J.P. MORGAN INVESTMENT MANAGEMENT INC.
A. General Description of Advisory Firm
This Brochure relates to the investment advisory services offered by J.P. Morgan Investment Management Inc. ("JPMIM"). JPMIM, a Delaware corporation, is registered with the Securities and Exchange Commission ("SEC") as an investment adviser pursuant to the Investment Advisers Act of 1940, as amended (the “Advisers Act”). JPMIM, together with Bear Stearns Asset Management Inc., Highbridge Capital Management, LLC, J.P. Morgan Alternative Asset Management, Inc., JF International Management Inc., JPMorgan Asset Management (Asia Pacific) Limited, JPMorgan Asset Management (UK) Limited, JPMorgan Funds Limited, Security Capital Research & Management Inc., each an SEC registered investment adviser, various affiliated foreign investment advisers and the asset management division of JPMorgan Chase Bank, N.A. comprise the Asset Management ("AM") business of J.P. Morgan Asset & Wealth Management ("JPMAWM"). J.P. Morgan Asset Management ("JPMAM") is the marketing name for the AM businesses of JPMorgan Chase & Co. and its affiliates worldwide ("JPMC"). JPMC is a publicly traded global financial services firm. JPMorgan Asset Management Holdings Inc., which is a subsidiary of JPMC, owns all the common stock of JPMIM. JPMIM was incorporated in Delaware on February 7, 1984.
B. Description of Advisory Services
This Brochure describes the investment management services that JPMIM provides for the You Invest Portfolios Program (the "Program"). JPMIM also provides a broad range of investment strategies and advisory services on both a discretionary and non- discretionary basis through separately managed accounts and pooled investment vehicles, which are described in a separate brochure. For additional information about these services that JPMIM provides to its other clients, please see JPMIM's Firm Brochure, which is available at the SEC's website at www.adviserinfo.sec.gov or upon request from JPMIM.
The Program, sponsored and offered by J.P. Morgan Securities LLC ("JPMS"), an affiliate of JPMIM, is a digital investment advisory wrap fee program designed to provide clients with access to discretionary advisory services delivered through the Chase Online or J.P. Morgan Online websites and such mobile applications or digital interfaces as JPMS may from time to time use in connection with the Program (together, the “Program Website”). The Program provides clients with a target asset allocation and discretionary investment management services based on information about the client's risk profile and investment goals that the client provides through the Program Website. Each client participates in the Program through one of two types of model portfolios, “Portfolios” and “Glide Path Portfolios”.
Investors in the Program will have access only to J.P. Morgan ETFs selected by JPMIM for the Program which may be more limited than the investment options available under other JPMIM managed portfolios. Although JPMIM has investment discretion over the construction of the model portfolios (including fund selection and replacements), JPMS retains trading authority to implement the model portfolios and place orders consistent with each client’s Selected Portfolio. The Program relies on a third- party vendor to administer certain technological, administrative and operational aspects of the Program. An Affiliate of JPMC holds a minority beneficial interest in the Program’s vendor.
The asset allocations of Portfolios are based on the firm’s long-term capital market assumptions, as well as the correlation between asset classes. While the asset allocations for Portfolios may change (for example based on JPMIM’s long-term market assumptions), they are not designed to change based on the client’s age and target retirement date. The Program currently offers four types of Portfolios: Conservative, Moderate, Growth and Aggressive.
The target allocations of a Glide Path Portfolio are designed to change over time. As clients progress towards their designated retirement date, a Glide Path Portfolio begins to seek more current income and less capital appreciation. The strategic target allocations of the current Glide Path Portfolios generally become more conservative as the client’s designated retirement date approaches (i.e., more emphasis on fixed income and less on equity). There are three types of Glide Path Portfolios: Moderate, Growth and Aggressive.
