JPMorgan fund CEO woos clients with simplicity

NEW YORK Tue Dec 13, 2011 4:48pm EST

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NEW YORK (Reuters) - JP Morgan Chase & Co.'s fund division is banking on the idea that if it can help advisers and investors understand what's going on in the markets, they will buy its funds.

Stock market volatility, the European debt crisis and uncertain macro-economic trends have left investors and some advisers uncertain about where to put their money.

"I don't think the industry has a great record of delivering products and services in a way that helps people understand them," George Gatch, CEO of the investment management Americas business of J.P. Morgan Asset Management, told Reuters.

But J.P. Morgan is taking a different approach. The goal: take sophisticated market themes and investment products and present them in easy-to-understand tidbits.

The firm next year plans an array of initiatives including hiring more sales staff, launching an iPad application for financial advisers and expanding its online information -- all in an effort to "advise the advisers," Gatch said.

Over the past few years, J.P. Morgan has caught the attention of advisers by showcasing its knowledge, primarily through chief market strategist, Dr. David Kelly.

On top of quarterly calls, Kelly also hosts calls amid rapid market changes, including an August discussion after Standard & Poor's downgraded U.S. debt. Nearly 8,000 advisers tuned in. It was the asset manager's biggest call ever.

HOT SEAT

Once a year, each of J.P. Morgan's sales staff stand in front of a panel of portfolio managers, investment strategists and sales managers, who grill them on their product, market knowledge and overall sales skills.

Training coaches use these videotaped sessions to identify areas for improvement, which could include knowing details of products to better presentation, Gatch said.

"Our sales people hate it," he said.

So far, J.P. Morgan's approach appears to be working. With $392.3 billion in assets, the mutual fund group is the fifth largest, behind Fidelity Management Research Co, Vanguard Group, Capital Research & Management Co and Pacific Investment Management Co, according to Lipper.

Investors added $17 billion to the firm's long-term mutual funds during the first 11 months of the year, making J.P. Morgan third in inflows behind Vanguard and PIMCO, according to Strategic Insight.

Emphasizing simplicity is not easy for a firm that has such complex offerings.

One example: The fund division offers 16 alternative funds, including 130/30 funds. The funds aim to have 130 percent long exposure to equities and 30 percent short. Most competitors use the 130/30 in the name of these funds. But J.P. Morgan's first retail 130/30 fund, launched in 2005, was called J.P. Large Cap Core Plus Fund.

The reason, said Gatch: Most 130/30 funds, J.P. Morgan's included, do not usually stick to a 130/30 strategy. It's a strategy in name, but not always in practice -- confusing for investors and advisers.

401(k) REVAMP

One of the fund division's biggest forays into simplifying complexity came in November when J.P. Morgan introduced a new plan design for large 401(k) plans.

Most 401(k)s offer target date funds and 18 or more investment options in a plan. But J.P. Morgan offered an alternative: Target date funds and three investment "buckets" consisting of diversified portfolio of equity funds, bond funds and cash alternatives.

Simple on its surface, the details behind it are more complex. Employers can have J. P. Morgan customize the buckets to the needs of the plan, which might include mutual funds or managed accounts, resulting in an array of investment options. But participants just see the bucket names and descriptions.

Next year, the firm hopes to bring this concept to smaller plans, or those with less than $1 billion, Gatch said.

"This idea of simplification isn't about being simple, but about bringing sophisticated capabilities in a customized way to investors," Gatch said.

To that end, J.P. Morgan will expand the "Market Insights" section on its website to house more of Dr. Kelly's views. The firm's marketing and sales budget will also increase by 10 percent in 2012, Gatch said, declining to elaborate on specifics.

For all the talk of simplicity, J.P. Morgan is staying away from what many investors see as the most basic of choices: exchange traded funds.

The fund company has filed with the Securities and Exchange Commission to launch active ETFs, but has made no move to develop them. Gatch does not believe active ETFs are worthwhile for investors.

"The day that we see that will be the day that you see us enter the ETF market," he said.

(Reporting by Jessica Toonkel, editing by Jennifer Merritt and Chelsea Emery)

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