Asset managers are increasingly attempting to reach individual investors through the launch of new products that offer lower minimum investments and some level of liquidity while providing access to investment strategies that were previously only available to institutions, high-net worth investors and family offices.
J.P. Morgan Asset Management has had its eye on the space for the past two years. Earlier this month, it launched its latest product, JPMorgan Private Markets Fund. The fund is a 1940 Act-registered, evergreen private equity fund designed to provide access to private equity investments for qualified and accredited individual and institutional clients. The fund includes a $25,000 investment minimum, no capital calls, simplified tax reporting and potential for quarterly liquidity. JP Morgan Asset Management is available on select private bank and custodial platforms and will expand availability in 2024.
Last year, JP Morgan Asset Management rolled out JP Morgan REIT, a non-traded REIT with Class T, Class S, Class D and Class I shares. Its original offering included $4 million in shares and up to $1 million of shares pursuant to a distribution reinvestment plan.
The non-listed REIT is focused primarily on stabilized, income-generating properties, but will also pursue value creation opportunities that incorporate property refurbishment, redevelopment and development. At launch, it anticipated a 75%/25% split between those strategies.
Shares in JPMREIT are offered on a continuous basis at a price generally equal to the net asset value per share of each class of common stock, updated monthly. The initial per share purchase price was $10.00 per share, plus applicable upfront selling commissions and manager fees. The shares currently list at $10.93 for Class T shares, $10.90 for Class S shares, $10.48 for Class D shares and $10.53 for Class I shares.
Under its J.P. Morgan Global Alternatives banner, the asset manager has more than $213 billion assets under management in strategies including real estate, private equity, private credit, hedge funds, infrastructure, transportation, timber and liquid alternatives. Overall, JP Morgan Asset Management manages $2.8 trillion in assets. JPMREIT currently has $333 million in assets under management invested across multifamily, student housing, truck terminals and outdoor storage. JPMorgan Private Markets Fund currently has $111 million in assets under management.
Wealthmanagement.com spoke with Shawn Khazzam, head of private wealth alternatives, J.P. Morgan Asset Management, about the asset manager’s efforts to woo individual investors and advisors.
This interview has been edited for style, length and clarity.
WealthManagement.com: Let’s start with the big picture. It seems like you have started offering more products aimed at private wealth. Talk about how J.P. Morgan Asset Management began to hone in on the individual wealth segment.
Shawn Khazzam: JP Morgan Asset Management has been investing in alts for the better part of the last 50 to 60 years. We have today around $215 billion in alternative assets under management. To the point you raised earlier, historically while we did manage some of it on behalf of private wealth, the majority was pension funds, sovereign wealth funds, insurance companies and other large institutions. That was one part of our business. The other side of the coin is that JP Morgan has been managing money on behalf of individuals for a long time, albeit in liquid formats.
So, as we started to view the idea that alts are becoming more and more important, not just for institutions to achieve investment goals, but also individuals, we said we would like nothing more than to partner with individuals and open up our capabilities and make it available to advisors. There’s no reason why individuals should be limited based on their net worth. With the advent of more accessible vehicles, we can tap into structures to get alts in the hands of the right folks.
WealthManagement.com: When did this effort begin in terms of thinking about this segment and thinking about the products you wanted to bring to the market?
Shawn Khazzam: It started in earnest about two years ago. As we look at our overall product suite, JP Morgan is lucky to have a broad range of experience across multiple alternative asset classes, including real estate, infrastructure, real assets, private equity, private credit and hedge funds. We took a step back and asked, “What would make the most sense for advisors? Where do we have a product suite that would be of interest to them?”
What we decided to do was be very focused in the products we introduced. We rallied around infrastructure, real estate and private equity. But when we speak with advisors, we are consultative. We don’t hesitate to carry on conversations and see how we can be helpful on other asset types.
Part of the reason why it was important to us to not just open all 30 to 35 strategies—the reason we were selective—is because everything we do is done in accordance with a generalist relationship management force that has been covering advisors for multiple decades. We have been speaking to them about mutual funds, ETFs and SMAs. To get as much focus on alts, it was important to not ask too much and to focus on what would be most beneficial today from an asset class perspective.
WealthManagement.com: Was any of this also driven by clients asking for more options in the alternatives space?
Shawn Khazzam: Every decision we make like this is very thorough. Part of the input comes from clients. We are checking our plans with clients and not just doing something because we think it’s a good idea. When we took our first product to market, we had strawman for product design, but then when we got on the road we took live feedback to make it better. Then we came to market with a product that was in a good position to meet the needs of advisors because we took their feedback from the beginning of the development process.
