J.P. Morgan’s head of UK retail sales Jasper Berens talks about the importance of educating IFAs, his plans to snatch market share from Invesco Perpetual, and what he would do if he were head of the FSA
Jasper Berens, J.P. Morgan’s head of UK retail sales, plans to take the group’s market share to dizzy heights over the next five years. His aim is to become a serious rival to M&G and Invesco Perpetual, two houses consistently topping the charts in terms of performance and assets under
management.
Berens was responsible for wholesale and discretionary sales until five years ago, when he was given control of JPM’s relationships with financial advisers in the retail market.
“When I took over the team, in terms of our market share position we were nineteenth on Cofunds and FundsNetwork.
“In early 2008, after three years of that strategy being in place, we were fifth in terms of net sales, so it was a huge change. We have grown from less than 1% market share to something like 6%,” he says.
This scramble towards the top hit a setback in late 2008, when all the hot money in the market was flowing into corporate bond funds. The manager slipped from fifth or sixth position back down to tenth because it did not have a UK corporate bond offering with which to take advantage of this trend. Berens says this was, and is, “an obvious gap in our armoury”.
“It is quite hard for us to be in the top three without a serious UK corporate bond fund.”
Franchise building
However, at the end of 2008, the group poached Bob Michele and his team from Schroders, appointing him global head of fixed income.
The team is now building a franchise, Berens says, and should be poised to take a slice of this part of the market in the next couple of years. With $23.4bn (£20bn) of retail assets under management at the end of 2009, JPM is now back up to sixth again in terms of market share.
“What I want to do is compete directly with Invesco Perpetual and M&G and be third, and get ahead of Jupiter and BlackRock, which are currently in third and fourth place. I think we have the brand, the sales team, the products, the performance and the relationships to do it now. It is all about building a capability to help financial advisers,” he says.
Berens takes the role of relationship building extremely seriously, and hopes to gain advisers’ trust and business through the process of education, especially around the Retail Distribution Review, which is set to change the landscape of financial services. He hopes this will drive greater recognition of the JPM brand within the retail market.
“One of the changes I wanted to make when Jamie Broderick [the head of Europe] appointed me to the role was to build on our success in the wholesale market with the retail channel,” he says.
“The mistake we were making was thinking our brand would be widely recognised by IFAs because we are J.P. Morgan. The reason it was a mistake was IFAs simply did not know who we were, because of course it is a very noisy market – there are a lot of our competitors out there. What did we have to do to get ourselves heard?”
Advertising
Berens says the most obvious option was to spend a fortune on advertising. He notes many of JPM’s competitors have done this, with varying degrees of success, but he felt this was not the right strategy for the group.
He explains: “You cannot be successful as a retail fund manager in the UK without a strong relationship with the IFA community. One of the other things we were finding was our asset flow both in and out of our funds was lumpy by just looking after the discretionary asset managers. By going after the IFA community, we thought it would be a way of having a much more sustainable business.”
JPM developed training tools for advisers, such as the Adviser Academy, building on its expertise in investment trusts. Advisers who want to remain independent will be forced to research and understand the closed-ended space when the RDR comes in at the end of 2012.
Berens says: “We worked out pretty quickly from all the soundings that were coming out of the FSA in early 2006 about the professionalism of advisers that we should offer a training tool to help them pass their exams. It has been hugely successful and we have trained literally thousands of advisers.
“The FSA is keen for advisers who want to remain independent to be whole of market and they therefore must have a view on areas like investment trusts. We are the market leader in investment trusts both in terms of assets and the number of funds out there, and we have built an Academy training tool we will now take out to advisers over the course of the summer and autumn to explain to them what an investment trust is and why they are useful for client portfolios.”
Recognition
J.P. Morgan is often associated with investment trusts, where it has a strong, wide-ranging offering, but Berens says its open-ended suite of products is becoming equally widely recognised.
“I think it is fair to say that in the discretionary, private client, stockbroker world, JPM is probably better known for investment trusts than open-ended funds, but everywhere else that is not true. Within fund of funds and private banks, we are much better known for open-ended than closed-ended. It is not a case of either/or. Our market share could be strong in each of those areas.”
He points to the Brazil investment trust the group launched in summer, which has so far raised £50m. “I consider this to be a really good launch in what was quite a tough market,” Berens says.
