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