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JPMorgan Global Bond Opportunities R6 GBONX

Medalist Rating as of | See JPMorgan Investment Hub
  • NAV / 1-Day Return 9.58  /  +0.21 %
  • Total Assets 3.4 Bil
  • Adj. Expense Ratio
    0.500%
  • Expense Ratio 0.500%
  • Distribution Fee Level Below Average
  • Share Class Type Retirement, Large
  • Category Multisector Bond
  • Credit Quality / Interest Rate Sensitivity Medium/Limited
  • Min. Initial Investment 15.0 Mil
  • Status Open
  • TTM Yield 3.91%
  • Effective Duration 4.10 years

USD | NAV as of May 07, 2024 | 1-Day Return as of May 07, 2024, 10:22 PM GMT+0

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Morningstar’s Analysis GBONX

Medalist rating as of .

Decisive top-down calls have helped drive returns in this unconstrained strategy.

Our research team assigns Silver ratings to strategies that they have a high conviction will outperform the relevant index, or most peers, over a market cycle on a risk-adjusted basis.

Decisive top-down calls have helped drive returns in this unconstrained strategy.

Senior Analyst Evangelia Gkeka

Evangelia Gkeka

Senior Analyst

Summary

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.

Rated on Published on

While the approach here courts risk, the team’s allocation decisions have been generally effective, often allowing the strategy to participate in the upside for risk assets during benign markets, while proactive risk reduction has helped during periods of turmoil.

Senior Analyst Evangelia Gkeka

Evangelia Gkeka

Senior Analyst

Process

Above Average

We rate the Process Pillar at Above Average.

The strategy is managed dynamically and has a global investment universe, including a wide range of fixed-income sectors, such as developed- and emerging-markets sovereign and corporate bonds, securitized debt, and currencies.

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 and are used in the weekly portfolio strategy meeting to fine-tune the asset allocation. This is driven by each sector’s expected return and conviction level. Sector teams play a vital role in credit selection.

The strategy’s broad guidelines include a 75% limit to high-yield exposure, a sector in which the strategy has exhibited a heavy bias historically, albeit more tempered of late. Duration can range from negative 2.0 to positive 8.0 years, but in practice it has never been negative.

As of February 2024, the strategy had a duration of 4.0 years, an increase from around 2.5 years a year prior. The increase in duration mainly came from the addition to exposure in emerging markets debt and securitized. The bulk of duration today comes from exposure to credit (2.8 years) and emerging markets (1.5 years), with 0.6 year coming from securitized. There is a negative duration of 0.8 year in government bonds as it holds short exposure to US government bonds as a hedge for duration risk in credit and emerging markets. The strategy also holds 0.4 years long exposure to European government bonds, specifically German Bunds and UK Gilts.

From an asset-allocation perspective, corporate credit accounts for 57.9% (higher from 52.6% a year ago), including 9.7% in non-US high-yield and 6.7% in US high-yield. Allocation to high yield was recently slightly increased by unwinding some index hedges. Within high yield there is a preference toward defensive sectors such as high-quality consumer-oriented companies, and select names within telecoms and media. The managers continued to favor investment-grade corporate credit with a roughly 38% allocation (similar to a year ago). Since last year allocations have shifted from high-quality credit to bank capital and corporate hybrids. The credit allocation also includes 4.0% in convertible bonds, most of which are US companies.

Exposure to emerging-markets debt stood at 17% (from around 16% a year prior) and included an 8.8% stake in local-currency debt, a 4.9% stake in hard-currency sovereigns, and 3.1% in corporate bonds. Securitized debt accounted for 12.5%—a material increase from 5% a year ago—and consisted of 9.9% in agency mortgage-backed securities (exposure was added when spreads reached historically wide levels last year due to selling pressure during the US regional banking crisis), 1.6% in commercial MBS, and small exposure in nonagency MBS, asset-backed securities, and collateralized loan obligations.

All figures above refer to the Luxembourg vehicle, but there are no material differences compared with the other vehicles.

Rated on Published on

The strategy is comanaged by global fixed-income CIO Bob Michele, who joined the firm in 2008 from Schroders, and international fixed-income CIO Iain Stealey, who joined in 2002.

Senior Analyst Evangelia Gkeka

Evangelia Gkeka

Senior Analyst

People

Above Average

The departure of Nicholas Gartside(previously international fixed-income CIO and comanager here) in 2019 didn’t cause disruption, as the presence of Michele and Stealey, both comanagers since inception, ensures continuity.

The managers primarily focus on top-down positioning; Michele focuses on US macro, while Stealey is more focused on the non-US side, mainly Europe. They rely on the expertise of sector specialist teams for idea generation and security selection across currency, rates, credit, securitized, and emerging-markets debt. Four comanagers were added to the strategy in July 2020 in recognition of their contributions to idea generation and returns: 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. Amoa left in April 2021, but her departure did not cause any disruption given the team-based approach. Our conviction here is driven by the experience and portfolio management skills of the lead managers, the tenures of the comanagers, and the depth and quality of the available sector team resources. We maintain the People Pillar rating at Above Average.

