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Is JPMorgan Fabricating Its Mutual Fund Returns?
If you’re not thinking about investing in a mutual fund from JPMorgan Asset Management, you probably should be. Just have a look at the following statistics which are taken straight from the horse’s (or should we say “whale’s”) mouth.
84% of JPM’s 10-year long-term mutual fund AUM is ranked in the top two quartiles, while 70% and 81% of JPM US equity mutual funds have outperformed their benchmark on a 1- and 3-year timeframe, respectively, and then, to top it off, 83%, 85%, 86%, and 100%(!) of AUM has outperformed both the peer median and benchmark in equities, fixed income, multi-asset solutions, and alts, respectively.
Here are the pretty slides:
Impressive numbers. We think. In last year’s presentation, the bank cited Morningstar and Lipper (who know a thing or two about calculating mutual fund returns) as sources. The only (admittedly small) problem is that it later turned out that Morningstar and Lipper had no idea how JPM calculated the returns.
Here’s Bloomberg:
A year ago, a list of achievements in JPMorgan’s investor presentation included the statement: “80 percent of 10-year mutual fund AUM [assets under management] in top 2 quartiles.” Asked about such numbers in November, JPMorgan declined to provide details of the calculations for publication. So Bloomberg asked two fund research companies the bank cited as sources—Lipper and Morningstar—to come up with their own estimates. (All calculations exclude money-market mutual funds.) Lipper, using its standard methods, calculated that 64 percent of the bank’s funds ranked in the top half of their categories, after adjusting for assets—giving greater weight to bigger funds. Morningstar, which didn’t adjust for assets, came up with 58 percent.
Many of the numbers for JPMorgan’s “alternatives/absolute return” category, which includes hedge funds, funds of hedge funds, some mutual funds, and money managed in separate accounts, are not public. According to the bank’s 2014 presentation, 97 percent of alternative assets beat their benchmarks for the previous 10 years. In 2015 that figure rose to 100 percent. Working from their own, more limited data on JPMorgan’s alternative assets, Morningstar and Lipper got different numbers. Morningstar said 33 percent of JPMorgan’s alternative assets beat their benchmarks over the previous 10 years. Lipper’s figures show that only 14 percent did.
When you actually try to decipher some of the rather convoluted language the bank uses to describe its returns, you start to get an idea of why it might not be a good idea to rely on the data in the investor day presentations.
Take the 84% figure for instance. It seems to us that what the bank is saying is that 84% of the AUM in JPM funds that have been around for at least 10 years saw returns in the top two quartiles. That seems like a woefully simplistic way of calculating performance as they’ve basically just taken a grand total of assets accumulated in funds that have been around for a while and then looked at what percentage of those assets fall into the top brackets based on performance over the past decade. But don’t take our word for it, just ask JPM:
JPMorgan provided Bloomberg with what it called an illustration of how it reached the 80 percent number. Using Morningstar Direct, a Web-based tool, it looked at all the funds with 10-year records. It checked each one’s ranking within its category for the 10-year period and its assets in the final month of the period, and concluded that 79.8 percent of the assets were in funds that ranked in the top two quartiles of their categories.
Ok, so let’s say you wanted to do it right, how would one go about that?
Morningstar’s method differs from JPMorgan’s. To reflect each fund’s ups and downs, the company typically calculates its rank within its category for every month to come up with an average ranking for the period, and does the same with assets. In effect, it uses a video of the fund, not a snapshot. That way, a fund that had a couple of hot years early in the 10-year period, attracted more cash from investors, and then saw its performance level off doesn’t get too much credit for those first strong years, when it was investing a relatively small amount of money.
Using its standard methods for calculating asset-weighted returns, Morningstar finds that JPMorgan’s funds outperformed 57.5 percent of similar funds on average.
Of course, all of this is backward looking, so perhaps JPM calculated the numbers in this year’s presentation differently, but we certainly doubt it given that they all look remarkably similar to the figures in last year’s slides. For those who are interested, JPM does have some extensive notes you can read on its scrupulous (and needlessly torturous) methodologies. Here’s an excerpt which explains the 84% figure mentioned above:
At the end of the day all of this likely misses the point. We are talking about presentations made to shareholders after all, so fund performance doesn’t really matter. What does matter is summarized nicely in the final slide of this year’s presentation, shown below.
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Would someone please kick Jamie in the balls?
I thought the cancer treatment took care of that problem.
The treatment was unsuccessful, he lived.
The mainstream business media only cares that Jamie's bonus is safe
Well ~ I'm relieved to know that they never had a hand in manipulating $SILVER prices by leverage...
& on that note... compliments on killing Bin Laden for the umpteenth time & sinking the Titanic, or 'Olympic', or, whatever...
Isn't that cheating or sumthin' like almost illegal
No, it's legal. They never claimed to be using Lipper or Morningstar data (unless it's in the fine print at the bottom that I can't read). And they footnoted their calculation method (also in the fine print at the bottom that I can't read).
The funds themselves may be 1940 Investment Act funds (the manager of the fund has a fiduciary responsibility to their investors) but the company selling the product (JPM) is NOT acting as a fiduciary. They are only held to the 1933 Securities Act standards. Basically they can say anything any way they like as long as they disclose what those claims are based on and they are not fraudulent.
