July 31, 2025 • 39 mins
The ETF "Thunderdome" is an unforgiving and relentless environment. Which makes the exchange-traded funds from JPMorgan Asset Management so noteworthy. Led by its Chief Executive Officer George Gatch, the firm has carved out a unique niche — active ETFs — and then used its institutional muscle to move up the leaderboard while driving down costs. In an era where 75% of all active funds are seeing outflows, JPMorgan has found a way to thrive; in fact, it’s now the fourth biggest active fund company in the US.
On this episode of Trillions, Eric Balchunas and Joel Weber speak with Gatch about JPMorgan's secret sauce, his strategy in the active category, how his biggest products became such hits, why fixed income remains a promising space, what to watch in private markets and why he's avoiding crypto.
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:05):
Welko our Jollins.
Speaker 2 (00:06):
I'm Joel Webber and I'm Eric Balchutas.
Speaker 1 (00:12):
We got a big deal in the podcast today. I'm
excited about this one.
Speaker 3 (00:15):
Yeah.
Speaker 2 (00:15):
We needed to counterweight. The last two were a little
off the cuff and we needed something heavier and deeper.
Speaker 1 (00:23):
We needed a heavyweight. We did. So we're going to
be joined by George Gatch, who's the CEO of JP
Morgan Asset Management. I'm excited about this one in part
because JP Morgan has become such a big force in
the ETF industry relatively quickly.
Speaker 2 (00:40):
Yeah, and active in general. People don't realize that when
you look at all the active mutual funds and ETFs
and you add it all together. JP Morgan is now
fourth after Capital Group, Fidelity and Vanguard, and they've come
up from like eighth in only a couple of years,
passing Pimpco DFA T. I mean these are heavyweight firms.
(01:02):
People may not know that. I think they think of
JP Morgan, they think of bank more so than asset management.
But that is some powerhouse surge there, and they have
taken in about four times more in inflows than any
other active shop. So they are on fire when it
comes to active and it really was embracing the ETF.
(01:22):
The ETF is the majority of those flows, although their
mutual funds are actually treading water, which is which helps
because they don't have to offset any outflows in the
mutual funds. Really, and the ETFs have been a big hit.
They've got a couple. They've got the biggest stock active
ETF and the biggest bond active ETF in the world.
Speaker 1 (01:39):
Who knew muscle, that's what we call that. So joining
us in this episode George Gatch of JP Morgan's asset management,
this time on Trillions, the new heavyweight. George, Welcome to Trillions.
Speaker 3 (01:54):
Oh, thank you, gentlemen. Great to be here.
Speaker 1 (01:56):
Okay, So when people think of JP Morgan, I think
most of the time they think of Jamie Diamond and
the bank. Can you just describe how, how and where
the asset management part came from and how you've become
such a dominant force so quickly.
Speaker 3 (02:11):
Yeah. Well, I think Jamie would refer to us as
the hidden gem within JP Morgan. We've been managing money
for a long long time, well over a century in fact,
if you replay the tapes a little bit in the
seventies during the trust banks JP Morgan Morgan guarantee trust
with the largest asset manager in the world. So we're
(02:32):
on a mission to regain that position as being the
best asset manager. We have eighty five hundred employees that
do only one thing, manage other people's money. One of
the largest commitments to research, fundamental research, and we differentiate
our size by being exclusively focused on active management. And
(02:53):
I think as we talk about our success in ets
and more broadly and active, I think that's a key,
key different trading point for us.
Speaker 1 (03:01):
And when did that ETF light bulb first go off
for you?
Speaker 3 (03:05):
Well, you would have to have been blind to have
not seen that ETFs were something that there was significant
amount of demand in the industry. And so about ten
years ago we said, we think this is a really
important innovation and benefit for investors. It was at that
time pretty much exclusive to passive but we thought we
(03:25):
needed to develop expertise and capabilities, and so we launched
our first ETFs, which were factor tilts essentially. So we're
trying to bring some degree of differentiation to the market
and we've been on a journey. One of the the
important differentiats I said before, is our focus on active is.
We had a debate within JP Morgan Asset Management about
(03:45):
should we try to be a scale passet manager. And
when I became CEO six years ago, I really made
the decision that we're going to focus on our straints
and put all of our resources in into active and
that was represented in the investments we made in our
ETF lineup. We do have some passive capabilities, but those
(04:07):
are really building blocks for our active multi asset strategies,
target date funds, and other things that we offer.
Speaker 1 (04:15):
So when you showed up six years ago and already
Vanguard black Rock had the passive game like down, was
it more of like there's an opportunity and active that
those two have conceded and that's how we're going to
show up. Or was it like we'll get to the
passive stuff later, but we need something like a hallmark
product to really distinguish ourselves.
Speaker 3 (04:36):
I mean, it's amazing we saw, which is this massive
title wave of investors moving from active to passive and
you can see that and flows in mutual funds, and
that's also represented in the intellectual capital that many asset
managers they focus their resourcing, their research on tracking markets,
(04:57):
and they did a good job of it, and it
was highly a feeling to investors. I saw that as
an opportunity where we could help exploit the ability to
outperform markets because there was simply less focus on it
from most of our competitors. I also think there's this
kind of cultural underpinning that's very powerful. To have eighty
(05:18):
five hundred people that are all believe in the ability
if you have sustainable sources of information, of an information
advantage of the ability to outperform outperform markets. And that's
important for our sales teams, it's important for our product development, operations,
fund accounting, etc. Everyone believes that we have an advantage
(05:40):
and we can exploit that to help people outperform markets.
Speaker 2 (05:43):
So I've been watching you for years. I saw you
guys come in and I saw the passive first sort
of the beta knockoffs. They did okay, there was some
BYO money, but then JEPPI to me, really changed everything
in gp JPST. That's the bond in the stock when
they're the biggest. What I've found interesting and what I
think this is my theory on why it has worked
(06:05):
so well because you came in and really made an
impact on something that people were kind of writing off
a little bit. Most of these big asset managers, they
were like, hey, let's come out with like free index
funds like Fidelity, just to offset the active outflows. So
we look like we're you know, in business still versus
just bleeding out slowly. But you guys are like, no,
(06:26):
we can make active work. One thing you did that
I think takes guts though, is the expense ratios. To me,
they are they feel fair. You know. A lot of
the problem with the active management is it's like ninety
basis points. It's largely S and P five hundred stocks.
They came in jep's thirty five BIPs. That's the same
as the R six class of your mutual fund, which
is the cheapest class. So in essence, they're giving the
(06:50):
ETF investors sort of the cheaper share class of the
mutual fund. Not only that, you get fundamental stock picking.
There's an options overlay, so there's a lot of legwork involved.
And it's JP Morgan. So I'm thinking of an advisor always.
I'm always in their brain going does this seem like
a good deal. It's like they can go to their
client now and say, look, I'm going to get you
JP Morgan. That'll that's really cool. That's lucky you have that.
(07:11):
A lot of firms don't. I'm going to get you
in options overlay. And it's just like it's going to
take the ball down a little bit, YadA YadA. It
feels fair at thirty five BIPs, and I think that's
part of the magic.
Speaker 3 (07:22):
Would you agree, Yeah, no, absolutely, you know, and I
think we all know, and we've looked at other industries
and other firms. If you don't evolve and adjust your
business model to the changing needs of investors financial advisors,
your business will with her. And so you know, we
made decisions to build products we think that, from both
(07:47):
a pricing and an investment standpoint, have a highly differentiated
offer relative to others. Now, we didn't apply the strategy
of a covered call options only in an ETF. We
actually did it first in a mutual fund. So what
we're doing is bringing our best ideas that we have
in mutual funds, separately managed accounts, what we've run for institutions,
(08:10):
and then putting them in an ETF and then going
through a process of how do we price that relative
to the value that we're adding to investors. And the
great thing about ETFs is there's very few little friction
relative to revenue share or transfer agency costs or other things,
so it allows us to do it at a price
point where then financial advisors can make the decisions to
(08:32):
add fees for the services they're providing. And so what
this has really done is seeing the disconnecting between manufacturing
and the costs associated with manufacturing versus services related to
advice and financial planning and other components of high value
added things that advisors do themselves. And I think that's
(08:52):
one of the reasons that ETFs has grown so rapidly,
both in passive and active, which is you see this
movement towards fee based programs and away from transactional revenue
sharing and other things that's good for investors, and so
we're playing to that theme and the way that we
price in service products.
