ASEAN is big … and getting bigger in portfolios?
We share the key themes that are driving equity investment opportunities in ASEAN.
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Important Information JPMorgan Multi Income Fund |
Key takeaways:
- Even amid heightened market volatility due to the conflict in Ukraine, we believe that income still has a key role to play in an overall portfolio1.
- We share our convictions as we continue to seek out income opportunities across regions, asset classes and sectors while managing risk2 as market conditions change.
While on a hike, a hiker can take various routes but changing weather conditions could sometimes have an impact on the journey.
It is similar to searching for income opportunities where amid periods of heightened market volatility, investors, based on their financial objectives and risk appetite, could adjust the allocation of fixed income, equity or other hybrid assets1 in a diversified portfolio to help manage risk2.
Just as a hiker would select the route or a combination of routes, according to stamina, objectives of the journey and weather conditions, we share some of our top convictions1 as we seek out multi-asset income opportunities in changing markets.
Trail 1: Dividend-paying stocks
The weather condition is a key factor in determining a hiking trail, just like how market conditions can play a crucial role in asset allocation. Dividend stocks are back in the spotlight supported by stronger earnings results as economies around the world gradually reopen. As illustrated in the chart 3, dividend stocks have lagged growth stocks in 2021, and we are seeing a rotation as vaccine efficacy improves.
We believe the stocks of some quality corporates could still present opportunities for dividend income, alongside growth potential.
3. Source: Bloomberg, J.P. Morgan Asset Management, as of 31.01.2022. All indices in local currency: MSCI World Index, MSCI World High Dividend Index, MSCI Europe High Dividend Index, MSCI Emerging Market High Dividend Index, S&P 500 Index. Indices do not include fees or operating expenses and are not available for actual investment. Past performance is not indicative of current or future results.
Trail 2: High-yield corporate credit^
Some trails on rough terrain may be difficult to navigate but they do offer spectacular views. As a part of their overall trek, hikers could consider these ‘higher-yielding’ trails based on their fitness level and whether they are properly equipped to tackle the uneven terrain.
Depending on an investor’s financial objectives and risk appetite, fixed income assets with higher-yielding potential, such as some high-yield bonds^, can present relatively attractive opportunities. US defaults are low as the economic recovery supports corporate earnings growth. The fixed income assets of some European corporates could also present potential diversification benefits.
^ High-yield credit refers to corporate bonds which are given ratings below investment grade and are deemed to have a higher risk of default. Yield is not guaranteed. Positive yield does not imply positive return.
Other trails: non-traditional income sources
Some seasoned hikers may prefer to explore new trails when on a hike. Similarly, investors, depending on their financial objectives and risk appetite, could go beyond traditional income sources such as cash savings and government bonds in their investment journey. As a part of an overall diversified portfolio, we believe income opportunities can be found in non-traditional sources such as securitised5 assets and other hybrids (preferred equity and real estate investment trusts) across regions, sectors and asset classes.
JPMORGAN MULTI INCOME FUND
JPMorgan Multi Income Fund invests flexibly across different asset classes and markets globally to seek out a diverse range of compelling income opportunities1. Even amid periods of heightened volatility, we continue to invest flexibly, striving for a consistent income stream and growth opportunities.
As illustrated below, the primary holdings in the Fund include equities (45%) and high-yield bonds4 (26%), as of 31 January 2022.
- Dividend stocks: Over the past year, we continue to see income opportunities from developed-market dividend stocks
- High-yield bonds4: supported by the economic recovery, corporate earnings growth and lower defaults
- Hybrids securities from convertibles and preferred equities, which are generally higher in the capital structure and are supported by strong fundamentals in financials and robust capitalisation of banks.
6. Source: J.P. Morgan Asset Management. Allocation data as at 31.12.2020, 31.03.2021 and 31.01.2022. The Fund is an actively managed portfolio, holdings, sector weights, allocations and leverage, as applicable are subject to change at the discretion of the Investment Manager without notice. Cash exposure represents both physical cash and derivative cash offset. Physical cash was 6.0% as of 31.01.2022. Duration figures indicates portfolio duration. Provided for information only to illustrate macro trends, team’s current views and investment process, not to be construed as research or investment advice. Not indicative of current or future results. Investments involve risks and are not similar or comparable to deposits. Not all investments are suitable for all investors.
Conclusion
Different assets react differently under changing market conditions. We believe that employing a flexible and dynamic approach across multiple income sources can help build a robust portfolio while managing risk2.
Provided for information only based on market conditions as of date of publication, not to be construed as investment recommendation or advice.
Diversification does not guarantee investment return and does not eliminate the risk of loss. Yield is not guaranteed. Positive yield does not imply positive return.
1. 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.
2. The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
4. High-yield credit refers to corporate bonds which are given ratings below investment grade and are deemed to have a higher risk of default. Yield is not guaranteed. Positive yield does not imply positive return.
5. Securitisation is the process in which certain type of assets, such as mortgages or other types of loans, are pooled so that they can be repackaged into interest-bearing securities. Examples of securitised debt include asset-backed securities and mortgage-backed securities.
Investment involves risk. Not all investments are suitable for all investors. Past performance is not a reliable indicator of current and future results. Please refer to the offering document(s) for details, including the risk factors. Investors should consult professional advice before investing. Investments are not similar to or comparable with fixed deposits. The opinions and views expressed here are as of the date of this publication, which are subject to change and are not to be taken as or construed as investment advice. Estimates, assumptions and projections are provided for information only and may or may not come to pass. This document has not been reviewed by the SFC. Issued by JPMorgan Funds (Asia) Limited.
OUR FOCUS FUNDS
Asset Allocation
For more information, please call or email us. You can also contact your J.P. Morgan representative.