Utilizing a meticulous and effective bond-picking approach, JPMorgan Mortgage-Backed Securities’ experienced securitized specialists and vast fixed-income resources merit a People Pillar rating upgrade to High from Above Average.
Firm veterans Rick Figuly, Andy Melchiorre, and Michael Sais back up their experience with results. This team of securitized specialists effectively collaborates on decisions to give them an edge over most rivals. Sais has managed the fund since 2005, but Figuly (2015), head of J.P. Morgan’s value-driven core bond team, and mortgage-backed securities specialist Melchiorre (2019) oversee the day-to-day of this strategy. Still, it’s very much a team effort, with the managers conducting bottom-up research and drawing on specialized portfolio managers and a growing team of seven securitized analysts for ideas and ongoing monitoring.
The strategy’s MBS emphasis distinguishes itself from most of its intermediate core Morningstar Category peers and leverages the team's extensive securitized expertise. J.P. Morgan's quarterly investment committee helps shape the macro outlook, while weekly sector meetings and daily interactions guide portfolio construction. These value-driven managers employ rigorous fundamental analysis to evaluate agency and nonagency MBS of various types and structures that meet their stringent standards, identifying good relative value and favorable prepayment characteristics. The portfolio predominantly consists of agency residential and commercial MBS, typically accounting for 65%-75% of assets, which sets it apart from the typical category range for similar bonds of 25%-30% of assets.
The strategy’s relatively unique contours, including its absence of corporate bonds, cause it to lag most rivals in periods favorable to credit, but its high-quality, mortgage-centric holdings tend to give it a boost when credit is out of favor. This resiliency and strong security selection have paid off with compelling long-term results. Since Sais’ tenure began in July 2005, the I shares’ 3.6% annualized return through August 2023 beat the Bloomberg US Aggregate Bond Index’s 2.9% and placed in the top decile of the distinct intermediate core category. Results versus peers were even better when adjusting for volatility; its Sharpe ratio (a measure of excess return relative to excess standard deviation) ranked best among rivals.