Alternative Investing Insights

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Logo: JP Morgan. Text: PLEASE NOTE: This session is closed to the press. Investing in alternative assets involves higher risks than traditional investments and is suitable only for sophisticated investors. Alternative investments involve greater risks than traditional investments and should not be deemed a complete investment program. They are not tax efficient and an investor should consult with his/her tax advisor prior to investing. Alternative investments have higher fees than traditional investments and they may also be highly leveraged and engage in speculative investment techniques, which can magnify the potential for investment loss or gain. The value of the investment may fall as well as rise and investors may get back less than they invested. The views and strategies described herein may not be suitable for all clients and are subject to investment risks. Certain opinions, estimates, investment strategies and views expressed in this document constitute our judgment based on current market conditions and are subject to change without notice. This material should not be regarded as research or as a J.P. Morgan research report. The information contained herein should not be relied upon in isolation for the purpose of making an investment decision. More complete information is available, including product profiles, which discuss risks, benefits, liquidity and other matters of interest. For more information on any of the investment ideas and products illustrated herein, please contact your J.P. Morgan representative. Investors may get back less than they invested, and past performance is not a reliable indicator of future results. This information is provided for informational purposes only. We believe the information contained in this video to be reliable; however we do not represent or warrant its accuracy, reliability or completeness, or accept any liability for any loss or damage arising out of the use of any information in this video. The views expressed herein are those of the speakers and may differ from those of other J.P. Morgan employees and are subject to change without notice. Nothing in this video is intended to constitute a representation that any product or strategy is suitable for you. Nothing in this document shall be regarded as an offer, solicitation, recommendation or advice (whether financial, accounting, legal, tax or other) given by J.P. Morgan and/or its officers or employees to you. You should consult your independent professional advisors concerning accounting, legal or tax matters. Contact your J.P. Morgan representative for additional information and guidance concerning your personal investment goals. INVESTMENT AND INSURANCE PRODUCTS, NOT A DEPOSIT, NOT FDIC INSURED, NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY, NO BANK GUARANTEE, MAY LOSE VALUE.

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This session is closed to the press. Welcome to the JPMorgan webcast. This is intended for informational purposes only. Opinions expressed herein are those of the speakers and may differ from those of other JPMorgan employees and affiliates. Historical information and outlooks are not guarantees of future results. Any views and strategies described may not be appropriate for all participants and should not be intended as personal, investment, financial, or other advice. As a reminder, investment products are not FDIC insured, do not have bank guarantee, and they may lose value. The webcast may now begin.

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A shimmering strip of gold-plated handwriting swirls elegantly across a dark surface. It spells JP Morgan. Text: Ideas and insights.

A woman with long dark hair wears a white turtleneck and a textured light jacket, and she sits at a table with a glass of water. A city skyline fills the background. Text: Jasmine Green-Hogan, ALTERNATIVE INVESTMENTS SPECIALIST, J.P. MORGAN PRIVATE BANK.

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Hello, everyone. And thank you for joining us today. We're here for alternatives access, where we're going to spend some time on themes across private markets and investable opportunities that we think are interesting. My goal is to give you five charts, five ideas, and to do it in 25 minutes. And I have the pleasure of being joined by Kristin Kallergis Rowland, who is the global head of alternatives for asset and wealth management here at JPMorgan, one of my favorite people to work with, but also someone who's going to leave us all smarter when we wrap today. So, Kristin, thanks for joining us.

Thanks for having me.

I

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Kristin has long dark brown hair and wears a black outfit while sitting at a desk with Jasmine. The city skyline stretches across the windows behind them and the desk displays the J.P. Morgan logo.

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think it's going to be a lot of fun.

Let's see.

OK. So the goal really is just that we take clients through private markets today. The entire industry has evolved. Private markets looks a lot different than it did a decade ago or even five years ago because of accessibility. And as clients think about their evolving portfolios, we want private markets to be part of the conversation. When we just think about the world today as it is, why private markets?