Speaker 2 (09:12):
I will say, you make that sound easy, but over
the years, I think the fun companies that are just
fun companies, it is tougher for them. I see them
sometimes try to make the ETF industry come to their
on their terms and it doesn't work. You kind of
have to meet the ETF industry on its terms, and
I thought JPM was.
Speaker 1 (09:32):
Like Judo a little bit, like we're going to use
the energy and like redirect it a little bit rather
than take it head on. If you like that, I've
brought Olympic sports in here.
Speaker 2 (09:41):
I like metaphors. I don't know about that one, but
it's it's hopefully everybody listening understands. That flew over my
head a little bit. But the idea of having a
bank where asset management is a portion of the revenue,
and obviously Jamie Diamond has all these other groups making money.
(10:01):
There's a lot of things to work on and so
it's not like the whole thing depends on this one
mutual fund revenue stream. So you can make that ETF
leap a little easier because it does involve us a
little bit of self cannibalization. Although if you get enough assets,
you win in the end. But it's been tough for
the traditional nineties er mutual fund company to do that
(10:23):
because this is all they have. And I don't know,
do you feel like that that you work in this
gigantic diversified bank type company. Does it give you a
little more freedom or is that more just the Jamie
Diamond management thing to just let you do what you
need to do, because I don't feel like others are
given the keys so much as you guys were in
(10:44):
terms of pricing it and being able to sort of
maybe go a little cheaper than you probably would like to.
Speaker 3 (10:51):
The way I think about it is the asset management
business is to serve investor, and we are measured to
compete with the best asset managers in the world. That's
the way the board and that's the way Jamie judges
us with us, and we have the ability because it
(11:14):
is a fiduciary business is a very important point, and
we're hemetically sealed because of the conflicts that exists between
the bank and the asset management. We can't trade in
our ETFs with JP Morgan Chasing Company, but we have
the ability to reach out and pull in the expertise
and skills that are maybe difficult for other monoline asset
(11:36):
management firms to get. Cyber technology, artificial intelligence that bank
has since seventeen billion dollars a year on technology. We
have the ability to pull in generative AI expertise to
help apply that to managing managing money. So I would
describe this as the best of both worlds. The other
thing I would point out, which I think is important
(11:57):
for us, is they're kind of two I think two
ways that asset managers approcess. One is around marketing what's
best to sell, and then you have others who are
deep fiduciary managers where they lead from the investment standpoint,
how do you generate returns for clients and a risk
(12:19):
adjusted away. Some lean too much in one way, therefore
haven't been able to adapt their product offering rap enough.
Others lead the other way, and they end up producing
products that don't aren't in the interest long term investing
interest of investors. What I think we have been able
to do is balance that decision making between a very
(12:39):
strong investment led fraduciary culture and a very strong focus
on investor needs and demands and adapting our product line
and capability more rapidly, maybe than some of our competitors have.
Speaker 1 (13:00):
We talk about a lot how the ETF is a
terror dome, the ETF industry is a terrordome, and that
you know it's taxing, especially for all the juggernauts that
have to compete with one another. What's it feel like
to walk into the Terrordome every day and have to compete.
Speaker 3 (13:20):
Oh, it's great. I mean this is this is one
of the most exciting areas of the industry. I mean
the level of innovation. You pointed out the competition, and
it is invigorating for our teams and my people. And
I think that's one of the things because ETFs are
maybe they've been around for a long time, but they're
quite fresh as it relates to, you know, the active
(13:41):
asset management space, and I think it's it's it's bad,
you know, a degree of optimism and focus on the future,
and the competition is awesome. You think about, like what
the competition of the asset management space is meant for
the quality of what investors get today, and the innovations
that we've seen in mutual funds and separately managed tax
optimization and all of that I think is calling in
(14:05):
a seismic shift that's happening where ETFs will likely be
the most important product and vehicle for individual investors and
maybe institutions for the next decade. So I think it's
incredibly exciting.
Speaker 1 (14:21):
Yeah, do it you like to compete against you?
Speaker 3 (14:25):
I feel sorry for them.
Speaker 2 (14:27):
Actually, that's a good segue. I have a good example
of what I think of one of the We always
look for these interesting matchups inside different categories. And you
know I titled this Vanguard versus JP Morgan grabbed the popcorn.
Speaker 1 (14:41):
So JP Morgan popcorn for that.
Speaker 2 (14:43):
Yeah, I mean this is really interesting to me. JP
Morgan launched a high yield active bond e tf JPHY.
It's seeded with two billion, which is unheard of.
Speaker 1 (14:54):
Pretty good start.
Speaker 2 (14:54):
That's a good start. You're already the biggest one. Nice
just like that's like born on home plate right there. Now.
A couple of weeks later, Vanguard filed for an active
junk bond ETF and everybody had been writing them off
because people had thought they would file for a drunk
bond ETF at some point. Everybody wanted them to because
they have a mutual fund, and they never did. And
(15:16):
I think you got them to launch, in my opinion,
because they see the numbers. Vanguard is nineteenth in active
ETF and they're not nineteenth in anything. That probably pisses
them off. And they see you come in, you're cleaning up,
you're running circles around them, and you're bab basically biting
at their heels right now in third place of overall active,
(15:38):
so that I really I can't ever say I've seen
Vanguard look a little nervous, but this looks like that.
Speaker 3 (15:46):
Because Vanguard is a great firm and obviously huge innovator
in ETF space. The way I think about it, three
trillion dollars in fixed income ETFs globally, five percent of
that is indexed passive. This is a space where the
(16:06):
average manager outperforms the market. So I think investors have
loved the ETF package and therefore have gone down that
path of allocating to fixed income, and now that their
world class capabilities active capabilities in ETFs, I think we're
(16:26):
going to see a massive shift. And what we did
was we went to one of our largest clients, one
of the most sophisticated asset owners in the world, and
asked them whether they wanted to participate in us launching
a high yield ETF. And that shows the strengths of
our traditional institutional business and relationship. On day one, the
(16:49):
ETF had four hundred and fifty positions source from our
credit and portfolio management capabilities. So as an investor, if
you can into our fund on its first day, you
would have be fully diversified UH in the in the
sectors and securities that we think are our most attractive.
(17:10):
It's a great thing. I never thought I would see
the day where we were able to launch a e
t F and have it be the largest et F
in the category on day on day one. It's a
great position to be in.
Speaker 1 (17:21):
I want to talk about JEPY because we mentioned earlier
JP Morgan Equity Premium income ETF that has just crushed it.
And can you dissect why JEFPY has been such a success.
And also were there any other names that you considered
(17:42):
for the ticker?
Speaker 3 (17:44):
We're always wondering about the best, the best, the best tickers.
I mean, I think this is you know, as I
said before, this is not a strategy that was first
in the ets. It came to our mutual fund lineup first,
UH and and it all fors the investors the opportunity
to get their toe in the water, get allocation to
(18:06):
the upside potential of equities, but at the same time
generate very attractive income and have some less volatility and delivers.
So I think it's an idea that has applications to
every asset class. I think it's a core position over
the over the long term, as we see volatility spike,
(18:28):
you're likely to see greater demand for these types of products.
In markets like today, where you have UH momentum in
stock prices, it's likely to be something that's not the
first the first choice, but over time in a market cycle.
I think these strategies and we've obviously replicated it not
just an S and P five hundred which JEFP. We've
(18:50):
done it in Nasdaq stocks with j E p Q.
We've also applied a similar strategy to our hedged equity.
We have one for US strategy and we also have
one for an international strategy called OLAH. So I think
these types of products that give you equity exposures either
(19:12):
downside protection or high levels of income will continue to
be quite attractive. We launched them around the world Canada
our product range and USETS in Europe. We were the
first to list a active ETF strategy in Hong Kong
two weeks ago, which is actually a replica of jeffs.
So this is an error where we're seeing demand globally
(19:35):
around the world to these types of strategies.
Speaker 2 (19:38):
If you look at Europe, I was just in Europe
a couple of weeks ago, and Henry showed me the
active ETFs there. JP Morgan is like in a league
of their own, so like here there obviously right up
there there's a couple good active ETF managers, although some
of them take money from the mutual funds, so they
offset when you look at the boat. That's why when
I looked at your numbers in terms of mutual fund
(19:58):
plus ETF, it was very impressive because your mutual funds
were able to at least eke out a little bit
of flows, which is not the norm. JEPQ, which is
the one you mentioned. It's jetp's little brother, except it's
a little more feisty because the cues have more volatility.
