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Capital Allocators – Inside the Institutional Investment Industry

Apr 23, 2018

Michael Cembalest is the Chairman of Market and Investment Strategy for J.P. Morgan Asset & Wealth Management, a global industry leader with $2 trillion of client assets under management. Michael is also a member of the Investment Committee for J.P. Morgan Asset & Wealth Management and the Investment Committee for the J.P. Morgan Retirement Plan that covers the firm’s 250,000 employees. Before taking on his current seat in 2012, he spent eight years as Chief Investment Officer of J.P. Morgan’s powerhouse Global Private Bank. Prior to his work on the buy side, Michael worked on the sell side at J.P. Morgan Securities as head strategist for Emerging Markets Fixed Income. He started his thirty-year tenure at the firm as a member of the Corporate Finance division.

Our wide-ranging conversation begins with Michael’s early career that included watching a financial crisis unfold in the late '80s and side-stepping another in the late '90s, and turns to his role as CIO of a large, global private bank. We discuss differences in asset allocation and implementation between private clients and institutions and along the way come across his evaluation of Bernie Madoff, the creation of his strategy piece - Eye on the Market, the chart that everyone hates, the impact of politics, government debt, and energy on the markets, and views about active management. Lastly, you won’t want to miss an amazing story Michael tells in answer to a new closing question.

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Show Notes

3:14 – Michael’s start at J.P. Morgan

4:12 -  The creation of the first Brady Bond

6:14 – How did starting his career during a crisis impact his views on the world

8:10 – Early career roles

10:07 – Transition to the buy side

16:30 – Differences in managing money for a public company from managing money as an independent asset manager

17:25 – Transition to CIO

18:30 – First steps in changing the private bank investment structure from a closed model

22:21 – Overseeing a diverse group of clients

29:15 – How does he stay informed about everything impacting the markets

27:54 – Assessing Bernie Madoff

28:19 – Hedge funds and the tax difference they provide

30:28 – Differences in how Michael views various asset classes between taxable and tax-exempt pools

31:40 – Shift to strategy work and writing

34:09 – How does Michael describe Eye on the Market

35:20 – Domestic politics and geopolitical impact on the markets

38:52 - Looking at the high corporate profit landscape against the enormous debts of governments, nationally and locally

42:31 - Any way out of the debt problems we are seeing at state and local government level

47:31 – Entitlement spending in other countries

48:33 – Research on energy and consumption

51:44 – Use of technology to distribute his research

53:43 – Thoughts on active management

56:30 – Closing questions