JPM_logo_Eng
  • Funds

    Fund Listing

    • Fund Explorer
    • Fund Managers
    • Fund Documents

    Featured Funds

    • Multi Income Fund
    • Asian Total Return Bond Fund
    • China Bond Opportunities Fund
    • Income Fund
  • Insights

    Market Insights

    • Market Insights Overview
    • Guide to the Markets
    • Weekly Market Recap
    • On the Minds of Investors
    • Multimedia

    Retirement Insights

    • Retirement Insights Overview
    • Principles for a Successful Retirement
    • Building Better Retirement Portfolios
    • Are you letting volatility derail your retirement plan?
  • Investment Ideas
    • Managing Volatility
    • Growth Strategy
    • Income Strategy
    • Retirement and long-term investing
  • Personal Investing

    Knowing the Basics

    • Retirement Planning
    • Investing for Your Children’s Future
    • Ways to Diversify Your Portfolio
    • Mutual Funds 101

    Getting Started

    • Start Investing
    • Investment Ideas
    • Regular Savings Plan
    • eTrading Privileges
    • Open an Account Online with Ease
  • Retirement Services
    • ORSO Services
    • MPF Services
    • Retirement Fund Centre
  • Resources
    • About Us
    • Awards
    • Contact Us
    • Announcements
    • Forms & Literature
    • Investment Return Calculator
  • Library
Skip to main content
  • Language
    • English
    • 中文/ Chinese
  • Role
  • Country
  • eTrading Login
Search
Menu
CLOSE
Search
  1. Home
  2. Insights
  3. Investment Ideas
  4. A multi-income journey into the emerging high-yield potential

  • Print
  • Actions

  • Print
Important Information
JPMorgan Multi Income Fund
  1. The Fund invests in a diversified portfolio of income-producing equities, bonds and other securities. The Fund will primarily invest (at least 70%) in debt and equity securities. The Fund will have limited RMB denominated underlying investments.
  2. The Fund is therefore exposed to a range of investment related risks which includes risk related to dynamic asset allocation strategy, debt securities (including investment grade bond risks, below investment grade/ unrated invest risk, credit risk, interest rate risk, sovereign debt risk and valuation risk), asset backed securities, mortgage backed securities, collateralised loan obligations and asset backed commercial papers, equity, real estate market (associated with the risk of investing in REITs and other property related securities; direct investment in real estate is not permitted), emerging markets, concentration, currency, derivatives, liquidity, hedging, class currency, currency hedged classes and Eurozone sovereign debt crisis. 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.
  4. Investors may be subject to substantial losses.
  5. Investors should not solely rely on this document to make any investment decision.

A multi-income journey into the emerging high-yield potential

Jan 2021 (3-minute read)

multi-income-high-yield-bonds-a-3-minute-view-hero-banner

Key takeaways:

  • Amid an era of ultra-low rates, high-yield (HY) bonds1,2 could emerge as an optimal income source for a multi-asset portfolio, compared with traditional government bonds.

  • With a recovering economy, default rates have begun to decline from 2020 highs. In a market environment currently supportive of risk assets, active management is key in the pursuit of potential HY income opportunities.

The pursuit of income is a continuous journey. Over the past decade, income investors like us have stayed the course as we ride through the four seasons, employing an active investing approach as we navigate the markets’ ups and downs. With interest rates looking to stay at ultra-low levels for longer, active management, which integrates macro asset allocation views and the bottom-up, yield-focused insights of asset class specialists, is crucial in tapping income opportunities through the seasons.

Exploring high-yield potential as winter passes by1


After a tumultuous 2020, investors are keeping a close tab on the process of economic reopening around the world. Returns from traditional bond sectors have become relatively unattractive as unprecedented monetary and fiscal policies are keeping rates lower for longer, alongside the possibility of rising inflation further down the road. 