So it seems like to me that jepq's double any
other of your ETFs and flows this year. So it's
(20:19):
kind of like it hasn't surpassed JETPI in assets, but
it's it's getting, you know, it's taking in more money.
I think the idea here is if you write call
options on the cues, what you do is you give
up extreme upside, but what you get in return is
some income. So it yields eleven percent that income can
actually buffer the downside a little, so in essence, it's
(20:41):
like diet cues in a way, and that to me
is a strong selling point that is somewhat performance proof
because if you have a year where you underperform the cues,
the value proposition is still there because a lot of
older investors are like, I'm happy to give up a
little upside. I really I've made a lot of money
and that deal they strike with an issuer like jep
(21:02):
Q or JETPY, it's a brilliant concept because it doesn't
totally rely on performance year to year like say other ETFs.
Speaker 3 (21:12):
Do I have that right? Yeah? Absolutely. I think this
is why these strategies are so durable because I think
the demand for these types of products of high income,
exposure to equity markets, and less volatility. I think that's
a theme that we're going to see to continue continue
to play out. Now. It is the number one selling
product that we have year to date, and I think
(21:32):
there is an important point relative to kind of our
strategy around this. If you look at we got into
the business and saw strong flows through these derivative income
strategies JETP and jep Q, and through our short duration
fixed income JPST, which is the largest fixed income ETF
in the business. But over the last two years, more
(21:54):
than half of our total flows have been in other products.
And I think that's what I see. I'm so encouraged
about the strength of active fixed income, which I mentioned
mentioned before, our JPI, which is an income fixed income ETF,
our Core Plus strategy, which is our best selling fixed
(22:14):
income capabilities. I think that's what you're going to see
happen in the in the industry is we're going to
see more and more flows expanding into other into other
areas as more investment capabilities become available.
Speaker 2 (22:31):
And you also you oversee everything, right, So you've got
mutual funds ETF And I read a little bit about
your push into alternatives. What does that mean? What for you?
What is the push and alternatives? Black Rock says the
same thing. I think some people like, what does that mean?
And what kind of products door we expect?
Speaker 1 (22:48):
And does it mean crypto?
Speaker 2 (22:51):
Don't worry, I'll get there.
Speaker 3 (22:54):
So sixty forty diversified investing all alternatives to a diversified
portfolio and new increase return and reduce risks not a
new novel idea. It's been around for a long long time.
We've provided those tools for our big institutional clients for
a long long time, and we've got leading capabilities in
(23:17):
real estate, infrastructure, hedge, fund of funds, private equity, et cetera.
And I think there's two parts of this. One is
we believe in building stuff internally, so we have a
number of investment strategies that we've seated growth, private equity,
and number of things that you know, over time will
become important options for our clients. So that's part of
it expanding the universe of offerings that we have for clients.
Speaker 2 (23:41):
So you said private equity, and I think did you
launch an interval fund that has private equity credit or both?
Speaker 3 (23:48):
Yes, we have. We have two strategies today that are
private wealth alternatives. One is called JPMF which is a
private equity strategy private equity secondaries, co invest and fund
of fund And we also have a jpm RET which
(24:08):
is a ten tender offer strategy, and both of those
are designed for individual investors, have lower minimums, W two,
tax reporting, etc.
Speaker 2 (24:20):
But the interval means you can only get your money
out quarterly, something like that or is.
Speaker 3 (24:25):
This something It depends on the strategy and the fund.
But yes, there tend to be limits on redemption. These
are these are ill liquid strategies, so it's very important
relative to you know, education and disclosures to clients.
Speaker 2 (24:39):
It's interesting you picked the Interval fund. You're not alone.
I think Blackstone picked one. Vanguard is looking into it.
But there is a small shop or two in State
Street that try is trying to put privates into ETFs.
I do think ETFs are the pervert vehicle that to me,
they are like digital music, and Interval fund feels like
putting it into a CD. You probably could get it
(25:01):
done and listen to the music that way, but it's
not as convenient. On the flip side, privates are ill liquid,
so you know people hesitate to put them. But what
do you think of this move to try to get
privates into ETFs and even further to democratize them fully.
There's some talk of like, well, this is the private
(25:21):
companies just trying to unload this stuff on retail because
they had a nice run and the naves that they
price all the private sets sometimes aren't quite reflective of
reality versus when you put something in an ETF, you
got to price it every day. I don't know. What
do you think of all that. It seems like something
that's on the cusp of like really breaking through to
(25:44):
the retail world.
Speaker 3 (25:46):
Yeah, Eric, I think it's I think that's a great question.
Interval products, and there's a range of capabilities that now
can be delivered in structures designed for ill liquid securities,
and that's where our focuses is building out these capabilities
of private equity, private credit, infrastructure, et cetera, to make
(26:07):
them available to individual investors to complement sixty sixty forty ets,
like public mutual funds are priced daily. ILL liquid securities
have been used in public mutual funds and in ets,
but below the fifteen percent liquidity ILL liquid bucket. And
I think the principle should be if a product is
(26:31):
priced on a daily basis, that there should be limits
to the amount of securities and the strategy around valuations.
So I think we should be very cautious about how
we integrate private securities into ETF structures. There are other
vehicles where it makes more sense. The disclosure is better. Now.
I'm not saying there aren't opportunities to include I liquid
(26:53):
securities in ets. We have to be very mindful of
the issues that you raise.
Speaker 1 (26:58):
How much demand is there from on the consumer side
for products that you know, I have this that liquid stuff.
But are you know, effectively ANTF. Do you see the
demand there?
Speaker 3 (27:10):
No, not necessarily. I mean I say demands for the
ETF structures which are suitable for you know, daily valued securities.
So I'm not saying we see a you know, significant amount.
Now we do see demand for private alternatives to individual
investors significant significant demand.
Speaker 2 (27:28):
Question though, is the demand because these private equity vehicles
seem to have less volatility and can be a true alternative.
But then you know, there is some criticism that, well,
the reason they're alternatives or have lower volatility is because
they don't have to like live in reality of a
true market. For example, SpaceX probably has a similar profile
(27:51):
to Tesla, but you wouldn't know it from the navs.
And I think this is one of the critiques of
private equity is that largely they're to move like public
equities if you put them in the you know, reality.
And I believe there was even a story on Bloomberg
about like JP Morgan trying to trade some of these
and these private shops. It just seems like they're a
(28:11):
little hesitant to actually let this stuff into the reality
of a real market, because it's like it would like,
remove the veil, what's the emperor's new clothes, what's the
The emperor has no clothes. The emperor has no low volatility. Sorry,
that's almost as bad as your Judo metaphor. But you
know what I'm saying. Am I wrong there? Or do
(28:34):
you think there's some of that fear of like? And
so does retail? Do they understand that or is it
just a matter of like less companies go public. Hey,
I want a piece of the action of these companies,
but you know that aren't going public.
Speaker 3 (28:46):
I mean these these securities trade on appointment, and I
think you have to be not not not not every
minute of the day, and so I think you know
that needs to be taken into consideration. But there's some
realities here, right which is a decade ago, there were
eight thousand public companies. Today they're four thousand. There are
multiples of that in terms of private companies that offer
(29:08):
return opportunities to clients, and the same is true in
the fixed income markets. There is a large, growing market
of private securities that offer return opportunities for individual investors.
The question is packaging that in the right way. If
investors have long time arisons, they shouldn't be concerned about
what the pricing is on any individual moment. And I
(29:30):
think that's the opportunity with some of these vehicles that
offer exposure to these markets but are also disclosed that
you're not going to get your money every day. Ets
you're going to get your money every day. Valuation is
incredibly important, and that needs to be the premise around
the types of securities that you include in these portfolios.
And I do agree. I think the people are salivating
(29:52):
over the opportunity in the ETF market and the individual market,
and they want access to it. But we have to
be thoughtful about it. And I think that that's the
perspective that we bring.
Speaker 2 (30:02):
Speaking a thoughtful when I've been running these numbers on
ibit and ETHA that's the black Rock, Bitcoin and Ether ETF.
