JPMorgan Chase & Co.’s Mary Callahan Erdoes got her first assignment managing money when she was 6 years old. The eldest of four children, Erdoes showed an early aptitude for math that was fostered at her grandmother Kay’s suburban Chicago breakfast table, where she helped balance her grandparents’ checkbook on an adding machine.

“It was my first foray into money management,” Erdoes, 46, says.

Today, Erdoes oversees $2.2 trillion as chief executive officer of JPMorgan Asset Management, the sixth-largest money management operation in the U.S., according to data compiled by Pensions & Investments. Erdoes’s unit includes everything from 401(k) assets to hedge funds. It produced a 24% return on equity last year compared with 9.7% at BlackRock Inc., the largest U.S. money manager, and 15.4% at Fidelity Investments.

JPMorgan Asset Management’s profit, before provisions for credit losses, was up 14% from 2009 to $2.8 billion in 2012, compared with a 37.5% decline at the larger bank.

Total client assets rose 29.2% from September 2009, when Erdoes took the helm, to the end of June. JPMorgan oversaw $1.47 trillion directly plus $687 billion in client money invested with other firms.

“The flows are coming from every single region that we have around the world and, equally important, they are coming from every single channel and every single product,” Erdoes says.

Low Profile
Compared with her outspoken boss, JPMorgan CEO Jamie Dimon, Erdoes keeps a low public profile. Yet she’s among the most powerful and respected executives in finance, says bank analyst Michael Holland, chairman of Holland & Co., a long-term investor in JPMorgan.

“Quietly, she is a force, one of the most influential executives in the business,” Holland says. “Jamie Dimon promotes people who are the best at what they do. She is the best.”

Neil Rue, a managing director at Pension Consulting Alliance Inc. in Portland, Ore., says that under Erdoes, JPMorgan has risen from a middling player in pensions to the top of the heap.

“Their track record is such that clients can be reasonably confident they’ll deliver on expectations,” he says.

Although asset management generates just 10% of revenue at JPMorgan, it’s become an increasingly attractive business for U.S. banks as regulators step up capital requirements, says Jason Goldberg, an analyst at Barclays Capital in New York. Under the 2010 Dodd-Frank law, banks have to hold more capital against risky activities, such as trading, beginning next year.

Companies are also building capital to meet new Federal Reserve rules beginning in 2016 that require the largest U.S. banks, including JPMorgan, to hold an extra buffer against an economic downturn.

“Asset management is a great business, particularly in the new environment,” Goldberg says. “It’s a high-return-on-equity, high-fee-income, global business that is not capital intensive and that’s growing.”

Erdoes was a standout even in high school, says Mary Crook, who taught her calculus at Woodlands Academy of the Sacred Heart, an all-girls Catholic high school in Lake Forest, Ill. She graduated No. 2 in her class and was an accomplished pianist, says Crook, who wrote Erdoes a recommendation for the mathematics program at Georgetown University in 1985.

Math Graduate
Erdoes was the only woman to graduate from Georgetown with a math degree in 1989. She went on to Harvard Business School for her master of business administration.

Erdoes is a survivor at a bank whose senior management ranks have been thinned in the past four years by a series of shake-ups, including one following last year’s $6.2 billion-plus trading loss at the London-based chief investment office, which isn’t part of asset management. The scandal cost Ina Drew, the head of the unit, her job and in August resulted in criminal charges against trader Julien Grout and his supervisor, Javier Martin-Artajo, for wire fraud and other crimes.

Erdoes replaced James E. Staley as head of asset management in 2009, when he was promoted to run the investment bank. Staley, who left JPMorgan last year to join hedge-fund firm BlueMountain Capital Management LLC, says he first met Erdoes in 1999, when he took over JPMorgan’s private bank, where she had worked since joining JPMorgan in 1996 from Meredith, Martin & Kaye, a fixed-income advisory firm.

Always There
“The private bank was a pretty demoralized place,” Staley says. It was losing money, clients and assets. Staley says he would walk the private bank’s six floors late at night. “Amid the sea of empty desks, this one young woman was always there,” he says.

Erdoes, who was an advisor on short-term, fixed-income investing at the time, replaced Staley as head of the private bank four years later. Assets in the unit, which serves ultra-high-net-worth individuals, swelled 88.9% from September 2009 to $340 billion at the end of June.