It's

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Text: Kristin Kallergis Rowland, GLOBAL HEAD OF ALTERNATIVE INVESTMENTS, J.P. MORGAN PRIVATE BANK.

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a good question. We get it often from our clients. Because when we think about investing in portfolios, we debate. Should we access something in the private versus the public markets? The reality is-- and you'll see some of the numbers just right in front of us-- 87% of companies that have more than $100 million of revenue are only accessible via the private markets. When

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Slide: Private markets: the opportunity set beyond public markets. Text: Private equity provides access to high growth sectors and innovative companies offering clients unique opportunities that are increasingly absent from public markets. A tall stacked bar chart compares public and private U.S. companies with more than 100M dollars in revenue, and an orange block states that 87 percent of these companies are private while green orange and blue blocks label revenue ranges for public and private firms. A donut chart labeled Magnificent 7 as share of S&P 500 highlights a 37 percent slice next to logos for Apple Meta Tesla Amazon Google Nvidia and Microsoft, and below it a declining bar chart tracks the number of U.S. listed companies from 1993 to 2021 with a downward arrow labeled 43 percent. Text: Source S&P Capital IQ Note For companies with last 12 month revenue greater than 100M by count. Source KKR Pathstone World Bank Wolfe Research FactSet Bloomberg As of September 15 2025.

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you think about the shift that's happening within artificial intelligence, and now that we've built a lot of these large language models and a lot of the infrastructure behind it that I know we'll talk about, accessing software as this next leg of agentic AI-- 97% of software companies are private.

So part of it is definitely access. The other part that's super interesting is that we always say, an alternative is something alternative to what? And if the S&P 500 is a core part of a lot of clients' portfolios and there's concern about the concentration the S&P now has between things like the Mag Seven and other assets, looking alternatively somewhere else, like the private markets, has been interesting to a lot of our clients, both institutionally and individually.

And then I also just think there's a lot of reasons why private companies choose to stay private longer and make a lot of those strategic changes before they become a public company that has to meet quarterly earnings and so forth. So I think it's just that there's this huge opportunity set beyond just public markets that we want to have access to. And we do think that if you are going to access this market, you need to be mindful of which managers you're partnering with, which themes and diversification you're providing that portfolio. I know we'll get into that today. But it's really just the overall market opportunity is just so much bigger in the private markets that we can't not think about accessing it.

That's right. And I think part of the conversation over the past-- call it half a decade-- has been about the evolving opportunity set. And to your point around volume-- the volume of opportunity is tremendous. I think, really, that takes us into chart one or idea one that I want everyone to spend time on today. And

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Slide: Private equity: Companies are staying private longer. A horizontal bar chart displays last round valuations in billions of dollars for large private companies, beginning with a tall dark blue bar for SpaceX near 420 billion dollars, followed by shorter bars for ByteDance and OpenAI near the high 200s. Anthropic sits near the mid 100s with a label reading 62 and Stripe Revolut Databricks and XAI line up next with valuation labels 120 162 and 166. Additional narrower bars extend across the chart for Shein Waymo Copart Checkout.com Figure AI Safe Superintelligence Epic Games Anduril Industries Genesys Canva Ramp and Citadel Securities, each with small boxed numbers above them that indicate a comparative S&P 500 company ranking. A note in orange text states the three largest private companies would be in the Top 30 companies of the S&P 500. Text: Source Pitchbook as of August 4 2025 Excludes select companies which have not had a financing in the last 3 years This comparison is for illustrative purposes only Private companies may not have the same stability or risk profile as companies in the S&P 500 Privately held companies may be intrinsically riskier than publicly listed companies as the unquoted companies may be smaller more vulnerable to changes in markets and technology and dependent on the skills and commitment of a small management team Past performance is no guarantee of future results It is not possible to invest directly in an index See Definition of indices in the Appendix for more information.

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that's this idea that innovation, typically, its starting point is found in private markets. And I think what's interesting-- and you and I have had conversations about it before-- is, if you're walking down the street and you tap a random person on the shoulder and you ask them, is SpaceX, for example, private or public? They actually may say public because of the size and the scale and the way you hear about it in headlines. It's actually a private company.

