Competition is one of the topics that keeps J.P. Morgan Asset Management EMEA CEO Patrick Thomson up at night — but he said technology is key to the $3.2 trillion firm retaining its competitive advantage.
Globally, the firm spends about $500 million per year on business technology in asset management, Thomson said in an exclusive interview at the firm’s London office. “Our view on that is, that’s our competitive advantage. We want to be able to have the latest AI (artificial intelligence) models that are going through our proprietary equity research that we have … going back 40 years,” scouring research notes and coming out with a view or helping analysts to shape a view on company earnings, Thomson said. “That’s expensive, building that stuff. Globally, we have 1,400 technologists in asset management, which in a company headcount of over 8,000 is a pretty significant investment. That speaks to the need to process information as fast” as possible.
The need for speed means 90% of the firm’s trading is now done electronically, for example. “And why? Because you want it as frictionless … and as efficient as possible. We always remember it’s clients’ money — it’s not our money. So every single basis point counts in terms of saving money and being as efficient as we possibly can. The answer to all of that is technology.”
Thomson himself started in operations at JPMAM in 1995 — he remembers “vividly” that his team would put quarterly statements into manila envelopes and take time to deliver information on holdings to clients. “Now, the clients want it now. And then clients also want views,” Thomson said.
For that, JPMAM has its market insights team, led by Karen Ward, managing director and chief market strategist for Europe, the Middle East and Africa.
"When the labor print comes out … the next minute (clients want to know) ‘what’s going on with it?’” he said. The market insights team’s thought leadership is delivered in multiple languages — another requirement of technology.
Technology is something that Thomson’s operating committee spends a lot of time on. “It’s probably the most important thing we focus on,” he said, adding that the firm then thinks about a “hierarchy of needs. So, investment performance is the most important thing that we do — therefore, we dedicate a significant component of it (technology spend) to helping our investors to be as efficient as they possibly can. That’s not only drawing through data, making insights on company performance and delivering alpha, creating alpha; it’s also the entire supply chain of once you’ve made that decision that you’re going to buy that company or that company, how do you implement it in a very broad range of portfolios, as efficiently as you possibly can, in risk-adjusted ways?”
Then there’s the connection to the trading desk, trading at the most efficient price, settlement, and then “a report that’s digestible and easily understood by the client the next day, or as soon as humanly possible, to say … we just changed the position because of this, that and the other,” Thomson said.
Retaining that competitive advantage is particularly important in the U.K. market, where “it is not obvious how to grow. The U.K. has not been an easy place to be — cost pressures, DB plans declining, etc.”
And Thomson has a view across those pressures as chair of the Investment Association, which represents the U.K.’s money management industry with £9.1 trillion ($12.1 trillion) in assets under management.