Being owned by a bank has handcuffed many mutual fund units.
Just don't tell that to J.P. Morgan Funds. The JPMorgan Chase & Co. business line increased its assets under management 6.97% last year, to $445 billion, and now has its sights set on developing more assets through banks. On Monday, it announced the hiring of John Holcombe Boyd, the director of wealth management services for T. Rowe Price's third-party distribution division, to be a senior relationship manager focusing on boosting traffic through banks and trust departments.
Boyd is to report to Jed Laskowitz, the managing director of J.P. Morgan Funds who oversees its sales through broker-dealers, insurance companies, banks and registered investment advisers. The unit increased its long-term assets under management, including equity and fixed-income products, by 71.5%, to $92.6 billion last year.
"We had a strong 2009, and we have a lot of momentum for 2010," Laskowitz said. "In the fund business, we were third in net flows behind Pimco and Vanguard last year. We want to be able to sustain that position."
J.P. Morgan Funds had $26 billion of inflows into long-term funds last year, according to Strategic Insight, and it had $2 billion of inflows in January, trailing both Pimco and Vanguard. It closed January as the 10th-largest long-term mutual fund provider, according to Morningstar Inc., with $95 billion of fund assets under management.
Laskowitz said the goal is to reach the top five and that boosting sales through banks is a big part of his plan.
"We work with the bank market today, but most of our assets are housed in a lot of different channels," he said. "As the bank market grows and our share grows, we want to put a lot of focus on developing sales through banks and expanding in that space."
It is hard to pinpoint how much of J.P. Morgan Funds' assets are in the bank channel, Laskowitz said, because "a lot of firms that are banks now, weren't banks two years ago." However, 29% of JPMorgan Chase's total net inflows last year came from third-party channels, including banks — up from 23% in 2001, according to Cerulli & Associates.
"That is a trend that we expect will continue," Laskowitz said.
Analysts said that it remains difficult for most banks to sell proprietary investment products through their own bank much less competitors'.
"Things haven't changed," said Geoffrey Bobroff of Bobroff Consulting in East Greenwich, R.I. "JPMorgan is a retail bank, and it is very hard for banks to sell proprietary investment products through their own retail bank. All of JPMorgan's funds are branded as J.P. Morgan Funds, and that makes it even more difficult to sell them through other banks. … In the end, performance is ultimately the decider. If they can deliver strong long-term performance, they will get the sales or at least some visibility."
Laskowitz disagreed. "I think that that attitude has changed," he said. "As a lot of large banks get out of the asset management business, they still need to find quality third-party asset managers whether those are affiliated with a competing bank or not. We just haven't had any challenges partnering with other banks."
JPMorgan Chase's fund unit was able to withstand the difficult market environment of the past two years thanks to its lineup of fixed-income funds, he said. "Those products helped us compete well at a time when the industry had significant challenges," he said. "We took the momentum of that product line and navigated through the crisis well."
During the past two years, Laskowitz said, J.P. Morgan Funds built out its sales force and plans to add to it this year. He said that he wants to use an approach in the bank channel that is similar to what helped gain sales through registered investment advisers.
"We have developed a good reputation in the RIA market because we have been able to focus on that market since the mid-90's," he said. "We put a lot of effort in that space beyond just products, in terms of research and building capabilities. We want to take that same time and focus to the banks."
For RIAs, J.P. Morgan Funds launched an inflation-protected municipal bond strategy in 2005 that has already accumulated $3 billion to $4 billion in assets. Laskowitz said he thinks that that product can also be sold to banks. The fund unit has also been successful with alternative products. It has two of the 10 largest market-neutral funds in the industry, according to Morningstar.
Beyond mutual funds, J.P. Morgan Funds is seeing growth from its unified managed account platform, which was introduced in June 2008. In less than two years, it has accumulated 30,000 accounts and $6 billion of assets under management. Laskowitz said he expects this trend to continue as the company looks to offer these products through banks.
"We want to provide more solutions that offer diversification," he said. "UMAs will work in banks."
Bobroff said JPMorgan Chase's proprietary fund story is different from a lot of banking companies that were forced in the past two years to quit asset management to focus on core banking. Some companies have sold proprietary fund units and were left to sell third-party funds. Others have abandoned asset management altogether.
Laskowitz said asset management remains crucial at JPMorgan Chase. "The fund business, through the mergers, really has grown significantly in the past few years," he said. "We made a lot of investments in product development and really built out the quality of the asset management organization, and really the best evidence are the results and the expansion of our client base.
"Our private bank and retail bank go through a lot of due diligence to offer an array of third-party products and J.P. Morgan Funds, and that really works for us. In a competitive environment, we will win our fair share given our experience in this space and the diversity of our products. We think that we can continue to compete well in this space."
