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JPMorgan Chase's Strong Q2 Performance and Weaker Outlook

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Part 3
JPMorgan Chase's Strong Q2 Performance and Weaker Outlook PART 3 OF 8

JPMorgan Chase’s Asset Management Attracts Long-Term Capital

Asset management business

JPMorgan Chase’s (JPM) asset management business managed $1.9 trillion as of June 30, 2017—a rise of 11% on a year-over-year basis and 2% on a quarter-over-quarter basis, reflecting strong inflows as well as the broad market rise (SPX-INDEX)(SPY). In 2Q17, the division managed new flows of $9 billion into long-term offerings and outflow of $7 billion from liquidity products. JPMorgan’s asset management business faces competition from traditional as well as alternative managers like BlackRock (BLK), Blackstone (BX), Vanguard, and Goldman Sachs (GS).

Asset managers are expected to see lower returns in the upcoming quarters. Valuations have risen at a faster pace and global equities are trading at historic highs for most markets.

JPMorgan Chase&#8217;s Asset Management Attracts Long-Term Capital

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Client assets, net rises

JPMorgan’s asset management division managed net income of $624 million, up 20% on a year-over-year basis due to slower growth of expenses and higher performance fees. The division’s pre-tax margin grew to 32% in 2Q17, compared to 29% in the prior year. JPMorgan’s 77% of the total mutual fund offerings ranked in the first or second quartile over the past five years, reflecting better performance than the industry average. The division’s client assets rose 11% to $2.6 trillion, reflecting strong client activity, flow of assets, and appreciation of holdings.

The asset management division also managed 9% higher loan balances to $122.2 billion, reflecting leveraged bets and higher deployment toward riskier asset classes.

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