When investors think of the largest alternative investment managers, Blackstone and Apollo spring to mind long before J.P. Morgan Asset Management. But J.P. Morgan, whose $400 billion in alternative assets puts it in the top 10, is shaking things up to raise its profile.
George Gatch, CEO of J.P. Morgan Asset Management, has restructured the alternatives business, putting more resources and two veteran executives in charge. Jed Laskowitz, who has been with the firm for 28 years and has built product lines such as multiasset and ETFs, has taken over all direct investments, including real assets, private equity, infrastructure, and macro. Anton Pil, global head of alternatives, will lead private equity and hedge fund of funds. At the same time, Gatch has combined alternatives capabilities from asset management and JPM’s vaunted private bank for the first time.
“These are big complicated businesses with very smart, independent teams,” Gatch told Institutional Investor, adding that the firm is “asking two of our most accomplished executives, ‘how do we build this out and compete more directly against the biggest and the best alternatives firms, such as Hamilton lane and Cliffwater on the fund-of-fund side, and with Carlyle and Blackstone, on the direct private market business.”
Gatch said the changes are the biggest he’s made since becoming CEO five years ago. The restructuring also is in the context of his relentless 20-year refocus of the firm on active management, including on exchange-traded funds and developing strong public markets capabilities. In the last five years, assets have increased 12 percent annually from $1.9 trillion to $3.3 trillion, including $440 billion in net new flows into long-term investments.
But JPMAM’s alternatives aren’t as well-known as the firm’s public market funds at a time when institutions and high-net-worth investors continue to put more money into private markets and other higher-fee asset classes. Private equity and traditional managers both are scrambling to expand by buying competitors and investing in existing teams. JPMorgan already has a broad lineup of global real estate, infrastructure, hedge fund Highbridge, absolute return fixed income, macro, and special situations, and a range of capabilities in wealth management, including due diligence on third party managers and other discretionary capabilities designed for high-net-worth investors.
The restructure also positions J.P. Morgan to better leverage its long history as a private bank and its broad wealth management platform. (Rivals have gained a foothold in the last few years. For one, Blackstone’s fastest growing channel is wealth management, which it built from scratch.)
Like most competitors, JPMAM’s alts were developed for institutions, but wealthy individual investors — and even family offices — need products tailored to them. The firm is well positioned with evergreen funds — a non-traded Real Estate Investment Trust and a tender offer fund, PE fund of funds capability targeted to small and mid-size companies, coinvestments, and secondaries.
The growing popularity of evergreen funds is one example of a trend that has been driven by the wealth channel.
David Frame, CEO of J.P. Morgan’s U.S. Private Bank, said, “One of the biggest challenges with investing in private equity and private credit is managing it alongside everyday life. Investors receive distributions and capital calls, which require active management. However, many prefer a more streamlined approach where they can allocate capital and have it grow, with all distributions and capital calls managed within the investment vehicle itself.”
Some of the Private Bank’s largest clients like family offices increasingly want a big portion of their portfolios in direct investments. JPMorgan has long relationships with PE and hedge funds that can offer their best ideas. “By tapping into co-investment opportunities from our third-party manager investments, we can significantly enhance our strategy. We already do this, but this new initiative will put a sharpen lens on our focus and impact,” added Frame.
Two due diligence teams that JPMAM and the private bank have to support their PE and hedge fund of funds programs will be combined. With a single offering, “we have broader due diligence of third party hedge funds, better systems, better analytics, more resources,” said Gatch.
Other executives taking on larger roles include Jamie Kramer, who will head multi-asset solutions and become part of the Asset Management Operating Committee. Kramer, a 30-year veteran who most recently ran the hedge fund business and started the firm’s sustainable investment capabilities, will bring alternatives expertise to multi-asset.
Gatch said the strategy is informed by his conviction never to pursue products where the firm doesn’t have a competitive advantage. He’s always looking for the so-called white space. One gap has been private credit (even though the firm considered acquisitions), which may be lucky timing given the current market environment. But the asset manager is still doing investments along the edges of private credit, including global special situations, which sits between distressed debt and direct lending.
JPMAM is one of the largest managers in the world with $3 trillion in total assets — and that heft may have overshadowed its strength in alternatives.
“Think about the competitive landscape. There are firms that are principally in direct private markets, firms that are third-party, fund of fund related advisory, and then distributors. There are very few entities that have the ability to bring those three pieces together to solve problems for clients,” said Gatch.
