Departures lead to asset outflows at J.P. Morgan fixed-income unit

J.P. Morgan Asset Management’s value-oriented fixed-income team is being hit with outflows after losing at least seven members in recent months.

The departures from the Columbus, Ohio, unit include Doug Swanson, the senior portfolio manager on the team who retired in June after taking a leave of absence in October 2015.

Mr. Swanson was the lead portfolio manager on the J.P. Morgan Core Bond Fund. Since his departure in June, the fund has had net outflows of more than $2.6 billion, data from Morningstar Inc. show. The fund had $28.3 billion in assets under management as of Oct. 31, Morningstar data show.

Overall, the team had $3.6 billion in net outflows in the first nine months through Sept. 30, said Kristen Chambers, a J.P. Morgan spokeswoman. Ms. Chambers said in any given year assets will fluctuate between $1 billion and $10 billion given the strategy's sheer size. “In fact, in 2013 the platform was down 7% vs. just 4% this year,” she said.

Ms. Chambers would not comment on the departures. She said the team added 10 investment professionals in 2016 and will add another five in 2017, and was preparing “its investment engine for the next generation of growth.”

Mr. Swanson was replaced by Barbara E. Miller, a veteran portfolio manager on the value team.

Notes from the May 2016 meeting of the $14.1 billion Ohio Police and Pension Fund, Columbus, show the system terminated the team as manager of a $540 million core fixed-income portfolio, citing personnel departures at the manager and a change in direction for the system’s fixed-income portfolio.

The $9.5 billion Los Angeles Water & Power Employees’ Retirement Plan continues to keep J.P. Morgan Asset Management on its watch list, Chief Investment Officer Jeremy Wolfson said in an e-mail. The retirement system put the firm on watch May 11 after a May 4 letter from Mr. Wolfson to board members, stating that seven departures from the value team in a span of 10 months “are concerning.”

The value team manages $790 million for the water and power plan.

A May report from Morningstar said that besides Mr. Swanson, the departures from the value team have included Chris Nauseda, who joined in 1982 and had served as co-manager of the core bond fund since 2006. Mr. Wolfson, in his May letter, also mentioned the departures of Henry Song and Mark Jackson, two portfolio managers.

RVK Inc., investment consultant for the Los Angeles Water & Power Employees’ Retirement Plan, said in a May report that its consultants had multiple calls with J.P. Morgan over the staff departures.

“RVK believes the departures represent a loss of talent and raise concerns about J.P. Morgan’s ability to retain talented portfolio managers,” the report said.

The value team managed some LDI strategies for corporate clients. Investment officials at various managers specializing in LDI strategies, who asked to remain anonymous because they are not authorized to talk publicly about competitors, said they were receiving combined several billions of dollars in LDI inflows in recent months from clients terminating J.P. Morgan Asset Management.

Ms. Chambers, the JPMAM spokeswoman, said in an e-mail that “liability-driven investing remains a central part of what we do in our global fixed income business in Columbus and globally.” She added that a reorganization is creating a more comprehensive pension solutions platform, of which LDI is a core capability.

J.P. Morgan Asset Management managed $27.4 billion in worldwide LDI strategies, $26 billion of which was managed for U.S. clients as of Dec.31, 2015, according to Pensions & Investments data.