Webconference replay: JPM Multi-Asset Income Fund (Oct 2014)Contributor JPMAM UK
Following the team’s quarterly asset allocation meeting, Hannah Sparrow, JPM Multi-Asset Income Fund client portfolio manager, takes a closer look at how the fund’s diversification across asset classes, geographies and the capital structure should help it ride out more volatile market conditions.
Key topics and conclusions
- In volatile times, diversification is worth its weight in gold: The fund’s high level of diversification is important in what has been a more volatile period for both equity and fixed income markets.
- The timing and extent of rate rises worry the markets: In the past two weeks alone, the market has swung from worries over global rate rises led by the Federal Reserve, to pushing back on expectations over the timing of rate rises after the dovish tone of the Fed’s latest minutes.
- We believe there are still attractive dividend yields to be found in Europe. With the net debt/equity ratio coming down, corporates have a lot of cash on their balance sheets, some of which can be delivered back to shareholders through dividend increases.
Current asset allocation
- The fund has been designed to exploit income opportunities from across the full range of asset classes.
- Diversification is maintained by investing across the capital structure and on a truly global basis.
- The fund remains overweight on equities, and we continue to add to more cyclical stocks, particularly within the eurozone region. Valuations look attractive, as do dividend yields. What’s more, dividend yields look sustainable and, in some areas, come with potential for further growth.
- Over the past three months, we’ve increased our weighting to European equities by running a bespoke portfolio specifically focused on these stocks. Dividend yields in the European region look relatively attractive. The index is yielding about 4%, but the very focused yield portfolio developed by our European colleagues can deliver a dividend yield of around 5%, trading at a discount to the market.
- Our historical allocation to high yield has been an important driver of returns at NAV and distribution level. While we’ve been taking profits on some of those positions, we still have a healthy 25% of the portfolio invested in the US high-yield market. We’re relatively positive on the US economy, but think that default rates can come down further.
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