Separately managed accounts

Transcription

1 FOR INSTITUTIONAL/WHOLESALE/PROFESSIONAL CLIENTS AND QUALIFIED INVESTORS ONLY - NOT FOR RETAIL USE OR DISTRIBUTION Separately managed accounts A J.P. Morgan Global Liquidity solution

2 Separately managed accounts: A Global Liquidity solution IN BRIEF Separately managed accounts, discretionary portfolios opened on behalf of an investor and overseen by an appointed asset manager, are individually customized to meet an investor s specific parameters for security, return and liquidity. The asset manager will invest predominately in individual securities and although the manager will have a fiduciary responsibility for all investments made, the underlying securities are ultimately legally owned by the investor. Investors such as corporate treasurers and insurers choose separately managed accounts for their careful construction and flexibility. These accounts are designed to meet a client s particular risk tolerance and cash flow needs. Critical elements of Global Liquidity s separately managed accounts include precise individual customization; robust risk management and rigorous credit analysis; a strong structure and thorough set-up and documentation process; adaptability to changing interest rate and credit environments. In the following pages we explain how separately managed accounts are constructed and managed and explore the range of benefits they offer investors looking for a tailored investment solution. J.P. MORGAN ASSET MANAGEMENT IS ONE OF THE LEADING INSTITUTIONAL ASSET MANAGERS. GLOBAL LIQUIDITY IS A DIVISION OF J.P. MORGAN ASSET MANAGEMENT AND OUR INVESTMENT PROFESSIONALS ARE LOCATED AROUND THE WORLD, PROVIDING STRATEGIES THAT SPAN THE FULL SPECTRUM OF ASSET CLASSES. GLOBAL LIQUIDITY S OFFERING The largest institutional money market fund provider in the world*, Global Liquidity also provides carefully constructed, individually customized separately managed accounts or portfolios. These portfolios allow clients to define their own parameters for security, returns and liquidity based upon their risk tolerance and cash flow needs. Critical elements of our separately managed accounts include: Individual customization to meet an investor s specific needs Risk management: robust fiduciary culture, rigorous credit analysis Strong structure, thorough set-up and documentation process Adaptability to changing interest rate and credit environments Developing the appropriate portfolio for clients In establishing a separately managed account, Global Liquidity works closely with clients to set a clear mandate. The portfolio management team holds detailed discussions with a client to establish the desired investment objective, performance benchmark and expected risk/return characteristics, among other requirements. Based on these in-depth conversations, an investment strategy is developed, as well as a set of investment guidelines. These guidelines will be closely followed at all times in order to successfully execute the investment strategy on the client s behalf. The mandate will always remain flexible to adapt to changing investment requirements or market conditions and, as such, the guidelines can always be updated at any point in time. Our client s separately managed account is the result of extensive forecasting, analysis and expert construction. * Source: imoneynet as at 31 July SEPARATELY MANAGED ACCOUNTS: A GLOBAL LIQUIDITY SOLUTION

3 Customization is key A valuable benefit of a Global Liquidity separately managed account is its ability to tailor particular investment guidelines to meet a specific objective. The vehicle gives investors a much greater level of control over their investments when compared to pooled investment funds. Depending on a client s return target and risk appetite, customized features of a separately managed account may include: Specified credit quality Interest rate duration range/limit at the portfolio and security level Tax status Restrictions on the types of securities to be purchased Maximum allocation per issuer, minimum issuer rating Ability to control gains and losses Investment Philosophy By carefully managing interest rate and credit risk, and by closely partnering with clients to better understand their cash flow requirements, we believe we can build short-term fixed income portfolios that effectively meet client investment objectives. Portfolios may be denominated in any of the world s major currencies or can even be multi-currency. Our strategy seeks to: Deliver consistent returns Preserve principal Provide liquidity The order of importance of these objectives may vary depending on ultimate strategy, vehicle and client objectives. They are achieved through the combination of our worldclass credit research and exceptional liquidity and risk management. Conservative culture: An active approach to managing credit quality As a risk manager, J.P. Morgan Asset Management draws on a long-established conservative culture. Our reputation is built on more than 100 years of prudent investing. Our conservative philosophy and strong fiduciary culture ensure that a client s goals and interests are always placed first. We create optimal portfolios and protect client investments through: Integrated portfolio, analytic and risk management processes A consistently applied four-stage credit analysis process that chooses only the best investments Continuous portfolio monitoring that immediately eliminates securities that no longer qualify for the approved list Dedicated teams of tenured, career analysts that are specialized by sector RISK MANAGEMENT, CREDIT EXPERTISE Global Liquidity maintains a rigorous focus on risk management and credit analysis. All securities in a separately managed account must meet stringent quantitative and qualitative tests for selection. Separately managed accounts can provide more diversification and control in managing counterparty risks by leveraging our credit analysis and access to a broader range of direct securities. Our credit expertise is especially valuable for investors who have the goal but not the ability or resources to expertly manage their counterparty risk. QUANTITATIVE TESTS (Risk management) Establishes and monitors internal rating Outlines investment parameters CREDIT APPROVAL QUALITATIVE TESTS (Credit research) Evaluates credit strength Reviews operating trends, cash flows, product performance J.P. MORGAN ASSET MANAGEMENT 3

