JPMorgan Chase’s (JPM) Asset Management business managed ~$2.0 trillion on September 30, 2017—a 10% rise on a year-over-year basis and 4% on a quarter-over-quarter basis. This trend reflected continued inflows and a rise in the broad index (SPX-INDEX) (SPY).
In 3Q17, the division managed new flows of $21.0 billion into long-term offerings and $5.0 billion in liquidity products. Traditional and alternative managers such as BlackRock (BLK), Blackstone (BX), and Goldman Sachs (GS) also brought in more assets in 3Q17 toward equity and debt funds.
Markets are trending higher amid expectations of tax rate cuts and financial reforms, resulting in higher valuations for the companies.
In 3Q17, JPMorgan Chase’s Asset Management division managed net income of $674.0 million, up 21% on a year-over-year basis due to a lower increase in spending and improved performance fees. The division’s pre-tax margin grew to 33% in 3Q17 compared to 29% in 3Q16.
Overall spending rose 2% to ~$2.2 billion, reflecting economies of scale and operating efficiencies but partially offset by higher compensation. The division’s client assets rose 9% to ~$2.7 trillion sequentially, rising 3% and reflecting strong inflows and increased holdings.
JPMorgan Chase’s 81% of its total mutual fund offerings ranked in the first or second quartiles over the past five years, higher than the previous quarter’s 77% of its total mutual fund offerings.
The Asset Management division managed 10% higher loan balances to $125.0 billion and a 6% decline in deposits to $144.0 billion, reflecting leveraged bets and higher deployment toward riskier asset classes.
Asset managers are expected to see some difficulty in creating alpha returns above the index, as valuations have peaked with respect to historical standards. Managers could require a boost from the government to beat the index and attract more flows.