And so if we think about the opportunity set in private markets and just innovation at large, how do you think about the access and the stage in which you access, whether it's technology or health care or next-gen trends? And what part of the market do you see that most accessible?

Yeah. I do think the SpaceX is interesting, or the OpenAIs, or the ByteDances, a lot of the top names that you see on this chart. And the reality is, some of those top private companies folks have been accessing in private markets for 5, 10, 15-plus years. And so I do think when it comes to innovation cycles, there's a lot of talk right now about some of these and the leg of AI that's taking place and accessing those things in the private markets. I do think-- we've talked a lot about the merging of public and private opportunity sets in for portfolio construction reasons. And the reality is, if you look at the top 20 private companies, they're all at the level size that would make it into the S&P 500.

And so the question is, what are you accessing, and how are you accessing it? But there is risk in a lot of these companies still in the private markets. A lot of them are raising capital. They're having these big funding rounds. And the public markets does give you the discipline to sort of what's next for your company. And so understanding, What are those strategic changes that you want to make in the private markets? before you come public I think is super interesting.

But there's also a reason why they're staying private longer. And I do think in any innovation cycle, like the one we've been talking about within AI, I think it is important to make sure that-- as you see, every day, news comes out about one leapfrogging the others. And understanding what risk remains I think is really important. And the funding around these companies I think is super important. So I do think we're going to see a lot of that continue over the coming years. But I don't think you could think about one without the other.

Sure. And I think too-- you briefly mentioned this, but it was sort of the theme of your response just now is just around discipline. I think one of the things that I want clients to walk away with today is also just that private markets don't come without their own set of risks. There are day-to-day volatility in public markets, which we're all familiar with. But in private markets, you do inherently have the illiquidity that exists. And part of the innovation or the premium that you can achieve in private markets, whether it be early stage or growth equity, is that there's illiquidity there.

And then I think also, you're sort of trusting the managers that you're handing over capital to. And so that's why, ultimately, operational due diligence and investment due diligence is so important, particularly in this part of the market for us.

And by the way, our view is that if you don't believe that you can achieve a premium to liquid markets, you shouldn't consider illiquid markets, right? And there is that illiquidity premium, that we can talk about how it ebbs and flows in various time periods. But that's one of the more important things to lock up your capital, to invest in private credit. You're taking additional risk, not having that liquidity. And so there does need to be that premium that's available. We just have to figure out, as you move through cycles of innovation, how you're adjusting the premium to the risks associated with it.

That's right. And I think too, it's not just on the equity side, the private equity side or the growth equity side. It's also in the diversifiers for portfolios, like private credit, like real assets, like infrastructure. And so if we press forward and we think about private credit, also a part of the market that's dominating headlines today-- for both good and bad reasons when we think about the evolving marketplace-- private credit's sort of that next idea.

So

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Slide: Private credit: Opportunity for higher yields. A series of dark blue rectangles represent 10 year yield ranges for U.S. Treasuries IG Corps AAA CLOs U.S. High Yield Leveraged Loans and U.S. Direct Lending, each topped with a lighter blue band for the 10 year median and an orange diamond marking Q1 2025 yields. The U.S. Treasuries block reaches a Q1 2025 point of 4.1 percent, IG Corps reaches 5.2 percent, AAA CLOs show 5.1 percent, U.S. High Yield extends higher with a 7.7 percent point, and Leveraged Loans show 8.1 percent. A shaded gray panel highlights U.S. Direct Lending with the highest marked yield of 10.1 percent. Text: Past performance is not indicative of future results It is not possible to invest directly in an index Estimates forecasts and comparisons are as of the dates stated in the material Source Bloomberg Cliffwater FactSet J.P. Morgan Credit Research KBRA DLD J.P. Morgan Asset Management U.S. Treasuries IG corporates and U.S. High Yield categories use the yield to worst of their respective Bloomberg indices AAA CLOs use the quarterly yield to worst of AAA rated debt tranches as tracked by the J.P. Morgan Collateralized Loan Obligation Index CLOIE Leveraged Loans are represented by the yield to maturity from the J.P. Morgan Leveraged Loan Index Direct lending uses the annualized quarterly income return from the Cliffwater Direct Lending Index from the start of the period to 12 31 2021 and the quarterly yield to maturity from the KBRA DLD Index thereafter Data are based on availability as of May 31 2025.

