JPMorgan Mortgage-Backed Securities’ experienced securitized specialists ply a disciplined process focused on an array of mortgage-backed bonds. The fund’s cheapest share class earns a Morningstar Analyst Rating of Silver, while pricier share classes are rated Bronze and Neutral.
Experience, depth, and mortgage-backed securities expertise give this team its edge versus rivals. Michael Sais has managed this fund since 2005, but Rick Figuly (2015), head of JPMorgan’s value-driven core bond team, and Andrew Melchiorre (2019), an MBS specialist, oversee the day-to-day operations of this strategy. These comanagers lean on the firm’s large team of investment-grade portfolio managers and seven securitized analysts.
The strategy’s MBS emphasis distinguishes it from intermediate core bond Morningstar Category peers and takes advantage of its team’s securitized expertise. While the process begins with JPMorgan’s quarterly investment committee forming its three- to six-month macroeconomic outlook, weekly sector meetings and daily interactions drive decision-making here. These value-driven managers apply rigorous fundamental analysis to agency and nonagency MBS of varying types and structures to seek out good relative value and favorable prepayment characteristics. Agency-backed residential and commercial mortgages dominate the portfolio, typically 65%-75% of assets, which differentiates the strategy from peers that often maintain stakes in bonds of this ilk that range from 20%-25% of assets. The fund complements its agency-backed stake with nonagency residential and commercial MBS and asset-backed bonds, while the team maintains a small U.S. Treasury position to bolster liquidity.
The strategy’s contours differ from many of its category peers. Its lack of corporate bond exposure causes it to lag more credit-focused options when markets embrace risk, but in broadly risk-averse markets, its high-quality, mortgage-centric holdings tend to give it a boost. This resiliency, paired with the team’s strong security selection and subtle shifts across securitized sectors, has paid off with impressive performance over Sais’ July 2005-August 2022 tenure. The I share class’ 3.8% annualized return outpaced its median distinct rivals’ 3.2%, landing in the top decile of its peers and delivering a category-best Sharpe ratio, a measure of risk-adjusted returns.