Joe Kenney
Chief Executive, JPMorgan Private Client ServicesAs chief executive of JPMorgan Private Client Services, Joe Kenney oversees more than $120 billion in client assets. Kenney, 41, was previously National Investment Practice Leader for JPMorgan Private Client Services, responsible for investment strategy and solutions for the group. He spoke recently with Judith Schoolman about strategies for the current market.

Q: It's been said that your goal is to take the "single-digit millionaire" and turn him or her into a "double-digit millionaire." Given the difficult financial climate, how do you do this?

A: We are paying attention to the mix of asset classes, manager styles and the different suite of investment solutions, particularly structured and alternative investments. On the tactical side, we currently have about 15% to 20% of cash in client portfolios, which protects capital and allows us to take advantage of opportunities in the market when they present themselves.

Q: You are credited with the success of the expansion of the Private Client Services investment platform. What was your strategy and what are you doing now to expand the investment platform?

A: Our goal is to deliver the best risk-adjusted returns in the industry. Advances in the financial markets offer investors the opportunity to make money in both up and down markets. To do this successfully, diversification and access to the best intellectual capital in the industry is key. JPMorgan is one of the largest alternative [investments] managers in the world, which gives us access and insights from the top private equity, hedge fund and real estate managers around the world. Our global mindset and commitment to first-class business has stood the test of 150 years. Looking back just a decade ago, a typical private client portfolio consisted of stocks, bonds and cash; generally allocated 60/40, and benchmarked against the S&P 500. Today, we offer non-traditional asset classes such as real estate, commodities, hedge funds, private equity, structured notes and other alternative investments, which we believe provide better risk-adjusted returns. It is our job to make sure that our clients have access to the best managers in both traditional and non-traditional asset classes. The world is global and your portfolio needs to be as well.

Q: The Private Client Services division looks at investors who are still creating wealth. How does this occur given the current economic climate?

A: Being smart about estate planning can make money for clients in the same way as being smart about your investments. So why not do both? Today's combination of low interest rates and beaten down asset values is actually ideal for wealth transfer techniques, such as GRATs (grantor retained annuity trusts) and other "estate freeze" strategies. They are designed to lock in today's depressed asset values. When prices rebound, any upside above today's low hurdle rate goes tax-free to beneficiaries. Lower interest rates also make inter-family loans attractive.

Q: In terms of wealth growth, what investment opportunities or ideas are you recommending?

A: We are talking to clients about global infrastructure opportunities that access the [growth of] the middle-class in India and China. And given the huge dislocation in the fixed income markets, we also see opportunities with select experienced managers in the mezzanine debt space. Both of these ideas currently represent about 2% to 3% allocations in our clients' portfolios.

Q: What do you want to avoid?

A: We are always thinking long-term when it comes to investing our client's money, not timing the market. For clients with large amounts of excess cash, we recommend legging in, because by the time the press and the economic indicators become more positive, recovery will be underway. If you wait to time the market, you are likely to miss this opportunity. We also are avoiding esoteric fixed income mortgage structures and financials with unquantifiable losses to come.