Erdoes says she’s a worrier. Her day starts around 5:30 a.m., when she scans the overnight financial news. By 6:30, she’s in the office on calls with Asia and Europe as executives in those offices are winding down and before she runs the 8 a.m. global asset management call.

Throughout the day, Erdoes watches her team’s performance on five computer screens in her office, which is down the hall from CEO Dimon’s in the executive suite on the 48th floor of JPMorgan’s headquarters on Park Avenue in New York.

“You worry just as much about great performance as you do about underperformance,” she says. “So we spend a lot of time making sure we know why we’re getting great performance. Are we getting it for the right reasons or for lucky reasons? You never want lucky reasons.”

JPMorgan runs the world’s sixth-biggest mutual fund company, according to Morningstar Inc. in Chicago. The bank says its mutual funds managed $407 billion as of June 30, up 59% since September 2009.

“If they’ve stood out in an area, it’s in bringing in assets,” says Laura Lallos, a senior mutual fund analyst at Morningstar. “They are proving very popular with investment advisors.”

Because JPMorgan’s portfolio managers tend not to take dramatic risks, their funds are consistent performers and are less volatile than those of other firms, which makes them easier to sell to retail investors, Lallos says.

One unit under Erdoes’s command that has underperformed is institutional money management, which caters to big pension funds, governments and central banks. Assets under management declined 1.9% to $723 billion in June from $737 billion in September 2009.

Institutional money management’s fixed-income holdings lagged their benchmarks from 2005 to 2007, Erdoes says. In 2008, most fixed-income managers were replaced, and it has been Erdoes’s job to rebuild, an especially difficult job in the middle of the worst U.S. economy since the Great Depression.
“We had a lot of assets that had us on probation, and we wanted to make sure we knew what we were doing,” Erdoes says. “We persevered, and we now have a really strong three-year, almost-four-year track record.”

Fixed-Income Fix
More than 80% of JPMorgan’s fixed-income mutual funds now rank in the top 25th percentile among investments tracked by Morningstar for five-year performance.

Erdoes is in the middle of a tricky transition as Glenn Dubin, 56, the longtime head of Highbridge Capital Management LLC, gives up daily oversight of the hedge-fund company he founded in 1992 and in which JPMorgan took a controlling stake in 2004. Highbridge, with about $30 billion in assets, is part of a suite of JPMorgan Asset Management alternative offerings that include funds of hedge funds, funds of private-equity funds and real estate.

Wealthy clients had invested $147 billion in alternatives as of the end of the second quarter, up 56.4% from late 2009. The bank doesn’t disclose performance figures for alternative assets.

The new head of Highbridge, Scott Kapnick, whom Dubin hired in 2007 from Goldman Sachs Group Inc., was named on July 12. Dubin remains Highbridge chairman. Erdoes says her worry was that when Dubin stopped running Highbridge, longtime clients loyal to him would take their money elsewhere.
“Lo and behold, here we are,” she says, “and our clients continue to give us assets.”

Erdoes broadened the bank’s alternative investment portfolio and international reach in 2010, when JPMorgan acquired a majority stake in Brazilian hedge-fund firm Gavea Investimentos Ltd., founded by former Central Bank of Brazil head Arminio Fraga.

With assets in almost all of her fiefdoms growing, Erdoes has been on a hiring binge. Asset management took on 1,366 new employees in the 12 months through June—an 8% increase—even while JPMorgan Chase announced plans to cut 19,000 people in the consumer bank through 2014.

Many of the hires in asset management are outside the U.S. The division has received record amounts of new money from Japan during the past year, Erdoes says, plus a surge in private-bank deposits from Hong Kong and Taiwan and strong institutional and mutual fund flows from Italy and Spain.

“Clients are becoming more global; they’re realizing that markets are more interconnected,” Erdoes says. “It’s no longer the local regional clients buying the local regional flavors. It’s everybody asking for everything.”

Erdoes mixes often with those clients, says E. John Rosenwald, the 83-year-old vice chairman of the private bank and former vice chairman of Bear Stearns Cos., which JPMorgan took over in 2008. She has a second office at the private bank so she can meet important customers, he says.