You may think growing your mutual funds in this economic climate is as futile as eating only one cookie at your company’s holiday party. However, a recent article in The Wall Street Journal by Michael Pollock reveals that some companies are gaining more ground than you may think. According to the article, research from Strategic Insight shows J.P. Morgan’s long-term U.S. mutual funds provide a beacon of hope during these bleak times with net inflows second only to bond heavyweight Pacific Investment Management Co. Wondering how they did it? Despite the recent downward trend in J.P. Morgan’s overall revenue, analysts believe their successful mutual funds are a result of drawing on new tactics from their large private-wealth and institutional money-management arms and employing these strategies in funds for average investors. George Gatch, head of investment management for the Americas, explains that the goal has been to bring, “the best of our investment capabilities to the U.S. mutual-fund marketplace.”
J.P. Morgan’s success provides some valuable lessons. For instance, their fastest-growing funds currently are bond funds. These funds, led by JPMorgan Core Bond, use the Barclays Capital U.S. Aggregate Bond Index as their benchmark and have secured a place for the past 10 years in the top quarter of Morningstar’s intermediate bond group. As for their second-fastest-growing fund, JPMorgan Strategic Income Opportunities, no benchmarks are used, but rather the focus is on absolute return. Other strategies include maintaining a large cash position in the absence of attractive market opportunities, as well as using derivatives to make bearish bets on bonds. J.P. Morgan is also a proponent of implementing hedge fund tactics in mutual funds, which appears to be a wise move considering they have beaten both Standard & Poor’s 500-stock index and its Morningstar category by more than 4.5 percentage points per year for the last five years. They also look for expansion opportunities with companies that use fresh techniques to help them gain a foothold in future product-development issues.
So while it appears that times are tough, J.P. Morgan has demonstrated how to beat the economic blues for mutual funds. By being flexible and incorporating hedge fund as well as private wealth and institutional money management strategies, they are able to offer investors unique and cunning options. This type of performance is just what we needed to lift our spirits—after all, ‘tis the season for merriment and good fortune.
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