Portfolio Chart: A menu of options as bond yields reset higher
With yields hovering close to decade highs across many fixed income sectors, investors are presented with a “menu of options”. Still, selectivity matters as recession risks loom.
JPMorgan Funds – Income Fund
#ratehikes #duration #inflation
Major central banks around the world are poised to raise interest rates to combat rising inflation, and such policy moves can erode real returns. Real return refers to what is earned on an investment after accounting for inflation, which can erode an overall portfolio’s purchasing power.
To help manage an overall portfolio’s purchasing power against rising inflation, we share three pointers.
#1: Seeking out higher-yielding bond assets
|We believe the JPMorgan Funds – Income Fund’s current duration2 positioning and allocations to high-yield corporates3, the securitised market4 and select EMD look poised to capitalise on the continuation of a strong growth environment and high inflation in 2022.|
#2: Actively managing duration2
|The Fund has been building up short positions in US Treasury futures, enabling us to dynamically manage the Fund’s downside risks from rising interest rates by tactically hedging our interest rate exposure. This gives the investment team greater flexibility to express duration2 and sector allocation views independently of each other.|
#3: Diversifying across the full fixed income spectrum
With an unconstraint investment approach, the Fund invests opportunistically across multiple debt markets and sectors without benchmark constraints, harnessing our top convictions as we seek attractive income opportunities1 while managing risk5 through diversification. We remain focused on allocating towards sectors where we continue to have a positive fundamental outlook and that, in our current view, continue to present attractive yield characteristics.