Fixed income assets with high-yielding potential like HY bonds have thus become a relatively attractive income source to a multi-asset portfolio. Yield of US HY credit stood at 4.2%3, as of end-December 2020, a comparative compelling level compared with traditional income sectors such as government bonds.

Cash and most government bonds are delivering negative real yields3

200269_MIF_AEM(2800x900)

Maximise income opportunities across asset classes

Invests dynamically across asset classes and geographies to seek attractive income potential.

Learn more

‘Green shoots’ potential in the spring as opportunities emerge in high yield

From an asset allocation perspective, we believe potential opportunities in HY bonds are emerging with defaults on the decline and relatively attractive yield potential.

1. Defaults began to decline

  • US HY bond defaults4 spiked in 2020, increasing from 2.66% in January to 6.22% in July. Defaults began to see a mild decreasing trend as of December and continuous improvement is expected as economy gradually recovers
  • With the US Federal Reserve committed to its asset purchases programme and holding rates at near zero, companies could continue to raise public financing to repay their debt and deleverage their balance sheets. Gross new issuance of US HY bonds reached US$450 billion for 2020 through end-December5.

  • Additionally, European HY bonds also offer potential diversification benefits as they are generally of higher quality and have shorter duration.

2. Attractive yield potential

  • HY credit spreads6 are now narrowed to about 440 basis points from over 900 basis points in March 20204, providing ample cushion to absorb any additional defaults. Still, HY spreads have remained above pre-public health crisis levels.


Active management through all seasons

  • Through the decade, portfolio managers of JPMorgan Multi Income Fund have been actively adjusting the Fund’s HY bond allocation to manage portfolio risk, while seeking income consistently in changing market conditions.


How does JPMorgan Multi Income Fund actively manage its HY allocation7?

2018 (added a quality tilt to navigate the late cycle)

INITIATED EXPOSURE
TO EUROPEAN HY

 

  • The European high-yield market has a higher credit quality profile and shorter duration than its US counterpart, and provides a source of diversification for our still significant allocation to US high yield.

  • The recent political and trade-related volatility in European high-yield markets has pushed European credit spreads wider than those in the US market. This dynamic presents an attractive relative value opportunity, as the European high-yield market traditionally trades with narrower spreads than the US market, given its higher credit quality profile.

2021 (recovering from the global public health crisis)

AVOIDING SECTORS
WITH HIGH DEFAULT RISK

 

  • Some sectors such as energy and basic materials are facing considerable financial pressures, and we continue to take an active investing approach and a focus on quality to minimise allocation into sectors that are facing potentially higher default risk.

  • Moving into 2021, the economy is still recovering from the public health crisis. Taking an active investing approach and a focus on high-quality issuers as well as keeping an eye on liquidity conditions are crucial to optimise the relatively attractive valuations and to better manage any default risk.

Default risks diverge between sectors8
 

Conclusion
 

With a recovering economy and defaults on the decline, interest in HY bonds is gaining traction, especially as rates continue to stay low for longer. Investors, depending on their investment objectives and risk appetite, could keep an eye on the emerging opportunities in HY bonds for higher income potential.


J.P. Morgan Asset Management

Light up your income potential

J.P. Morgan Asset Management

Diversify your portfolio with growth strategies

J.P. Morgan Asset Management

Explore more investment ideas

Subscribe to our e-Newsletter

Provided for information only based on market conditions as of date of publication, not to be construed as investment recommendation or advice.

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. Diversification does not guarantee investment return and does not eliminate the risk of loss.

