Michael I. Falcon, J.P. Morgan Asset Management’s newly appointed Asia-Pacific CEO, says trends in the region should give his firm strong opportunities to expand its retail and institutional businesses alike in the coming years.
In an Aug. 4 interview, Mr. Falcon, who retained his previous title as head of the firm’s Asia-Pacific funds business, said the $140 billion JPMAM manages for Asia-based investors is split evenly between retail and private banking clients, on the one hand, and institutional investors on the other.
In terms of the room for growth, however, the retail/private banking segment might have more potential.
“I think the biggest, most exciting opportunities are around the growth of the intermediary distribution of funds,” an industry in the region that’s “really growing up,” Mr. Falcon said.
Banks are becoming more involved, financial advisers are becoming more proficient, the public, with access to better services and products, is becoming more open to thinking about investments as opposed to savings — developments that should all set the stage for strong growth, Mr. Falcon said.
Regarding Japan, where a long-predicted shift out of low-yielding bank deposits into higher-risk, higher-return investments never seemed to materialize, Mr. Falcon said there are signs that shift finally might be occurring.
A decade or more of low growth and deflation made keeping money in cash a sensible move for Japanese savers intent on maintaining their purchasing power. But the return of some inflation under Prime Minister Shinzo Abe’s aggressive stimulus policies is beginning to make people there look at investments differently, he said.
“If we see that (inflation) sustain itself, or even increase a bit, we’ll see a big movement out of cash and into investible assets,” Mr. Falcon said.
While much of that shift might focus on fixed-income products, corporate reforms in Japan over the past few years, seen in areas such as dividend policy and share repurchases, could lead to a “more constructive environment for equities as well,” he said.
JPMAM already is seeing hopeful signs in Japan, with some equity funds among the firm’s more successful offerings there over the past year, and a maiden multiasset-class fund that’s being “quite well received,” with net inflows of $170 million in its first 10 months, Mr. Falcon said.
On the institutional side, where roughly two-thirds of JPMAM’s $70 billion in assets under management is in long-only strategies and the remaining third in liquidity, Mr. Falcon said the growing sophistication of big investors in Asia — including sovereign wealth funds and managers of national pension and provident schemes — in managing risk presents opportunities, as do their growing interest in diversification and globalization.
Diversification is being pursued both in terms of geography — as seen, for example, by big institutional investors in Japan and Malaysia allocating more money over the past year to international equities — and by asset segments, with growing interest in alternatives and other uncorrelated investment opportunities, he said.
Mr. Falcon said he doesn’t think the evolution of Asia’s institutional landscape is likely to follow the pattern seen in U.S., U.K. and some northern European companies, with sizable defined benefit and defined contribution plans at the corporate level. Those retirement structures “grew out of a period of time when corporations were entering into a promise that today only governments dare tread, and they tread lightly,” he said.
China, meanwhile, is “one of our priority markets,” said Mr. Falcon. At present, JPMAM’s liquidity offerings — including the country’s largest AAA renminbi money market fund, with RMB81.9 billion ($13.4 billion) as of June 30 — are its biggest presence there, but the company is pursuing business through multiple channels, including institutional mandates and the funds market, he said.
Most recently, for the mutual recognition scheme announced by China and Hong Kong in May that will allow approved funds to be marketed in both jurisdictions, “we were the first in Beijing to submit our application” to sell JPMAM unit trusts registered in Hong Kong on the mainland, Mr. Falcon said. “Like the rest of the market, we’re eagerly awaiting approval and looking to start distribution to clients” there, he said.
Concerning the recent sell-off on China’s A-shares markets in Shanghai and Shenzhen, and the controversy over China’s direct intervention to halt the plunge, Mr. Falcon expressed confidence that China’s leadership remains committed to the reforms needed to build the strong capital markets necessary to underwrite the country’s continued growth.
J.P. Morgan announced Aug. 4 that Mr. Falcon would assume the Asia Pacific CEO title from Jed Laskowitz, who moved to New York to serve full time as co-head of global investment management solutions, JPMAM’s multi asset class business. Mr. Laskowitz had taken on that title in October 2014, in addition to his regional CEO responsibilities.
Mr. Falcon joined JPMAM in New York in November 2010 as head of retirement, and moved to Hong Kong as head of the Asia-Pacific funds business in 2014.