The model portfolios that are available in the Program will be comprised exclusively of exchange-traded funds (“ETFs”) sponsored or managed by JPMIM (“J.P. Morgan ETFs”) and an allocation of the portfolios will be in cash. Clients should not invest in the Program if they are not comfortable holding an investment portfolio that is comprised of 100% J.P. Morgan ETFs. JPMS will invest (i.e., sweep) available cash balances in Program client accounts that are pending investment, as well as any strategic cash balances allocated to cash, into a bank deposit account held with JPMCB (the “Deposit Account”). The Program has been designed to automatically rebalance the assets in a client’s Program account on a periodic basis, based on the Program's rebalancing logic and parameters.
Based on investment guidelines, objectives and benchmarks established by JPMS, JPMIM is responsible for model portfolio construction and for selecting and monitoring the J.P. Morgan ETFs used for Portfolios and Glide Path Portfolios, in the Program as further discussed below. JPMS is responsible for determining the Program's benchmarks and drift monitoring guidance and for defining investor suitability and for overseeing the Program and the performance of JPMIM as sub-adviser to the Program. See Item 8.A. for additional information.
For more information on J.P. Morgan ETFs and related conflicts of interest, see Item 11.B. below. For important information about each ETF, including investment objectives, risks, charges, and expenses, clients should read each ETF’s prospectus carefully and consider all the information in it before investing. To obtain a prospectus, please visit the fund company’s website at www.jpmorganfunds.com. To participate in the Program, clients enter into an investment advisory agreement ("Client Agreement") with JPMS. The Client Agreement authorizes JPMS to act as the client’s investment adviser with investment discretion and trading authority over enrolled accounts, and authorizes JPMS to perform its services under the Client Agreement directly or through affiliated or unaffiliated service providers as JPMS may from time to time designate. JPMS has appointed JPMIM, an affiliate of JPMS, to serve as sub-adviser for the Program. Clients are first required to complete an interactive investment proposal questionnaire through the Program Website (the “Investment Proposal Questionnaire”). The Investment Proposal Questionnaire will ask a series of questions to determine the client’s investment goals and risk profile. Based on responses to the Investment Proposal Questionnaire, JPMS’ proprietary algorithm will recommend a risk profile (the “Risk Profile”) for the client. JPMS is responsible for determining which Program model portfolio is appropriate for a particular client that corresponds to the client’s Risk Profile. Clients may select the initially assigned portfolio (the “Recommended Portfolio”), or they may select a portfolio that is more conservative or more aggressive than the Recommended Portfolio, subject to certain limitations (the “Selected Portfolio”). Clients should understand that their selection of a portfolio other than the Recommended Portfolio may not be suitable based on their Risk Profile and their responses to the Investment Proposal Questionnaire. A Selected Portfolio may perform better or worse over any time period than the Recommended Portfolio based on the information initially provided by the client. A client may not change his or her Selected Portfolio more than once in any thirty-day period. The Program model portfolio for a given client may be either a Portfolio or a Glide Path Portfolio.
Portfolios offers four model portfolios that correspond to four different Risk Profiles. The model portfolios are: Conservative, Moderate, Growth and Aggressive, each of which is described below. JPMIM manages similarly named model portfolios for other advisory programs; however, the style and the securities within the model portfolios for Portfolios are different, and are expected to perform differently. JPMIM's investment decisions with respect to Portfolios will seek to align each Portfolio with its respective investment objective as set out in the Investment Policy Statement established by JPMS.
Accounts with retirement as the designated investment purpose, as well as individual retirement accounts (“IRAs”), will be assigned to a Glide Path Portfolio, with two exceptions. The exceptions are accounts opened by clients with ten years or less to the end of their designated retirement age range and accounts with a Risk Profile of Conservative. These accounts, as well as accounts with an investment purpose other than retirement, will be assigned to a Portfolio (not a Glide Path Portfolio).The recommended Glide Path Portfolio depends on such client’s designated investment purpose, risk profile and investment time horizon. A Glide Path Portfolio will not be recommended for accounts that have: 1) ten years or less to the end of the client’s designated retirement age range or 2) a Risk Profile of Conservative. These accounts, as well as accounts with an investment purpose other than retirement, will be assigned to a Portfolio (not a Glide Path Portfolio) and cannot select a Glide Path Portfolio
Below is a description of each of the Portfolios. Each client will select a model portfolio based on the client's responses to the Investment Proposal Questionnaire. Clients that have questions about the descriptions below should contact 800-776-6061. For the related risks of each model portfolio, please see Item 8 below. In addition, in connection with investments in an ETF, the descriptions of the model portfolios below are qualified in their entirety by the information included in the applicable ETFs prospectus or statement of additional information. To obtain a prospectus, please visit the fund company’s website at www.jpmorganfunds.com.
