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.
Important Information JPMorgan Funds – Income Fund |
#ratehikes #duration #inflation
Key takeaways:
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
Conclusion
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.
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. Duration is a measure of the sensitivity of the price (the value of the principal) of a fixed income investment to a change in interest rates and is expressed as number of years.
3. 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.
4. 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.
5. The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
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.