JPMorgan Chase & Co. has a pair of initiatives designed to strengthen its position in the asset management market.
The $1.6 trillion-asset New York company said Tuesday that it would hire 300 employees over the next five years to expand its fund services operations in Boston; and it started offering its Chase Strategic Portfolio, an advisory program for retail banking customers, through its bank branch network.
Daniel Kramer, the global head of operations at JPMorgan Chase's fund servicing business, said his company has added a number of fund clients recently, including Massachusetts Financial Services Co., which was added last year. In addition to the planned hirings, the business added about 100 employees last year and 150 in 2006. It currently employs 3,500.
"Our business has been much bigger overseas than domestically" but is growing "significantly" in the United States, particularly in Boston, where many management companies are headquartered, Kramer said in an interview from Boston.
The U.S. growth in fund servicing is partly the result of an effort to cross-sell more products and services to commercial clients, he said. "The strength of our balance sheet" is also a selling point fund management firms seek out JPMorgan Chase because it can provide an array of services, including trading and lending.
Kramer said he expects the number of funds JPMorgan Chase services from its Boston office alone to expand more than 30% this year. It currently services 1,500 portfolios from the office, and about 600 of the unit's employees are based in Boston.
Fund servicing is part of JPMorgan Chase's treasury and securities management division, one of its fastest growing business lines. The division's first-quarter profits rose 53% from a year earlier, to $403 million, while JPMorgan Chase's overall earnings fell 50%, to $2.4 billion, because of rising credit costs and charged related to capital markets. It has $15.7 trillion of assets under custody and $4.7 trillion under administration.
Asset management is also one of the company's fastest growing business lines. The Chase Strategic Portfolio is meant for bank customers with at least $50,000 of assets. For a flat annual fee, customers can choose from 26 investment portfolios, which are managed and monitored on an ongoing basis by JPMorgan Chase's asset management operations.
Model portfolios include a "balanced" one with a 22% allocation in large-cap stocks, 5% in real estate investment trusts, and 2% in cash, the company said.
Arjun Saxena, a partner in the wealth and asset management practice of Marsh & McLennan Cos.' Oliver Wyman, said there has been a lot of interest of late among large banking companies in offering mass-market investment services through retail branches.
Several of JPMorgan Chase's competitors have offerings "in various stages of development," he said. "This could be very profitable," though it might take several years to reach the full potential of such an initiative.
The success of JPMorgan Chase's initiatives will depend on targeting the right customers, avoiding conflicts between retail banking and asset management over asset allocation and compensation, he said. Citigroup is developing a MyFi service that would give retail banking customers access to financial advisory services and help with savings and fund allocation. It will target customers with less than $500,000 of investable assets. Saxena said several companies are "months away" from launching products and services similar to the new JPMorgan Chase ones, which would compete most closely with offerings from Fidelity Investments and Charles Schwab Corp.