Uncertainty over the impact of the acute respiratory pandemic has caused big swings in financial markets in the past few months. Australian equities¹, as represented by the ASX 200 Index, sank 23% in 1Q 2020, reversing their 23% increase in 2019. Australian bonds¹, represented by the Bloomberg AusBond Composite (0+Y) Index, managed to stay in positive territory with a 3% return in 1Q 2020, but still lower than the 7% gain in 2019.
 

1. Source: Bloomberg Finance L.P., Dow Jones, FactSet, J.P. Morgan Economic Research, MSCI, J.P. Morgan Asset Management. Returns are unhedged, total return, in Australian dollars. Data as of 31.03.2020. Past performance is not a reliable indicator of current and future results.

While market volatility has increased and the outlook is uncertain, investors could still find opportunities to seek positive returns and build robustness to different market environments as a part of their overall portfolio allocation.

By taking advantage of market mispricings of macro trends, the JPMorgan Global Macro Opportunities Fund seeks to achieve positive returns over its cash benchmark in up and down markets² with expected annualised volatility of less than 10%. In 1Q 2020, the Fund generated positive returns each month³, and in April, volatility remained low and stable, despite the spike in market volatility.

So how could the Fund achieve this? It employs a macro, focused and flexible investment approach that draws on a broad opportunity set with the ability to take long and short exposures.

Provided for illustrative purposes, subject to change from time to time and not to be construed as investment recommendation or advice.
 

Select focused strategies^4,5

Once the investment team has defined the macro themes, they seek the most efficient reflection of these macro views from across a broad opportunity set of multiple asset classes and through long or short exposures. The Fund is benchmarked⁶ to cash so the team only invests where it finds the best expression of its macro views.

In March, the team took advantage of market moves to adjust physical equity positioning, reducing cyclical exposure and focusing on high quality (strong balance sheets), liquid names across favoured trends, such as cloud computing and e-commerce, the transition towards renewable energy in power generation, and select consumer stocks exposed to a potential China rebound.

The Fund held around 40 equity names, as of end-March 2020, demonstrating its focused nature, alongside positions in other asset classes.
 

Flexibility to seek opportunities in different environments^4,5

One of the Fund’s key characteristics is flexibility. It is able to quickly shift its positioning as the macro view changes.

The Fund started 2020 with considerable equity risk against a supportive macro backdrop, but as the environment deteriorated with the outbreak and escalation of the respiratory disease, the team tactically reduced risk. This was achieved first through adding short equity exposure via equity options then via futures from March as options became more expensive and by reducing long equity position sizes or removing lower conviction names.

The Fund benefited from holding long Japanese yen and short Australian dollar exposure in January and reintroduced these again in recent weeks, along with other risk-off exposures such as short Korean won. In March, the team introduced gold which it believes should perform well in an environment of low to negative real yields.

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Conclusion

While risk assets rallied in April on hopes that sizeable stimulus would ease the devastating impact of the pandemic and that lockdowns would potentially be eased more quickly than feared, the Fund maintained a cautious stance as the sudden stop in global economic activity will continue to severely impact employment, incomes and profit outcomes over the short and medium term.

The investment team expects the market to increasingly focus on high-frequency activity indicators in the months ahead, and they will continue to monitor the duration of lockdown measures and the beginnings of exit strategies, as well as medical developments, and remain flexible to add risk if the macro backdrop shifts.

Even in uncertain markets, we believe that a macro, focused and flexible approach retains the potential to add value for investors.
 

2. The Fund seeks to achieve its investment objectives stated in the offering documents, there can be no guarantee the objectives will be met. Investors should review the fund offering document(s) before investing.
3. Source: J.P. Morgan Asset Management, Bloomberg, as at 31.03.2020. Fund performance for January 2020 was 2.42%, February 2020 was 0.8% and March 2020 was 0.06%. Fund = JPMorgan Investment Funds – Global Macro Opportunities Fund. Performance is shown based on the NAV of the share class C in EUR. Indices used are hedged to EUR. The Global Macro Opportunities Fund (SICAV) is a specific portfolio within JPMorgan Funds, an open-ended investment company organised under Luxembourg law as a société anonyme qualifying as a SICAV and authorised under Part I of the Luxembourg law of 17 December 2010. The Australian registered JPMorgan Global Macro Opportunities Fund is a locally managed fund and the performance of the two funds will differ due to the impact of fees, taxes, currency fluctuation and other factors applicable to the Australian fund which are set out in its Product Disclosure Statement.
4. For illustrative purposes only based on current market conditions, subject to change from time to time. Not all investments are suitable for all investors. Exact allocation of portfolio depends on each individual’s circumstance and market conditions. Provided for information only, not to be construed as investment recommendation. Investments involve risks, not all investment ideas are suitable for all investors.
5. Holdings, exposures and allocations for actively managed portfolios are subject to change from time to time.
6. Benchmark: Bloomberg AusBond Bank Bill Index.

The information provided is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Therefore, before you decide to buy any product or keep or cancel a similar product that you already hold, it is important that you read and consider the relevant JPMorgan fund Product Disclosure Statement (PDS), which is available to download on this website and make sure that the product is appropriate for you. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice. Issued by JPMorgan Asset Management (Australia) Limited ABN 55 143 832 080, AFSL No. 376919.