JPMorgan Chase & Co. is still trying to make a buck while selling America's cheapest exchange-traded fund.
The bank plans to charge just 20 cents for every $1,000 invested in a new stock fund, undercutting all 2,000 existing U.S. ETFs, a regulatory filing showed Monday. But for some even that price isn't low enough, with analysts predicting that a zero-fee ETF is only a matter of time.
It's a wake-up call for BlackRock Inc. and Vanguard Group, which have built multi-trillion dollar businesses on the back of cheap indexed funds. Newer issuers like JPMorgan, which sold its first ETF in 2014, have taken note and are increasingly prepared to sacrifice immediate fee revenue in order to make a splash in the $3.7 trillion market.
"If you lower it, they will come," said Eric Balchunas, an ETF analyst at Bloomberg Intelligence. "We've seen time and time again that even one basis point cheaper can move the needle on flows, so there's little doubt this will be successful — albeit maybe not the game-changer a zero expense ratio would have been."
More than 97% of flows into ETFs last year went to funds that charge $2 or less, data compiled by Bloomberg show. Of the 11 ETFs that JPMorgan started in 2018, eight charge less than $2. Those funds have lured more than $10.5 billion, doubling the firm's ETF assets to $23 billion.
Social Finance Inc., the online lender known as SoFi, is helping start two new ETFs that won't charge a management fee for at least their first year, regulatory documents showed last month. The company is however waiving its fee, rather than making the funds permanently free. Vanguard meanwhile recently cut the cost of more than 10 ETFs to as little as 30 cents.
Alongside its 20-cent BetaBuilders U.S. Equity ETF (BBUS), JPMorgan plans to charge 50 cents for an aggregate bond ETF, the filings showed. That's in line with the fee on BlackRock's iShares Core U.S. Aggregate Bond ETF, the largest bond ETF with $58 billion under management.