Essay about Behavioral Finance Jp Morgan

1428 Words Mar 9th, 2012 6 Pages
Answer 1:
How does JP Morgan’s Asset Management group make profit? The JP Morgan Asset Management group (“JP Morgan” or “the group”) earns profits by charging direct and indirect fees including commissions on the total assets under management (“AUM”) of $847 bn . The group offers a full range of financial products comprising U.S., non-U.S. and global mutual funds/investment management, across cash management, equity, fixed income segments as well as alternative asset classes, such as private equity and real estate. It has a worldwide client base of institutional and retail clients, including governments, corporations, endowments, foundations and individuals.
The equities segment accounts for $370 bn1 AUM spread over a mix of
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The stock selection process aims at identifying value stocks that are undervalued and momentum stocks with better momentum than the market. Momentum stocks are continually re-valued to change positions from long to short. These strategies, investing in value stocks (i.e. high book value/market value stock) and long/short in momentum stocks has proved to be lucrative for the group as it has consistently been placed in top 20% of its Lipper categories and delivered strong returns to its.
What is their competitive advantage? JP Morgan’s competitive advantage is its ability to provide global coverage in terms of products and clients and be among the first to integrate BF into its investment philosophy and customer management. The group has successfully applied BF theories to a wide range of mutual funds and rolled them out to a global audience across its product development, investing and marketing teams. In addition, it has cross leveraged the findings from BF theory to understand and support some of the distinct emotive values which drive the behavior of clients across its advisory, private banking and wealth management divisions. This has differentiated JP Morgan from its competitors, who provide a relatively more standardized service that over time has become commoditized. We feel that by leveraging behavioral finance, JP Morgan has become more attractive and better connected to clients in a business where client

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