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when I think about idea two, private credit has increasingly become a part of the market where clients are looking for income or what they see as durable return streams in a portfolio or can be. Talk to us about, one, the headline perspective around private credit. But also, just at its baseline, why would a client want to add private credit to their portfolio?

Yeah. I think part of it, you see on this chart. And the private credit industry, I should say, there's the private credit industry that's about to surpass $2 trillion. That's in an alternatives ecosystem of $20 trillion. So it's becoming big. What's fascinating to me, if you look from 2009 'til today, the private credit industry post the Great Financial Crisis has gone from about $1.3 trillion to $2 trillion. The corporate public market has gone from about $3 trillion to $11 trillion. So the size doesn't concern me, which-- I know there are a lot of headlines about that.

I do think it's, again, understanding the underlying things that are taking place within these markets. Because a lot of the whole private credit ecosystem came about because if you were a company that had an EBITDA of less than $300 million, it was tougher for you to access capital via the high-yield market post the Great Financial Crisis. And so there was part of just size of companies and what it meant for regulations when a bank wanted to go lend money to those small- and medium-sized businesses. So that was initially part of it.

I do think, as you think about some of the volatility in public markets and what comes about, a lot of companies turn towards private credit lenders to get certainty of capital-- and certainty of capital to grow their business, certainty of capital to think about what it means in those times of volatility to shift things around and do it outside of the public markets. And so there's a huge need for private credit from a lot of businesses. That's what the data would tell you.

I think from an investor perspective, again, I think most investors continue to access it and continue to have demand for it because it is an opportunity for higher yields. That's been on this chart. You'll see it's been about 200 basis points. We do believe that that premium can continue, has the potential to continue on a go-forward basis, even though we do think, with base rates coming down and with spreads tightening a little bit, that it's probably a slightly lower return overall on a go-forward basis. This is corporate direct lending.

Now, there's other parts of private credit markets that are completely opening up in our opinion, things like asset-backed lending, things like stress or distress capital. The specialists in some of these spaces, there's a few of them left. But in a market of $2-trillion private credit market-- and when you think of the 1,400 managers that exist, we partner with about a dozen of them.

So, again, we work to make sure that there's a premium that you can get versus public markets. We think that premium has the potential to persist. And we think that there is a need, from a company perspective, as to why they continue to borrow from private lenders.

And I think even if we just zoom out, part of why you've seen private credit continue to come up in conversations when people are building portfolios is, a decade ago, if you talked about private credit, it signaled distress to the marketplace, from a company perspective, if you were pursuing this avenue. Today, to your point, it's an alternative part of the market to pursue security of financing for a lot of these companies.

So for our clients, I think what we want to stress is the idea that this is not a replacement for fixed income. The risk looks very different here. Again, to your comments around corporate credit, these are unrated companies, if you will, across private markets. But you have the ability to potentially see some of that premium from a return perspective. If you're thinking about adding additional sources of income to your portfolio, private credit is where you can explore.

And by the way, some of the recent headlines around some of these names that were out there that had to do with fraud and so forth, the interesting part was that those were broadly syndicated loans. But there was questions on the market about, what does it mean for private credit lenders? Because it is outside the public eye, in terms of what's being done and the risk that these managers have underwritten and how they think about those companies on an ongoing basis. And so it's something that we look at very closely. But it is why manager selection continues to matter outside of just equity, especially in things like credit, as we're going to expect to go through continued times of volatility in broader markets.