When I run like fastest to twenty billion, and I
look at all the ETFs that have got to twenty
billion quickly or fastest to ten billion, I bit blowing
everybody away.
Speaker 1 (30:19):
But guess who.
Speaker 2 (30:20):
Guess who's record they're breaking. It's either IMG which was
a fast end jetpy. So here comes ibit getting to
ten billion, twenty billion, thirty billion, four or five six
times faster than Jeppy, which was in some cases the
fastest to that number. You see that, What do you
think is there any any bit of like jealousy, like hey,
(30:42):
we should get a piece of that action or I
don't know. I'm just curious as the numbers grow and
become more astonishing, and a firm like JP Morgan, which
is traditionally it's not what you do, and if that's
your roadmap, it wouldn't make sense. But on the flip side,
more companies are doing it, and it's growing and growing,
(31:03):
and you may hear clients asking for just curious, how
you you know, wrestle with all that.
Speaker 3 (31:09):
Yeah, listen, I think we have a guiding principle around
what types of ETFs we will launch, and we're going
to launch ETFs that we believe are durable and have
a strategy for how to incorporate into a long term
investment strategy. Now, I know that may sound kind of boring,
but boring can be quite successful investment investment strategy. So
(31:31):
that may mean that we move, we lose some trendy
fatty ideas, but we're going to you know, we're going
to stick to our guns. I think that cryptocurrencies are
quite a speculative investment, investment in quotation, and it has
significantly higher volatility in the S and P five hundred,
(31:52):
no income, no intrinsic value. We don't know how to
incorporate it into an investment. I'm not saying it's a
bad thing. I'm just saying we we don't see a way.
That we have summer analysts who come in and one
of the projects we always give them is give us
an investment thesis around crypto bitcoin. Uh, And they come
back and say, we can't tell you how to value
(32:13):
a bitcoin. And so that's that's the premise around our
investment capabilities. And listen, there are lots of ideas that
people are launching water ETFs, animal spirit ETF. So that
doesn't mean they're good ideas, and we're going to We're
going to stick to those things that we think makes
sense for for investors. And that's the discipline we bring
to our product development efforts.
Speaker 1 (32:39):
If you could pick up one thing in the ETF
marketplace and bolt it to your strategy, what would you
like to.
Speaker 3 (32:48):
Acquire what would I like to acquire?
Speaker 1 (32:50):
Yeah, what ETF out there would you most like to
bring into your stable?
Speaker 3 (32:56):
Listen. I think acquiring things as an asset manager is
credibly difficult to do successfully. We run almost four trillion
dollars of assets, we have over five hundred strategies. There
isn't a gap in our offering. I also find it
having built a lot of businesses at JP Morgan over
(33:16):
the last thirty nine years, from our global money market
fund business to our mutual fund business to our ETF business.
Let me tell you it is a hell a lot
more fund building things that it is acquiring things. And
now that doesn't mean where we don't look at everything
we do because I think it makes you, it makes
you smarter. I think there's quite a different culture in
the ETF business because it grew out of passive. So
(33:38):
the strategy was let's launch against as many indices, be
first and own as much of the market as possible.
I think as that relates to active, it's quite a
different philosophy that you need to bring to it to
be successful because the strategies ultimately have to helperform in
order to succeed, and that means it needs to be
more focused, and they need to be capabilities that you
(34:03):
have total confidence over full market CYCLI or likely to outperform.
So ours isn't to do everything at all costs. It's
to do things at a very focused level where we
have a competitive advantage. I'd rather build it than buy it.
Speaker 2 (34:18):
You're in a good spot. I mean you really, I
get that. A lot of these firms, Joel that have
acquired firms, they came in late and again they launched
a couple of products on their terms and nobody cared.
And they're like, oh my god, they panicked and they
just bought companies like I said, JP Morgan had they
just it's like they just came in. You know. I
used that metaphor of a castaway. You know, Tom Hanks
(34:40):
is the middle manager. At the beginning, he's like a
little chunky and then you know, forty five minutes in
the movie, he's like weighs one hundred and forty pounds
and he's spearfishing. That's a legacy active manager on day
one versus third year in. But JP Morgan kind of
came almost as the spearfisher guy. And that's you know again,
(35:01):
and I don't know, does Jamie Diamond take pride in
this because it really is unusual to come out and
sort of pass all of these massively popular mutual fund
companies and active assets. Does he understand that, like, hey,
my firm is taking in four times more flows than
any other active fund company out there? Does he follow
(35:25):
that much going on?
Speaker 1 (35:26):
Is?
Speaker 3 (35:26):
I think he greatly appreciates the asset management business and
the strength of what we do. Now. Remember Jping Morgan
Chase is number one in investment banking, number one in
retail banking in the United States, So perhaps his expectations
are that we bring the same from management business.
Speaker 1 (35:43):
Yes, he's like, why are you not number one?
Speaker 3 (35:48):
But listen, you know, I think the thing that the
board of Jping Morgan Chase, one of the things that
I think they've done a great job is they allow
us to manage our business as an asset manager. That's
the way we compensate eight people. Our business has a
very long tail. The decisions that we made five ten
years ago are the reason that we're having success today.
(36:10):
So it's a little bit different, and I think they,
you know, allow us to manage the business that way.
Speaker 1 (36:15):
All right, final question, it's one that we always ask
what is your favorite ETF ticket other than any that
JP Morgan does, other.
Speaker 3 (36:23):
Than a JP Morgan ETF. Oh that's a very difficult question.
That's why I asked. I mean, I really only know
our ETF.
Speaker 1 (36:34):
So yeah, any any that give you a chuckle when
somebody says moo, for instance, does that make you laugh?
Speaker 3 (36:42):
I laugh quite a bit when I watch look at
ETF product development and what's what's coming out? That is?
That is for sure?
Speaker 2 (36:49):
They just fired. They just filed one Jedi, which is
like JEPI Jedi is a I believe it's a Space
ETF or something like that Drone.
Speaker 1 (36:59):
I would hope it Space.
Speaker 3 (37:01):
That's a good ticker.
Speaker 2 (37:02):
It is a good ticker. So Jetty Jedi and now
Jetpy anyway, Jetpy's pretty good. It's I'm a big fan
of vowels, and you guys have a lot of vowels.
Jet by jet Q. It's just easy for an analyst.
Jpst a little trick here, but hello, what do you
call it? Hello? Sometimes I have names for tickers and
the asset managers, like nobody at our shop calls at
(37:23):
that like jaw.
Speaker 1 (37:25):
You're not pronouncing it great Janus.
Speaker 2 (37:26):
People are like, that's j triple A, only the Bloomberg
people call it JAW And I'm like, all right, well.
Speaker 3 (37:31):
Anyway, that's one of the amazing things about the ETF
effort at JP Morgan. I'm not sure portfolio managers knew
the tickers of our mutual funds. Well, let me tell you.
They know the tickers of the ets that they're running,
and they you know, what's probably the most important product
capability that they they offer, and it's how they get paid.
They get paid and the shares of the ETFs that
they run on behalf of clients. It's pretty unique.
Speaker 2 (37:54):
Ola Jade, that's a good one.
Speaker 1 (37:56):
What's jade?
Speaker 2 (37:58):
That is the active developed markets? So you got a
temp some some interesting ones in here. You wouldn't it
would be weird if you went too crazy. You don't
want to go to full.
Speaker 1 (38:10):
I'm sure there's the full direction.
Speaker 2 (38:12):
They're the crazy ticker. Yeah, you want to middle it out?
Speaker 3 (38:14):
Yeah, yeah, all right, George got going to stay mainstream.
Speaker 1 (38:18):
George Gosh, thanks for joining us on trias. Thank you,
John Munch, thanks for listening to trillions. Until next time.
You can find us on the Bloomberg terminal Bloomberg dot com.
Apple Podcasts, Spotify, or wherever else you'd like to listen.
We'd love to hear from you. Hit us up on
social I'm at Joel Weber Show, He's at Eric Falchine's.
(38:40):
Trillions is produced by Magnus Hendrickson. Brendan Newman is our
executive producer. Sage Bauman is the head of Bloomberg Podcast
Welko our Jollins.
Speaker 2 (00:06):
I'm Joel Webber and I'm Eric Balchutas.
Speaker 1 (00:12):
We got a big deal in the podcast today. I'm
excited about this one.
