Despite uncertain markets and slowing growth, investors may consider high-quality fixed income investments. Yields remain attractive across fixed income sectors, and adding fixed income to a diversified portfolio provides some hedging as global growth momentum slows.
Important Information
1. The Fund invests primarily (at least 80%) in global investment grade debt securities. The Fund will have limited RMB denominated underlying investments.
2. The Fund is exposed to risks related to debt securities (including credit risk, interest rate risk, below investment grade/ unrated investment risk, investment grade bond risk, sovereign debt risk and valuation risk), emerging markets, currency, derivatives, liquidity, hedging, class currency and currency hedged classes. Pertaining to investments in below investment grade or unrated debt securities, these securities may be subject to higher liquidity risks and credit risks comparing with investment grade bonds, with an increased risk of loss of investment. For RMB hedged class, risks associated with the RMB currency and currency hedged classes risks. RMB is currently not freely convertible and RMB convertibility from offshore RMB (CNH) to onshore RMB (CNY) is a managed currency process subject to foreign exchange control policies of and restrictions imposed by the Chinese government. There can be no assurance that RMB will not be subject to devaluation at some point. The Manager may, under extreme market conditions when there is not sufficient RMB for currency conversion and with the approval of the Trustee, pay redemption monies and/or distributions in USD.
3. Where the income generated by the Fund is insufficient to pay a distribution as the Fund declares, the Manager may at its discretion determine such distributions may be paid from capital including realised and unrealised capital gains. Investors should note that the payment of distributions out of capital represents a return or withdrawal of part of the amount they originally invested or from any capital gains attributable to that original investment. Any payments of distributions by the Fund may result in an immediate decrease in the net asset value per unit. Also, a positive distribution yield does not imply a positive return on the total investment.
4. Investors may be subject to substantial losses.
5. Investors should not solely rely on this document to make any investment decision.
Markets have largely been unsettled with volatility rising in the second quarter.
Gauges of stock and bond market volatility – the Volatility Index (VIX) and Merrill Lynch Option Volatility Estimate Index (MOVE) – continue to remain elevated as investors navigate the geopolitical and economic environment1.
Such periods of elevated volatility can present a greater challenge when hedging against market risks. Against this backdrop, fixed income may play a crucial role in generating income opportunities and mitigating downside risks in portfolios. Still, valuations are relatively attractive with real yields hovering near multi-year highs1.
While the US economy looks resilient, concerns about the size and sustainability of its fiscal deficit persist. High-quality fixed income, emphasising credit quality, duration2 and lower volatility, may help manage downside risks. Active management and keeping a quality bias remain crucial.
Leveraging active fixed income indexing
In the current market environment, actively managed fixed income strategies may have greater potential to uncover alpha opportunities missed by passive strategies.
The Bloomberg US Aggregate Index, for example, excludes about 47% of the US$53 trillion US public bond market3, including high-yield corporates and non-agency mortgage-backed securities. Asset-backed and agency securities4 have limited exposure, and much of the securitised market is excluded3.
Additionally, active managers have historically outperformed passive strategies. Net of fees, the average annualised returns of active core and core plus managers have exceeded the Bloomberg US Aggregate Index over the trailing 3-, 5-, and 10-year periods5.
Amid slowing economic growth momentum, quality fixed income assets with higher credit ratings could prove favourable for portfolios. Investing in a global portfolio of high-rated bonds may present diversification opportunities and help manage portfolio volatility.
JPMorgan Global Bond Fund - a high-quality bond portfolio
JPMorgan Global Bond Fund is a strategy that employs a quality-biased investment strategy to construct a high-quality portfolio that primarily seeks exposure to investment-grade (IG) bonds (at least 80%6) across the globe. By focussing on high-quality fixed income, the strategy tends to exhibit lower volatility versus single-sector fixed income.
The strategy actively shifts its allocation towards areas with stronger fundamental outlook, while seeking to actively manage duration2 and currency risks through a disciplined yet dynamic risk management approach7. For the Fund’s yield, click here.