Also why, when you're sort of adding alternatives to a portfolio, working with a partner who has the diligence capability is so important-- even if it's just from a transparency perspective, I think that's super important. Awesome. OK. We're going to press forward to chart three. This

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Slide: Private infrastructure: Powering artificial intelligence. A rising series of dark blue vertical bars on the left charts U.S. data center power demand from 2015 through 2035, increasing steadily from about 25 TWh to more than 400 TWh, and the title states U.S. data center power demand is expected to continue to rise. On the right a waterfall style chart titled Demand is increasingly running the risk of outpacing supply begins with a dark blue bar marked 69 for total U.S. data center power demand then drops with a teal bar labeled minus 10 for data centers under construction and another teal bar labeled minus 15 for available U.S. grid capacity before ending with an orange bar labeled 44 to indicate a potential shortfall. Text: Source LHS BloombergNEF New Energy Outlook 2025 As of May 2025 RHS Morgan Stanley Research As of November 11 2025.

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is one of my favorite parts of the market-- one, because it's tangible. You see it. You feel it. You turn on your light switch every day. I'm sure you know where I'm headed. And that's infrastructure.

This has been a part of institutional portfolios for decades. Large public pensions, endowments, foundations have always had structural allocations to infrastructure. And we know that most of our clients have institutional-like balance sheets. That's why adding infrastructure to a portfolio can make a lot of sense for our clients.

When you think about the world of infrastructure today, whether it's old-world infrastructure, like bridges, toll roads, airports, et cetera, and you also think about digital infrastructure, like fiber to the home, syndication of cell towers, so on and so forth, what are the, A, characteristics that make this compelling in a portfolio, but then some of just your favorite themes that are taking place where we can get excited?

Well, you mentioned the turning on the light switch, which your point is, many of us will pay whatever we need to for power in our home or for the water bill or whatever it might be. And so a lot of these, your choices are very limited. So it's a very monopolistic business. They tend to be very monopolistic. They tend to be very cash-flow heavy. A lot of them are adjusted to rates that are tied to CPI as sort of the base floor, which is the Consumer Price Index.

So as you think about rising inflation, the ability to pass through those expenses-- because, again, I will continue to pay whatever I need to pay to keep my lights on, to keep the water going. So you're right, that is a little bit of what has been old-world infrastructure. But there are a lot of interesting opportunities that take place because there's a lot of utilities that might have had a power asset, that power wasn't in that high of demand for the last decade. Now we'll talk about how power is in-- we talk about power powering artificial intelligence on a go-forward basis.

And even a change from a 2% power demand to 2 and 1/2% power demand and what it means to work with these assets that have been underinvested in to get more power out is really interesting. So having operators in these assets I think is really interesting. That's part one. Part two is that-- and, again, it's on this page. When we're talking about the biggest holdback, in terms of where AI can go next, it is that understanding of the power dynamics. And a lot of that came from powering things like data centers, which-- everyone assumes that data centers just has to do with a lot of what's going on in AI. It doesn't. There's still the move to the cloud that needs to happen for a lot of these businesses.

And so when I think about infrastructure, it is all the things that allow us to sort of live. It's all the things that are powering the innovation side. I do also think there's things in the world of global fragmentation and the need for infrastructure security, energy security, how all of that fits together. Infrastructure has been one of the core pieces of our portfolio, in terms of what we're offering our clients. Because we just see a high demand for it, a limited supply of specialists in this area that actually know how to work and operate these assets. And the demand we just think continues from here.

So we really like the supply-demand dynamics. And we also-- the last thing I'll say on this topic-- is, I mentioned the point where it's tied to inflation, but it's also pretty uncorrelated to broader markets. Because what happens in revenues of a company versus the need for how we're living, how we're moving, how we're doing all those things is pretty uncorrelated. And we've seen that in portfolios, which is why it's becoming an increasing part of conversations but also allocations in our client portfolios.

