Investing in a world of ultra-low rates
Lower returns from bonds could pose a challenge to long-term investors.
Which is why the updated# JPMorgan Multi Balanced Fund seeks to deliver attractive income through a conservative multi-asset portfolio investing across geographies and sectors. The Fund strives to capture diversified income opportunities with volatility lower than the broad market over the medium term.
#The investment objective, policy and restrictions of the Fund have been changed with effect from 3 April 2019. The Fund seeks to construct a conservative portfolio, provide regular income, with the aim of operating the portfolio as a whole with volatility lower than that of the broad market over the medium term. For details, please refer to the offering document(s).
Looking at the returns and volatility of different asset classes as well as “conservative” and “balanced” approaches, a conservative approach – with 80% bonds and cash and 20% equities and real estate investment trusts (REITs) – has demonstrated lower volatility over a longer horizon while delivering better returns than cash.
Source: Bloomberg Finance L.P., Dow Jones, FactSet, MSCI, Standard & Poor’s, J.P. Morgan Asset Management. APxJ: Asia Pacific ex-Japan. DM: developed market. EM: emerging market. HY: high yield. REITs: real estate investment trusts.
Hypothetical portfolios were created to illustrate different risk/return profiles and are not meant to represent actual asset allocation. USD total return calculations are based on MSCI Total Return, Bloomberg Barclays and J.P. Morgan indices. APxJ equities stands for MSCI AC Asia Pacific ex-Japan. *Monthly total returns between 31.03.2004 and 31.03.2019 used for all asset classes.
Guide to the Markets – Asia 2Q 2019, page 70. Data reflect most recently available as of 31.03.2019. Past performance is not indicative of future performance.
While risks remain heightened with trade conflicts between the US and other economies, Brexit and other geopolitical concerns, how the US economy will perform will also have an impact on the rest of the world.
In the Asia-Pacific (ex-Japan) equity market, there have been years with positive return despite sizeable intra-year decline. Volatility is an inherent feature of stock markets that a wise investor would learn to accept and live with.
Source: FactSet, MSCI, J.P. Morgan Asset Management. Returns are price returns based on MSCI AC Asia Pacific ex-Japan Index in USD terms. Intra-year decline is the largest peak to trough decline during the respective year. Returns shown are calendar year returns from 1988 to 2018. Guide to the Markets – Asia 2Q 2019, page 67. Data reflect most recently available as of 31.03.2019. Past performance is not indicative of future performance.
In Hong Kong, the real return on cash has not been favourable. Taking into consideration the impact of year-over-year inflation, the real return of cash has been negative over varying horizons.
Not putting one’s money to work may mean letting inflation erode one’s wealth and purchasing power. Investing in other asset classes based on one’s risk tolerance level may be worth considering.
Source: FactSet, various central banks, IMF, J.P. Morgan Asset Management.
*Post crisis time period defined as 2008-2014. Post 1st Fed rate hike defined as 2015-2018.
Guide to the Markets – Asia 2Q 2019, page 65. Data reflect most recently available as of 31.03.2019.