So much for first-mover status. In less than a year since its launch, the $3.4 billion JPMorgan BetaBuilders Canada ETF (BBCA) has become the largest Canada ETF on the market, dethroning the $2.6 billion iShares MSCI Canada ETF (EWC), which has been on the market since 1996.
Since the start of the year, more than $1 billion in new net inflows has quietly flowed into BBCA, most of which has come in the past two weeks:
That’s on top of the $2.3 billion in net inflows the fund saw last year (read: “New Canada ETF 2nd Fastest To $1B”).
Most of that money originates from J.P. Morgan’s own asset management clients, in a clear example of the “bring your own assets” model of attracting investment dollars that has become increasingly common among today’s most successful ETF launches.
According to the most recent 13-F filings (accessed via WhaleWisdom.com), 74.1% of BBCA’s shares were held by J.P. Morgan itself for its clients.
Still, money is money, whether it comes from organic growth or from inside one’s own house.
Similar Portfolios, Different Costs
On the tin, BBCA doesn’t seem all that different from EWC. Both funds track a market-cap-weighted index of large- and midcap Canadian stocks, although BBCA tracks a Morningstar index, while EWC tracks an MSCI one.
Both funds also have roughly the same number of constituents (100 for BBCA, 94 for EWC). They even have the same top-10 holdings, though in ever-so-slightly different weights. (That slight portfolio difference may account for some of the performance difference between the two funds; year-to-date, BBCA has returned 18.7%, while EWC has returned 17.7%.)
Where the two funds truly differ is in cost. BBCA charges only 0.19% per year compared with EWC’s 0.47%, a cost difference of 0.28%. That will make a significant impact on long-term returns for buy-and-holder investors.
Expenses Not The Whole Story
But expense ratio isn’t everything. For short-term traders or more tactical investors, EWC remains the clear favorite. That fund has a far more robust liquidity profile than BBCA. EWC’s spread is lower than BBCA’s (0.04%, compared with 0.07%), and on average, EWC trades $67 million in volume every day. BBCA, meanwhile, trades less than a quarter of that.
Perhaps, then, it’s no surprise that there seem to be relatively few EWC investors making the switch to BBCA; last year, for example, EWC only saw net outflows of $190 million. Year-to-date, the fund has lost $160 million.
In truth, not every ETF can be all things to all investors. For long-term asset allocators, BBCA’s low cost is a compelling selling point. For those with short time horizons or who need to make quick changes to a portfolio, EWC might be better suited. As usual, in investing, there is “no one size fits all.”
Contact Lara Crigger at [email protected]