Sure. And I think even as we see just broader volatility in public markets, which we expect to persist to some degree, thinking about ways that you can add, to your point, lower-correlated return streams to a portfolio can be interesting. I think infrastructure is one where clients tend to be underallocated, even just from a real assets perspective in general. So there are multiple reasons why you would think about adding infrastructure. But I think you called out a lot of them.

It's also just really interesting to talk about investing in the communities around us. A lot of these are critical supply-chain and industrial hard assets that are quite literally powering and running our world. And to be able to say you're contributing in that way is a really interesting thing. OK. Another fan favorite on your end--

Uh oh. Where are we going?

--is real estate. You always bring up real estate in conversations with clients. Whether

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Slide: Private real estate: Diversification, inflation hedge & yield. A long sequence of vertical bars combines dark blue income returns with light blue capital appreciation to illustrate rolling 4 quarter global private real estate returns from 2009 to 2025, beginning with deep negative capital appreciation in 2009 near minus 25 percent and gradually rising into positive territory by 2011. Through the mid 2010s the stacked bars fluctuate around combined mid single digit to low teen returns as income remains steady while capital appreciation cycles. In 2022 the light blue bars peak sharply near the mid teens before falling into negative levels again in 2023, and by 2025 both components settle near modest positive values. Text: Sources MSCI J.P. Morgan Asset Management Guide to Alternatives Note Real Estate returns represented by the MSCI Global Property Fund Index Data show rolling four quarter returns from income and capital appreciation The chart shows the full index history beginning in 1Q09 and ending in 1Q25 Data are based on availability as of August 31 2025 Outlooks and past performance are no guarantee of future results It is not possible to invest directly in an index Please refer to Definition of Indices and Terms for important information.

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they're holders of personal real estate on their balance sheets or whether they're underallocated, it continues to be a place where clients can think about the potential for, again, lower correlation, inflation protection. You have really nice appreciation over time to the extent you're investing in the right geographic locations with the right partners and the right types of assets. When you think about just through any investment cycle, through a full cycle, the power of adding private real estate to a portfolio is what in your eyes?

Well, I think it provides a couple of things. And on this chart, the thing I love most about this chart is-- and I've always used this example, where I say, even in the Great Financial Crisis, the value of this building, the mark to market of this building may have gone down. It did go down, actually, if you were to have to sell it at that moment in time. But it depends on the tenants inside and their ability to continue to pay their rents, which is why you see you could have great assets that have mark-to-market volatility from an appreciation perspective, from a NAV perspective. But the income is a lot of the reasons why our clients continue to allocate in their portfolios in real estate.

And when you actually look-- we did a client survey, where we asked 200 of our families, what are their suballocations across liquid, illiquid markets? It was just over 45% that was allocated to alternatives. Private equity and private equity funds was about 17%. Real estate was the next at 15%. And a lot of clients do allocate to real estate to have a combination of both yields as well as the potential for capital appreciation.

And so those are some of the reasons why we like real estate. And then as inflation rises, so hard assets-- the value of those assets also goes up. And so we've gone through a really interesting period most recently that you see on this chart from a real-estate return perspective that we think we're just getting out of. And so we are more bullish on real estate today than we were the last couple of years. But I would say it really depends on the underlying asset.

The other component of real estate is that our clients can invest through equity or through credit. And so when you think about the amount of issuance that was done in things like the multifamily space between 2019 and 2021, it was a 52% increase versus the last 10 years. A lot of those loans are coming due where now base rates are obviously much higher. And so we do think about the dynamics of like, now, when we think about real-estate opportunities-- it could be both on the equity side but even on the credit side-- you can have great assets with the wrong balance sheet as base rates have come up.

And so we are thinking through opportunities as well that we're talking to a lot of our clients about. Because you could access several of these in one allocation to real estate.

You bet. And you mentioned two ways to play in real estate-- equity or debt. I think one of the things that's also interesting about the platform that we've built here on the JPMorgan alternatives platform is just there are also two ways to play structurally. For clients who are just looking for the potential to add income into a portfolio, you can think about accessing it through evergreen or semiliquid vehicles, which are a new and evolving part of the market, but we continue to see opportunities there, you can also do it through drawdown capabilities.

