JPMorgan’s Global Bond Opportunities strategy benefits from an experienced management team, the firm’s wider resources, and a flexible and nimble investment process.
Global fixed-income CIO Bob Michele and international fixed-income CIO Iain Stealey comanage the strategy, backed by a well-resourced and experienced team. In recognition of their contributions to idea generation and returns, four comanagers were added to the strategy in July 2020: Lisa Coleman, head of global investment-grade corporate credit, who joined in 2008; Andrew Headley, head of securitized strategies, who joined in 2005; Jeff Hutz, a high-yield portfolio manager who joined in 2004; and Diana Amoa, an emerging-markets portfolio manager who joined the team in 2015 but left in April 2021.
The strategy aims to maximize total return with a 5%-10% volatility target, which allows the team considerable flexibility to invest in a variety of sectors, such as high-yield and investment-grade corporates, emerging markets, and securitized debt. Macro decisions are the dominant driver of the process. The comanagers and sector team heads debate the macro environment at quarterly meetings, which define the team’s top-down investment roadmap. During the weekly sector team meetings, fundamental, quantitative, and technical research inputs are generated for every sector, which help fine-tune the asset allocation.
For most of the time since inception, the large stake in high-yield debt has ranged between 35% and 65%, across corporate credit, emerging-markets exposure (government bonds and corporates), and securitized and has been beneficial in a generally benign market environment. The team has exercised sound judgment in reducing that stake when valuations are less compelling, and it makes use of the flexibility and wider tools available. This gives confidence in the team’s ability to proactively reduce risk and modify exposure levels in market stress periods.
The strategy first became available to US retail investors in 2012 and then as a SICAV in 2013. Since their respective inception dates, all three vehicles (Luxembourg, UK OEIC, US) have outperformed their respective peers and Morningstar Category indexes on an absolute and risk-adjusted basis. In 2022 the strategy couldn’t avoid a negative return, but the outcome was better than with peers and handsomely ahead of the different vehicles’ respective indexes. Credit exposures including corporate investment-grade and high yield, as well as emerging-markets debt, detracted as spreads widened. However, net short government bond duration throughout the year, mainly via US Treasuries but also European government bonds, was the main driver of outperformance. A hedging position in Russian credit default swaps also helped at the beginning of 2022. In 2023 the strategy posted a positive return but underperformed peers owing to underweight exposure in riskier parts of the market such as high yield and emerging markets.