JPMorgan Government Bond applies the collaborative efforts of an experienced group of securitized specialists to this disciplined, mortgage-centric offering. Those advantages are enough to award the strategy’s cheapest share classes a Morningstar Analyst Rating of Silver, while its more expensive share classes are rated Bronze or Neutral.
Led by Michael Sais, who has been with this fund since 1995, and Robert Manning, who joined Sais in 2013, the strategy benefits from the support of a cadre of value-driven managers, analysts, and traders with dedicated securitized and credit specialties based in Columbus, Ohio. The efforts of JPMorgan to more closely integrate its fixed-income resources across various global sector hubs has improved this group’s access to the broader firm’s research and risk tools.
The team applies rigorous fundamental analysis to mortgage-backed securities of varying types and structures. Agency-backed residential and commercial mortgages (45%-65%) typically comprise the lion’s share of the portfolio, with Treasuries (15%-30%), and agency debentures (5%-20%) taking a supporting role. While many of its intermediate government Morningstar Category peers emphasize more traditional MBS passthroughs and hold smaller Treasury stakes, the team seeks to control the extension and contraction issues of mortgage bonds by emphasizing collateralized mortgage obligations, which it finds have more stable and predictable cash flows, while also maintaining a slug of Treasuries for ballast.
Sais and his cohort have successfully applied this process for decades, using their security-selection acumen to seek out specified pools of agency passthroughs with strong fundamentals and rotating between residential and commercial CMOs where they perceive attractive relative valuations. This discipline has generated impressive returns under Sais’ long reign: from January 1997 through August 2021, the Institutional share class generated 4.8% annualized, comfortably in the top decile of its distinct category rivals.