And sometimes, whether it's equity or it's credit, it varies what access point we have. But there are two ways to play structurally also that I think make a difference, whether capital appreciation is your goal or if just the potential for income's your goal.

Yeah. And even on the income side, to put some of these assets in a REIT-type structure-- and when you think about a tax-paying individual in the US and what that means to earn that income in a REIT structure. There's other benefits too that we love talking to clients about, in terms of how to access this.

Sure. So last but not least, number five-- and I think this is one that historically maybe has been slightly controversial, but I'd say hedge funds are back. And

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Slide: Hedge funds: Potential diversification & capitalization on volatility. Three sets of vertical bars compare returns during major market sell offs across the years 2000, 2001, 2002, 2008, 2022, and March 2025 using dark blue for a 50 50 HFRI RV Macro Blend teal for MSCI World and orange for the S and P 500. In each downturn the dark blue hedge fund bars sit noticeably higher than the deeper losses in the equity indices such as steep teal and orange drops in 2008 near minus 40 to minus 45 percent and double digit declines in 2000, 2001, 2002, and 2022. By March 2025 the dark blue bar sits near zero at 0.1 percent while the teal and orange bars show small negative returns. Text: Past performance is no guarantee of future results It is not possible to invest directly in an index Sources Bloomberg Public Equities S and P 500 Public Fixed Income Bloomberg US Agg April 2025 Hedge Fund HFRI Macro Total Index Bloomberg HFRI 2025.

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I was being a little cute there. But I think what's just interesting is, we continue to have this conversation around diversification. And when we think about clients building really well-diversified and balanced portfolios over time, I think there's space in them for hedge funds.

And I think when we think about the due diligence and underwriting we're doing here, it's very particular around the asset classes that we're picking and choosing from and whether you want to be a thematic investor or whether you want to invest truly to build in the ability for hedges in a portfolio. You would think about hedge funds in a number of different ways. I think what we think about is on the macro or relative value or just simply a multistrategy portfolio that's sort of investing across asset classes. Hedge funds can be an interesting allocation to the portfolio.

Talk to me about, one, how you think about hedge funds in the portfolio, from whether a sizing perspective or an allocation perspective, and then why you've always thought hedge funds were sort of here to stay.

Yeah. We just celebrated 30 years of allocating to hedge funds at JPMorgan, which we're really proud about because there's so much data that's given us over time. And you're right, we did go through what I call an alpha winter in the hedge fund sort of ecosystem. And I say, it's not an asset class, it's an industry. There's over 9,000 hedge funds. We invest in less than a hundred of them. There's a wide dispersion of both strategies and then managers, in terms of their ability to outperform why we invest in them.

And so, again, it's an alternative to something. And so for a lot of our clients, hedge funds have served as an alternative to a diversifier like fixed income. Because as stock bond correlations have risen, we're looking again for less-correlated return streams. And what you'll see is that if you think about a 50/50 blend of the HF relative value macro index, it has outperformed, from a diversification perspective, even what you see on the 60/40.

And so it does have a purpose in portfolios. Now the question is, why do we believe that hedge funds can play an important role on a go-forward basis? Part of it is what I just mentioned. Stock bond correlations are increasing and so the need and the want for uncorrelated returns streams. The other thing-- and why they had this alpha winter-- was because base rates were zero for so long that if you were to hedge the market or go short something, you weren't earning anything while you waited to-- whatever investment you were going to make.

So the concept of a short rebate didn't exist on the market for almost a decade. And so that's something that-- the base rates don't have to be high for that, but they just have to be somewhat normalized. Also, the volatility and the dispersion of markets matters for someone that is trying to hedge, whether it's within a single-company cap table or when you think about across an industry. And so there was a decade where it made more sense to be long the beta of markets than to think about hedge funds. Because a lot of hedge funds are macro managers. Many of them do not take beta risk in their portfolios. So they're really trying to take advantage and capitalize on volatility in the markets.