Conservative. The Conservative model portfolio primarily seeks to preserve initial capital investments and generate income with a secondary goal to achieve moderate levels of capital growth. The model portfolio also aims to maintain below-moderate exposure to risk of capital loss in pursuit of this return objective. Consistent with these objectives, it is expected that a majority of the model portfolio will be invested in ETFs that seek to track the performance of assets that have a history of lower capital returns and volatility, such as fixed income securities. In seeking returns that include capital growth, it is expected that the model portfolio will invest more assets in ETFs that target the performance of assets that are historically more volatile, such as equities, than would a portfolio focused solely on capital preservation alone; the secondary objective of the model portfolio provides more exposure to more volatile securities than a fixed-income asset alone.
Moderate. The Moderate model portfolio primarily seeks to achieve growth of initial capital investments and income generation with a secondary goal of principal preservation. The model portfolio aims to maintain moderate exposure to risk of capital loss in pursuit of returns. Consistent with these objectives, it is expected that the model portfolio will be invested in ETFs that seek to track the performance of assets that tend to have a history of lower capital returns and volatility, such as fixed income securities, and those with a more volatile history and upside return potential, such as equities securities. Growth. The Growth model portfolio primarily seeks to achieve growth of initial capital investments. The model portfolio also aims to maintain above-moderate exposure to risk of capital loss in pursuit of this return objective. Consistent with these objectives, it is expected that the model portfolio will be invested predominantly in ETFs that seek to track the performance of assets that tend to have a history of higher return potential and volatility, such as equities, with a lower percentage invested in ETFs that seek to track the performance of assets that have been historically less volatile, such as fixed income securities. Aggressive. The Aggressive model portfolio seeks to achieve growth of initial capital investments. The model portfolio will generally maintain high exposure to risk of capital loss in pursuit of this return objective. Consistent with this objective, it is expected that the model portfolio will be invested predominantly in ETFs that seek to track the performance of assets that tend to have a history of high upside return potential and volatility, such as equity securities.
Glide Path Portfolios
Each Glide Path Portfolio is designed by JPMIM to have a similar risk and return objective over a forty (40) year time horizon as its respective comparable Portfolio (Moderate, Growth, Aggressive). JPMIM will review the construction of the Glide Path Portfolios at least annually and will adjust the annual asset allocation targets as appropriate consistent with the overall risk and return characteristics of the comparable Portfolio. Clients should note that Glide Path Portfolios will generally have higher portfolio turnover than Portfolios because the asset allocations for Glide Path Portfolios are adjusted over time. ETF transaction costs are included in the Advisory Fee, so higher turnover will not increase transaction costs; however, higher portfolio turnover may result in higher taxes for taxable accounts.
The Glide Path Portfolios are “to” glidepaths rather than “through” glidepaths. A “through” glidepath has a longer glidepath that goes beyond a designated retirement year. “Through” glidepath portfolios are designed for investors with longer investment horizons that go 10 to 20 years past their retirement age. Such glidepaths tend to be more aggressive in that their strategic target allocations to equities at retirement are higher than “to” portfolios, and become more conservative over a longer period of time after retirement. A “to” glidepath generally treats the target date as the end point of the glidepath. Such portfolios generally reach their most conservative strategic target allocations at or close to the designated retirement date. The Program’s Glide Path Portfolios are “to” portfolios. In other words, they reach their most conservative strategic target allocations within the client’s target retirement date range.
For more information about Portfolio and Glide Path Portfolios in the Program, clients and prospective clients should carefully review the JPMS Wrap Fee Program Brochure - J.P. Morgan You Invest Portfolios Program, which is available on the Program’s Website, and on the SEC's website at www.adviserinfo.sec.gov or upon request from JPMS.
