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Let's keep the conversation going right now. George gatch He is the CEO of JP Morgan Asset Management. He joins us on set. Great to see you in person, George.
Oh, great to be here, Katie, Thank you for the invite.
Let's talk about that a little bit more, because it seems like, I mean, you think about some of the issuers in the bond markets switching between private and public markets. Then you think about some of the companies in the equity markets too, that those take privates that are happening. As the CEO of an asset manager with about four trillion dollars in assets under management, how are you approaching that blurring distinction.
Yeah, Well, the way I think about it is that it's happening. The opportunity to be able to provide investors with the advantage of public markets, deep liquidity, transparency fees, and combine that with the diversification potential that you have in private markets, I think is great for investors. I do think though you need to approach it relatively cautiously. Many investors face liquidity issues in their portfolios, and I think it's important to weigh those challenges as well as
the advantages that you see. But you're absolutely right. In fixed income markets, borrowers and issuers are approaching they syndicated lending market, they're issuing public bonds, and sometimes they're negotiating private transactions with private private credit providers. The ability for a portfolio manager to look at relative values across all of those markets and the answer isn't always private credit,
it's not always high answer isn't always high yield. But the ability for a portfolio manager to move across those markets I think is going to be a big advantage over time, assuming investors can handle the liquidity of private markets, which is a very important consideration.
Yeah, well there's a lot to dig into there, but let's dig into that last point, specifically the liquidity. When you think about how much private credit should be and the average portfolio, and I know that doesn't exist, I wonder where you fall on that question. I know that JP Morgan Asset Management filed for a total credit ETF yesterday that has an up to fifteen percent allocation to
private credit. I know you can't speak specifically to an active filing, but I mean ten to fifteen percent does that sound right, Well, I think it.
Really depends on the individual circumstances and the investment horizon
and risk tolerance of the individual investments. I don't think you can answer that as a general As a general statement, I do think importantly for ETFs and mutual funds which are daily valued and daily redemptions and purchases occur, it's very important that the liquidity considerations be of paramount important and that's particularly important as we move towards defined country fusion plans and other conversations that are happening in the
industry around the use of private securities in daily valued portfolios.
There's been also a lot of talk in addition to the liquidity issues about return of possibilities, if you will, and how that stacks up against more traditional assets. I mean, obviously the sixty forty I know that's long gone, but that was sort of, at least from a retirement plan perspective, that was sort of the model maybe on a sort of a targeted sort of ramp up into one or the other. How much does that change?
Well, the way I think about it and our teams our teams think about it is the advantage of public markets in terms of liquidity profile and public markets aren't debt. There's a tremendous amount of innovation that is happening. We pioneered the use of derivative income strategies and that's become a major opportunity in the market to produce uncorrelated returns to diversify portfolios further. Private market's going to offer the
same opportunity to do that. And importantly, though disclosures, transparency, the level of fees are something that individual investors and institutions need to consider quite quite closely and evaluating the use of private markets and divers and diversified portfolios.
Are you getting that diversification too? If we start to see more of this conversion between public and private markets, I mean, is that separation that is traditionally sort of made private markets more attractive. Does that get blurred or muted a little bit as it sort of moves I guess more into the public sphere.
Yes, I think so. I mean, if you think about what's going to happen in five to ten years fromorrew is the private market's going to look more like public markets probably, and that's going to relate to transparency. It's going to relate to fees, secondary market liquidity. Those are all going to change the dynamics of the markets. But the innovation that's going to continue to occur in the
development of these tools for investors. I think that's one of the most exciting things about markets today and what's happening in the asset management space.
I also want to talk about relative valuations a little bit here because you and I last spoke, I think at the end of June, and you made the interesting point that you take a look at the private credit landscape and it looks a little bit frothy, especially when you take a look at public high yield for example, it feels like since then spreads have only gotten tighter. So I mean, right now, where do you stand well?
I think markets are pricing in a very favorable outlook on both credit and equity markets, and for good reason. The economy is quite healthy, consumer balance sheets are healthy, the corporate sector, and that's priced into equity and spreads
in high yield markets. I continue to believe that public markets offer tremendous opportunity for investors, and I think if you look at particularly taking into soliquidity considerations, I tend to steer today towards public markets as being relatively better valued, and.
George, before we let you go, I have to ask you about something fairly in the weeds, and that is what we saw on Monday, the SEC putting on a statement that it intends to grant dimensional fund advisors exemptive relief to offer ETF share classes at share classes of their mutual funds. I know that JP Morgan has filed for similar exemptive relief, and I think for a lot of people it's hard to grasp why this is important.
So I would love if you could put this into context, the ability to offer ETF share classes of existing mutual funds. I mean, what would that mean for JP Morgan and the asset management industry at large.
I think one of the most exciting things happened in the asset management industry is now world class active investment capabilities available with the benefits of ETFs, transparency, liquidity and fees. Now we have today one hundred and forty five ETFs around the world over three hundred billion dollars in assets.
We're one of the leaders in active ETF capabilities. The additional tool of being able to offer a share class and the ability for an individual investor to tax free exchange from a mutual fund and then to get the benefits of an ETF traded on an exchange. Is going to be just another potential transformation of the asset management industry and one that we are excited to see.
George, great to have you.
Thank you very much.
George Gatchs, the CEO of JP Morgan Asset Management,