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Impact Investing

IPE special report May 2018

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JP Morgan makes 'master KAG' move

Global custodian JPMorgan Chase has gone into the ‘master KAG’ business in Germany. “Our aim is to strip out the administrative part of the JPMorgan Fleming KAG and decouple the asset management from this,” says Arnulf Manhold, business executive of the US bank’s investor services in Frankfurt.
From the beginning of July, the two business sides were split. “So physically, those people working at the new master KAG provider, which is called JP Morgan Fonds Services GmbH are separated from the asset manager,” he says. “We now have a 20-plus strong team here.”
“We find that our clients have a strong interest in the master KAG approach,” says Manhold. “We are the first global custodian to take this step in Germany, which enables us to offer institutional investors the ability to group all their Spezialfonds into one structure and widen their access to international investment advisers.”
Manhold sees major opportunities here as the German market faces inevitable consolidation ahead among the 80 KAGs active there. JPMorgan is understood to have just entered into such an agreement for another group’s KAG activities.
“All of our asset management activities for the German market are now concentrated on the new legal entity which is named JPMorgan Fleming Asset Management (Europe) Sarl Frankfurt Branch,” he says.
Manhold adds: “We will have an outsourcing arrangement with the asset management, who will use us as an insourcer providing all the regulatory statutory reporting, accounting, NAV calculation required. JPMorgan Fleming will now be able to concentrate 100% on asset management.”
He believes the group has its timing right for this move. “This gives us good time to market, as many institutional investors are now thinking of moving their assets to one master KAG.” Some market players are looking to gain additional asset management business by offering these services, while a number of others may decide to go the purely administrative route.
The move by investors to a master KAG, where they can group all their Spezialfonds in one structure, is often accompanied by a move to use a global custodian as well. “With a master KAG all their portfolios are handled in the same way,” he says. “As we see it the master KAG is a consolidator in much the same way as a global custodian.”

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