This content is from: Portfolio

J.P. Morgan’s Fund Business Joins Robot Revolution

Human traders at J.P. Morgan Asset Management have been replaced by robots and quantitative researchers.

  • Joe McGrath

J.P. Morgan Asset Management has joined buy-side firms in reducing human traders in favor of robots managed by tech-savvy handlers.

The acknowledgement came in an interview with Kristian West, the firm’s global head of equity trading, who emphasized the increasing importance of quantitative researchers within the business since 2015. In a statement following the call, a spokeswoman for J.P. Morgan Asset Management, declined to specify the number of human trading roles that had been cut but acknowledged “there are fewer, pure, traditional traders.”

Asset managers are increasingly bowing to pressure to cut costs by automating jobs, with BlackRock and PNC Capital Advisors disclosing plans in the last two weeks to give computers and data science a more significant role. All areas of trading at J.P. Morgan Asset Management are becoming more quantitative, with quant practices within equity migrating to other asset classes such as fixed-income, according to the spokeswoman.

“Our trading team has become a mix of traders, quants and technologists, with the latter two groups becoming a bigger part of the mix,” the spokeswoman said. “That transition should continue.”

J.P. Morgan Asset Management has 69 traders globally, including 24 in fixed-income and 45 in equities.

“If you visit our offices in London, we now have nine traders, surrounded by 15 technologists,” West said. “That is quite profound to see. Going forward, [we want to] have the traders and the quant team come together.”

The new quant research staff now has a global role, with two individuals in New York, London and Hong Kong, according to West. The spokeswoman said the firm expects the expanded quantitative research team to continue to “grow in importance and size over time.”

West’s colleague, Kenneth McLeish, global head of equities trading technology, said in an interview that trading is moving “from an art to a science” as firms work on using data to drive decisions. “It is about being analytical about how we do things, analyzing how the traders are working,” he said.

PNC Capital Advisors is placing its large-cap mutual funds under the leadership of a factor-based computer model, according to Douglas Roman, managing director of PNC’s Large-Cap Equity Advantage investments. He said earlier this week that the move to “quant” will help the firm expand its business with mainstream investors, in part because quantitative models are a less expensive way to manage portfolios. BlackRock announced March 28 that it was converting some of its funds managed by stock pickers to pools run by quant models, underscoring the challenge active managers face in beating gains produced by low-cost passive funds.