When Fund Strategy met with Jasper Berens three years ago, the Retail Distribution Review was the hot topic, having come into effect earlier that year. For JP Morgan Asset Management, it was a natural extension of what had been a focus for the firm since 2005: building educational tools for advisers.
This education drive has been the making of JPMAM in the retail space. Having evolved its outreach to advisers from pre-RDR academy support to the guide to markets and the recent principles of investment, the firm is now recognised by fund selectors as a leader in adviser support.
Indeed, AJ Bell head of fund selection Ryan Hughes says JPMAM has “forged an enviable reputation with advisers” while Wellian Solutions CIO Richard Philbin says the firm “has been on the front foot when it comes to training and education”.
Berens, head of UK retail, says advisers now see JPMAM as “a major partner”, which in turn has drawn clients to consider the full extent of its product range. While the firm has significant assets in its emerging market equities, European equities, US equities and natural resources funds, Berens admits that historically JPMAM was viewed as a provider of these “less core” Oeic funds. That seems to have changed. “We are now being rewarded by people looking at us in the core of their portfolios,” Berens says.
Nowhere is this more noticeable than in the Global Macro Opportunities fund, run by Talib Sheikh, which has attracted over £800m since its launch in February 2013. The fund went from less than 1 per cent market share of gross flows in May 2015 to 6 per cent market share of gross flows by August 2016, according to the Investment Association.
“We have seen a big move in the Global Macro Opportunities fund,” Berens says. “We are now seen as a core provider.”
One area that hasn’t changed in the way Berens hoped since the RDR is the take-up of investment trusts.
“I thought that would have changed more,” he admits. “The number of investment trusts bought through platforms has increased, but from a low base. However adviser platforms have incorporated investment trusts more readily than before; there is an upward trend.
“As the retail adviser market becomes more sophisticated I think investment trusts will be taken even more seriously. Wealth managers tend to be the natural shareholder base of investment trusts; as they take on more discretionary powers investment trusts will fulfil a need more.”
JPMAM is the largest provider of investment trusts both by number of trusts (23) and assets (£8bn), Berens says, adding that he expects the investment trust arm of the business to see the most rapid growth from adviser recommendations.
Investment trusts are one of the three prongs of the UK business, with the Oeic and Sicav ranges the other two.
“The fact we have three sets of vehicles in the UK makes us different to our competitors,” Berens says. “We are set up differently in that no one else has that much exposure to investment trusts. Aberdeen is similar, but it doesn’t have the size or scale in the Sicav range, and Baillie Gifford, but it doesn’t have the size and scale in its Oeics. It means we are committed to multiple distribution demands in the UK and we probably have the chance of being successful in most of those channels, if not all.”
A recent coup for JPMAM was its alternative investment arm winning the mandate for the BlueCrest AllBlue fund investment trust – now known as the Highbridge Multi-Strategy fund – which Berens says “a number of companies pitched for”.
“The demand for BlueCrest and the growth of the Global Macro Opportunities fund shows there is consumer demand in the marketplace for asset classes that are different to traditional asset classes; a blend of diversification for people’s portfolios, which has been really important this year.”
Meanwhile the 43-strong Oeic range – while still boasting over £14bn in AUM – has shrunk slightly, following the closure of the Fusion fund of funds in 2015, two-and-a-half years after the firm hired Tony Lanning from Henderson Global Investors to launch the range, which had less than £100m in assets when it was shut down.
“It was difficult to compete in an established marketplace,” Berens says. “It is a very, very competitive marketplace. People tend to hold onto fund of funds longer than other investments. It was hard to raise money, although the funds had performed well.”
JPMAM’s Sicav range has a number of funds which are marketed back to the UK, representing approximately £3.2bn in AUM. The range tends to house the more specialist funds; recent launches include the Multi-Manager Alternatives fund and the US Opportunistic Long-Short Equity fund.
“We market our Sicav funds that are available in the UK to top-end advisers. Wealth managers don’t differentiate between Oeics and Sicavs,” Berens says. “There are different types of innovative products in the Sicav range. It is an increasingly competitive world out there; we have got to have an edge over our competitors.”
Back in 2013, JPMAM had £20.5bn in assets under management; the latest figures show it now has £25.8bn in AUM. “I would say we are top 10 for AUM in the UK. I’d consider us top 10 for assets and certainly for sales.”
Indeed, the lastest Pridham report shows JPMAM “making a comeback in Q3”; the group ranked eighth for gross retail sales over the quarter with £1.4bn, and sixth for net retail sales with £357m.
“Historically we’ve been at the sides of people’s portfolios. We are still there, but we have seen growth in our global macro products and we’ve pushed into UK equities. Next year we will be pushing fixed income. We will see a big change in the Pridham report; we will be top five and top 10 more consistently than in the past.
“£25bn in assets under management – that’s not bad considering the industry’s net flows were significantly reduced in 2015 and it looks like 2016 will see net flows out. People have moved to passive. It is a challenging
environment for the active industry.”
JPMAM has reacted to these challenges by setting up its stall in the smart beta arena. The firm hired Mike Camacho as global head of beta strategies in July, with the “remit to build”.
“We are looking at what the right products are and which distribution channels to use,” Berens says. “We are excited about it. We will launch products in 2017. We need to use our best skill sets in areas people want.”
The main focus for next year will be on fixed income; Berens admits they are not a go-to firm for the asset class in the UK.
“We are taking our Strategic Bond fund, the Global Bond Opportunities fund and the Sterling Corporate Bond fund to the marketplace,” Berens says.
“Andreas Michalitsianos has managed the Sterling Corporate Bond fund for three years. It is a small fund so very nimble and performance is top quartile over one year. Everyone wants exposure to sterling corporate bonds, but some companies are under pressure because their funds’ performance are under pressure. It creates opportunities for other fund managers.
“We are known for fixed income globally, but in the UK less so. That will change over the next few years.”
Company biography: JP Morgan Asset Management is a global asset manager providing a range of investment funds and segregated strategies to institutions, individuals and financial intermediaries across equities, fixed-income and money markets, as well as offering alternative investments such as hedge funds, real estate and managed currency. JPMAM is part of JPMorgan Chase & Co and has a history dating back more than 150 years. The firm has investment teams covering more than 15 cities globally with investment hubs in London, New York, Tokyo and Hong Kong.