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. 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.
3. Source: Bloomberg Barclays, J.P. Morgan Asset Management. Data as of 31.12.2020. Representative indices: iShares US Preferred Stock ETF Index (Preferred equities), Bloomberg Barclays Credit Rate Sensitive Index (Convertible bonds), Bloomberg Barclays US Corporate High Yield 2% Constrained Index (US high yield), BofA Merrill Lynch Euro Developed Markets Non-Financial High Yield Constrained Index (European high yield), J.P. Morgan EMBI Global Diversified Index (Emerging markets debt), Bloomberg Barclays US IG Credit Index (US investment grade credit), US 10-Year Treasury Index (US 10-year treasury), German 10-Year Treasury Index (German 10-year treasury), Japan 10-Year Treasury Index (Japan 10-year treasury), USD Cash Index (USD cash). Indices do not include fees or operating expenses and are not available for actual investment. Yield is not guaranteed. Positive yield does not imply positive return. Investments involve risks and are not similar or comparable to deposits. Provided to illustrate general market trends not to be construed as research or investment advice.
4. Source: J.P. Morgan Economics Research, J.P. Morgan Asset Management. *Default rate is defined as the percentage of the total market trading at or below 50% of par value and includes any Chapter 11 filing, pre-packaged filing or missed interest payments. Spreads indicated are benchmark yield-to-worst less comparable maturity Treasury yields. US corporate high yield is represented by the J.P. Morgan Domestic High Yield Index. Data reflect most recently available as of 31.12.2020.
5. Source: J.P. Morgan, Bloomberg Finance L.P., Lipper FMI. Data as of 31.12.2020.
6. Spreads refer to the interest rate differential between two different types of bonds.
7. Source: J.P. Morgan Asset Management. Data as of 31.12.2020. 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. These represent Multi-Asset Solutions team’s views under current market conditions, subject to change from time to time. Provided for information only, not to be construed as investment advice.
8. Source: Bloomberg Barclays, J.P. Morgan Asset Management. Data as of 31.12.2020. *Option-adjusted spread of bonds trading above 1,000bps. Comparator = Bloomberg Barclays US High Yield Index – 2% Issuer Cap. **Portfolio weight of the standalone US High Yield allocation of the JPMorgan Multi Income Fund. 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.

Investment involves risk. Not all investments are suitable for all investors. Past performance is not a reliable indicator of current or 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

  • JPMorgan Multi Balanced Fund
  • JPMorgan Multi Income Fund

Equity

  • JPMorgan Asia Growth Fund
  • JPMorgan China A-Share Opportunities Fund
  • JPMorgan China Pioneer A-Share Fund
  • JPMorgan Funds - US Technology Fund

Fixed Income

  • JPMorgan Asian Total Return Bond Fund
  • JPMorgan Funds - China Bond Opportunities Fund
  • JPMorgan Funds – Income Fund
  • JPMorgan Global Bond Fund
See all funds

RELATED ARTICLES

A vaccine boost that’s extending recovery in Asia

Growth potentials have emerged in select sectors as vaccines are distributed across Asia.

Read more

Dividend stocks are back on multi-income investors’ radar

Dividend stocks have largely been on the sidelines in 2020 but relatively attractive opportunities are emerging in 2021.

Read more

Recovering Asia: seeking long-term sector opportunities

Where are the growth opportunities in Asia as economies recover from coordinated monetary and fiscal support?

Read more

What’s trending in China’s equity markets?

As the year begins, consider a 2021 list of China A-share ideas as you devise a plan for your investment portfolio?

Read more

Curious about income investing? We share 4 FAQs

How much do you know about income investing amid an evolving market environment?

Read more

Outlook 2021: portfolio positioning with ‘G.P.S.’

Uneven recoveries in 2021 would imply the need for more active management.

Read more

Year ahead 2021: seeking clarity amid macro uncertainty

As market volatility could persist in 2021, how can investors cut through the fog of uncertainty?

Read more

Outlook 2021: investment themes in a ‘new normal’

How a ‘new normal’ could shape investing in equities, fixed income and multi-asset solutions.

Read more

Keeping a longer investment horizon as events unfold in China and the US

What are the investment implications of China’s new economic blueprint and the US elections?

Read more

Finding growth: there’s still more to know about Asia

We share our views on how the public health crisis has accelerated some structural growth trends in Asia.

Read more

Finding growth: how a consumer’s routine can spark investing ideas

We share our perspectives on potential opportunities arising from evolving consumer behaviours.