Speaker 3 (00:15):
Yeah.
Speaker 2 (00:15):
We needed to counterweight. The last two were a little
off the cuff and we needed something heavier and deeper.
Speaker 1 (00:23):
We needed a heavyweight. We did. So we're going to
be joined by George Gatch, who's the CEO of JP
Morgan Asset Management. I'm excited about this one in part
because JP Morgan has become such a big force in
the ETF industry relatively quickly.
Speaker 2 (00:40):
Yeah, and active in general. People don't realize that when
you look at all the active mutual funds and ETFs
and you add it all together. JP Morgan is now
fourth after Capital Group, Fidelity and Vanguard, and they've come
up from like eighth in only a couple of years,
passing Pimpco DFA T. I mean these are heavyweight firms.
(01:02):
People may not know that. I think they think of
JP Morgan, they think of bank more so than asset management.
But that is some powerhouse surge there, and they have
taken in about four times more in inflows than any
other active shop. So they are on fire when it
comes to active and it really was embracing the ETF.
(01:22):
The ETF is the majority of those flows, although their
mutual funds are actually treading water, which is which helps
because they don't have to offset any outflows in the
mutual funds. Really, and the ETFs have been a big hit.
They've got a couple. They've got the biggest stock active
ETF and the biggest bond active ETF in the world.
Speaker 1 (01:39):
Who knew muscle, that's what we call that. So joining
us in this episode George Gatch of JP Morgan's asset management,
this time on Trillions, the new heavyweight. George, Welcome to Trillions.
Speaker 3 (01:54):
Oh, thank you, gentlemen. Great to be here.
Speaker 1 (01:56):
Okay, So when people think of JP Morgan, I think
most of the time they think of Jamie Diamond and
the bank. Can you just describe how, how and where
the asset management part came from and how you've become
such a dominant force so quickly.
Speaker 3 (02:11):
Yeah. Well, I think Jamie would refer to us as
the hidden gem within JP Morgan. We've been managing money
for a long long time, well over a century in fact,
if you replay the tapes a little bit in the
seventies during the trust banks JP Morgan Morgan guarantee trust
with the largest asset manager in the world. So we're
(02:32):
on a mission to regain that position as being the
best asset manager. We have eighty five hundred employees that
do only one thing, manage other people's money. One of
the largest commitments to research, fundamental research, and we differentiate
our size by being exclusively focused on active management. And
(02:53):
I think as we talk about our success in ets
and more broadly and active, I think that's a key,
key different trading point for us.
Speaker 1 (03:01):
And when did that ETF light bulb first go off
for you?
Speaker 3 (03:05):
Well, you would have to have been blind to have
not seen that ETFs were something that there was significant
amount of demand in the industry. And so about ten
years ago we said, we think this is a really
important innovation and benefit for investors. It was at that
time pretty much exclusive to passive but we thought we
(03:25):
needed to develop expertise and capabilities, and so we launched
our first ETFs, which were factor tilts essentially. So we're
trying to bring some degree of differentiation to the market
and we've been on a journey. One of the the
important differentiats I said before, is our focus on active is.
We had a debate within JP Morgan Asset Management about
(03:45):
should we try to be a scale passet manager. And
when I became CEO six years ago, I really made
the decision that we're going to focus on our straints
and put all of our resources in into active and
that was represented in the investments we made in our
ETF lineup. We do have some passive capabilities, but those
(04:07):
are really building blocks for our active multi asset strategies,
target date funds, and other things that we offer.
Speaker 1 (04:15):
So when you showed up six years ago and already
Vanguard black Rock had the passive game like down, was
it more of like there's an opportunity and active that
those two have conceded and that's how we're going to
show up. Or was it like we'll get to the
passive stuff later, but we need something like a hallmark
product to really distinguish ourselves.
Speaker 3 (04:36):
I mean, it's amazing we saw, which is this massive
title wave of investors moving from active to passive and
you can see that and flows in mutual funds, and
that's also represented in the intellectual capital that many asset
managers they focus their resourcing, their research on tracking markets,
(04:57):
and they did a good job of it, and it
was highly a feeling to investors. I saw that as
an opportunity where we could help exploit the ability to
outperform markets because there was simply less focus on it
from most of our competitors. I also think there's this
kind of cultural underpinning that's very powerful. To have eighty
(05:18):
five hundred people that are all believe in the ability
if you have sustainable sources of information, of an information
advantage of the ability to outperform outperform markets. And that's
important for our sales teams, it's important for our product development, operations,
fund accounting, etc. Everyone believes that we have an advantage
(05:40):
and we can exploit that to help people outperform markets.
Speaker 2 (05:43):
So I've been watching you for years. I saw you
guys come in and I saw the passive first sort
of the beta knockoffs. They did okay, there was some
BYO money, but then JEPPI to me, really changed everything
in gp JPST. That's the bond in the stock when
they're the biggest. What I've found interesting and what I
think this is my theory on why it has worked
(06:05):
so well because you came in and really made an
impact on something that people were kind of writing off
a little bit. Most of these big asset managers, they
were like, hey, let's come out with like free index
funds like Fidelity, just to offset the active outflows. So
we look like we're you know, in business still versus
just bleeding out slowly. But you guys are like, no,
(06:26):
we can make active work. One thing you did that
I think takes guts though, is the expense ratios. To me,
they are they feel fair. You know. A lot of
the problem with the active management is it's like ninety
basis points. It's largely S and P five hundred stocks.
They came in jep's thirty five BIPs. That's the same
as the R six class of your mutual fund, which
is the cheapest class. So in essence, they're giving the
(06:50):
ETF investors sort of the cheaper share class of the
mutual fund. Not only that, you get fundamental stock picking.
There's an options overlay, so there's a lot of legwork involved.
And it's JP Morgan. So I'm thinking of an advisor always.
I'm always in their brain going does this seem like
a good deal. It's like they can go to their
client now and say, look, I'm going to get you
JP Morgan. That'll that's really cool. That's lucky you have that.
(07:11):
A lot of firms don't. I'm going to get you
in options overlay. And it's just like it's going to
take the ball down a little bit, YadA YadA. It
feels fair at thirty five BIPs, and I think that's
part of the magic.
Speaker 3 (07:22):
Would you agree, Yeah, no, absolutely, you know, and I
think we all know, and we've looked at other industries
and other firms. If you don't evolve and adjust your
business model to the changing needs of investors financial advisors,
your business will with her. And so you know, we
made decisions to build products we think that, from both
(07:47):
a pricing and an investment standpoint, have a highly differentiated
offer relative to others. Now, we didn't apply the strategy
of a covered call options only in an ETF. We
actually did it first in a mutual fund. So what
we're doing is bringing our best ideas that we have
in mutual funds, separately managed accounts, what we've run for institutions,
(08:10):
and then putting them in an ETF and then going
through a process of how do we price that relative
to the value that we're adding to investors. And the
great thing about ETFs is there's very few little friction
relative to revenue share or transfer agency costs or other things,
so it allows us to do it at a price
point where then financial advisors can make the decisions to
(08:32):
add fees for the services they're providing. And so what
this has really done is seeing the disconnecting between manufacturing
and the costs associated with manufacturing versus services related to
advice and financial planning and other components of high value
added things that advisors do themselves. And I think that's
(08:52):
one of the reasons that ETFs has grown so rapidly,
both in passive and active, which is you see this
movement towards fee based programs and away from transactional revenue
sharing and other things that's good for investors, and so
we're playing to that theme and the way that we
price in service products.
Speaker 2 (09:12):
I will say, you make that sound easy, but over
the years, I think the fun companies that are just
fun companies, it is tougher for them. I see them
sometimes try to make the ETF industry come to their
on their terms and it doesn't work. You kind of
have to meet the ETF industry on its terms, and
I thought JPM was.
Speaker 1 (09:32):
Like Judo a little bit, like we're going to use
the energy and like redirect it a little bit rather
than take it head on. If you like that, I've
brought Olympic sports in here.
Speaker 2 (09:41):
I like metaphors. I don't know about that one, but
it's it's hopefully everybody listening understands. That flew over my
head a little bit. But the idea of having a
bank where asset management is a portion of the revenue,
and obviously Jamie Diamond has all these other groups making money.
