Last month, we announced that, for the second consecutive year, JPMorgan Asset Management had won the coveted Silver Salver for What Investment Fund Management Group of the Year.

This is given annually to the fund management group that has shown the most consistent record across all of our other award categories, both open-ended and closed-ended funds.

It is not necessarily the case that the group concerned has won any of our other Fund Management Awards, although this year JPMorgan Asset Management did win two of our Investment Trust categories – Management Group of the Year and Best Specialist Trust (for JPMorgan Russian Securities). What is important is that the winning group has achieved a series of consistently high places across a range of fund types.

This JPMorgan Asset Management has certainly done. In our 2008 Awards, not only
did the group win in two of the investment trust categories, as mentioned above, it also came fifth in the Generalist Investment Trust category (JPMorgan Elect Managed Growth) and had three trusts in the top six in both the Specialist and Most Consistent Investment Trust categories.

And in the open-ended fund awards, the group had two of the top five funds in the Most Consistent Unit Trust Award, was fifth in the Specialist Group category and seventh in the fiercely competitive Unit Trust Management Group Award.

Secure foundations
So what has contributed to this sustained level of outperformance across both open-ended and closed-end funds? Jasper Behrens, head of UK Retail at JPMorgan Asset Management, argues that ‘One of the key things is stability, by which I mean the stability of JPMorgan as a firm. People are beginning to recognise that JPMorgan, from being a brand they didn’t know, has become one that they both recognise and trust. We say that we have been around over 120 years and will be around for at least another 120. The knowledge that we are going to be around for a long time is very reassuring for investors.’

There is no question that the UK asset management company’s parent group has been in the headlines this year, following its effective takeover of Bear Stearns in the US at the height of the credit crunch. But Behrens insists, ‘We have shown with Bear Stearns that we have a strong balance sheet and a lot of clout. Stability also means our fund management staff are reassured that, if they perform well, they are well remunerated. This means that they will stay with us, and that, in turn, builds continuity.’

He adds that ‘There are literally hundreds of people behind each team at JPMorgan. We don’t believe in star fund managers as with a team involved you should get greater consistency of return, providing that you have the resources to do that. Our view is that we generate performance through having teams of stars rather than star teams.’

Indeed, Behrens feels that the size and global reach of JPMorgan’s asset management business is a further factor that both contributes to performance and reassures the group’s investors. He insists, ‘We now have presence in the retail investment market and we can cover more than one or two products. Boutiques have a place, but no-one knows who they are and they, by their nature, will only be involved in one or two product areas. Private investors want to be invested with management houses with a range across different areas, which is what makes winning the What Investment Award so satisfying – it is for both open-ended and closed-ended fund management.’

Cyclical momentum
He adds, ‘Across the cycle, if investors are moving from one sector to another, they are going to continue to get excellent performance because JPMorgan has shown it can produce performance across a range of asset classes,’ Behrens says. ‘One of the trends that we are beginning to see among financial advisers – and this will be replicated among private investors – is to have a solid investment core with more aggressive funds as satellites. So what you will see is more people looking at our Russian fund, for example, or our Indian investment trust and putting these alongside broader core funds.

‘This year, we saw the best ISA season we have ever had because we had a blend of solid core products and more adventurous funds in the same range.’

However, Behrens is also keen to underline the fact that the group is not resting on its laurels. Investment management is a competitive business and innovation is key if you want to stay ahead of the pack. He argues, ‘We are constantly challenging the market by developing new products where there is a profitable niche.’

Behrens adds, ‘JPMorgan is not afraid to bring new products to the market. For example, our Cautious Total Return Fund aims to beat LIBOR plus three per cent, when very few savings accounts match LIBOR. Cautious Total Return is a Multi-Asset fund. Research showed us that 90 per cent of investors benchmark their investments to what they would have got in a bank or building society savings account. So we benchmarked Cautious Total Return against cash, which is why it is now the fastest-growing fund in the Cautious Managed Sector. It fulfils what investors want.

Rather than trying to create a product we think people want, we actually went out and asked them what they wanted.’

Global view
A similar logic lies behind the group’s introduction of a global income portfolio. Behrens explains, ‘A vast amount of money has gone into UK equity income funds in the past couple of years. This means that most of these funds are not delivering high levels of income as they are all holding the same things, so the prices of these assets goes up, meaning that, in turn, the yield goes down.

‘So our argument is: why limit yourself to UK equity income when you can invest globally with the JPMorgan Global Equity Income fund, which is currently yielding four per cent compared with 2.9 per cent on a typical UK Equity Income fund.’

At the same time, the group is looking to widen retail investors’ horizons, by taking a more distinctive approach to portfolio construction. Behrens reports, ‘We are concerned that there are significant investment trends that are not being tapped by consumers. One of the major ones is the effect of consumers themselves, as understanding what consumers do is going to be the next big theme. Western consumers are getting older, but consumers in developing markets are increasing in numbers, and so we are launching a brand new fund that is the only one out there that invests specifically in global consumer stocks.’

Putting it in context
A further dimension to JPMorgan Asset Management’s approach to its retail investors is to encourage them to think about the most effective ways to invest. Behrens insists, ‘We are trying to get investors to think about their long-term cash holdings. The old certainties have to be challenged, and people are very worried about the security of their banks or building societies, so it is sensible to spread your investments across a number of accounts. But why not go further and put long-term deposits into AAA-rated liquidity funds?

‘They already have these in Luxembourg and they are very big in the States, where there is more money in AAA-rated funds than in bank deposits. Bear in mind that the only institution in the UK which is itself AAA rated is the Bank of England. People are worried about the security of their deposits, and that is where we come back to the stability and longevity of JPMorgan.’