05/04/2011

JP Morgan Aims Prime Brokerage at Europe

J.P. Morgan is gearing up to launch a European prime-brokerage business next month, filling a gap that has hampered its ability to work with hedge funds outside the U.S.

The bank has been quietly adding staff to its broker-dealer arm in London, J.P. Morgan Securities Ltd., and now has several dozen people dedicated to the roll-out of a prime-brokerage offering for fund operators in Europe. The bank expects to hire additional staff over the next 12 months.

“We already have a good pipeline of hedge funds, a mix between more recent startups and more established funds, that have committed themselves to become JPMSL clients,” said Andrea Angelone, global co-head of prime brokerage at J.P. Morgan. “We tend to target the larger, more established funds, but we obviously are in contact with startups and funds across the market.”

The bank’s London team will provide a full suite of prime-brokerage services, from clearing and settling to securities lending and capital introduction. The new offering dovetails with the recent launch of an expanded swaps business in London and a well-established European custody business.

“Once we have the JPMSL offering up and running in June, we will have a leading and complete servicing platform,” Angelone said. “The objective is to offer both cash and synthetic exposure as a combined package, which is what hedge funds are seeking.”

J.P. Morgan entered the ranks of major prime brokers via its 2008 takeover of Bear Stearns. But Bear’s prime brokerage was strictly a U.S. business, and the knock against J.P. Morgan has been that it lacked the infrastructure to serve managers in Europe. What’s more, Angelone said, some large European managers have been reluctant to hire J.P. Morgan out of fear of attracting attention from U.S. regulators — especially since the Dodd-Frank Act became law last July.

Basing the new business in London should address those concerns, though European regulators are currently enacting their own reforms.

With its European prime brokerage on the launching pad, J.P. Morgan’s next focus will be Asia. The plan is to expand an Asian prime-brokerage presence that currently consists of a small equity-finance team and even smaller group of cap-intro staffers.

Overseeing the global expansion are Angelone and prime-brokerage co-head Lou Lebedin. Lebedin, who joined J.P. Morgan from Bear, oversees U.S. prime brokerage from New York. Angelone, who is based in London, has worked at the bank since 1994.

Said Lebedin, “Our investment programs allow us to meet the challenging demands of European and Asian managers. As our clients expand their [assets under management] and investor base, we are aiming to be their provider of choice regardless of geography or trading style.”

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