Crypto News: ETF IQ: The next JEPI

Welcome to ETF IQ, a weekly newsletter dedicated to the $14 trillion global ETF industry. I'm Bloomberg News reporter and anchor Katie Greifeld.

JPMorgan is dominant in the actively managed exchange-traded fund arena. While Dimensional wears the crown of most active ETF assets under management — $168 billion, per Bloomberg data — JPMorgan helms the industry's first and third largest active stock ETFs — the $37 billion JPMorgan Equity Premium Income ETF (ticker JEPI) and the $18 billion JPMorgan Nasdaq Equity Premium Income ETF (JEPQ), respectively.

JEPI and JEPQ's pitch is that they provide exposure to the equity market with the cushion of income from their options overlay. While these aren't passive funds, that's a different strain of active management than old-school stockpicking — one that has been wildly popular over the past several years, with JEPI only launching in May 2020 followed by JEPQ in 2022.

JPMorgan Asset Management's head of global equities Paul Quinsee is now gearing up for the next round of the active ETF industry's growth. While JEPI and JEPQ have been smash-hits for the issuer, Quinsee thinks investors will soon seek out more traditional forms of active management. And when they do, Quinsee says JPMorgan has the lineup to meet that demand with the likes of the $3.3 billion JPMorgan Active Growth ETF (JGRO) and the $1.8 billion JPMorgan Active Value ETF (JAVA), both of which launched in the past few years.

"I think the next phase is going to be getting our best active managers' strategies out in the ETF format so that everyone can invest in them," Quinsee told me at the firm's ETF Symposium event on Thursday. "We've already seen a lot of progress there. JGRO and JAVA — the growth and value versions — are already seeing a tremendous amount of interest and in the long run, that could be even bigger for us than JEPI and JEPQ. So we're committed to getting the full range of our strategies out there."

Let's also talk about the active fixed-income ETF market (where JPMorgan also controls the largest fund, the $27 billion JPMorgan Ultra-Short Income ETF). It's always a refreshing exercise to speak to non-ETF natives — managers who have spent their career in other fund structures before coming across the ETF wrapper.

One of those managers is Bob Michele, the chief investment officer and head of global fixed income at JPMorgan Asset Management, who I also spoke with at the bank's ETF Symposium. Prior to ETFs, one of the challenges that historically faced fixed-income investors was actually locating the bonds, particularly in less-liquid segments such as high-yield debt. The embrace of bond ETFs has made life easier behind the scenes, according to Michele:

You have a hundred million dollar inflow into a mutual fund, it doesn't price until the end of the day and it will take us maybe three days, up to a week to find the bonds to put into it. Today, we'll see midday that hundred-create, we'll start working on and negotiate a basket, we'll be shown two to five hundred million dollars worth of bonds we'll be able to go through with our optimizer, cherry pick what we want and they go back into the portfolio. All of that takes a little less than an hour. So it's not only improved transparency and giving you the active, but the wrapper also allows you to get liquidity and invest intraday. So it's a big advancement for the bond market.

Bob Michele Photographer: Kholood Eid/Bloomberg

That frees up more time for those bond investors to fret about the deficit and complain about the Federal Reserve. Everyone wins!

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[Programming note: No Drill Down since Bloomberg Television's ETF IQ was on hiatus this week for special US presidential coverage. It'll be back next week.]

This week marked a symbolic milestone for the cryptocurrency world: BlackRock's spot Bitcoin ETF is now bigger than its spot gold fund.

While both Bitcoin and gold are hovering near all-time highs, the former has been met with record demand. The iShares Bitcoin Trust ETF (ticker IBIT) surpassed the $33 billion iShares Gold Trust (IAU) in total assets, reaching $34.3 billion after a record inflow of $1.1 billion on Thursday in the aftermath of Donald Trump's US election win, according to data compiled by Bloomberg.

Signage for the Bitcoin cryptocurrency. Photographer: David Lombeida/Bloomberg

Now, IBIT still has a long way to go before it unseats the $76 billion SPDR Gold Shares ETF, which ranks as the biggest gold-tracking fund. But it's still a stunning achievement for IBIT, which only came into existence this past January. IAU, meanwhile, has been trading since 2005.

Bitcoin is often referred to as digital gold, given that it's a supply-and-demand driven asset that doesn't produce any cash flows. But maybe there's a distant future where gold is thought of as physical Bitcoin.

Rob Arnott of Research Affiliates and DBi's Andrew Beer join me, Eric Balchunas and Scarlet Fu on Bloomberg Television's ETF IQ. Watch live on Mondays at noon on Bloomberg Television, on the Bloomberg Terminal at TV <GO> and on YouTube.