Raising profile
He says Fidelity’s decision to launch Anthony Bolton’s China fund as an investment trust was a positive in terms of raising the profile of the closed-ended space, although he is critical of its fee structure. “I wish they had not paid commission on it because I think that has told people you can only have an investment trust if it pays commission. In two years, commission will be illegal. Advisers should be thinking about investment trusts as not paying any commission or trail.” With the changes to capital gains and income tax, JPM will be able to point advisers towards which open- and closed-ended products will best suit their needs in terms of tax efficiency, he adds.
Berens also plans to work towards building the profile of particular products in the group’s range over the coming months and years. “Historically, the hardest thing is not building a brand, it is building an aura around a product. I think we did that very successfully with Natural Resources and Cautious Total Return. We now need to do it with two or three other products to get to that market share,” he says. The focus in the immediate future will be on Emerging Markets, Global Consumer Trends, MultiAsset Income, and Strategic Bond. “If we add 1% or 2% market share in each of those products, we will compete with M&G and Invesco Perpetual.
We would actually have a much more stable business than Invesco, which is dominated by UK equity income and UK corporate bonds. It would be much more like M&G’s, which is more broadly based,” Berens says.
Forecasts
Global Consumer Trends, managed by Peter Kirkman, will be among JPM’s strongest products in the near future, Berens forecasts. “My prediction is that it will be bigger than Natural Resources in five years’ time, which is quite a big bet considering Natural Resources is a couple of billion in size. But I think it will be because it describes a trend that no-one can disagree with, which is the Western world is getting older, and emerging economies are getting wealthier. Regardless of what global growth is doing, people are spending money, the question is working out where they are spending it.”
The recent appointment of Gary Clarke, formerly the head of Schroders’ European equities team, will help strengthen this offering as he will be working with Kirkman on thematic and global equities products, including Global Consumer Trends.
As well as the growing popularity of thematic products, another major change Berens has seen in the course of his career is the trend towards passive investing. “That in itself is probably the biggest threat to active fund managers,” he says. “However, I think the other big change is the growth in Ucits III, total and absolute return investing, and that has been really positive for the active fund management industry because, by definition, any return you get above cash is alpha, and if you are an active fund manager you are always trying to achieve alpha. But there are some other big changes to come.”
Transparency
The RDR is, of course, the most significant change the industry is going to see in the next couple of years. Berens says it will be “fantastic” for advisers and consumers as the industry is forced to become more transparent, although he notes some fund houses will bemoan the heavier burden of regulation.
“I think a lot of people in the fund management industry will have a big problem with it, but I think it is great for those groups like ourselves who are already very explicit about what their fees are.
“The other thing I think it will bring is there will be nowhere to hide in very mediocre performing products. This is linked to another big trend we have seen in the industry over the last 15 years, which is the focus on investment performance has got narrower and shorter. Every year people are much more focused on short-term performance and I think that is extremely dangerous.”
Berens would like to see investors giving fund groups more of a chance to perform, rather than churning money between products on a short-term view. But for those funds that do underperform in the timescale groups have set out, consolidation is likely to be on the cards. “A number of funds will close down as consumers vote with their feet and poor performance is stamped down upon by investors coming out of funds,” he says. “You will see this disbanding of mediocrity. As you have had much lower fees for passive investing, people will start to pay for alpha, and then you will start to see higher fees, with really good, consistently high alpha-generating funds, which will be of great benefit to the fund management industry.”
Passion
There are other changes Berens would like to see introduced that would be highly beneficial both to the financial services industry and the end consumer, he argues. What would he do if he were appointed head of the FSA tomorrow? He becomes as animated as he has been throughout the course of the interview, discussing something he is clearly passionate about. “I think the FSA should charge a toll from everybody in financial services, possibly around assets, and that toll should be matched by the FSA to advertise, promote, and educate the British public in financial services.
“We are simply never, as a country, going to get out of the mess we are in until the savings ratio increases. And the savings ratio will only increase when people actually understand what it is they are investing in.” He believes bringing proper financial education into the school curriculum at an early stage is the answer, and adds it would bring more business to the industry as educated children become educated adults and consumers of financial services.
Ambitions
There is no doubt Berens has ambitious plans as the figurehead of J.P. Morgan’s retail business. Over the next five years, he would like to see the group expand into new product areas such as multi-manager, multi-asset, and even the increasingly popular Ucits III or ‘newcits’ funds.
“There is plenty more for us to do,” he says. “We have come a long way but there is further for us to go, and that is where I think we will go over the next five years.”
It is clear, for the foreseeable future, Berens is going to be a busy man.