And so for the last five years, it has served our portfolios well to have an allocation to hedge funds. But again, in the world of 9,000, there's only less than 1% of that we invest in. But we continue to find really unique, uncorrelated return streams of specialists that can target inefficiencies in the markets to generate alpha for our clients.

Sure. And I think the punchline of everything there truly is just, when you find the right manager and you underwrite a track record and an expertise and, to your point, a specialist, you have the opportunity for some of this premium of return, which, again, is why we're having the conversation today. For those of you who are in the place, from an investing perspective, where you can take a little bit of illiquidity risk, you can step into private markets, whether it's a 5%, 10%, or 15% allocation, there are ways that you can achieve both diversification and also the potential for a premium return.

And by the way-- you and I have talked about this for a long time. I always say, if you start at $100 and you're down 50% and up 50%, you're not back at $100. You're at $75. And if you could take that same $100 and instead try to have a buffer on the downside-- so maybe you're down, let's say, half the market. And again, I'm not saying all hedge funds can achieve this. But if you could be down 25% and up 25%, you end up at 93.75. And so the point is that if you can make the roller coasters of market this baby roller coasters, over time, you can compound at a higher rate and a higher overall level. And so that is the goal of what hedge funds are.

Now, the question is, who can deliver it? And for the public markets and the S&P, when you look over the last decade and you think about the next decade of what it's going to bring, the question is whether you want to be long the beta of the markets or you want to actually think about folks that can capitalize on that volatility.

That's right. And as we always tell our clients, there's room in the portfolio for both. And most clients are anchored in public equities, as we are. And so there's a place for this in the portfolio. And so working with your JPMorgan advisor, it's really important to carve out, what is the percentage that potentially makes sense for this part of the market? But we wanted to arm everyone with the five ideas we thought were compelling today.

So thank you so much for your time today, Kristin. I hope that we said something interesting or something that resonated in some capacity for you all today. It was a blast to get to spend some time. To that point, if anything was interesting, feel free to reach out to your JPMorgan team. We will be around to continue to have conversations, and we will be back next month with alternatives access. We're going to spend some time diving into agentic AI and how to access that across private markets. But thanks so much, Kristen.

Thank you.

See you guys next time.

Thank you for joining us. Prior to making financial or investment decisions, you should speak with a qualified professional in your JPMorgan team. This concludes today's webcast. You may now disconnect.

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Logo: J.P. Moran. IMPORTANT INFORMATION. An investment in alternative investment strategies involves substantial risks, and potential investors should clearly understand the risks involved. Investing in alternative investment strategies is speculative, not suitable for all clients, and intended for experienced and sophisticated investors who are willing to bear the high economic risks of the investment, which can include: loss of all or a substantial portion of the investment due to leveraging, short selling or other speculative investment practices; lack of liquidity in that there may be no secondary market for the fund and none expected to develop; volatility of returns; restrictions on transferring interests in the fund; absence of information regarding valuations and pricing; delays in tax reporting; less regulation and higher fees than mutual funds; and advisor risk. This communication is provided for information purposes only and therefore does not constitute an offer or a solicitation of an offer of shares or investment services. Certain investment opportunities may not be available in all jurisdictions, may not be suitable for all investors and may require the signature of certain additional documentation before they may be offered. Certain opinions, estimates, investment strategies and views expressed in this document constitute our judgment based on current market conditions and are subject to change without notice. This material should not be regarded as research or as a J.P. Morgan research report. Investors may get back less than they invested. Past performance is not a reliable indicator of future results. Please read all Important Information. To the extent that this material relates to investment activities, it is directed solely at persons to whom it may be lawfully directed, as provided for under section 238 of the FSMA, the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemption) Order 2001, as amended from time to time, and Chapter 4 of the Financial Conduct Authority’s Conduct of Business Sourcebook. Any investment services and products will only be available to, or engaged in with, such persons, and no other person should rely or act upon information contained in this communication. Some of the products and/or services mentioned may not be available in all jurisdictions.

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