catch on across Europe as well.”
He feels there are not enough active ETFs in Europe, with the exception of the JPMAM platform which has 40 active ETFs based on equities and 16 active fixed income ETFs so can be used to build a full model portfolio, something that the firm has offered through its affiliated partner, JPMorgan Personal Investing platform. The firm also has a venture with BUX, the Netherlands-based neobroker.
“There is going to be a strong trend going forward delivering professional management through active ETFs or model portfolios to investors who are getting smarter and smarter about how they invest. It’s really exciting,” Spence concludes.
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