WealthManagement.com: One consistent theme I hear all the time in discussing this niche is how do you educate advisors, especially given the breadth of assets and products that are in the market?
Shawn Khazzam: Our education strategy has two pillars. One is people. Two is the content and the platform it is delivered on. We have a distribution force of about 140 people. That is a generalist relationship management distribution team. In addition, we have a team of alternatives specialists that are out in the field today. They are working hand in hand with their generalist counterparts to speak to advisors on anything that is alternatives. They can move across asset classes. Every discussion begins with education and insights. That’s how we are delivering that content.
In terms of how we are designing the content, we have been building a “Guide to Alternatives” program. It is a sister to our “Guide to the Markets.” David Kelly is part of the group that delivers that content to advisors. We are leveraging that content and brand to deliver education.
What you notice over time, of the 300,000 advisors in the U.S., not all of them are at the same level of alternatives knowledge. We carve up the content. An advisor can do a 101, graduate to a 201 and finally the 301 in our “Guild to Alternatives” program. Advisors can get deep into technical knowledge.
WealthManagement.com: Do you also work with third parties like CAIS or iCapital?
Shawn Khazzam: We work with them mostly as it comes to delivery. Subscriptions can be a friction. They have good tech to make that subscription process easier. We like to rely on what we have done in house for education and continue with the insight-led conversation.
WealthManagement.com: One of your recent offerings is a non-traded REIT. So, the obvious question when it comes to real estate right now is how do you battle the negativity surrounding the space? Most of the challenges are in the office sector, but fundamentals are quite strong in many other segments. But you don’t get that impression looking at some headlines.
Shawn Khazzam: That comes up all the time. I like the way that you positioned it. There are a lot of negative headlines, but it’s important for advisors to realize not all real estate is created equal. More often than not, the concern today is around office—big city office specifically. But when you look at the industrial sector with the supply chain, truck terminals, outdoor storage or in residential where there continues to remain a shortage, the fundamentals in those sectors remain quite strong. Valuations are down anywhere from 15% to 20% in those sectors. It is an incredible buyer opportunity. Asset selection remains key to make sure you are picking up the right assets in that market.
WealthManagement.com: Did you see the REIT with any existing assets or are you building its portfolio post-launch?
Shawn Khazzam: We are building from the ground up. Our real estate Americas team has been investing in the same types of assets in the REIT that JP Morgan has invested in for a long time. The team has lot of experience in valuations, risk management and overseeing an open-end structure. We are excited to make real estate more accessible to individual investors than before.
WealthManagement.com: The other recent product is focused on private equity. What kinds of opportunities in the PE space is that entity targeting?
Shawn Khazzam: We are very focused on the small and middle markets. Unlike many other players, that is the heritage of our private equity group. It has been investing in small/mid market opportunities for the better part of 40 years. It’s similar to the story with real estate. It’s about taking the knowledge and experience that had been managed on behalf of institutions and a good amount of private wealth and putting it in a more accessible vehicle. We think there is a strong opportunity set that is less reliant on leverage and many exit opportunities. There’s a really interesting opportunity that is quite complementary to more large-cap oriented strategies.
WealthManagement.com: Are you also looking at secondaries for that?
Shawn Khazzam: Secondaries will be a big part and so will co-investments.
WealthManagement.com: Is there anything else you would like to add?
Shawn Khazzam: We recently conducted a survey of over 1,000 advisors that do business with JP Morgan Asset Management. We found that despite the fact from an asset raising perspective that it’s different from years back, over half are planning to maintain or increase exposures. That’s exciting for me.
We are spending a lot of time when it comes to things like that friction when you want to invest. We will continue to work with tools to make that easier for advisors. We will continue to work with a broader distribution team to better cover advisors. It’s not just about having great products, but also being a trusted client advisor to help navigate what is a complicated world of alternatives so you can see more advisors incorporate them into their practices.
WealthManagement.com: In research that we and others have done, some of the consistent sticking points we have found, in addition to education, which we’ve talked about, is liquidity. Is it also something you found?
Shawn Khazzam: That is consistent. Top concerns are liquidity, education and valuations in today’s market. And whether the risk/reward is able to get them where they want to be.
If you look at advisors across country, you have a classic 80/20 scenario. Most of the firms that we speak with are looking for our help to help expand alternatives use to more advisors rather than deepen to ones that already do a lot of alternatives. That’s where I think having built up relationships with advisors in past decades gives us an interesting perspective in being able to achieve those goals. The importance of distribution continues to grow over time as alternatives become more mainstream as you see their use expand.