(10:01):
There's a lot of things to work on and so
it's not like the whole thing depends on this one
mutual fund revenue stream. So you can make that ETF
leap a little easier because it does involve us a
little bit of self cannibalization. Although if you get enough assets,
you win in the end. But it's been tough for
the traditional nineties er mutual fund company to do that
(10:23):
because this is all they have. And I don't know,
do you feel like that that you work in this
gigantic diversified bank type company. Does it give you a
little more freedom or is that more just the Jamie
Diamond management thing to just let you do what you
need to do, because I don't feel like others are
given the keys so much as you guys were in
(10:44):
terms of pricing it and being able to sort of
maybe go a little cheaper than you probably would like to.
Speaker 3 (10:51):
The way I think about it is the asset management
business is to serve investor, and we are measured to
compete with the best asset managers in the world. That's
the way the board and that's the way Jamie judges
us with us, and we have the ability because it
(11:14):
is a fiduciary business is a very important point, and
we're hemetically sealed because of the conflicts that exists between
the bank and the asset management. We can't trade in
our ETFs with JP Morgan Chasing Company, but we have
the ability to reach out and pull in the expertise
and skills that are maybe difficult for other monoline asset
(11:36):
management firms to get. Cyber technology, artificial intelligence that bank
has since seventeen billion dollars a year on technology. We
have the ability to pull in generative AI expertise to
help apply that to managing managing money. So I would
describe this as the best of both worlds. The other
thing I would point out, which I think is important
(11:57):
for us, is they're kind of two I think two
ways that asset managers approcess. One is around marketing what's
best to sell, and then you have others who are
deep fiduciary managers where they lead from the investment standpoint,
how do you generate returns for clients and a risk
(12:19):
adjusted away. Some lean too much in one way, therefore
haven't been able to adapt their product offering rap enough.
Others lead the other way, and they end up producing
products that don't aren't in the interest long term investing
interest of investors. What I think we have been able
to do is balance that decision making between a very
(12:39):
strong investment led fraduciary culture and a very strong focus
on investor needs and demands and adapting our product line
and capability more rapidly, maybe than some of our competitors have.
Speaker 1 (13:00):
We talk about a lot how the ETF is a
terror dome, the ETF industry is a terrordome, and that
you know it's taxing, especially for all the juggernauts that
have to compete with one another. What's it feel like
to walk into the Terrordome every day and have to compete.
Speaker 3 (13:20):
Oh, it's great. I mean this is this is one
of the most exciting areas of the industry. I mean
the level of innovation. You pointed out the competition, and
it is invigorating for our teams and my people. And
I think that's one of the things because ETFs are
maybe they've been around for a long time, but they're
quite fresh as it relates to, you know, the active
(13:41):
asset management space, and I think it's it's it's bad,
you know, a degree of optimism and focus on the future,
and the competition is awesome. You think about, like what
the competition of the asset management space is meant for
the quality of what investors get today, and the innovations
that we've seen in mutual funds and separately managed tax
optimization and all of that I think is calling in
(14:05):
a seismic shift that's happening where ETFs will likely be
the most important product and vehicle for individual investors and
maybe institutions for the next decade. So I think it's
incredibly exciting.
Speaker 1 (14:21):
Yeah, do it you like to compete against you?
Speaker 3 (14:25):
I feel sorry for them.
Speaker 2 (14:27):
Actually, that's a good segue. I have a good example
of what I think of one of the We always
look for these interesting matchups inside different categories. And you
know I titled this Vanguard versus JP Morgan grabbed the popcorn.
Speaker 1 (14:41):
So JP Morgan popcorn for that.
Speaker 2 (14:43):
Yeah, I mean this is really interesting to me. JP
Morgan launched a high yield active bond e tf JPHY.
It's seeded with two billion, which is unheard of.
Speaker 1 (14:54):
Pretty good start.
Speaker 2 (14:54):
That's a good start. You're already the biggest one. Nice
just like that's like born on home plate right there. Now.
A couple of weeks later, Vanguard filed for an active
junk bond ETF and everybody had been writing them off
because people had thought they would file for a drunk
bond ETF at some point. Everybody wanted them to because
they have a mutual fund, and they never did. And
(15:16):
I think you got them to launch, in my opinion,
because they see the numbers. Vanguard is nineteenth in active
ETF and they're not nineteenth in anything. That probably pisses
them off. And they see you come in, you're cleaning up,
you're running circles around them, and you're bab basically biting
at their heels right now in third place of overall active,
(15:38):
so that I really I can't ever say I've seen
Vanguard look a little nervous, but this looks like that.
Speaker 3 (15:46):
Because Vanguard is a great firm and obviously huge innovator
in ETF space. The way I think about it, three
trillion dollars in fixed income ETFs globally, five percent of
that is indexed passive. This is a space where the
(16:06):
average manager outperforms the market. So I think investors have
loved the ETF package and therefore have gone down that
path of allocating to fixed income, and now that their
world class capabilities active capabilities in ETFs, I think we're
(16:26):
going to see a massive shift. And what we did
was we went to one of our largest clients, one
of the most sophisticated asset owners in the world, and
asked them whether they wanted to participate in us launching
a high yield ETF. And that shows the strengths of
our traditional institutional business and relationship. On day one, the
(16:49):
ETF had four hundred and fifty positions source from our
credit and portfolio management capabilities. So as an investor, if
you can into our fund on its first day, you
would have be fully diversified UH in the in the
sectors and securities that we think are our most attractive.
(17:10):
It's a great thing. I never thought I would see
the day where we were able to launch a e
t F and have it be the largest et F
in the category on day on day one. It's a
great position to be in.
Speaker 1 (17:21):
I want to talk about JEPY because we mentioned earlier
JP Morgan Equity Premium income ETF that has just crushed it.
And can you dissect why JEFPY has been such a success.
And also were there any other names that you considered
(17:42):
for the ticker?
Speaker 3 (17:44):
We're always wondering about the best, the best, the best tickers.
I mean, I think this is you know, as I
said before, this is not a strategy that was first
in the ets. It came to our mutual fund lineup first,
UH and and it all fors the investors the opportunity
to get their toe in the water, get allocation to
(18:06):
the upside potential of equities, but at the same time
generate very attractive income and have some less volatility and delivers.
So I think it's an idea that has applications to
every asset class. I think it's a core position over
the over the long term, as we see volatility spike,
(18:28):
you're likely to see greater demand for these types of products.
In markets like today, where you have UH momentum in
stock prices, it's likely to be something that's not the
first the first choice, but over time in a market cycle.
I think these strategies and we've obviously replicated it not
just an S and P five hundred which JEFP. We've
(18:50):
done it in Nasdaq stocks with j E p Q.
We've also applied a similar strategy to our hedged equity.
We have one for US strategy and we also have
one for an international strategy called OLAH. So I think
these types of products that give you equity exposures either
(19:12):
downside protection or high levels of income will continue to
be quite attractive. We launched them around the world Canada
our product range and USETS in Europe. We were the
first to list a active ETF strategy in Hong Kong
two weeks ago, which is actually a replica of jeffs.
So this is an error where we're seeing demand globally
(19:35):
around the world to these types of strategies.
Speaker 2 (19:38):
If you look at Europe, I was just in Europe
a couple of weeks ago, and Henry showed me the
active ETFs there. JP Morgan is like in a league
of their own, so like here there obviously right up
there there's a couple good active ETF managers, although some
of them take money from the mutual funds, so they
offset when you look at the boat. That's why when
I looked at your numbers in terms of mutual fund
(19:58):
plus ETF, it was very impressive because your mutual funds
were able to at least eke out a little bit
of flows, which is not the norm. JEPQ, which is
the one you mentioned. It's jetp's little brother, except it's
a little more feisty because the cues have more volatility.
So it seems like to me that jepq's double any
other of your ETFs and flows this year. So it's
(20:19):
kind of like it hasn't surpassed JETPI in assets, but
it's it's getting, you know, it's taking in more money.
I think the idea here is if you write call
options on the cues, what you do is you give
up extreme upside, but what you get in return is
some income. So it yields eleven percent that income can
actually buffer the downside a little, so in essence, it's
(20:41):
like diet cues in a way, and that to me
is a strong selling point that is somewhat performance proof
because if you have a year where you underperform the cues,
the value proposition is still there because a lot of
older investors are like, I'm happy to give up a
little upside. I really I've made a lot of money
and that deal they strike with an issuer like jep
(21:02):
Q or JETPY, it's a brilliant concept because it doesn't
totally rely on performance year to year like say other ETFs.
