JPMorgan has SECRET plans. I read about them on CNBC's website.  

Secret JPMorgan project aims to push bank deeper into growing market serving private companies

CEO Jamie Dimon is aggressively investing to help his bank battle fintech firms.

CNBCHugh Son

Secret's out now. And CNBC know a helluva lot for something so secretive...

A key part of Project Bloom is a digital network for JPMorgan clients that will match start-ups with investors, helping them in fundraising rounds, said the people.

Other planned-for services include helping companies sell shares in tender offers or providing loans on private stakes, offering a digital interface for secondary trading of private company stock, and helping venture capital firms raise new funds.

While elements of these offerings exist across parts of JPMorgan’s sprawling operations, the new effort aims to create a one-stop digital portal for start-ups and venture capital firms, family offices and other institutional investors, said the people.

The business aims to tie in offerings from the firm’s corporate and investment bank, commercial bank and private bank. For instance, the private markets trading desk first reported by CNBC in 2020 will feed into the new platform, according to the sources.

By creating a self-service platform, JPMorgan can target smaller, earlier-stage companies than its bankers traditionally engage with, helping them raise funds and offering automated recommendations, the people said.

What's the goal?

JPMorgan appears to be betting that if it can create a fully-scaled private company network before the fintechs do, its place in a future in which private companies have even greater importance will be assured.

Makes sense. Fend off competition from the pesky little fintechs before they can truly scale and compete with you...

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This trend towards private equity is nothing new. Michael Mauboussin & Dan Callahan wrote about it back in 2020 here:

From the end of World War II through the early 1970s, many companies went public to raise capital to fund their growth.

Today, young companies often rely more on intangible assets and have a less voracious appetite for capital.

They also have unprecedented access to capital through the private markets. Consequently, many young companies have elected to stay private longer than did the companies of prior generations.

Those intangible assets again!

Basically, firms don't need as much investment to buy machinery for factories nowadays. This is the digital era.

Stripe's a great example of a private firm doing exceptionally well. 👇

What Growth Strategy made Stripe the largest venture-backed private company

How product development-based growth strategy helped payment processing giant “Stripe” become the most valued ($95 bn) venture-backed private company?

The Strategy StoryAbhiyash Jain

And there are plenty of 'unicorns' out there... 👇

That earlier quote from the CNBC piece grabbed my attention...

a future in which private companies have even greater importance will be assured

Even greater importance than this...? 👇

In recent decades, sophisticated investors, including pension funds and endowments, have moved their asset allocation toward private markets in search of higher returns.

For example, Yale University’s endowment, run by its chief investment officer David Swensen since 1985, has delivered excellent long-term returns and is considered a pioneer in asset allocation.

When Swensen took the helm in the mid-1980s, about 65 percent of the portfolio was allocated to U.S. equities, 15 percent to U.S. bonds, and none to private equity.

Today, U.S. equities, bonds, and cash are less than 10 percent of the endowment’s target asset allocation. Further, companies have raised more money in private markets than in public markets in each year since 2009.

For example, companies raised $3.0 trillion in private markets and $1.5 trillion in public markets in 2017.

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Is private equity in for a rough ride?

There is a strong negative correlation between the average price paid for businesses and subsequent PMEs in the buyout business. Multiples in 2019 were at a record. This concern is partially mitigated by low interest rates.

If inflation can't be brought under control and interest rates do need to rise above neutral as some have suggested, a lot of the old assumptions will be challenged.  

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