4 Buy and maintain, not buy and hope Managing realized gains and losses in the portfolio is a key objective for many users of separately managed accounts. However this does not necessarily mean all investments are made and simply left until maturity. Our credit research process continuously monitors the risk of any security held and, when necessary, the recommendation to sell a security or reduce the holding may be the most prudent solution to mitigate risk. ECONOMIC OUTLOOK Each month, senior investment professionals meet to discuss our fundamental outlook for the economy, focusing on factors such as GDP growth, unemployment and interest rates. Data from a range of internal and external economic sources are compiled and debated by the team, and a consensus view is established. This view is then translated into investment themes, which guide portfolio decisions. MONITOR AND REVIEW PORTFOLIOS Portfolio positions are monitored daily by the portfolio management team and monthly by our Investment Committee, that is made up of representatives from portfolio management, risk management, credit research and sales. Ongoing review Portfolio construction Economic outlook analysis Portfolio modeling Scenario SCENARIO ANALYSIS Next, the portfolio management team uses scenario analysis tools to evaluate security and portfolio performance in different environments to help determine optimal portfolio positioning on the yield curve and across sectors. PORTFOLIO CONSTRUCTION Using the model portfolios as a base, all portfolios are constructed in line with client guidelines. Individual securities are selected based on their relative value and ability to achieve client investment objectives. Rigorous credit analysis forms the foundation for security selection. Only those securities included on the approved-for-purchase list, developed by our in-house credit research team, can be incorporated. MODEL PORTFOLIOS Using the results of the scenario analysis, the portfolio management team develops model portfolios. Model portfolios differ by currency and risk/return objectives. These portfolios include the optimal yield curve and sector positions identified during the scenario analysis, focusing in particular on those positions that performed well across all economic scenarios. 4 SEPARATELY MANAGED ACCOUNTS: A GLOBAL LIQUIDITY SOLUTION

5 An integrated approach to client service Global Liquidity provides an integrated approach to client servicing for separately managed accounts, with each new client assigned a client service team consisting of a client advisor, a client portfolio manager, and a client account manager. CLIENT ADVISOR CLIENT PORTFOLIO MANAGER CLIENT ACCOUNT MANAGER Serves as the key point of contact for client and manages the overall client relationship. Assumes overall responsibility for the portfolio. Reviews the investment guidelines and develops an implementation program that outlines the interim steps required to achieve the long-term strategy. Oversees the process of setting up a client s account on the firm s accounting and client information systems. Responds to all day to day queries. Provides strategic advice reflecting industry perspective and Global Liquidity insights. Presents insights on investment allocation and plan structure. Consults with the client to determine the portfolio s objectives and design the portfolio strategy. Communicates investment strategy decisions, performance and market outlook to the client. Ensures proper communications, client reporting, accounting and compliance with guidelines. Handles all contractual, operational, legal and regulatory issues. Periodically reviews the portfolio s compliance with both the client s guidelines and the product s internal guidelines and relevant regulations. CLIENT REPORTING For reporting on our clients separately managed accounts we have partnered with Clearwater Analytics TM, an innovative provider of portfolio reporting and analytics for institutional investors, to develop a comprehensive Internet based platform for reporting. Our alliance with Clearwater provides important benefits for our clients: A market-leading corporate cash accounting and compliance monitoring solution, including off-cycle accounting and the complete suite of required disclosures. Clearwater s web-based reporting tool is constructed to deliver a complete and easy to understand solution for all investment reporting needs to all constituencies, including treasury, senior management, tax, audit, accounting, and financial reporting clients. Clearwater provides daily performance reports which are fully customizable based on clients tax rates, return type and reporting periods (e.g. daily, monthly, quarterly or off-calendar). Accounting statements cover income detail, balance sheet classification, security details and portfolio transactions. J.P. MORGAN ASSE T MANA G E ME N T 5

