Structuring is commonly defined as to construct or arrange according to a plan; to give a pattern or organization to.

It sounds straightforward and benign enough, but in financial markets, structuring is perceived as one of the more esoteric business lines, sometimes misunderstood and perceived as overly complex.

Rui Fernandes and his team are on a mission to help change that perception– one client solution at a time.

“Structuring doesn’t necessarily mean complexity,” said Fernandes, Global Head of Markets Trading Structuring at JP Morgan. “What it is, is bespoke. It is a very specific way to address a very specific client need.”

“We tailor it, we make it bespoke in terms of the wrapper, the delivery mechanism, and the payoff,” Fernandes continued. “All of these are dimensions that can be adjusted to address a precise client need, which typically you can’t always do with a standardized product.”

Structuring clients range from the largest long-only investment managers and insurance companies, to hedge funds, wealth managers and private banks. If a buy-side firm has a certain scale, chances are that firm will at least periodically need a custom solution that may include a hedge, currency exposure, yield enhancement, and spot funding. This emphasizes the value of structurers on Wall Street.

Three Pillars

In an interview with Markets Media, Fernandes emphasized the importance of the three pillars of JP Morgan Structuring: innovation, customization at scale, and interoperability of platforms.

“We are a sophisticated provider of solutions for clients, with a thriving e-trading agenda that’s central to our markets business and our technology adoption,” Fernandes said.

Regarding interoperability, Fernandes noted that platforms at investment banks are often spawned and developed in silos – it’s the job of the structuring team to promote interoperability across platforms. “If a credit client wants something that combines an element of a credit derivative with an equity option, delivered to a client in an emerging market where we have a local entity structure, then we will aim to deliver all of that.”

Fernandes, who holds a Doctorate in Philosophy in Economics from the University of Oxford, is a managing director and 17-year JP Morgan veteran who was appointed to his current position in January 2024. He had been global head of equities and credit structuring. Based in New York, Fernandes oversees a global team with coverage across all asset classes and JP Morgan offices globally. Other key structuring leaders include Arnaud Jobert, Global Head of Equities Structuring, and Denis Gardrat, Global Head of Credit Structuring.

Sell-side structurers face the challenge of working with the often complex needs of global asset managers with tens or hundreds of billions of dollars under management, amid an always-shifting macro landscape that currently features expectations of lower interest rates, election and geopolitical risk, elevated stock valuations, and the threat of market volatility.

Capital requirements, regulatory compliance, and liquidity needs and constraints are among a number of factors that large pension plans and insurance companies need to manage on an ongoing basis.

Understanding the tradeoff

“It’s not just ‘I want exposure to this asset class or that asset class’,” Fernandes said. “There’s a lot of expertise that goes into delivering solutions for them, and there’s a lot of work that goes into customizing the types of exposure that clients may be seeking.”

“And let’s face it, generally there is a trade-off in going from standardized to customized, in the sense that the more customized you go, the more potentially illiquid a position is,” Fernandes added. “So part of our job is optimizing that, in an iterative process with clients, so they better understand what any give-up might be in terms of cost or in terms of liquidity.”

Fernandez highlighted two services that JP Morgan is increasingly providing for structuring clients: quantitative investment strategies (QIS), and financing.

Hedge funds in particular are deploying capital into QIS, though overall the product is in the early innings of client adoption. “We want to be part of that story, which means a lot of product innovation and customization – as well as knowledge-sharing. Knowledge-sharing is crucial for successfully guiding clients on this journey, involving both in-person interactions and a continuous narrative.”

As for financing, “we’re a bank and we have a strong balance sheet,” Fernandes said. “Prime brokerage and repo are the classic financing products, but we’ve been doing a lot of work on how we can grow our financing businesses on a cross-asset basis and better meet evolving client needs for more illiquid assets.”

Lastly, Fernandes emphasized that, in his view, any lingering negative perceptions of structuring from the 2008-2009 global financial crisis should be reassessed in light of a strong regulatory response that has sought to increase transparency and tighten capital requirements.

Fernandes added: “Structured isn’t necessarily complex or esoteric. It’s just bespoke.”