Read more

Finding growth: it’s a digital revolution

We share our perspectives on riding the wave for future growth in tech investing.

Read more

What’s ahead for investing as Election Day approaches

With less than a month to go before the US elections, we look at the investment implications for 5 major economic sectors.

Read more

Building a stronger income portfolio as rates stay low

A persistent and flexible strategy has become more important ever in seeking income.

Read more

Recovering economy, reinforcing Chinese equity opportunities

Looking at China’s economic recovery and the beneficiaries in the long term.

Read more

Risks and potential opportunities for bonds in 4Q 2020

The potential opportunities and risks in bonds in the last stretch of 2020.

Read more

Securitisation 101: making optimal use of securitised debt

Let's explore the role securitised debt could play in an investment portfolio.

Read more

Why some investors are still investing in equities

Understand stock valuations for clues to potential opportunities in a market rally.

Read more

Recovering economy, recovering Chinese property bond demand

As China’s property market recovers, capture income potential of Chinese property bonds with a diversified Asian bond strategy.

Read more

What do the As and Bs in bond credit ratings mean for investors

Understand bond credit rating and broaden potential income opportunities.

Read more

Is the Fed’s new framework a boon for Asia?

With the Fed’s new policy framework, where do we see opportunities in Asia?

Read more

Activating Asia’s bond potential with a dynamic approach

Actively manage local currency opportunities in an Asian bond portfolio.

Read more

What a weak US dollar could mean for a portfolio

Seeking investment opportunities as the US dollar weakens.

Read more

Asia’s bond markets = one region + multiple income options

Asia’s bond markets have grown significantly over the past decade, spanning a diverse range that offers investors more fixed income options.

Read more

Seeking quality growth potential in China A-Shares

Our portfolio manager shares her views on potential quality growth and A-Shares as China enters a new normal.

Read more

It’s three-in-a-row: Asian bonds in a portfolio

Income opportunties can still be found in Asia’s bond markets amid low rates as they are supported by these three factors.

Read more

Asian bonds: there’s still more to know

The Asian bond market has grown significantly in the past decade. Explore the abundant opportunities.

Read more

Chinese bonds: what, why and how

In the zero interest rate era, what are the income opportunities in Chinese bonds?

Read more

Growth in focus: finding the ace among A-Shares

Amid China’s long-term structural growth trends, which are the sectors that could stand out in the A-Share market?

Read more

3, 2, 1 – getting ready to invest in Chinese bonds

Expand your sources of income by considering the potential opportunities in Chinese bonds.

Read more

Unlocking long-term growth potential in Asia

Structural growth trends in Asia remain intact amid the pandemic and some have actually been accelerated.

Read more

Navigating Chinese bonds with versatility

As the search for income gets tougher, consider the world of Chinese bonds to diversify your income opportunity set.

Read more

Riding through the highs and lows with global dividend opportunities

Striving to optimise potential equity income opportunities as markets recover.

Read more

Scenarios of an expected global economic recovery

We describe three case scenarios for economic recovery after the pandemic subsides.

Read more

Making the most of bond opportunities as the pandemic subsides

Positioning to tap bond market opportunities as economies reboot as the pandemic subsides.

Read more

Positioning for yield in time for a global restart

As liquidity conditions improved, our portfolio manager shares how we are positioned for income opportunities across asset classes.

Read more

Emerging trends set in motion for US technology

US technology sector looks set to benefit from emerging trends driven by the pandemic.

Read more

Income Strategy Q&A: focusing on long-term value proposition

Our income strategy portfolio manager shares how he looks through the headlines and focuses on the long term.

Read more

China Q&A: finding quality A-shares in volatile markets

China’s long-term structural trends such as consumption upgrades, domestic technology and healthcare innovation are expected to remain intact amid the pandemic.

Read more

Multi-asset income strategies in unique times

As the search for quality income gets challenging, a diversified multi-asset income solution could be considered to broaden income potential.

