JPMorgan Chase & Co. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with JPMorgan Chase & Co. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.
The material contained herein is intended as a general market commentary. Opinions expressed herein are those of Robert Klein and may differ from those of other J.P. Morgan employees and affiliates. This information in no way constitutes J.P. Morgan research and should not be treated as such. Further, the views expressed herein may differ from that contained in J.P. Morgan research reports. The above summary/prices/quotes/statistics have been obtained from sources deemed to be reliable, but we do not guarantee their accuracy or completeness; any yield referenced is indicative and subject to change. Past performance where presented throughout this document is not a guarantee of future results.
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References to the performance or character of our portfolios generally refer to our Balanced Model Portfolio constructed by J.P. Morgan. It is a proxy for client performance and may not represent actual transactions or investments in client accounts. The model portfolio can be implemented across brokerage or managed accounts, depending on the unique objectives of each client, and is serviced through distinct legal entities licensed for specific activities. Bank, trust and investment management services are provided by JPMorgan Chase Bank, N.A. and its affiliates. Securities are offered through J.P. Morgan Securities LLC (JPMS), member NYSE, FINRA and SIPC, and its affiliates globally as local legislation permits. Securities products purchased or sold through JPMS are not insured by the Federal Deposit Insurance Corporation (FDIC); are not deposits or other obligations of its bank or thrift affiliates and are not guaranteed by its bank or thrift affiliates; and are subject to investment risks, including possible loss of the principal invested. Not all investment ideas referenced are suitable for all investors. Speak with your J.P. Morgan representative concerning your personal situation. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Private investments may engage in leveraging and other speculative practices that may increase the risk of investment loss, can be highly illiquid, are not required to provide periodic pricing or valuations to investors and may involve complex tax structures and delays in distributing important tax information. Typically, such investment ideas can only be offered to suitable investors through a confidential offering memorandum, which fully describes all terms, conditions and risks. High yield bonds are speculative non-investment grade bonds that have higher risk of default or other adverse credit events and which are appropriate for high-risk investors only. Investments in commodities carry greater volatility than investments in traditional securities. There are additional risks associated with international investing and may not be suitable for all investors. This material is distributed with the understanding that J.P. Morgan is not rendering accounting, legal or tax advice. You should consult with your independent advisors concerning such matters.
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KEY RISKS OF INVESTING IN ALTERNATIVES
General/Loss of capital. An investment in private equity funds involves a high degree of risk. There can be no assurance that (i) a private equity fund will be able to choose, make and realize investments in any particular company or portfolio of companies, (ii) the private equity fund will be able to generate returns for its investors or that the returns will be commensurate with the risks of investing in the type of companies and transactions that constitute the fund’s investment strategy, or (iii) an investor will receive any distributions from the private equity fund. Accordingly, an investment in a private equity fund should only be considered by persons who can afford a loss of their entire investment due to its high degree of risk. Investors in the private equity fund could lose up to the full amount of their invested capital. The private equity fund’s fees and expenses may offset the private equity fund’s profits. Past performance is not indicative of future results.
Lack of information. The industry is largely unregistered and loosely regulated with little or no public market coverage. Investors are reliant on the manager for the availability, quality and quantity of information. Information regarding investment strategies and performance may not be readily available to investors.
Limited liquidity generally. Interests are not publicly listed or traded on an exchange or automated quotation system. There is not a secondary market for interests, and as a result, invested capital is less accessible than that of traditional asset classes. Also, withdrawals and transfers are generally restricted.
Limited liquidity for private equity. Investments in private equity funds are intended for long-term investors who have the financial ability and willingness to accept the risks associated with making speculative and primarily illiquid investments. Interests in the private equity funds are generally not redeemable. An investor in such a fund may not freely transfer, assign or sell any interest without the prior written consent of the fund manager. An investor may not, save in particular circumstances, withdraw from a private equity fund. Interests in private equity funds will not be registered under the U.S. Securities Act of 1933, as amended or any other securities laws in any jurisdiction. There is no liquid market for such interests and none is expected to develop. Consequently, a commitment may be difficult to sell or realize.
Dependence on manager. Performance is more dependent on manager-specific skills, rather than broad exposure to a particular market.
Event risk. Given certain funds’ niche specialization (e.g., in an industry or a region), market dislocations can affect some strategies more adversely than others.
Speculation. Alternative investments often employ leverage, sometimes at significant levels, to enhance potential returns. Investment techniques may include the use of derivative instruments such as futures, options and short sales, which amplify the possibilities for both profits and losses and may add volatility to the alternative investment fund’s performance.