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JPMorgan (JPM) on Expansion Spree, to Acquire OpenInvest

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JPMorgan JPM is on an expansion spree through strategic on-bolt acquisitions. The bank has inked a deal to acquire San Francisco-based start-up, OpenInvest. The financial terms of the deal, expected to close in the third quarter, were not revealed.

Founded in 2015, OpenInvest is a FinTech company. Through its various products, the firm enables financial advisors to build, manage and report on their environmental, social, and governance (ESG) portfolios. Also, it provides ESG investment management products.

Upon closure, OpenInvest will retain its brand name and be part of JPMorgan’s Private Bank and Wealth Management client offerings. Further, the deal complements the company’s acquisition of Boston-based 55ip, a FinTech firm with focus on the creation of tax-efficient investment strategies.

JPMorgan is planning to leverage OpenInvest's ESG skills with that of 55ip's tax-smart investment strategies to offer personalized solutions to clients “that are values-aligned and tax-efficient.”

Our Take

At present, ESG investing is gaining traction. The coronavirus pandemic has shifted investors’ interest toward those companies that perform well on ESG targets. So far this year, ESG funds have attracted huge investments across the globe.

Mary Callahan Erdoes, CEO of JPMorgan’s Asset and Wealth management segment, said, “Clients are increasingly focused on understanding the environmental, social, and governance (ESG) impact of their portfolios and using that information to make investment decisions that better align with their goals.”

Also, earlier this month, JPMorgan’s asset management division — J.P. Morgan Asset Management — announced a deal to acquire Campbell Global, LLC, a forest management and timberland investing company. Through the move, the bank seeks to directly make its mark on the transition to a low-carbon economy and provide ESG-minded investment opportunities.

Apart of these buyouts, JPMorgan has plans to further expand its reach globally. The bank has announced the acquisition of one of the U.K.’s largest robo advisory firms, Nutmeg. This will support its endeavors in establishing a digital retail bank (under the Chase brand) in the country later this year.

Additionally, the bank has entered into an agreement to acquire a 40% ownership stake in Brazil’s full-service digital bank, C6 Bank. The financial terms of the deal, subject to regulatory approvals, have not been disclosed yet.

Last year, at an investors’ conference, the company’s CEO Jamie Dimon signaled that the bank is considering buying asset management businesses or FinTech companies to further accelerate growth. Also, he noted that JPMorgan will be carrying out on-bolt acquisitions that are likely to support its efforts to digitize operations and improve market share in several lucrative businesses.

So far this year, shares of JPMorgan have gained 21.3% compared with 27.5% growth recorded by the industry.

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Currently, JPMorgan carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Competitive Landscape

Many finance companies have started to come ahead and participate in ESG investing for the past couple of years. In June this year, BlackRock BLK announced a deal to acquire the Climate Change Scenario Model of Baringa Partners and integrate the same into its own Aladdin risk management system. Earlier in February, Affiliated Managers Group AMG announced a deal with Boston Common Asset Management, LLC.

In November 2020, Moody's MCO acquired a minority stake in MioTech, as part of its efforts to offer innovative ESG and know your customer solutions to the financial markets of China. Also, in 2019, Moody’s acquired a majority stake in Vigeo Eiris, a global leader in ESG research, data and assessments.

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