Rated on Published on

A well-resourced, thoughtful, and disciplined steward of client assets, JPMorgan Asset Management maintains an Above Average Parent rating.

Associate Director Emory Zink

Emory Zink

Associate Director

Parent

Above Average

As of 2022, this investment stalwart manages more than USD 2.5 trillion in AUM. Composed of various global cohorts and diverse asset classes, the firm has more tightly integrated its capabilities in recent years, notably through the development of proprietary analytical and risk systems. Investment teams are robustly staffed and helmed by seasoned contributors. The firm’s strategies tend to produce reliable portfolios, and several flagship offerings are Morningstar Medalists. Manager incentives align with fundholders'; compensation reflects longer-term performance factors, and portfolio managers invest in the firm’s strategies as part of their compensation plans.

The firm’s funds tend to be well-priced, but they aren’t as competitive as many highly regarded peers of similar scale. Recent product launches include thematic and single-country strategies, both of which carry the potential for volatile performance and flows, along with misuse by investors. The firm remains intrepid when it comes to developing an environmental, social, and governance-focused framework and continues to move into other areas such as direct indexing through its 55iP acquisition and China through its joint venture, but these complicated initiatives take time to assess any real and lasting effect.

Rated on Published on

From the strategy’s inception in 2012 through March 2024 all three vehicles(Luxembourg, UK, US) have outperformed their respective peers and category indexes on an absolute and risk-adjusted basis.

Senior Analyst Evangelia Gkeka

Evangelia Gkeka

Senior Analyst

Performance

Although asset-allocation moves can be difficult to time, the team here has added value with its calls since inception. A large allocation to high yield has helped this fund thrive in previous credit market rallies, such as in 2013, 2016, 2017, and 2019. The decision to increase exposure in credit and emerging markets also helped during the market-recovery phase from the second to fourth quarter 2020, while the decision to increase high-yield allocation helped in 2021. At the same time, the strategy has held up relatively well during credit downturns thanks to the team’s preparedness to reduce risk. For example, the decision to have an underweight positioning in the energy sector from mid-2015 to early 2016 prevented the fund from getting hurt more than its average peer. In addition to that, the team has made other deft tactical moves to respond to quickly escalating risks. Examples include the first-quarter 2020 selloff caused by the outbreak of the coronavirus pandemic when government rates exposure in the US, Canada, and Australia; a reduction in high-yield positioning; shorts in emerging-markets currencies; and longs in safe-haven currencies all helped the fund hold up better than most peers. The year 2022 was another good example of a volatile period during which the strategy managed to contain downside volatility. While it couldn’t avoid a negative return, the outcome was better than against peers and handsomely ahead of the respective indexes for each vehicle of the strategy. 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 CDS also helped at the beginning of 2022. In 2023, the strategy posted a positive return with exposure to investment-grade corporates, high-yield corporates, and emerging-markets debt contributing to performance. However, it underperformed its peers owing to underweight exposure in riskier parts of the market, such as high yield and emerging markets, driven by the managers’ cautious macroeconomic outlook.

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It’s critical to evaluate expenses, as they come directly out of returns.

Senior Analyst Evangelia Gkeka

Evangelia Gkeka

Senior Analyst

Price

Based on our assessment of the fund’s People, Process, and Parent Pillars in the context of these expenses, we think this share class will be able to deliver positive alpha relative to the category benchmark index, explaining its Morningstar Medalist Rating of Silver.

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Portfolio Holdings GBONX

  • Current Portfolio Date
  • Equity Holdings
  • Bond Holdings
  • Other Holdings
  • % Assets in Top 10 Holdings 18.9
Top 10 Holdings
% Portfolio Weight
Market Value USD
Sector

Federal National Mortgage Association 4.5%

4.60 173.8 Mil
Securitized

JPMorgan Prime Money Market Inst

4.13 156.1 Mil
Cash and Equivalents

United Kingdom of Great Britain and Northern Ireland 3.75%

2.69 101.7 Mil
Government

Cash

2.35 88.8 Mil
Cash and Equivalents

Government National Mortgage Association 5%

2.31 87.1 Mil
Securitized

Mexico (United Mexican States) 7.75%

1.85 70.0 Mil
Government

Invesco Senior Loan ETF

1.78 67.1 Mil

Federal National Mortgage Association 5.5%

1.64 61.9 Mil
Securitized

Secretaria Tesouro Nacional 10%

1.24 46.8 Mil
Government

United States Treasury Notes 1.375%

1.00 37.7 Mil
Government