JPMorgan High Yield’s seasoned managers, deep credit analyst team, and considerable resources execute a prudent process, but middling performance has not distinguished it from peers.
Experienced managers and deep supporting resources rival that of the top high-yield competitors. J.P. Morgan tapped Rob Cook in September 2019 to lead this effort and build this stable team of high-yield specialists after the consolidation of the firm’s two legacy high-yield teams. He also rose to head the firm’s global high-yield platform. There is no shortage of experience with comanagers Jim Shanahan (38 years), Thomas Hauser (31 years), and Jeffrey Lovell (29 years) each having been at the firm for more than two decades. This close-knit team consolidates its various inputs in conjunction with its sizable credit research team and traders to inform investment decisions. As one of the deeper credit teams in the industry, its 18 dedicated high-yield researchers, plus three research associates, bring more than 17 years of average industry experience and feature a good balance of newer talent and veterans.
Strong fundamental credit analysis and effective collaboration are key to this approach. The managers work closely with each sector-focused researcher who dives deeply into their respective issuers to help build the portfolio. Regularly scheduled and impromptu meetings ensure ample inputs to discuss fund positioning, relative value opportunities, new issues, and individual credits. The managers leverage firm-generated risk models around liquidity and sector diversification when positioning the fund versus its ICE BofA US High Yield Constrained Index. The fund’s historical sector exposures have stayed within a tight band around the index’s weightings, but Cook’s tenure is marked by larger stakes in higher-conviction sectors like consumer noncyclical and communications, which have become strategic overweightings, while financials make up the fund’s largest underweighting. He is also willing to deviate more from the benchmark’s duration while the ability to invest in senior secured bank loans gives this team added flexibility.
These style tweaks have not led to better results yet, with only middling short- and long-term returns versus peers. Since Cook’s first full month of performance in October 2019, the fund’s 3.2% annualized return through May 2024 trailed the high-yield Morningstar Category median’s 3.4% gain and the ICE BofA US High Yield Constrained Index’s 3.5%. The fund’s volatility-adjusted results, as measured by Sharpe ratio, ranked near the category’s norm. While the past four calendar years’ results have been inconsistent, owing in large part to a challenging 2020, investors can expect a more predictable path forward.