6 Sample Portfolios The sample portfolios below illustrate how investment allocations can be customized to meet specific client requirements. As the chart demonstrates, the asset mix of a separately managed account will vary considerably depending on cash flow needs, investment horizon, risk profile and the parameters of a client s investment policy. CREATE UNIQUE PORTFOLIOS TO OPTIMIZE RETURNS Agency Bonds Government Bonds Liquidity Fund 30% 20% 20% 35% 50% Commercial Paper Corporate Bonds (AA and A) Corporate Bonds (BBB) 40% 10% 20% 20% 5% 10% 15% 10% 5% 10% OBJECTIVES Liquidity Balance between liquidity and return Return CASH FLOW Unpredictable and volatile Able to segment portion of cash that is not required near term INVESTMENT HORIZON 90 days 6 months plus 18 months plus RISK PROFILE POLICY PARAMETERS Principal preservation is top priority Credit: Min A, less than 6 months Government/Agency: Min A, less than 1 year Willing to accept low volatility but not over a longer period Credit: Min A, less than 2 years Government/Agency: Min A, less than 3 years Strong cash flow with significant balances Developed risk budget and comfortable with volatility Credit: Min BBB, less than 3 years Government/Agency: Min A, less than 5 years Partnering with J.P. Morgan custody A crucial component in willing the management of a separately managed account is the role of the custodian. A custodian works alongside the asset manager and is tasked with the settlement, safekeeping and reporting of all investments made. J.P. Morgan Asset Management is willing to work with either an external custodian or our affiliated custodian, which is a fully owned subsidiary of our parent company, JPMorgan Chase & Co. J.P. Morgan is one of the world s leading providers of custody and securities servicing solutions to the world s leading institutional investors. Custodial services include trade instruction processing, the settlement and safekeeping of assets, as well as corporate event and income processing, banking services and foreign exchange. Highlights of the service include, but is not limited to or guaranteed for all clients. These services could be negotiated with J.P. Morgan s custody business: Straight-through processing: The use of automation and market standards in processing client trade instructions, a critical requirement as global markets move toward shortened settlement cycles. Corporate actions: The flexibility of online notification and response to voluntary actions and utilization of the latest SWIFT corporate action messages. Foreign exchange: A range of foreign exchange services are available if required. Our AutoFX service presents an automated foreign exchange solution that requires no intervention from clients. JPMorgan ACCESS: The provision of sophisticated, user-friendly technology to deliver browser-based reporting on the client s desktop that is powerful, flexible and intuitive, enabling clients to create customized reports. Contractual settlement: Contractual settlement on security purchases and sales. This allows clients to manage exposure to foreign exchange risk, improve the certainty of cash flow and reduce the cost of overdrafts or missed opportunities. 6 SEPARATELY MANAGED ACCOUNTS: A GLOBAL LIQUIDITY SOLUTION

7 Why choose Global Liquidity Clients choose Global Liquidity because we have the scale, resources, disciplined investment process and robust risk management necessary to create customized, competitive and risk-controlled separately managed accounts. We have a dedicated, experienced team of 33 investment professionals (as at June 2015) and we cover a large diversified client base which provides us with unique insight. We understand the trust placed in our hands and we are committed to partnering with clients to fully understand their needs in order to deliver the very best in cash management solutions. As one of the largest asset and wealth managers in the world, with assets under management of USD1.78 trillion (as at June 2015), we provide global market insights and a range of investment capabilities that few other firms can match. Throughout our long and distinguished history, we have been steadfastly committed to putting our clients interests first. This fiduciary responsibility defines our relationship with clients and informs the basis of every decision we make on their behalf. This core principle is the foundation of our business as we work to understand our clients needs, offer knowledgeable advice and execute strategies to generate excess returns and provide world-class client solutions. Global Liquidity is the business line of J.P. Morgan Asset Management dedicated to offering a wide range of short-term investment solutions for cash investors over a diverse array of currencies, strategies and jurisdictions. J.P. MORGAN ASSET MANAGEMENT 7

