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JPMorgan Chase’s Asset Management Expands on Flows, Growth

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Asset Management segment

JPMorgan Chase’s (JPM) Asset Management segment managed $2 trillion on December 31, 2017, a 15% rise on a year-over-year basis and 5% on a quarter-over-quarter basis. Growth was led by new inflows as well as the rise of the broad market (SPY) (SPX-INDEX) in recent quarters. Asset managers, including Blackstone (BX), BlackRock (BLK), and KKR (KKR), have added new funds to active and passive fund offerings.

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In 4Q17, the segment managed new flows of $30 billion in long-term offerings and $10 billion in liquidity products. The multi-asset category added the highest flows of $17 billion, followed by $12 billion in the fixed income category and $1 billion in equities. The markets rejoiced over tax rate cuts and other financial reforms over the past few quarters, partially offset by the fear of an asset bubble at record-high equity valuations.

Fund performances

In 4Q17, JPMorgan Chase’s Asset Management segment managed net income of $654 million, a rise of 12% on a year-over-year basis due to higher revenues and performance fees, partially offset by higher spending and a provision for taxes. The segment’s pre-tax margin declined to 30% in 4Q17 compared to 33% in the previous quarter and remained the same on a year-over-year basis. The AUM (assets under management) expanded $49 billion due to market appreciation in 4Q17, reflecting the strong performance of its holdings.

Overall spending rose 14% to $2.3 billion, reflecting higher employee spending and higher external fees. The segment’s client assets rose 4% to $2.8 trillion sequentially, reflecting wealth creation and strong inflows.

The Asset Management segment managed 11% higher loan balances to $128 billion and a 10% decline in deposits to $142 billion, reflecting a shift from deposits toward investments and various riskier asset classes.

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