April, 2022
• Global equity and fixed income markets sold off in April as inflation remained elevated and renewed lockdowns in China and the war in Ukraine caused further disruptions. The MSCI World was down 7.3% and the JPM Global GBI fell 2.8% (hedged to Australian dollar). The fund return was negative.
• Inflationary pressures remained in focus as elevated inflation data and strong labour markets prompted central banks to further tighten monetary policy. Comments from the US Federal Reserve were incrementally hawkish and expectations for an accelerated tightening path led to a sharp move higher in global bond yields. Against this backdrop, our long equity exposure delivered negative returns, particularly tech which is more sensitive to higher discount rates. However, our short Nasdaq strategy via futures, which we held to tactically hedge some of our long tech exposure, added value. Within long equity, our global media streaming strategy was another key detractor, driven by negative earnings updates, which highlighted a higher market penetration rate and lower structural profitability than previously expected, and we removed the strategy from the portfolio. Meanwhile, our long US large-cap put options and shortbiased equity futures held for portfolio protection, which we tactically adjusted over the month, provided positive performance.
• An escalation of Covid-19 outbreaks in China triggered more lockdowns in a number of cities and provinces, weighing on global manufacturing surveys and renewing concerns around global supply chain disruptions. In this environment of growing downside risks to growth, our long US dollar versus China-sensitive currencies such as Australian dollar and South African rand, held for diversification benefits, added value. Given nearer term risks in the region, we took profit on our long Chinese renminbi versus short Taiwanese dollar strategy.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/monthly-commentary-jpmorgan-global-macro-opportunities-fund-11.pdfMarch, 2022
• Equity markets were volatile but ultimately rebounded and government bond markets moved lower in March, as sentiment recovered, with gas and oil continuing to flow from Russia despite its invasion of Ukraine, and investors adjusted for what had been light positioning in risk assets. The MSCI World was up 3.0% and JPM Global GBI fell 2.2% (hedged to Australian dollar). The fund return was negative.
• Sanctions on Russia that left its energy markets largely out of scope sparked investor optimism and re-risking on technical factors. Against this backdrop, our low level of portfolio risk that reflected a less positive macro outlook hindered performance. Strategies held to provide protection from a risk-off environment detracted, particularly our short-biased equity futures and options in the US and Europe. Our long US dollar versus short South African rand and Australian dollar strategies, held to reflect the view that risk assets could be negatively impacted by tighter financial conditions, also detracted.
Meanwhile,our select quality growth equity names in cloud computing, long defensive sector exposures via futures, and select names in healthcare and utilities, held to reflect the cyclical slowdown environment and to which we added, delivered positive returns.
• The US Federal Reserve (the Fed) raised rates amid labor market strength and elevated inflation. The meeting was hawkish, with Fed members forecasting a median of six rate hikes and several expecting hikes in increments of 0.5%. This prompted a further sharp move higher in bond yields reflecting an accelerated path of policy normalization, causing our long Australian government bond strategy to detract, and we reduced our exposure. We added a short Nasdaq strategy via futures in reflection of the sensitivity of long-duration equity assets to higher rates. Meanwhile, we also added gold for its risk-off properties and positive correlation to inflation and oil prices
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/monthly-commentary-jpmorgan-global-macro-opportunities-fund-8.pdfJanuary, 2022
• Investment grade credit was a key detractor, with longer duration impacting as core rates rose, and spreads also widening by 11 basis points (bps). Heavy supply in the market was another headwind from a technical perspective, despite evidence from earnings season that fundamentals remain robust.
• Corporate high yield was also a driver of negative performance as risk markets underperformed, with high yield spreads widening by 53 bps in the US and 36 bps in Europe, as well as core rates moving higher. Investor sentiment was softer than in recent months, as evidenced by outflows across the industry. Convertible bonds, typically highly correlated to equity markets, also sold off.
• Securitised products also detracted, driven by agency MBS and CMBS, which are vulnerable to tightening from the Federal Reserve. • Emerging market debt was the final detractor, driven by hard currency sovereigns, where spreads widened by 16 bps. Performance from our local currency bond positions was flat.
• On the positive side, government rates went a long way to offsetting the performance from spread sectors, given our short exposure across developed markets. A broad-based increase in yields therefore meant that this short positioning proved an effective hedge for the strategy.
• Over the month, we reduced duration from 1.2 to 0.9 years, via short UK and US rates exposure. Conscious of tight valuations, we are reducing overall high yield exposure from 30% to 27%. We selectively increased exposure (from 2% to 4%) to emerging market local currency bonds, and trimmed our exposure to agency MBS, bringing overall securitised exposure from 32% to 29%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/monthly-commentary-jpmorgan-global-strategic-bond-fund-8.pdfNovember, 2021
• Government rates was the biggest detractor, led by our short US Treasury positioning, which was impacted as rates rallied in response to fears around the Omicron variant. Exposure to European rates was also a small detractor, while a tactical Australia trade added to performance.
