JP Morgan's Global Access Portfolio: Strategies, Risk Management and Role of Zhikharev

Global Access Portfolio's Investment Strategies

Task:

Describe JP Morgan's Global Access portfolio. How is it different from other investment portfolios?

Your Answer:

Initially, the Global Access Portfolio was intended  to serve a handful of J.P. Morgan's Latin clients. It was later extended out to other clients categorized as high net worth (net worth between $5 million and $25 million). This portfolio was navigated by four distinct strategies; Balanced, Growth, Wealth Preservation and Hedge Fund-Only. Unlike other investment portfolios, the GAP was not designed to beat market indices or benchmarks. They were designed to offer investors superior risk-to-return performance through the investment cycle. The Hedge Fund-only strategy was the only strategy measured against a benchmark.

Which type of risk management provided more value for JP Morgan's Private Bank and why?

Your Answer:

The risk operation that gives better value is the Risk administration in Global Approach in that it is created around the risk funds utilization, relying on the capture of return and instability. Seizure of return should be essential than the seizure of volatility. The better that is attained, the more value gets released from a risk-adjusted view. This pattern is also approved to understand latent downside in the cases from costly, but inherent devastating actions.

What were the risks of the Private Bank's business model?

Your Answer:

The dangers of the individual Bank’s firm model entails the initial issue was improving the ongoing estimation of the credit excellence of the counter company entailed in transactions. At any time two parties enrolled into a budgetary transaction whenever there was an assurance to compensate whether in some days, as in the action of a sale of funds, or in several years, as in few derivative businesses, ‘counterparts liabilities’ occurred. That is, there was several chances, the counter company would not hand over the cash when essential. Regan was specifically interested about firms that did considerable measure of derivatives firm with the individual bank and its customers.
 
The second effect was advancing the ability to attain access to any guarantee that was placed by counter companies as a condition of dealings with Morgan. This action was to necessitate that Morgan comprehended where the accompany was held that the appropriate certification was in place of approving for Morgan custody in the incident of a failure under the conditions of a particular, and there was inner Morgan accountability. For capturing the collateral supposing and when it came essential. The effect of placing the proper securities and creating good on the allegation of the event of a company failure was found trickier this is because assurance held as collateral, both in the third company firms, were frequently borrowed to other companies on block street at a small payment. The last effect is to understand the degree to which bank managers, either intrinsic or extrinsic, had potentially directed away from individual investments command.

Explain the duties of JP Morgan's Global Access risk oversight teams. What were its key advantages? What was the role of Zhikharev, and specifically how did the work of embedded risk managers like Zhikharev contribute during the financial crisis of 2007-08?

Your Answer:

Global Access' risk oversight operated in two teams. The first was the independent oversight function run by George Lencyk, who was responsible for risk management oversight across all the investment activities in the Private Bank; he reported to Joseph Regan.

The second team was a precursor to Regan's broader goal of evolving the investment risk management function throughout Asset Management; this positioned risk management as a "business partner."

Zhikharev was the team member serving as a quality risk controller looking out for everyone's interest. He was not directly managing portfolios, but responsible for keeping portfolios in alignment with both broad Private Bank-level policies as well as Global Access-specific, market-risk related items such as trade approvals, portfolio risk analysis, positional concentrations, etc. Market risk was his primary responsibility.
During the financial crisis Zhikharev  went on to spearhead what became known as the "Global Access Risk Factor Model." This model forced portfolio managers to remain honest and encouraged managers to redesign trades if it added to the same type of risk.

Placing yourself in Mary Erdoes' shoes, what would have concerned you about risk management at the Private Bank? What would you have done about your concerns?

Your Answer:

The concerns about risk management at the individual bank was the counter company risk; a counter company could not give the payment when necessary mostly those which bared derivatives firm with the individual bank and its customers. Bank managers likely drifted from their finance command because of the considerable business moves in search of benefits in such changeable markets, amplifying the risk of the contributions made. Cognition and approach to the collaterals reduced the danger of not receiving access to those guarantees when needed.
 
My interest is to elude the chance of executives drifting from their contribution mandates, confine their transactions, and detain the fixed risk managers operating inside the file management company, lower danger tolerance in the agreements being made, and continue investing and advancing technologies to aid in danger management.