Tuesday 19 June 2018

Jamie Dimon

JP Morgan CIO chief quits after trading loss

New York, May 14, 2012

JP Morgan Chase & Co sacrificed investment chief Ina Drew on Monday in response to trading losses that could reach $3 billion or more and which have tainted the reputation of the bank's high profile chief executive Jamie Dimon.

The biggest bank in the United States by assets said Drew, its New York-based chief investment officer and one of its highest-paid executives, would retire. The statement confirmed what sources close to the matter had previously told Reuters, that Drew would depart the firm.

It also said Matt Zames would take Drew's position, while Daniel Pinto, currently co-head of global fixed income with Zames, would become sole head of the group.

Mike Cavanagh, CEO of the Treasury & Securities Services (TSS) group, will lead a team of executives overseeing and co-ordinating the group's response to the recent losses.

The statement made no mention of two of Drew's subordinates who were involved with the costly derivatives trades, London-based Achilles Macris and Javier Martin-Artajo, who the sources had also said were expected to leave.

Neither could be reached for comment earlier on Monday. A woman who answered the door at Macris's London apartment in a grandiose 19th century mansion block overlooking Westminster Cathedral said he was at work.

JP Morgan said Cavanagh 'will ensure that best practices and lessons learned are carried across the firm.'     

The departure of Drew after 30 years at JP Morgan comes after the unit she ran, known as the Chief Investment Office (CIO), mismanaged a portfolio of derivatives tied to the creditworthiness of bonds, according to bank executives.

The portfolio included layers of instruments used in hedging that became too complicated to work and too big to quickly unwind in the esoteric, thinly traded market.

One hedge fund manager who previously ran a proprietary (or prop) trading book at JP Morgan said the bank's public commitments to trim balance sheet risk were at odds with its network of trading silos, who were making bets independently with only a handful of the bank's most senior executives notified of their vast, complex exposures.

'This (CIO) group was completely separate, completely distinct from the prop trading unit. We had no clue about their prop book and they would have no clue about ours for that matter,' the manager said.

'They were all totally independent. All the activities were reported to New York and they ran the allocation of capital to each and every strategy ... those decisions were definitely not taken in London. These things were very, very opaque. Every bank is, whether you're Goldman, Morgan (Stanley) or JP.'

Drew had repeatedly offered to resign in recent weeks after the magnitude of the debacle became clear, according to one of the sources, but the resignation was not immediately accepted because of her past performance at the bank.

Until the loss was disclosed late on Thursday, Drew was considered by some market participants as one of the best managers of balance sheet risks. She earned more than $15 million in each of the last two years.

'Ina is an amazing investor,' said a money manager who knows Drew, but who declined to be quoted by name. 'She's done a really good job over a lot of years. But they only remember your last trade.' - Reuters 

Tags: investment | CIO | hedge | JP Morgan | derivatives | drew |


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