The embattled CIO unit at JPMorgan Chase & Co. (NYSE:JPM) which was rocked hard last year by major losses from the “London Whale” saga hasn’t missed on all of their trades. A close look at their holdings in their $360bil plus available for sale (AFS) portfolio reveals pretty substantial bets on UK & Dutch RMBS.
As of year end 2012, JPMorgan Chase & Co. (NYSE:JPM) held over $70bil in non-US non-agency MBS bonds. This is a sizable stake in the European structured products markets, something that Reuters reported on earlier last year. “Indeed, the CIO almost single-handedly resuscitated European RMBS market in 2009, buying huge chunks of new issues and providing repo agreements on others. As one fixed-income head said, when selling European structured finance, the JP Morgan CIO was “your first call, your second call, your third call and your fourth call.”>
The ExodusPoint Partners International Fund returned 0.36% for May, bringing its year-to-date return to 3.31% in a year that's been particularly challenging for most hedge funds, pushing many into the red. Macroeconomic factors continued to weigh on the market, resulting in significant intra-month volatility for May, although risk assets generally ended the month flat. Macro Read More
With the dramatic rally in all spread products, non-agency MBS bonds have been big winners, and JPMorgan Chase & Co. (NYSE:JPM) looks to have began to trim their position during Q1 2013. Their 10-Q provides confirmation of this on Page 37 noting, “Securities decreased largely due to repositioning of the CIO AFS portfolio, which resulted in lower levels of non-U.S. residential mortgage-backed securities (“MBS”)”. Given the ZIRP environment and pressure on bank NIM’s, activity in the bank’s investment portfolio will continue to play a big role going forward. $684bil or 29% of the bank’s total assets are in cash, AFS securities, or secured financing as of 12/31.
By David Schawel, CFA of economicmusings