Speaker 3 (21:12):
Do I have that right? Yeah? Absolutely. I think this
is why these strategies are so durable because I think
the demand for these types of products of high income,
exposure to equity markets, and less volatility. I think that's
a theme that we're going to see to continue continue
to play out. Now. It is the number one selling
product that we have year to date, and I think
(21:32):
there is an important point relative to kind of our
strategy around this. If you look at we got into
the business and saw strong flows through these derivative income
strategies JETP and jep Q, and through our short duration
fixed income JPST, which is the largest fixed income ETF
in the business. But over the last two years, more
(21:54):
than half of our total flows have been in other products.
And I think that's what I see. I'm so encouraged
about the strength of active fixed income, which I mentioned
mentioned before, our JPI, which is an income fixed income ETF,
our Core Plus strategy, which is our best selling fixed
(22:14):
income capabilities. I think that's what you're going to see
happen in the in the industry is we're going to
see more and more flows expanding into other into other
areas as more investment capabilities become available.
Speaker 2 (22:31):
And you also you oversee everything, right, So you've got
mutual funds ETF And I read a little bit about
your push into alternatives. What does that mean? What for you?
What is the push and alternatives? Black Rock says the
same thing. I think some people like, what does that mean?
And what kind of products door we expect?
Speaker 1 (22:48):
And does it mean crypto?
Speaker 2 (22:51):
Don't worry, I'll get there.
Speaker 3 (22:54):
So sixty forty diversified investing all alternatives to a diversified
portfolio and new increase return and reduce risks not a
new novel idea. It's been around for a long long time.
We've provided those tools for our big institutional clients for
a long long time, and we've got leading capabilities in
(23:17):
real estate, infrastructure, hedge, fund of funds, private equity, et cetera.
And I think there's two parts of this. One is
we believe in building stuff internally, so we have a
number of investment strategies that we've seated growth, private equity,
and number of things that you know, over time will
become important options for our clients. So that's part of
it expanding the universe of offerings that we have for clients.
Speaker 2 (23:41):
So you said private equity, and I think did you
launch an interval fund that has private equity credit or both?
Speaker 3 (23:48):
Yes, we have. We have two strategies today that are
private wealth alternatives. One is called JPMF which is a
private equity strategy private equity secondaries, co invest and fund
of fund And we also have a jpm RET which
(24:08):
is a ten tender offer strategy, and both of those
are designed for individual investors, have lower minimums, W two,
tax reporting, etc.
Speaker 2 (24:20):
But the interval means you can only get your money
out quarterly, something like that or is.
Speaker 3 (24:25):
This something It depends on the strategy and the fund.
But yes, there tend to be limits on redemption. These
are these are ill liquid strategies, so it's very important
relative to you know, education and disclosures to clients.
Speaker 2 (24:39):
It's interesting you picked the Interval fund. You're not alone.
I think Blackstone picked one. Vanguard is looking into it.
But there is a small shop or two in State
Street that try is trying to put privates into ETFs.
I do think ETFs are the pervert vehicle that to me,
they are like digital music, and Interval fund feels like
putting it into a CD. You probably could get it
(25:01):
done and listen to the music that way, but it's
not as convenient. On the flip side, privates are ill liquid,
so you know people hesitate to put them. But what
do you think of this move to try to get
privates into ETFs and even further to democratize them fully.
There's some talk of like, well, this is the private
(25:21):
companies just trying to unload this stuff on retail because
they had a nice run and the naves that they
price all the private sets sometimes aren't quite reflective of
reality versus when you put something in an ETF, you
got to price it every day. I don't know. What
do you think of all that. It seems like something
that's on the cusp of like really breaking through to
(25:44):
the retail world.
Speaker 3 (25:46):
Yeah, Eric, I think it's I think that's a great question.
Interval products, and there's a range of capabilities that now
can be delivered in structures designed for ill liquid securities,
and that's where our focuses is building out these capabilities
of private equity, private credit, infrastructure, et cetera, to make
(26:07):
them available to individual investors to complement sixty sixty forty ets,
like public mutual funds are priced daily. ILL liquid securities
have been used in public mutual funds and in ets,
but below the fifteen percent liquidity ILL liquid bucket. And
I think the principle should be if a product is
(26:31):
priced on a daily basis, that there should be limits
to the amount of securities and the strategy around valuations.
So I think we should be very cautious about how
we integrate private securities into ETF structures. There are other
vehicles where it makes more sense. The disclosure is better. Now.
I'm not saying there aren't opportunities to include I liquid
(26:53):
securities in ets. We have to be very mindful of
the issues that you raise.
Speaker 1 (26:58):
How much demand is there from on the consumer side
for products that you know, I have this that liquid stuff.
But are you know, effectively ANTF. Do you see the
demand there?
Speaker 3 (27:10):
No, not necessarily. I mean I say demands for the
ETF structures which are suitable for you know, daily valued securities.
So I'm not saying we see a you know, significant amount.
Now we do see demand for private alternatives to individual
investors significant significant demand.
Speaker 2 (27:28):
Question though, is the demand because these private equity vehicles
seem to have less volatility and can be a true alternative.
But then you know, there is some criticism that, well,
the reason they're alternatives or have lower volatility is because
they don't have to like live in reality of a
true market. For example, SpaceX probably has a similar profile
(27:51):
to Tesla, but you wouldn't know it from the navs.
And I think this is one of the critiques of
private equity is that largely they're to move like public
equities if you put them in the you know, reality.
And I believe there was even a story on Bloomberg
about like JP Morgan trying to trade some of these
and these private shops. It just seems like they're a
(28:11):
little hesitant to actually let this stuff into the reality
of a real market, because it's like it would like,
remove the veil, what's the emperor's new clothes, what's the
The emperor has no clothes. The emperor has no low volatility. Sorry,
that's almost as bad as your Judo metaphor. But you
know what I'm saying. Am I wrong there? Or do
(28:34):
you think there's some of that fear of like? And
so does retail? Do they understand that or is it
just a matter of like less companies go public. Hey,
I want a piece of the action of these companies,
but you know that aren't going public.
Speaker 3 (28:46):
I mean these these securities trade on appointment, and I
think you have to be not not not not every
minute of the day, and so I think you know
that needs to be taken into consideration. But there's some
realities here, right which is a decade ago, there were
eight thousand public companies. Today they're four thousand. There are
multiples of that in terms of private companies that offer
(29:08):
return opportunities to clients, and the same is true in
the fixed income markets. There is a large, growing market
of private securities that offer return opportunities for individual investors.
The question is packaging that in the right way. If
investors have long time arisons, they shouldn't be concerned about
what the pricing is on any individual moment. And I
(29:30):
think that's the opportunity with some of these vehicles that
offer exposure to these markets but are also disclosed that
you're not going to get your money every day. Ets
you're going to get your money every day. Valuation is
incredibly important, and that needs to be the premise around
the types of securities that you include in these portfolios.
And I do agree. I think the people are salivating
(29:52):
over the opportunity in the ETF market and the individual market,
and they want access to it. But we have to
be thoughtful about it. And I think that that's the
perspective that we bring.
Speaker 2 (30:02):
Speaking a thoughtful when I've been running these numbers on
ibit and ETHA that's the black Rock, Bitcoin and Ether ETF.
When I run like fastest to twenty billion, and I
look at all the ETFs that have got to twenty
billion quickly or fastest to ten billion, I bit blowing
everybody away.
Speaker 1 (30:19):
But guess who.
Speaker 2 (30:20):
Guess who's record they're breaking. It's either IMG which was
a fast end jetpy. So here comes ibit getting to
ten billion, twenty billion, thirty billion, four or five six
times faster than Jeppy, which was in some cases the
fastest to that number. You see that, What do you
think is there any any bit of like jealousy, like hey,
(30:42):
we should get a piece of that action or I
don't know. I'm just curious as the numbers grow and
become more astonishing, and a firm like JP Morgan, which
is traditionally it's not what you do, and if that's
your roadmap, it wouldn't make sense. But on the flip side,
more companies are doing it, and it's growing and growing,
(31:03):
and you may hear clients asking for just curious, how
you you know, wrestle with all that.