Scumbags being scumbags. Just an average Tuesday on Wall St.
"Lies, damn lies, and statistics"
Oh, that would be fraud and how could anyone ever even think that JPM or Twatmouth would ever lie or commit fraud?
"Winning!" in the new normal.
Are theyr working the same double call strike reversal snake oil strategy gambit Maddoff was running?
See it's loopholes like this that prove it's all a giant con. No true lawmaker (that being one who acts for the people) would allow this loophole to exist.
Oh, so they didn't remove the cancer, is what you're saying.
I think a wooden stake might be more effectiive?
With all the insider info they have these funds should be up 2000% every year
They must be skimming again.....
They gotta pay for the Whale that got away. How many billion was that again....6.2 billion I believe. Otherwise they would be up many more percent. Hell when you know what stocks the govt is going to buy tomorrow front running them should be easy and quite profitable.
You're ON FIRE today WB7!!!
liars
If this strategy fails my earlier suggestion of a new 'carry trade' still holds: move from USD.JPY to USD.JPM, or the firm's monthly regulatory fines in $Billions
"Is JPMorgan Fabricating Its Mutual Funds Returns?
Does a bear shit in the woods?
Trick question. CNBC sez extinct creatures can't defecate.
Agreed.
But long before they go extinct they rot from the head down. For an example, see the US corporate management structure.
Shit, when it comes to all useless paper-pushers in finance, they are all fabricating their returns!!!
Feed the guillotine already!!!
<It's all BS.
<It's all BS.
I am glad I wasn't drinking anything when I read
"Client focused, fiduciary culture"
We MF Global'ed some folks.
Yeah, it's a fiduciary culture all right. They always do what's in their own best interest.
Fiduciary to ourselves, focused on taking client money.
Ain't too hard to do when you control the printing presses. Shut them down now.
I would't stop here. I'd say JPM is also in the business of fabricating global currency exchange rates and commodity prices on a daily basis.
morningstar: what the fuck you talkin' about willis?
If they've got to fabricate numbers with the information access they have, they must really suck.
JPM is the ultimate in investing and ignore all those pesky lawsuits and payoffs, those are just people who deny the perfection of Oz the Great....
They probally reported the missing MF Global funds ....
Dimon: Quick, the London Whale has escaped! I thought I told you schmucks to close the aquarium door?
No way to talk about Hitlary.
Without reading the article I can spot an edit, from the title remove "Is" and "?"
The yields on our top-tier rehypothecated quarterly yielding corporate offering vastly exceeds the average weekly gains of our competitor's bundled debt equity portfolio by 200%, divided by three and compounded every 2 1/2 hours. (except on weekends, or during months with an 'R'.)
These bonds are geared towards the saavy investor who wants to maximize his YOY return, with an eye towards the immediate re-investment of the proceeds, if any, to our ultra-high yield semi-quarterly rotating asset transitional negotiable bond 'package', which carries a guaranteed return of a minimum of 15% of the original invested capital, minus brokers fees, initial investment origination fees, portfolio insurance fees (required in NY, NJ, and Guam.), and a one-time charge of 4,567.18 for portfolio maintenance. (good for the life of your investment.)
Come on in and speak with one of our representatives today!
I can produce pages and pages of this stuff...Call me, Jaime!
I'm sorry but I have to laugh at the opening line - investing in JPM. I'm sure there are a lot of people on ZH that have that ability and god bless you. Me - and the crowd I know - consider investing some upgrade of our current survival equipment - maybe an upgrade to the generator or a second hand weapon we've been eyeing. That being said, you have to wonder how long they can keep these frauds and scams going.
Fraudsters committing fraud. Shocking. Like non GAAP, mark to fantasy, what do you expect. After the crash in 1929 everybody knew the stock market was a ponzi. After the last 2 corrections the only thing that has saved the "market" has been counterfeiting, and fraud. Blowing bubbles in one asset class and then another. Think we're running out of assets classes to blow bubbles in. Then again maybe we'll get negative rate mortgages.
"Real is simply electrical signals interpreted by your brain" - The Matrix
...or by Jamie's computer
If you invest, thinking your in the 81% club, you will find your in the 58% club. The 23% difference is the front running of the 58 by the 81.
Where is the graph which shows the fine for crossing-the-line ratio?
That is the only chart that matters.
When you need to steal to Survive.. funny things happen when you are no longer able to Steal..
There's an old trick where fund houses close their shitty funds and merge them into their good funds. Voila! All our funds are above average!
So how many shitty funds did JPM close or merge over those 10 years?
arent those the JP Morgue products run by Madoff?
Sad that people still buy this crap and call it an "investment"
JP Morgan Lie? They never have before so dont know why they would start now............................................................
print money print fab reports continue all good besides no downside to this risk free party
I am almost certain they are. I used to work there. Their retirement plan had a fund tied to Real Estate which was available for investment. I shit you not, it never lost 1% of its value through the whole housing crisis. When I left that place I could not liquidate my 401k and move it away from them fast enough.
JP Morgan pulling a Bernie Madoff out of its magic hat?
The monthly statements only have to look real.
That's the nature of the Satanic Tribe!
M-F'ers will F their M's? Quel Surprise!