C. Availability of Reasonable Restrictions
Clients will not be allowed to make trades in their accounts, however, they can request reasonable restrictions on the management of their accounts by designating specific ETFs that should not be purchased or that should be sold if held in the account, subject to JPMS’ acceptance and the Program parameters described below. Requests for restrictions must be made through the Program Website. Clients may request a restriction on the purchase of certain individual ETFs, but JPMS is not required to accept account restrictions that it deems unreasonable. The determination of whether a particular restriction is reasonable will depend on the relevant facts and circumstances, including whether the restriction is inconsistent with the nature or operation of the Program, as described in Items 4.B., 8.A. and 11.B. In addition, the restriction of more than three ETFs in any Recommended Portfolio will be deemed to be unreasonable due to the impact on the model portfolio construction and investment strategy of the Selected Portfolio. Any restrictions a client places on his or her Program account will cause the account to perform differently than similar, unrestricted accounts, possibly increasing fees and producing lower returns. Clients cannot prohibit or restrict investments in specific securities or types of securities that are held within any ETF.
If a restriction is considered reasonable, JPMS has the discretion to direct the investment of the portion of the client account that would have been invested, or was previously invested, in the restricted security in the other securities in the account (on a pro rata basis), to select a substitute J.P. Morgan ETF or to hold those assets in cash. In the event that a restriction request for an ETF that is currently held in a client’s account is accepted, the ETF will be sold consistent with the Program’s rebalancing logic, and a client may experience tax consequences.
D. Wrap Fee Programs
JPMIM’s investment advisory and portfolio management services are available to clients through the Program, a “wrap fee” program sponsored by JPMS. For the Program, a client pays a single (or “wrap”, “advisory” or “bundled”) fee to JPMS for investment advisory, portfolio management, brokerage, execution, custody and reporting services. JPMS, in its discretion, can waive or reduce the advisory fee. JPMIM acts as a sub-adviser to the Program under an investment advisory agreement between JPMIM and JPMS. In this capacity, JPMIM has discretionary authority, within investment constraints established by JPMS, over the asset allocation, fund selection and portfolio construction of the model portfolios available in the Program. JPMIM is further responsible for monitoring the performance of the ETF selections and evaluating the model portfolios on a periodic basis. See Items 10 and 11 below for more information on material conflicts of interest relating to JPMIM's advisory (including sub-advisory) services. JPMIM does not generally communicate directly with Program clients (including communications with respect to changes in a Program client’s investment objectives or restrictions). All such communications generally must be directed through JPMS. Also, JPMIM does not provide overall investment supervisory services to Program clients and is generally not in a position to determine, and is not responsible for determining, the suitability of the Program or any Recommended Portfolio or Selected Portfolio for Program clients. JPMIM’s investment advisory services are also available through other wrap fee programs sponsored by certain broker-dealers or investment advisers, including Affiliates of JPMIM ("Sponsors"). Please reference JPMIM's Firm Brochure, available at www.adviserinfo.sec.gov, for more information about these other wrap fee programs. Please refer to Section 5.I.(2) of Schedule D in Part 1A of JPMIM’s Form ADV for a full list of the wrap fee programs in which JPMIM participates.
For additional information regarding Fees and Compensation, Brokerage Practices and Custody, please see Item 5.A-E, Item 12, and Item 15, respectively.
E. Assets Under Management
As of December 31, 2018, JPMIM had assets under management in the amounts set forth below:
Assets Under Management U.S. Dollar Amount
Assets Managed on a Discretionary Basis $1,396,510,918,283 Assets Managed on a Non-Discretionary Basis $4,776,295,948
Total Regulatory Assets Under Management $1,401,287,214,231
Other Advisory Assets not included in Regulatory Assets Under Management $24,358,336,203
Total Assets Under Management $1,425,645,550,434 please register to get more info
Open Brochure from SEC website
|Pooled Investment Vehicles||$342,706,951,747|
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