$14bn gatekeeper outlines EM moves, real estate adds

Kent Demien, director of investment research and financial planning at Johnson Financial Group, said the firm has paused a couple of emerging market equity funds as they prepare to add a new strategy.

Johnson Financial Group’s top gatekeeper, Kent Demien, has been busy this past year making some recent additions within real estate and active ETFs, while also moving away from some emerging market equity funds.

As director of investment research and financial planning, Demien leads - and is one of - eight analysts on the $14bn firm’s manager research team. The team has an approved list of 209 strategies, including 125 mutual funds, 82 passive ETFs and 2 active ETFs. Outside of that list, the team offers interval funds and LP-related funds to advisors.

Earlier this month, Demien was promoted to director of financial planning, in addition to director of investment research. With this promotion, Demien now has two financial planners who report to him. Demien acknowledged that while it’s rare for the same person to be the director of both facets, he’s confident in himself and his team.

‘I might have said no if I didn’t think our team was doing a really good job. I feel like we’re really on top of our managers,’ Demien said.

For example, Drake Dorfner, the team’s international equities analyst, just finished his emerging markets equity search. Demien said Dorfner moved away from some strategies that he didn’t have ‘high conviction in.’

The strategies are the $994.4 Aberdeen Emerging Markets fund (ABEMX) and the $14.8bn Invesco Developing Markets fund (ODVIX).

According to Demien, Dorfner didn’t like the fund’s poor performance in the past few years - which has failed to meet the benchmark.

Over the last three years, ODVIX has had an annualized return of 6.20%, behind its peers in the Morningstar Large Growth category, which returned an average of 8.29% over that same period.

‘He doesn’t think the manager is bad, he just doesn’t want people to add more money to it while he further evaluates that strategy,’ Demien said.

Demien said Dorfner hasn’t presented him with what emerging market equities strategy (or strategies) he plans to add, but that it will happen soon.

Dorfner joined Johnson a little over a year ago, in May 2024. Dorfner is just beginning his research into international equities, which Demien said is a ‘pretty sexy topic’ right now.

‘But that’s not really why he’s doing a search. He’s doing a search because it’s time for him to get in there and learn his area,’ Demien said.

Alternative adds

Johnson Financial has added two alternative real estate strategies.

The search wrapped up in May and was led by Jon Henshue, director of alternatives strategy. The team added the JP Morgan Real Estate Income Trust (JPMREIT) and the $977.55m Clarion Partners Real Estate Income fund (CPREX).

Demien said they used bfinance, a London-based due diligence consulting firm, to source the funds.

When adding real estate funds, Demien said the team was looking at managers who have a target return of ‘preferably higher’ than 8%.

This return expectation is unique to real estate due to the extensive work required when establishing a general or limited partnership.

’So if the expected return isn’t high enough, then what are we even bothering with this for?’ Demien asked.

The next item on the team’s agenda is infrastructure. Demien said they are looking at GP or LPtype relationships, or interval funds within that space that make sense.

‘One of the things that’s super attractive about infrastructure is that you get those cash flows regardless of what goes on,’ Demien said.

Because of that steady cash flow, infrastructure strategies don’t have the same return requirements as real estate, he explained.

First active ETFs

Also new in the past year has been the addition of two active fixed income ETFs, the first active ETFs offered through Johnson.

The ETFs are the $6.6bn JPMorgan Core Plus Bond ETF (JCPB) and the $31.5bn JPMorgan Ultra-Short Income ETF (JPST).

Demien said it’s ‘just a coincidence’ that both the ETFs are from JPMorgan, and the firm only accounts for a few of the strategies on their approved list.

‘’We leverage them often because they’re amazing and deep and really good researchers,’ Demien added.

The products are exclusively offered in Johnson’s internal ETF-only model, but Demien said he’d love to expand their reach and use them in their regular model, as well as expanding access so they can be used within SMAs.

As seen in CityWire.com