JP Morgan Asset Management has completed the conversion of a $1 billion mutual fund that invests in US-listed mid and small-cap equities into a transparent actively managed ETF.

JP Morgan is planning a further two mutual fund-to-ETF conversions by mid-June 2022.

The JPMorgan Market Expansion Enhanced Equity ETF (JMEE US) has been listed on NYSE Arca with an expense ratio of 0.24%, notably lower than the 0.60% fee charged under the mutual fund format.

Investment approach

The fund is managed by Phillip Hart, Wonseok Choi, and Jonathan Tse who collectively have 57 years of industry experience including 53 years at JP Morgan.

The ETF seeks to outperform the S&P 1000 Index (which represents a combination of the S&P MidCap 400 and S&P SmallCap 600) by selecting stocks from this universe based on a proprietary ranking system driven by fundamental analysis.

The fund is expected to own a large portion of stocks from the benchmark (the portfolio currently consists of 642 holdings) while maintaining sector weights similar to the parent universe.

Outperformance is sought from an enhanced index strategy that modestly overweights higher-ranked stocks and underweights lower-ranked stocks based on JP Morgan’s analysis.

This is the second mutual fund-to-ETF conversion from JP Morgan this year following the introduction of the JPMorgan Inflation Managed Bond ETF (JCPI US) last month. The firm plans to convert a further two mutual funds, collectively housing around $6.5bn, into ETFs by mid-June.