JPMorgan Limited Duration Bond’s experienced securitized specialists follow a disciplined process focused on short-term mortgage- and asset-backed bonds; the strategy earns a Morningstar Analyst Rating of Silver for its R6 share class and Bronze and Neutral for its most expensive.
This team’s experience, depth, and expertise in securitized bonds differentiates this team versus rivals. Comanagers Michael Sais, who has been with this fund since 1995, and Robert Manning, who joined in 2013, lead this effort and benefit from the support of JPMorgan’s large team of value-driven portfolio managers and fundamental analysts based in Columbus, Ohio, and New York.
The team’s heavy emphasis on securitized bonds stands out versus its Bloomberg 1-3 Year U.S. Government/Credit Index, composed of about 70% U.S. Treasuries and agencies and 30% investment-grade corporates, and typical short-term bond Morningstar Category peer. While the process begins with JPMorgan’s quarterly investment committee to form its three- to six-month macro-outlook, weekly sector meetings and daily interactions drive decision-making here. Sais and Manning apply their rigorous fundamental analysis to securitized debt of varying types and structures. As of June 2022, the portfolio held roughly 81% in agency and nonagency residential and commercial mortgages-backed securities, asset-backed securities, and collateralized loan obligations. Corporates also comprised about 10% of assets, and the team has shunned low-yielding U.S. Treasuries. The managers only buy investment-grade bonds at the time of purchase and manage duration, a measure of interest-rate sensitivity, within a one- to three-year band, but the strategy’s duration typically sits around 1.5 years, shorter than its index and peers’ 1.9 and 2.3 years, respectively (June 2022).
The managers have successfully used their security-selection acumen to seek structured bonds with strong fundamentals and to rotate between various securitized sectors where they perceive attractive relative valuations. Over the past 10 years through August 2022, the R6 share class generated 1.8% annualized, landing in the top quintile of its distinct category rivals. They also effectively managed risk over the same period with lower-than-peer volatility resulting in top-decile risk-adjusted performance, as measured by the Sharpe ratio.