J.P. Morgan's leadership change prompts no alarm

After five years as the CEO of J.P. Morgan Asset Management, Chris Willcox is preparing to retire from the firm at the end of the year.

While sources outside of the organization say they are watching the $2.1 trillion asset manager's next steps following the unexpected announcement, they are not currently raising red flags over the leadership change, as a 33-year company veteran will become the new chief.

Mr. Willcox, who has been at the company more than 13 years, "decided to take time off and retire from the firm," according to a June 18 internal memo from Mary Callahan Erdoes, CEO of asset and wealth management, which was obtained by Pensions & Investments.

George Gatch, who is currently responsible for the global funds group and institutional client coverage, will replace Mr. Willcox. Mr. Willcox will continue to run the asset management business until the transition of responsibilities to Mr. Gatch at the end of the year, a JPMAM spokeswoman confirmed.

Additionally, Paul Quinsee, global head of equities, and Bob Michele, global head of the fixed income, currency and commodities group, will expand their roles to include becoming co-heads of the asset management investment committee, according to the memo.

On the investment committee, the duo will report to Ms. Erdoes, who is the committee chairwoman. Within JPMAM's investment organization, however, the pair will report to Mr. Gatch.

Mr. Gatch was not available to comment for this story.

He takes the reins at JPMAM, New York, as assets under management at the firm have grown to nearly $2.1 trillion as of March 31, up 23% from $1.7 trillion as of mid-2014. Mr. Willcox was named CEO in May 2014.

Mansco Perry III, the executive director and chief investment officer of the $95.8 billion Minnesota State Board of Investment, St. Paul — which is a client of JPMAM — said he is "not too alarmed as of yet" regarding the leadership changes.

JPMAM manages more than $1 billion in equity assets for the Minnesota fund, according to Mr. Perry.

"The asset management group is a pretty large entity," Mr. Perry said. "If (JPMAM) were a smaller firm, we'd think there would be some key-man impacts. All this will do is prompt us to ask a bit more (due diligence) questions and speed up a review of the products we are (invested) in."

The fund does not have an official "watchlist" for its money managers, but Mr. Perry's philosophy is that "every manager is on watch."

Some institutional investors use watchlist designations, which can be triggered over organizational or personnel changes, at asset management firms.

Donald Putnam, managing partner at investment banking firm Grail Partners LLC, San Francisco, said that Mr. Gatch is a "battle-tested professional" and the kind of candidate the company "would and should pick for succession."

Mr. Gatch established JPMAM's subadvisory and institutional mutual funds businesses and doubled the market share of the U.S. mutual fund complex during his tenure as head of the group over the past decade, according to the internal memo from Ms. Erdoes.

Given Mr. Gatch's track record, "this is no crisis or battlefield promotion," Mr. Putnam said. "The entire fund management space is under threat from passive (investing), ETFs, (and) price pressures. That makes (George) Gatch the thoughtful right choice, not the last survivor in the foxhole."

Thomas Lancereau, director of North America manager research at Morningstar Inc., Chicago, said that Mr. Willcox's impending departure "was not expected."

But, the six-month leadership transition period and the fact that the new CEO comes from within the organization "are important points suggesting that investors should not expect major shifts in the direction of the firm," Mr. Lancereau said. JPMAM has also been focusing on its strengths and supporting its investments teams with adequate resources, he noted.

During his tenure as CEO, Mr. Willcox and the asset management operating committee launched an initiative called "Simplify for Growth," which was focused on "reducing complexity in (asset management) to maintain (JPMAM's) excellence in core competencies and invest in areas that will drive long-term growth and help us serve clients better," Ms. Erdoes wrote in the memo.

Under the initiative, which took place from 2016 to 2018, JPMAM shut down or merged 229 mutual funds (30% of its lineup), closed 21 offices, and cut 457 staff in lower growth segments of the business, Ms. Erdoes said in late February during J.P. Morgan Chase & Co.'s investor day in New York. The firm also launched 125 new funds, opened 17 new offices and added 464 new hires in strategic growth areas, however, during the period.

"They were out of favor, they were underperforming ... or they've just lost their edge," Ms. Erdoes said of the shuttered funds at the time. "Those are really hard things to do, but they are really important for the long-term franchise."

Product rationalization continues at the firm, by way of recent changes at JPMAM affiliate Highbridge Capital Management LLC, New York. The hedge fund firm, which had $3.9 billion in assets under management as of Dec. 31, is winding down its $2.85 billion multistrategy fund (Pensions & Investments, June 20).

"Highbridge is refocusing its broad multistrategy approach to a specialized focus on multistrategy credit," a JPMAM spokesman said. "Over the last several years, clients have evolved their multistrategy hedge fund allocations from a broad-based approach towards more specialized areas of expertise."

Highbridge is part of JPMAM's $150 billion global alternatives business.