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Borja Astarloa: "We see probable high single-digit returns on the Stock Exchanges" | Markets

JP Morgan is the largest bank in the United States and one of the biggest on the planet. Outside of your local market, your business focuses on advising and managing large fortunes. To be a client of JP Morgan Wealth Management you must have a financial equity of at least 20 million euros. Of course there are also exceptions. "There are family groups that own a large company that we can accompany for years until they decide to take part of the capital stock," explains Borja Astarloa, general director of private banking.

This executive heads the most select group of private bankers in the country: only five people, but they are the advisers to some of the most powerful and wealthiest citizens in Spain. From entrepreneurs to winners of the Euromillion. "There are many clichés about people with money, but the truth is that many are far more normal than the public imagines."

What is the typical JP Morgan Private Banking client?

They are family groups, usually owners of a successful company. We offer you support not only in the management of your financial assets, but also with your company: to set growth plans, capital increases, balance sheet restructuring or even the sale of the business. One of the main added values ​​we provide is our close collaboration with the investment banking department. We also offer financing.

How do they reach new customers?

It is a very thorough work. We look for liquidity events, events that may cause a person or a family to take on significant financial assets. We approach and explain our strengths. We have behind us a very powerful banking group and incomparable analysis and study teams, with presence and knowledge all over the world.

"Passive management has reduced the cost of client portfolios by a third in four years"

Is the fiscal aspect key to them?

Evidently. The client looks for a good financial-fiscal profitability. We do not give specific advice, but we do work with your tax advisors to execute the most optimal investment policies at the tax level, within strict compliance with regulations.

Are you worried that there may be a change in the regulation of the sicavs?

Yes, there is a clear uncertainty. In the end, there will be a decision that will be purely political. We manage several sicavs, but if the new legal framework is very unfavorable our clients will look for other formulas. We have already seen sicavs converted into limited companies or limited companies. And others that have merged.

How do you see the current stock market situation?

We always try to offer a long-term vision. This has been clearly demonstrated with what has happened in recent months. At the end of 2018 there was a sharp fall in the stock market, which has fully recovered in 2019. All of our clients are already at equity levels prior to the corrections. Those who decided to liquidate portfolios made an error. The falls of the end of last year were an aberration.

What strategies do you now transfer to your clients?

We are very tactical. When the strong corrections were made, we chose to maintain the weight of the investment in the stock market. After the change of tone of the Federal Reserve, we have opted to increase the weight of the variable income. We see clearly that the stock market will continue to perform better than fixed income.

Is it difficult to manage in this final part of the stock market cycle?

We have been listening to this chant for years. That if the cycle is exhausted, the recession comes … At the end of 2018 we were worried, but we see that inflation rates in the United States are at reasonable levels, we see an acceptable level of economic growth and that the cycle still has a path for the stock assets. There could be a change of perspective if the commercial war is finally deepened or if geopolitical tensions lead to a strong growth in the price of oil. Saving these specific events, we see a slowing growth that is still solid. We think it is likely that there are high single-digit returns on the Stock Exchanges.

Do large fortunes use passive management funds in their investments, funds that replicate the evolution of indices?

Increasingly. On the stock exchange, these products represent between 70% and 90% of the investment. There are assets, such as US equities, where it is always invested through index funds or ETFs. On the European Stock Exchange and fixed income a little less is used, but the weight does not stop growing. We, when choosing the best assets, make a thorough cost-benefit analysis. If we choose an indexed fund, it is because we see that it provides the best risk-return balance.

Has the growth of passive management been noted in the costs?

It has been noticed in a radical way. In just four years, the underlying costs of our clients' portfolios have been reduced to one third.


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