Speaker 3 (31:09):
Yeah, listen, I think we have a guiding principle around
what types of ETFs we will launch, and we're going
to launch ETFs that we believe are durable and have
a strategy for how to incorporate into a long term
investment strategy. Now, I know that may sound kind of boring,
but boring can be quite successful investment investment strategy. So
(31:31):
that may mean that we move, we lose some trendy
fatty ideas, but we're going to you know, we're going
to stick to our guns. I think that cryptocurrencies are
quite a speculative investment, investment in quotation, and it has
significantly higher volatility in the S and P five hundred,
(31:52):
no income, no intrinsic value. We don't know how to
incorporate it into an investment. I'm not saying it's a
bad thing. I'm just saying we we don't see a way.
That we have summer analysts who come in and one
of the projects we always give them is give us
an investment thesis around crypto bitcoin. Uh, And they come
back and say, we can't tell you how to value
(32:13):
a bitcoin. And so that's that's the premise around our
investment capabilities. And listen, there are lots of ideas that
people are launching water ETFs, animal spirit ETF. So that
doesn't mean they're good ideas, and we're going to We're
going to stick to those things that we think makes
sense for for investors. And that's the discipline we bring
to our product development efforts.
Speaker 1 (32:39):
If you could pick up one thing in the ETF
marketplace and bolt it to your strategy, what would you
like to.
Speaker 3 (32:48):
Acquire what would I like to acquire?
Speaker 1 (32:50):
Yeah, what ETF out there would you most like to
bring into your stable?
Speaker 3 (32:56):
Listen. I think acquiring things as an asset manager is
credibly difficult to do successfully. We run almost four trillion
dollars of assets, we have over five hundred strategies. There
isn't a gap in our offering. I also find it
having built a lot of businesses at JP Morgan over
(33:16):
the last thirty nine years, from our global money market
fund business to our mutual fund business to our ETF business.
Let me tell you it is a hell a lot
more fund building things that it is acquiring things. And
now that doesn't mean where we don't look at everything
we do because I think it makes you, it makes
you smarter. I think there's quite a different culture in
the ETF business because it grew out of passive. So
(33:38):
the strategy was let's launch against as many indices, be
first and own as much of the market as possible.
I think as that relates to active, it's quite a
different philosophy that you need to bring to it to
be successful because the strategies ultimately have to helperform in
order to succeed, and that means it needs to be
more focused, and they need to be capabilities that you
(34:03):
have total confidence over full market CYCLI or likely to outperform.
So ours isn't to do everything at all costs. It's
to do things at a very focused level where we
have a competitive advantage. I'd rather build it than buy it.
Speaker 2 (34:18):
You're in a good spot. I mean you really, I
get that. A lot of these firms, Joel that have
acquired firms, they came in late and again they launched
a couple of products on their terms and nobody cared.
And they're like, oh my god, they panicked and they
just bought companies like I said, JP Morgan had they
just it's like they just came in. You know. I
used that metaphor of a castaway. You know, Tom Hanks
(34:40):
is the middle manager. At the beginning, he's like a
little chunky and then you know, forty five minutes in
the movie, he's like weighs one hundred and forty pounds
and he's spearfishing. That's a legacy active manager on day
one versus third year in. But JP Morgan kind of
came almost as the spearfisher guy. And that's you know again,
(35:01):
and I don't know, does Jamie Diamond take pride in
this because it really is unusual to come out and
sort of pass all of these massively popular mutual fund
companies and active assets. Does he understand that, like, hey,
my firm is taking in four times more flows than
any other active fund company out there? Does he follow
(35:25):
that much going on?
Speaker 1 (35:26):
Is?
Speaker 3 (35:26):
I think he greatly appreciates the asset management business and
the strength of what we do. Now. Remember Jping Morgan
Chase is number one in investment banking, number one in
retail banking in the United States, So perhaps his expectations
are that we bring the same from management business.
Speaker 1 (35:43):
Yes, he's like, why are you not number one?
Speaker 3 (35:48):
But listen, you know, I think the thing that the
board of Jping Morgan Chase, one of the things that
I think they've done a great job is they allow
us to manage our business as an asset manager. That's
the way we compensate eight people. Our business has a
very long tail. The decisions that we made five ten
years ago are the reason that we're having success today.
(36:10):
So it's a little bit different, and I think they,
you know, allow us to manage the business that way.
Speaker 1 (36:15):
All right, final question, it's one that we always ask
what is your favorite ETF ticket other than any that
JP Morgan does, other.
Speaker 3 (36:23):
Than a JP Morgan ETF. Oh that's a very difficult question.
That's why I asked. I mean, I really only know
our ETF.
Speaker 1 (36:34):
So yeah, any any that give you a chuckle when
somebody says moo, for instance, does that make you laugh?
Speaker 3 (36:42):
I laugh quite a bit when I watch look at
ETF product development and what's what's coming out? That is?
That is for sure?
Speaker 2 (36:49):
They just fired. They just filed one Jedi, which is
like JEPI Jedi is a I believe it's a Space
ETF or something like that Drone.
Speaker 1 (36:59):
I would hope it Space.
Speaker 3 (37:01):
That's a good ticker.
Speaker 2 (37:02):
It is a good ticker. So Jetty Jedi and now
Jetpy anyway, Jetpy's pretty good. It's I'm a big fan
of vowels, and you guys have a lot of vowels.
Jet by jet Q. It's just easy for an analyst.
Jpst a little trick here, but hello, what do you
call it? Hello? Sometimes I have names for tickers and
the asset managers, like nobody at our shop calls at
(37:23):
that like jaw.
Speaker 1 (37:25):
You're not pronouncing it great Janus.
Speaker 2 (37:26):
People are like, that's j triple A, only the Bloomberg
people call it JAW And I'm like, all right, well.
Speaker 3 (37:31):
Anyway, that's one of the amazing things about the ETF
effort at JP Morgan. I'm not sure portfolio managers knew
the tickers of our mutual funds. Well, let me tell you.
They know the tickers of the ets that they're running,
and they you know, what's probably the most important product
capability that they they offer, and it's how they get paid.
They get paid and the shares of the ETFs that
they run on behalf of clients. It's pretty unique.
Speaker 2 (37:54):
Ola Jade, that's a good one.
Speaker 1 (37:56):
What's jade?
Speaker 2 (37:58):
That is the active developed markets? So you got a
temp some some interesting ones in here. You wouldn't it
would be weird if you went too crazy. You don't
want to go to full.
Speaker 1 (38:10):
I'm sure there's the full direction.
Speaker 2 (38:12):
They're the crazy ticker. Yeah, you want to middle it out?
Speaker 3 (38:14):
Yeah, yeah, all right, George got going to stay mainstream.
Speaker 1 (38:18):
George Gosh, thanks for joining us on trias. Thank you,
John Munch, thanks for listening to trillions. Until next time.
You can find us on the Bloomberg terminal Bloomberg dot com.
Apple Podcasts, Spotify, or wherever else you'd like to listen.
We'd love to hear from you. Hit us up on
social I'm at Joel Weber Show, He's at Eric Falchine's.
(38:40):
Trillions is produced by Magnus Hendrickson. Brendan Newman is our
executive producer. Sage Bauman is the head of Bloomberg Podcast
Popular Podcasts
24/7 News: The Latest
The latest news in 4 minutes updated every hour, every day.
Crime Junkie
Does hearing about a true crime case always leave you scouring the internet for the truth behind the story? Dive into your next mystery with Crime Junkie. Every Monday, join your host Ashley Flowers as she unravels all the details of infamous and underreported true crime cases with her best friend Brit Prawat. From cold cases to missing persons and heroes in our community who seek justice, Crime Junkie is your destination for theories and stories you won’t hear anywhere else. Whether you're a seasoned true crime enthusiast or new to the genre, you'll find yourself on the edge of your seat awaiting a new episode every Monday. If you can never get enough true crime... Congratulations, you’ve found your people. Follow to join a community of Crime Junkies! Crime Junkie is presented by audiochuck Media Company.
The Clay Travis and Buck Sexton Show
The Clay Travis and Buck Sexton Show. Clay Travis and Buck Sexton tackle the biggest stories in news, politics and current events with intelligence and humor. From the border crisis, to the madness of cancel culture and far-left missteps, Clay and Buck guide listeners through the latest headlines and hot topics with fun and entertaining conversations and opinions.