J.P. Morgan Fleming Asset Management
has signed on its first defined contribution plan client for a life
cycle fund that contains two underlying hedge fund strategies. The
firm has signed on a multi-billion dollar U.S. defined contribution
plan, making it one of the first DC plans to offer hedge fund
strategies. "[Without any specific research] I haven't heard of
anyone else doing similar things," said Gerry O'Connor, a
consultant at the Spectrem Group. He added that using an aggressive
option in a life cycle series would be the likely way to offer
hedge fund strategies because most employees lack a sophisticated
investment background. The life cycle funds are comprised of
separate account strategies designed to meet a broad set of risk
profiles. The J.P. Morgan series is known as the Smart Mix
series and features moderate, conservative and aggressive life
cycle options, which can be customized based on client
needs.
Hedge fund strategies have been added for the
first time to the Aggressive Smart Mix fund, which now
features two long/short options alongside traditional investments,
said Carolyn Jones, a J.P. Morgan spokeswoman. Anne
Lefter, v.p. and portfolio manager in J.P. Morgan Fleming's
asset allocation services group, added, "We have a number of
clients that have used real estate as part of a balanced fund but
only one with hedge funds." As interest grows in alternatives the
asset management giant is actively marketing the concept to other
defined contribution plans. They declined to name the first DC plan
client.
The defined contribution client that has signed
on for the hedge fund-customized Aggressive Smart Mix offers
a multi-billion dollar plan and has invested approximately $235
million in the aggressive option, Jones said. The underlying hedge
fund strategies are J.P. Morgan's MACS long/short equity
separate account and its Nippon Neutral Japanese market
neutral separate account.
In general, J.P. Morgan would expect this option
to only make sense for large plan clients. "It is part of our
marketing effort now and there seems to be some interest. This is
actively available," Jones said, adding that the new option makes
sense for plans with at least $500 million in assets, as it uses
separate account strategies rather than mutual funds. "We only
recommend this in the context of a broad portfolio," Lefter
added.
This article was originally published in Alternative Investment News.