• Corporate high yield, including convertible bonds, was another key detractor, impacted by worsening risk sentiment given the spread of the new variant. Spreads widened by around 50 basis points in both the US and Europe.
• Investment grade credit was another detractor, with spreads widening, although the longer duration component helped to limit the negative total return.
• Finally, while we also saw spread widening inemerging market debt sovereign bonds, which detracted from the fund, our EM currency positions (funded out of EUR) were marginally additive to performance.
• Over the month, we tactically traded Australia rates, temporarily added some bunds exposure, and went short Italy rates. Duration fell from 2.5 to 2.3 years.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/monthly-commentary-jpmorgan-global-bond-opportunities-fund-7.pdfOctober, 2021
Government rates were the main detractor as curves flattened, with our short positioning at the longer end of the US curve detracting as front-end yields backed up. Our long Italy exposure also detracted, although we sold our position before the bulk of the spread widening there. Our short UK gilts position offset some of the underperformance, having moved short the UK in expectation of higher rates, and removing our position once we felt markets had appropriately priced future hikes.
• High yield exposure also detracted, as markets experienced some faltering risk sentiment after a sustained rally in previous months. Fundamentals remained strong, and as such, this appeared to be a technical sell-off, with spreads widening, particularly in Europe, with an 18 basis point widening as the sector did not participate in the energy sector rally.
• Investment grade credit was impacted by marginally higher yields, detracting from the fund, although similarly to high yield, corporate fundamentals remained strong as Q3 earnings came in. Securitised products were another marginal detractor.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/monthly-commentary-jpmorgan-global-bond-opportunities-fund-6.pdfAugust, 2021
Emerging market debt was the biggest contributor, with positive returns from both local and hard currency bonds. Among our local bond positions, Indonesia and South Africa were standout performers, with the latter rebounding somewhat from previous volatility earlier in the summer. EM currencies also added. • Corporate high yield also added to performance, with spreads in the US and Europe tightening by 12 basis points (bps) and 10 bps, respectively. The shorter duration of the asset class helped to overcome the backup in rates and high yield has provided attractive carry over recent months. Convertible bonds also did well.
• Our government rates positioning, where we remain short US Treasuries, was also a contributor to performance in August. With yields backing up after several months of grinding lower, this helped the fund. UK gilt yields also rose, where we also held a short position.
• Investment grade credit was a marginal offset to the positive performance, given its longer duration and thus susceptibility to rising rates. Despite this, corporate fundamentals remain supportive.
• Over the month, we trimmed our Italian bond exposure, added short positions to Poland and Chile government bonds. We rotated our EM FX exposure. Duration moved from 2.7 to 2.5 years.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/monthly-commentary-jpmorgan-global-bond-opportunities-fund-1-1.pdfJuly, 2021
The best-performing sector for the fund was corporate investment grade, which benefitted primarily from the continued rally in rates as corporate fundamentals remained supportive.
• Emerging market debt was another key contributor, driven by local currency government bond positions in Indonesia and China. Hard currency bonds also did well, though the return from core rate moves was somewhat offset by some spread widening.
• Corporate high yield also added, as the sector remained attractive from a carry perspective, and although spreads widened in light of concerns around the Delta variant and the peak in growth, the move lower in rates was a tailwind. Fundamental strength is still apparent for high yield corporates, as evidenced by corporate earnings. Convertible bonds offset some of the positive performance as the sector sold off in sympathy with equities.
• Government rates were a significant detractor from performance, primarily due to our short US rates positioning as yields fell further. Short positioning in the UK and France also dragged on returns. Long exposure in Italy, Canada and Germany slightly offset the negative overall rates contribution.
• Over the month, duration was flat at 2.7 years. We reduced effective exposure to emerging market (EM) sovereign and US high yield by adding some CDX protection. We also marginally reduced our EM currency exposure, rotating the funding basket by adding a short NZD position
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/monthly-commentary-jpmorgan-global-bond-opportunities-fund-5.pdfJune, 2021
Strong inflows in the US and spreads tightened by 3 basis points (bps) over the month. The duration component of investment grade credit also helped as rates fell. Fundamentals continue to look supportive amid a strong earnings season.
• Corporate high yield also added, across both the US and Europe, as spreads tightened by 29 bps and 7 bps, respectively. Similar to investment grade credit, corporate balance sheets look in good shape and earnings season indicated a strong recovery post-Covid-19.
• Emerging market debt, with an attractive carry profile and longer duration, also added as core rates fell. Hard currency led the contribution to returns despite spreads widening modestly.
