JPMorgan Asset Management is developing share in sales of managed accounts even as bank distribution lags, according to a distribution executive at the company.
James T. Detmer, who is a managing director at the unit of JPMorgan Chase & Co., said that its managed account assets more than tripled last year. (And the total more than tripled in 2003, as well.) He said he expects aggressive growth from the $5 billion asset level reached at Feb. 28.
"I would hope that within the next three to five years we will be managing $20 billion in managed account assets," Detmer said, "and that will put us in the top five in this space."
The JPMorgan unit distributes through intermediaries - registered investment advisers, broker/dealers, banks and insurers - and Detmer is the head of broker/deal distribution. His unit's managed account distribution has been strong through registered investment advisers and broker/dealers, he said, but not as good through banks.
"It is not as broad through banks as it ultimately will be," he said. "It bears a striking resemblance to mutual fund penetration in the early 1980s. It wasn't until the late 1980s that banks 'got it' and became prolific providers of mutual funds. I think the same thing will happen with managed accounts.
"Managed accounts are still the domain of registered investment advisers and broker/dealers, but it will transition down to banks and other financial institutions."
The Money Management Institute has reported that managed account assets grew 15.8% last year overall, to $576.1 billion. Despite banks' relative slowness to adopt the product, their share of the market continued growing, the institute said, from 6.7% at Dec. 31, 2003, to 7.4% by last Dec. 31.
JPMorgan Asset Management began offering managed accounts in 2001 with a small portion of business it acquired in its deal for Fleming Asset Management. Nicole St. Pierre, a managing director and head of the managed account business at JPMorgan, said the asset unit did not focus on developing this business until 2002 but that since then it has grown quickly.
By the end of 2002 the company was managing $430 million in 2,100 accounts. Within a year, these totals had more than tripled - to $1.5 billion in 6,900 accounts - then they better than tripled again last year, to $4.7 billion in 23,000 accounts. The company added 2,000 accounts and $300 million of assets in the first two months of this year.
St. Pierre said she expects assets will continue growing quickly since the managed account business is still in its infancy.
"There is a huge opportunity in general in the industry and specifically for our firm," she said. "When you look at the history of managed accounts, there are a lot of boutique money managers in this space that only offer one or two strategies. Big players can offer more choices and will continue to gain share."
Analysts say many banks' wariness about fee-based products leaves opportunity unexploited.
"Banks want to work with a firm that has established a strong foundation in the managed account business," said Burton Greenwald, an analyst at BJ Greenwald & Associates in Philadelphia. "There are only handfuls that have the track record to succeed."
Detmer agreed. "Some banks have done O.K. by offering managed accounts, but it hasn't fully taken off through the channel," he says. "A lot of firms are still testing the waters."