JPMorgan Government Bond’s seasoned managers bring extensive securitized debt experience. This team and vast supporting cast execute this disciplined, value-driven process, earning an upgraded People rating.
Comanagers Michael Sais and Bob Manning each bring over three decades of experience, but they don’t do it alone. A deep supporting lineup of managers, research analysts, and traders propel this strategy’s People rating to High from Above Average. They consistently execute this straightforward approach that only invests in U.S.-government-backed debt, but their expertise in sourcing and selecting various agency mortgage-backed securities structures stands out. Alongside the managers, a seven-person dedicated securitized analyst team helps with bottom-up research.
The fund forges its own path. Stringent security selection and stable duration highlight the fund’s approach, while its Bloomberg U.S. Government Bond Index, which only features U.S. Treasuries and agency debt, is only a loose proxy. Instead, the fund features agency MBS of various structures designed to offer an attractive yield and stable duration profile, limiting extension in periods of rising yields. While the process considers macro themes, bottom-up security selection drives portfolio construction. Agency-backed residential and commercial MBS and CMOs typically comprise 45%-65% of assets while U.S. Treasuries (15%-30%) and agencies (3%-20%) take a supporting role. The fund’s approach to interest rate risk stands out, normally keeping duration between 5.0 and 5.5 years.
The managers don’t make big moves, but methodically adjust exposures consistent with their macro-outlook and relative value views. Recently, their forecast for a recession has led to an increase in the fund’s U.S. Treasury and agency debt allocation to about 38.2% of assets, its highest level since 2019 and about 5 percentage points higher than a year ago. The team currently favors better prepayment protection of agency CMBS and well-structured CMOs over pass-throughs. While the fund's 5.87-year duration (as of August 2023) has risen slightly above its upper band, it’s much more stable than its typical rival over time.
The fund has an enviable long-term record. Since Sais’ first full month on the fund in January 1997, the Institutional share class’s 4.0% annualized return through August 2023 beat its unique intermediate government Morningstar Category median peer’s 3.5% and Bloomberg U.S. Government Index’s 3.8%. This result landed in the category’s top decile. Its Sharpe ratio, a measure of returns relative to standard deviation, was better than 75% of its category rivals.