• We continue to be short US government rates,which impacted the fund negatively given the fall in 10-year yields. This was slightly offset by positive performance from our long exposure in Germany, Italy and Canada, where yields also moved lower. • EM currencies also detracted, in particular our ZAR, CNY and IDR positions. Over the month, we increased our short gilt exposure, added exposure to Italy. Duration was reduced from 3 to 2.8 years.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/monthly-commentary-jpmorgan-global-bond-opportunities-fund-4.pdfMay, 2021
Emerging market debt was the main contributor, with all sub-sectors adding to performance. After a challenging first quarter, volatility in EMs has since been subdued, and the growth backdrop is broadly encouraging. Spreads continued to tighten across the sovereign space, and local currency bonds did well, particularly South Africa, Mexico and China. EM currencies provided an additional source of return over the month.
• Corporate investment grade credit spreads tightened at the margin, and the sector added to fund performance. Flows continued into the asset class, reflecting strong demand in the US. Supply has slowed down somewhat, and from a fundamental perspective, corporate earnings reports have been very strong.
• Positive earnings have also helped corporate high yield, which posted positive returns over the month and contributed modestly to the fund: despite a slight widening of spreads (by around 5 basis points in the US), the carry component added to total returns.
• Our short exposure to US government rates was the sole detractor from the fund, impacted by the slight move lower in Treasury yields. This marginal underperformance was offset by our positions in Germany and Canada.
• Over the month, we moved net long German Bunds, and further increased our short US Treasury position. We increased our EM currency exposure, rotating within a basket of currencies and shifting half of our short EUR funding position into short CAD. The fund’s duration was flat at 3 years
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/monthly-commentary-jpmorgan-global-bond-opportunities-fund-3.pdfApril, 2021
• Emerging market debt was a key contributor, led by hard currency sovereigns as flows returned to the market and spreads compressed by 15 basis points (bps). Despite several idiosyncratic risks playing out across emerging markets, demand has remained healthy overall, with the China growth story underpinning the wider recovery. Local currency bond positions in Indonesia and South Africa added to performance. Corporate investment grade also contributed, as the sector stabilised following a challenging first quarter. Earnings season has proven a positive tailwind, beating expectations as the reopening gathers pace.
• Fundamentals also look strong in high yield, which contributed to performance as spreads tightened by 7 bps in the US and 10 bps in Europe. The only detractor from performance was government rates, where our short positioning in US Treasuries hurt given the drop in yields over the month.
• Over the month, we reduced overall fund duration from 3.6 years to 3.1 years, trimmed our emerging market debt exposure and increased net exposure to European high yield
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/monthly-commentary-jpmorgan-global-bond-opportunities-fund-2.pdfDecember, 2020
• Emerging market debt was the top contributor, primarily driven by hard currency sovereigns (as in previous months). China’s recovery remained a tailwind for emerging markets, and the announcement of an effective AstraZeneca/Oxford vaccine boosted risk sentiment further. Local bonds also added, with positive contributions from China, Indonesia, Mexico and South Africa. Emerging market currencies were an additional key contributor.
• Corporate high yield, to which we have recently increased exposure, benefitted from positive vaccine news, with US high yield accounting for most of the positive return (US high yield spreads tightened by 47 bps).
• Convertible bonds also did well as global equities closed the year at new all time highs.
• Continued strong technicals meant that investment grade credit finished 2020 strong, and we also saw a marginal contribution from our Italy (long) and US (short) government rates positions.
• We marginally added to emerging market bonds and currencies over the month, reducing our developed market government bond exposure. Duration fell from 3.9 years to 3.7 years. We added some US high yield, funding purchases by trimming some of our asset-backed securities.
asset_class: Fixed Income
asset_category: Multi-Strategy Income
peer_benchmark: Fixed Income - Multi-Strat Income Index
broad_market_index: Global Aggregate Hdg Index
manager_contact_details: Array
ticker: PER0716AU
release_schedule: Monthly
commentary_block: Array
factsheet_url:
https://am.jpmorgan.com/au/en/asset-management/adv/products/fund-explorer/auut
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fund_features:
PMorgan Global Bond Opportunities Fund aims to achieve a return in excess of the Benchmark by investing opportunistically in an unconstrained portfolio of debt securities and currencies, using financial derivative instruments where appropriate. The Fund invests substantially in the underlying sub-fund with a majority of its assets invested in debt securities, including, but not limited to, debt securities issued by governments and their agencies, state and provincial governmental entities and supranational organizations, corporate debts securities, asset-backed securities and mortgage-backed securities and currencies. The Fund invests across sectors in developed and emerging markets located around the world. Under normal circumstances, the Fund will invest at least 80% of its assets in bonds. The Fund will invest at least 40% of its total assets in countries other than the United States.
structure: Managed Fund