JPMorgan High Yield’s experienced cohort is on the right path but needs more time under the current regime to execute its mandate. The strategy retains its Morningstar Analyst Rating of Neutral across all but its priciest share class, which is rated Negative.
Since late 2019, this team has undergone significant change, combining its independent legacy Cincinnati and Indianapolis teams into one cohesive unit. This integrated effort seems poised to leverage the vast experience and resources of this group led by JP Morgan’s global head of high yield Rob Cook. High-yield pros Thomas Hauser and Jeffrey Lovell join Cook and longtime manager Jim Shanahan, who has run this strategy since its 1998 inception. A robust fundamental credit analyst bench supports the managers. Relative stability over the past year is a positive sign after higher post-integration turnover brought about short-term uncertainty.
The disciplined process, which emphasizes fundamental analysis and security selection, remains the same under Cook’s leadership, but he brings a slightly different approach resulting in higher issuer concentration. While the process is solid on paper, a discernible advantage versus other high-yield bond Morningstar Category rivals has yet to emerge. Each credit analyst focuses their fundamental evaluation of issuers in their respective sector, and the managers synthesize these bottom-up recommendations with firm-generated liquidity and diversification risk reports to position the portfolio relative to the Bloomberg U.S. High Yield 2% Issuer Capped Index. This framework has allowed the managers to actively manage exposures, including stakes in leveraged loans and equity acquired through restructuring.
This flexibility hasn’t translated to noticeable outperformance relative to its distinct high-yield rivals. Cook’s tenure is short, and performance under his leadership mixed. A misstep in holding more cash during the mid-2020 high yield rally caused the strategy to significantly lag peers, but stronger relative performance more recently is positive. Over the trailing 10 years ended June 2022, the institutional share class posted a medianlike 3.9% annualized result.