JPMorgan Total Return's flexible approach to this benchmark-aware core-plus mandate draws on this team’s unconstrained bond investing experience, but execution has not met expectations.
This lean investment team is led by fixed-income veteran Bill Eigen, whose history managing flexible mandates spans beyond his J.P. Morgan tenure that began in 2008. He draws on the support of longtime managers Jarred Sherman and Jeff Wheeler, who lead the fund’s investment-grade credit and securitized sleeves, respectively. A macro strategist, trader, and research analyst round out the group, and while the vast resources of J.P. Morgan's global fixed-income, currency, and commodities platform are at their disposal, they are only used sparingly. While this close-knit team collaborates on idea generation, Eigen has the final say on portfolio decisions, which introduces some key-person risk.
The framework combines the foundational attributes of traditional core bonds with opportunistic allocations. Three risk buckets serve to guide these exposures; core represents a traditional high-quality intermediate mandate, while opportunistic allocations range from high yield and structured mortgage-backed securities to relative value long-short strategies and other uncorrelated plays. While specific guardrails around these allocations are not defined, core makes up the lion's share of assets (about 91% as of September 2023). However, the fund's early days saw more than 30% of assets in opportunistic stakes, primarily high yield. Overall, void of compelling opportunities to invest in riskier sectors, the fund more closely resembles the risk profile of the Bloomberg U.S. Aggregate Bond Index.
This flexible approach fits with Eigen's contrarian style and desire to be nimble as market conditions change. However, his reluctance to enter riskier markets, even when spreads appear compelling, has caused the strategy's performance to lag core-plus rivals in recent years. High-yield corporate bonds, the fund's biggest risk lever, stood near its all-time low at 1.9% of assets as of September 2023. The fund continues to eschew risk and favor liquidity as investment-grade corporates, agency MBS, Treasuries, and cash made up more than 91% of assets.
This risk aversion has dented its long-term performance versus peers that held higher stakes in riskier debt. Over the past 10 years, the I shares' 1.8% annualized return ended December 2023 trailed its unique intermediate core-plus bond Morningstar Category median peer's 2.1%, ranking in the bottom quintile. Relative returns over the past three- and five-year periods were similar.