Morgan Going Beyond Client Base To Market Its Brand-Name Funds

J.P. Morgan & Co. is looking outside its list of blue-chip corporate clients for new investors in its proprietary mutual funds.

For the first time, the bank is seeking to sell its JPM Institutional Funds to investors that have no other ties to Morgan. Until now, the $9 billion fund family was offered only to existing clients looking to solve specific investment needs.

The bank has hired a team of salespeople from Wall Street firms, including Goldman, Sachs & Co. and Lehman Brothers, to help it push its funds. The new group is trying to convince other banks, investment managers, trust companies, and insurance companies to make the Morgan funds part of their institutional product lines.

"This is the first time we developed a distribution strategy to proactively go outside Morgan to sell the funds," said George C.W. Gatch, vice president of J.P. Morgan Investment Inc. "They were sold to our institutional clients more in a reactive mode or as an internal service to our corporate clients."

J.P. Morgan already offers its funds to other banks via a "private label" program. This latest effort is separate from that push, which allows other firms to offer Morgan portfolios under their own names.

Both programs, however, are designed to increase assets under management at J.P. Morgan. The New York-based bank manages more than $200 billion worldwide for corporations, employee benefit funds, government agencies, and wealthy individuals.

According to Mr. Gatch, Morgan is zeroing in on the institutional market, as assets held by that group are expected to increase by more than 10% annually over the next ten years.

"Given our heritage and reputation with institutions and the opportunity that presents itself in the marketplace," the institutional mutual fund business is an obvious one for Morgan to target, Mr. Gatch said.

By marketing its funds outside its current customer base, J.P. Morgan is setting its sights on smaller clients than it usually serves. The bank typically requires a minimum investment of $50 million to open a separately managed institutional account. JPM Institutional Funds carry investment minimums ranging from $500,000 for an emerging market equity fund to $10 million for three money market funds.

"If you've got a crowded market with a lot of products, you've got to find every nook and cranny-even if it may seem inconsistent," said Adele L. Heller, a director at RogersCasey, a Darien, Conn.-based consultant to institutional investors. "That is what they're trying to do."

"It's a great strategy for them," added Richard M. Todd, principal of Innovest Portfolio Solutions Inc., Englewood, Colo. "They're gonna be able to open up their universe to a huge number of investors." Mr. Todd recently advised a client to invest in a Morgan fixed income fund.

To get the program up and running, Mr. Gatch appointed four new vice presidents to his team, each experienced working with the institutional clients of banks, thrifts, insurance companies, corporations and state and local governments.

The new hires, who joined in January, include Robert Deutsch, from Goldman Sachs Asset Management, and Jim Kwok, also from Goldman. They are joined by Paul Rice, who came from Lehman Brothers, and Kirtsen McElroy, a Morgan veteran who most recently worked in global custody and securities lending.

The team will be fighting to get the bank's funds sold by institutions that already market portfolios managed by a large stable of providers, including Fidelity Investments, Federated Investors, T. Rowe Price Associates Inc., State Street Global Advisors, Vanguard Group, and Provident Capital Management.

That has some people in the industry wondering just how successful Morgan can hope to be.

"There is some limited opportunity. There are a lot of players with that capability," said David B. Master, managing director of Optima Group Inc., a Fairfield, Conn.-based firm that consults investment managers.

Yet according to Mr. Gatch and his staff, Morgan is making a long-term commitment to the strategy. And three financial companies have already agreed to offer Morgan's wares to their clients.

"Each of these (accounts) are in the tens of millions of dollars," said Mr. Deutsch. "We're up and running-and, running pretty fast."

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