James E. Staley, the JPMorgan Chase & Co. (JPM:US) executive once seen as a candidate to become chief executive officer, quit to join BlueMountain Capital Management LLC, the $12 billion hedge fund that profited from the bank’s trading loss last year.
Staley, who was at JPMorgan for more than 34 years, will become a managing partner and purchase a stake in BlueMountain, the New York-based firm said today. The former investment banking chief, Staley last year handed off day-to-day management duties and became chairman of the corporate and investment bank in a series of executive changes as JPMorgan grappled with wrong-way bets in its chief investment office in London.
“I’m very excited to be joining BlueMountain at a time when sea changes in the financial industry combined with the firm’s unique strengths open up enormous possibilities to deliver value to clients,” Staley, 56, said in the statement.
Staley, who rose from his post as an investment banker in Brazil, took over JPMorgan’s investment bank in 2010 after chief executive officer Jamie Dimon ousted co-heads Steve Black and Bill Winters. He was stripped of all day-to-day management duties and passed over for promotion in July. He had been looking for a new job for several months, according to people with knowledge of the situation.
BlueMountain, co-founded in 2003 by Andrew Feldstein, who helped create the credit-derivatives market while he worked for JPMorgan in the 1990s, aided the bank last year as it unwound trades at the heart of what became at least $6.2 billion in losses at its CIO unit.
“Jes is one of the most experienced and successful leaders in the industry and has played a key role at one of the world’s most successful financial institutions,”Feldstein, the 48- year-old chief executive and chief investment officer of BlueMountain, said in the statement. “Not only has he had a front row seat for the evolution of the financial industry, but he’s also one of the most ethical people we’ve worked with.”
BlueMountain benefited after a trader in the JPMorgan CIO unit, Bruno Iksil, had built a portfolio of credit derivatives so large it distorted price relationships in the market, first reported by Bloomberg News on April 5. The hedge fund compiled offsetting index trades to help JPMorgan unwind the position, people familiar with the trading said at the time.
Staley warned Dimon that supervision and risk controls in former Chief Investment Officer Ina Drew’s division weren’t strong enough, current and former executives said last year. Dimon brushed off the concerns, one of the people said. JPMorgan has denied that assertion.
Staley was moved to a new role in July when Dimon named Matt Zames, who worked for Staley in the investment bank, co- chief operating officer with Frank Bisignano. London-based Barclays Plc and Baltimore-based Legg Mason Inc. both considered hiring him as CEO during searches last year, the Wall Street Journal and CNBC reported at the time.
“Jes has been an extraordinary leader and a valued partner for many of us at JPMorgan over the years,” Dimon said in an e- mail to senior managers today. “While Jes is leaving JPMorgan Chase, he is joining a respected private investment firm, BlueMountain Capital. BlueMountain is an important client of ours, and we look forward to working with Jes in the future.”
Feldstein co-founded BlueMountain with Harvard Law friend Stephen Siderow in a spinoff from BlueCrest Capital Management LLP. Affiliated Managers Group Inc., the company with stakes in firms overseeing about $416 billion, last year increased its minority stake in BlueMountain.
Proceeds from the stake sale to Staley will be invested in new infrastructure, technology and people, BlueMountain said.
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