Photo: AP Images
Everyone is still trying to figure out who profited from the JP Morgan Chief Investment Office’s $2 billion risky trade.Once hedge funders and other traders got wind of what bank’s Chief Investment Office was doing, they definitely started capitalising on it. That’s what you expect on Wall Street — when there’s blood in the water, the sharks will attack.
But here’s some surprising news, some of the sharks in on the other side of JP Morgan’s trade were inside JP Morgan — in the bank’s asset management division (run by Mary Callahan Erdoes).
Dealbook reports that the Strategic Income Opportunities Fund, a mutual fund run by William Eigen bought up about $380 million of the ‘London Whale’s’ trades starting a year ago. The fund holds about $13 billion of client money.
By last May, the mutual fund had built a position of about $150 million in coverage, which it doubled over the summer. Since then, the position increased about $80 million through March.
“If you take JPMorgan chief investment office out of the equation, it’s exactly the kind of trade you’d expect them to be doing,” said Eric Jacobson, an analyst with Morningstar. “It’s like a hedge fund trade. This is kind of what the mandate is.”
So while JP Morgan lost its own money on this trade, its clients in another division made money on the other side of it. Good looking out, guys.
Another positive thing to glean from this is that it seems like the asset management division wasn’t talking to the CIO, which is exactly as it should be legally.
That almost makes you feel warm and fuzzy inside, right?