JPMorgan Chase’s Mary Callahan Erdoes got her first assignment managing money when she was 6 years old. The eldest of four children, Erdoes showed an early aptitude for math that was fostered at her grandmother Kay’s suburban Chicago breakfast table, where she helped balance her grandparents’ checkbook on an adding machine.
“It was my first foray into money management,” says Erdoes, 46.
Today, Erdoes oversees $2.2 trillion as chief executive of JPMorgan Asset Management, the sixth-largest money management operation in the United States, according to data compiled by Pensions & Investments, a publication that caters to the industry. Erdoes’s unit includes everything from 401(k) assets to hedge funds. It produced a 24 percent return on equity last year compared with 9.7 percent at BlackRock, the largest U.S. money manager, and 15.4 percent at Fidelity Investments.
JPMorgan Asset Management’s profit, before provisions for credit losses, was up 14 percent from 2009 to $2.8 billion in 2012, compared with a 37.5 percent decline at the larger bank.
Total client assets rose 29.2 percent from September 2009, when Erdoes took the helm, to the end of June. JPMorgan oversaw $1.47 trillion directly plus $687 billion in client money invested with other firms.
“The flows are coming from every single region that we have around the world,” Erdoes says, “and, equally important, they are coming from every single channel and every single product.”
Compared with her outspoken boss, JPMorgan chief executive Jamie Dimon, Erdoes keeps a low public profile. Yet she’s among the most powerful and respected executives in finance, says bank analyst Michael Holland, chairman of Holland & Co., a long-term investor in JPMorgan.
“Quietly, she is a force, one of the most influential executives in the business,” Holland says. “Jamie Dimon promotes people who are the best at what they do. She is the best.”
Neil Rue, a managing director at Pension Consulting Alliance in Portland, Ore., says that under Erdoes, JPMorgan has risen from a middling player in pensions to the top of the heap.
“Their track record is such that clients can be reasonably confident they’ll deliver on expectations,” he says.
Although asset management generates just 10 percent of revenue at JPMorgan, it’s become an increasingly attractive business for U.S. banks as regulators step up capital requirements, says Jason Goldberg, an analyst at Barclays Capital in New York. Under the 2010 Dodd-Frank law, banks have to hold more capital against risky activities, such as trading, beginning next year.
Companies are also building capital to meet new Federal Reserve rules beginning in 2016 that require the largest U.S. banks, including JPMorgan, to hold an extra buffer against an economic downturn.
“Asset management is a great business, particularly in the new environment,” Goldberg says. “It’s a high-return-on-equity, high-fee-income, global business that is not capital intensive and that’s growing.”
Erdoes was a standout even in high school, says Mary Crook, who taught her calculus at Woodlands Academy of the Sacred Heart, an all-girl Catholic high school in Lake Forest, Ill. She graduated No. 2 in her class and was an accomplished pianist, says Crook, who wrote Erdoes a recommendation for the mathematics program at Georgetown University in 1985.
Erdoes was the only woman to graduate from Georgetown with a math degree in 1989. She went on to Harvard Business School for her master of business administration.
Erdoes is a survivor at a bank whose senior management ranks have been thinned in the past four years by a series of shake-ups, including one after last year’s $6.2-billion-plus trading loss at the London-based chief investment office, which isn’t part of asset management. The scandal cost Ina Drew, the head of the unit, her job and in August resulted in criminal charges against trader Julien Grout and his supervisor, Javier Martin-Artajo, alleging wire fraud and other crimes.
Erdoes replaced James E. Staley as head of asset management in 2009, when he was promoted to run the investment bank. Staley, who left JPMorgan last year to join hedge fund firm BlueMountain Capital Management, says he met Erdoes in 1999, when he took over JPMorgan’s private bank, where she had worked since joining JPMorgan in 1996 from Meredith, Martin & Kaye, a fixed-income advisory firm.
“The private bank was a pretty demoralized place,” Staley says. It was losing money, clients and assets. Staley says he would walk the private bank’s six floors late at night. “Amid the sea of empty desks, this one young woman was always there,” he says.
Erdoes, who was an adviser on short-term fixed-income investing at the time, replaced Staley as head of the private bank four years later. Assets in the unit, which serves ultra-high-net-worth individuals, swelled 88.9 percent from September 2009 to the end of June, to $340 billion.