By Saeed Azhar
NEW YORK, Dec 10 (Reuters) - JPMorgan Chase's most senior external hire yet, Todd Combs from Berkshire Hathaway, is set to turbocharge its $1.5 trillion push into national security.
Combs, a long-serving deputy to legendary investor Warren Buffett, joined the nation's largest bank this week to lead a team that will invest more than $10 billion of JPMorgan’s own money in companies deemed strategic for the United States. He will report directly to CEO Jamie Dimon.
"Ideally, the cadre of
investors will help JPMorgan identify promising opportunities and effectively identify and circumvent policy obstacles," said Sean Dunlop, a banking analyst at Morningstar.
Combs' group will source deals in areas like technology, defense, rare earths, robotics, and medicines, targeting smaller and mid-sized businesses instead of large-scale acquisitions, a source familiar with the plans told Reuters.
The initiative got rolling in late October as JPMorgan invested in Perpetua Resources Corp, which recently raised $255 million in equity investments.
DIMON'S BUS TOUR
The bank's national security initiative took shape after Dimon's yearly bus tour this summer. During the trip, he visited an L3Harris Technologies facility in Alabama, which provides critical propulsion systems, solid rocket motors and engines for major defense and space programs.
An executive at the company told Dimon about challenges their vendors and supply chain can face because of uncertainty over future order volumes, the source said. Dimon then asked bankers how the bank could help the vendors of large defense companies with similar challenges.
L3Harris declined to comment.
JPMorgan's $1.5 trillion, 10-year plan is to facilitate, finance and invest in industries critical to national economic security and resilience. As part of this new initiative, the bank will make direct equity and venture capital investments of $10 billion or more to help select companies, primarily in the United States.
JPMorgan's new team, led by Combs, will comprise external hires alongside employees who will be redeployed from the corporate and investment bank, as well as asset and wealth management, the source said.
Combs, who led Berkshire-backed insurer Geico, previously sat on JPMorgan's board of directors. He was Dimon's first choice to lead the initiative, the source said.
"Todd Combs is one of the greatest investors and leaders I've known," Dimon said in a statement on Monday. Combs joined Buffett's conglomerate in 2010 after running a hedge fund.
"He loves this company, he really enjoys this company, he knows all the senior people here. It's a natural home," the Financial Times cited Dimon as saying about Combs in a report on Wednesday. "I think he finds it unbelievably interesting to use his skills in different ways."
Combs has "a very impressive long-term investment track record" at Berkshire, said Meyer Shields, an analyst who covers Berkshire Hathaway at Keefe, Bruyette & Woods.
"Think of it as (Combs) metaphorically sitting at his (Buffett's) knee and understanding how Warren Buffett looks at the world ... It's probably a reasonably good background for this strategic role that he's undertaking a JPMorgan."
Buffett's emphasis on executives operating businesses - including Combs during his tenure at Geico - helps them to have deeper knowledge than other investors.
Dimon has consistently linked economic strength to national security, writing in his annual letters to investors that America must rebuild industrial capacity and invest in critical technologies to maintain global leadership.
The U.S. has become too reliant on China for essential resources like rare earths, semiconductors, and pharmaceutical ingredients, Dimon has said. He emphasized that this presents significant risks, particularly as policy disagreements grow between the U.S. and China.
It remains to be seen how much of the bank's $1.5 trillion pledge will be divided between loans and direct investment, and what proportion will see JPMorgan act as an intermediary, Dunlop said.
JPMorgan acted as both as lender and advisor for MP Materials in October, arranging $1 billion of committed financing for a government-backed deal to boost output of rare earth magnets.
(Reporting by Saeed Azhar, editing by Lananh Nguyen and Nick Zieminski)
