J.P. Morgan Asset Management is set to introduce Brazilian Depositary Receipts (BDRs) of its JEPI (JPMorgan Equity Premium Income) ETF in Brazil, even though active exchange-traded funds are not yet formally permitted in the country. This move anticipates potential regulatory changes currently under consideration by the Securities and Exchange Commission (CVM). Giuliano De Marchi, CEO for Latin America at J.P. Morgan Asset Management, described this as a significant development, marking Brazil's first active ETF. The timing is considered favorable due to the start of monetary easing in Brazil and expected volatility leading up to the presidential election, encouraging Brazilian investors to diversify into global companies.
The JEPI ETF is the world's largest active ETF in its category, managing $44 billion in assets as of December. Since its launch in 2020, it has delivered average annual total returns of approximately 12%. The fund invests in S&P 500 stocks and uses options strategies to generate monthly income for shareholders, typically between 7% and 9% per year in dollar terms, with 8.33% paid to investors in 2025. Initial availability will be for qualified investors, with plans to extend to retail clients by year-end, after system adjustments.
Currently, only passive ETFs are allowed in Brazil, which merely replicate an index. Active ETFs, like JEPI, allow managers to adjust portfolio weights based on performance. Travis Spence, J.P. Morgan Asset's global head of ETFs, noted the stark difference in ETF adoption: 30% of the U.S. fund industry vs. just 1% (R$80 billion in assets) in Brazil. Despite high interest rates concentrating Brazil's market in fixed income, J.P. Morgan Asset, which manages about $4 trillion globally, sees significant growth potential in Brazil, having grown 50% annually there over the past three years. The firm aims to bring its full lineup of over 100 active ETF products to Brazil.
BDRs function as certificates traded on the B3 exchange, representing shares or ETFs listed abroad, giving Brazilian investors exposure to JEPI as if they were investing directly. ETFs offer advantages such as portfolio transparency, intraday liquidity, and typically lower management fees (around 0.35% per year) compared to mutual funds. Spence likened ETFs to the "Spotify of asset management" for their ease of use. Brazil's asset management market currently represents only 3% of the global market, highlighting the extensive opportunities outside the country and the need for greater access to global markets.