Read more

2Q 2020 bonds: weathering a market storm

Diversifying across fixed income, with a quality tilt, could help build portfolio resilience.

Read more

Taking steps to stay on top of volatility

A diversified portfolio with a defensive bias could help build portfolio resilience while seeking yield opportunities.

Read more

Focus Q&A: how tech stocks in APAC are faring

The limited impact of COVID-19 on APAC’s technology industry chain in the medium to long term.

Read more

Adding a fitting pace to your income portfolio

Diversify your income sources to help navigate uncertain markets.

Read more

Fixed income investing in uncertain times

Investing across multiple fixed income sectors could help navigate uncertain markets and seek yield in fixed income.

Read more

Repositioning for income potential in uncertain times

Our multi-asset fund manager shares how he repositions for income in uncertain times.

Read more

Some investing dos and don’ts when markets are volatile

Some investing ‘dos & don’ts’ as you navigate market volatility in uncertain times.

Read more

Investing during the COVID-19 outbreak: 4 topmost concerns

As COVID-19 continues to evolve, our strategists share 4 topmost concerns among Asia’s investors.

Read more

China’s fundamentals signal resilience despite health crisis

China’s economic fundamentals remain resilient as the country races to contain an evolving health crisis.

Read more

The little red envelope savings guide

As you welcome the Year of the Rat, plan to make your “lucky money” work harder for you.

Read more

Aiming high when yield stays low

Yield can still be found in a low rate environment but requires moving along the risk spectrum.

Read more

1Q 2020 bonds: where we see opportunities

Time to reposition fixed income as the economy bottoms out and recession risk wanes.

Read more

Investing in a world of ultra-low rates

Lower returns from bonds could pose a challenge to long-term investors.

Read more

Securitisation 101: What are ABS and MBS?

Fixed income isn’t just government or corporate bonds, it also includes non-traditional debt securities.

Read more

Securitisation: Then and now

The securitisation market has regained much ground in the past decade.

Read more

The secret to effective diversification

Diversification sounds easy, but how to do it effectively?

Read more
lets-solve-it-logo

Feel free to call our InvestorLine or email us if you would like further information about our Funds or eTrading services:

(852) 2265 1188

investor.services@jpmorgan.com

J.P. Morgan Asset Management

  • Terms of Use
  • Privacy Statement
  • Cookies Policy
  • Investment Stewardship
  • Fund Notes
  • Offering Document(s)
  • Forms & Literature
  • Guide to Using This Website
  • Sitemap
J.P. Morgan

  • J.P. Morgan
  • JPMorgan Chase
  • Chase

The information contained herein is intended only for use by Hong Kong residents. By using this information, you are representing and warranting that you are either residing in Hong Kong or the applicable laws and regulations of your jurisdiction allow you to access the information, and you confirm that you accept the Terms of Use as set out in https://am.jpmorgan.com/hk/. Investment involves risk. Past performance is not indicative of future performance. In particular, funds which are invested in emerging markets and smaller companies may involve a higher degree of risk and are usually more sensitive to price movements. Investors should carefully read and consider the fund offering document(s), which contain details on investment objectives, risk factors, charges and expenses of the fund, before making any investment decisions. Investors should read carefully the fund notes before making any investment decisions. Information in this website does not constitute investment advice, or an offer to sell, or a solicitation of an offer to buy any security, investment product or service, nor a distribution of information for any such purpose. Opinions and statements of financial market trends set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. Investors should conduct their own verification. The views and strategies described may not be suitable for all investors. This website and the advertisements contained herein are issued by JPMorgan Funds (Asia) Limited. This website has not been reviewed by the Securities and Futures Commission of Hong Kong ("SFC"), with the exception of material relating to the JPMorgan Provident Plan that the SFC has pre-approved (however such pre-approval does not imply official recommendation by the SFC).

Copyright 2021 JPMorgan Funds (Asia) Limited. All rights reserved.