The head of JPMorgan Funds has handed responsibility for the company’s growing registered investment adviser business to a lieutenant. 

Steve Lundquist, previously the national sales manager of JPMorgan Funds’ wirehouse division, is the new head of the registered investment adviser, or RIA, channel, it announced last week.

 

JPMorgan Funds is the U.S. mutual fund business unit of JPMorgan Asset Management, whose parent is JPMorgan Chase & Co. of New York.

 

George Gatch, president and chief executive officer of JPMorgan Funds, said that distribution through the channel has grown robust enough so that it requires a dedicated chief.

 

“We have had a fairly significant effort in the RIA marketplace over the last 10 years,” said Gatch, who used to head the business directly. “This is part of our continuing investment and focus on what we think will be one of the fastest-growing sectors of the advice market in the United States.”

 

Citing company policy, Gatch declined to say how much of JPMorgan Funds’ distribution is done through registered investment advisers. The business manages nearly $400 billion in mutual funds and separately managed accounts overall, he said.

 

JPMorgan Funds distributes through broker/dealers, independent B/Ds, banks, and RIAs. A sales force of nine — three-person teams in the West, Midwest and East — handles RIA distribution. JPMorgan Funds focuses on “larger, more sophisticated RIAs, those with more than $100 million in assets managed,” Gatch said.

 

The target RIAs tend to serve affluent clients, those with at least $1 million of investable assets, he said.

 

Aiming for sizable RIAs is an efficient way to tackle a market that is fairly young and very fragmented, said Alois Pirker, a senior analyst at the research firm Aite Group LLC.

 

The number of such firms will grow, thanks to continuing consolidation in the industry, he said. What is more, he predicted, assets handled by RIAs should increase in the next couple of years as the stock markets’ woes prompt investors to leave traditional brokerages in search of more advice and guidance.

 

“That happened in the last downturn, and the same thing will be true in this one as well,” Pirker said.

 

An Aite survey done a year ago found that the average RIA firm had $106 million under management. The 78 firms surveyed said they expected to grow, on average, 21.1% annually during the next two years.

 

The RIAs in the sample reported that mutual funds and annuities accounted for 41% of the client assets they managed and separately managed accounts and mutual fund wraps for just 9%.

 

JPMorgan Funds has $340 billion of assets under management in its mutual funds, $10 billion in separately managed accounts, and $34 billion in sub-advised mutual funds.

 

One advantage the company believes it possesses is a range of specialty products that has been beefed up in recent years.

Since 2005, the business has introduced 32 mutual funds. These include a 130/30 fund, whose managers are able to bet that certain stocks’ prices will rise and others’ will fall, and a Tax Aware Real Return Fund, which seeks to maximize after-tax, inflation-protected returns.

 

The company also touts the capabilities of sister businesses under the parent JPMorgan Chase. These include everything from structured notes created by the investment bank to private-equity placements and hedge funds available through the company's partnership with New York-based Highbridge Capital Management, Gatch noted.

 

On the marketing side, JPMorgan Asset Management has played host to 10 annual wealth management symposiums for RIAs. This spring’s event, a three-day affair at the University of Chicago, was attended by advisers who manage an aggregate $50 billion of assets, according to the company.

 

Another JPMorgan Funds event on tap this summer is an alternative investment forum specifically for RIAs. This event is to include insights from academics and investment managers about what may lie ahead for the market, Gatch said.

 

JPMorgan Funds has relationships with 40% of the 1,100 largest RIAs, he said, describing the company’s goal under Lundquist’s leadership as “significant growth over the next few years.”

Lundquist is to be responsible for the institutional adviser group’s business strategy and for managing the sales and national accounts teams.

 

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