8 FOR INSTITUTIONAL/WHOLESALE/PROFESSIONAL CLIENTS AND QUALIFIED INVESTORS ONLY - NOT FOR RETAIL USE OR DISTRIBUTION NEXT STEPS For more information please contact your client adviser or your regional sales head: Global Liquidity EMEA Jim Fuell james.m.fuell@jpmorgan.com Tel: Global Liquidity Americas Robert White robert.lamar.white@jpmorgan.com Tel: Global Liquidity Asia Paula Stibbe paula.stibbe@jpmorgan.com Tel: FOR INSTITUTIONAL/WHOLESALE/PROFESSIONAL CLIENTS AND QUALIFIED INVESTORS ONLY - NOT FOR RETAIL USE OR DISTRIBUTION This document has been produced for information purposes only and as such the views contained herein are not to be taken as an advice or recommendation to buy or sell any investment or interest thereto. Reliance upon information in this material is at the sole discretion of the reader. The material was prepared without regard to specific objectives, financial situation or needs of any particular receiver. Any research in this document has been obtained and may have been acted upon by J.P. Morgan Asset Management for its own purpose. The results of such research are being made available as additional information and do not necessarily reflect the views of J.P. Morgan Asset Management. Any forecasts, figures, opinions, statements of financial market trends or investment techniques and strategies expressed are those of JPMorgan Asset Management, unless otherwise stated, as of the date of issuance. They are considered to be reliable at the time of writing, but no warranty as to the accuracy, and reliability or completeness in respect of any error or omission is accepted. They may be subject to change without reference or notification to you. J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. This communication is issued by the following entities: in the United Kingdom by JPMorgan Asset Management (UK) Limited, which is authorized and regulated by the Financial Conduct Authority; in other EU jurisdictions by JPMorgan Asset Management (Europe) S.à r.l.; in Switzerland by J.P. Morgan (Suisse) SA, which is regulated by the Swiss Financial Market Supervisory Authority FINMA; in Hong Kong by JF Asset Management Limited, or JPMorgan Funds (Asia) Limited, or JPMorgan Asset Management Real Assets (Asia) Limited; in India by JPMorgan Asset Management India Private Limited; in Singapore by JPMorgan Asset Management (Singapore) Limited, or JPMorgan Asset Management Real Assets (Singapore) Pte Ltd; in Australia by JPMorgan Asset Management (Australia) Limited ; in Taiwan by JPMorgan Asset Management (Taiwan) Limited; in Brazil by Banco J.P. Morgan S.A.; in Canada by JPMorgan Asset Management (Canada) Inc., and in the United States by JPMorgan Distribution Services Inc. and J.P. Morgan Institutional Investments, Inc., both members of FINRA/SIPC.; and J.P. Morgan Investment Management Inc. Copyright 2015 JPMorgan Chase & Co. All rights reserved. LV JPM /15 jpmgloballiquidity.com* *PLEASE NOTE THAT THE SITE IS NOT INTENDED FOR RETAIL PUBLIC IN ASIA AND EUROPE. IT IS INTENDED FOR INSTITUTIONAL INVESTORS IN SINGAPORE, PROFESSIONAL INVESTORS IN HONG KONG AND PROFESSIONAL/INSTITUTIONAL AND QUALIFIED INVESTORS IN EUROPE ONLY. PERSONS IN RESPECT OF WHOM PROHIBITIONS APPLY MUST NOT ACCESS THIS SITE. ACCORDINGLY, THE INFORMATION CONTAINED IN THE SITE DOES NOT CONSTITUTE INVESTMENT ADVICE AND IT SHOULD NOT BE TREATED AS AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY FUND, SECURITY, INVESTMENT PRODUCT OR SERVICE.