J.P. Morgan Asset Management Advocates for High-Quality Fixed Income Investments
- J.P. Morgan Asset Management highlights high-quality fixed income as a prime investment opportunity.
- Portfolio manager Priya Misra emphasizes the potential for a 6.5% yield without sacrificing credit quality.
- Concerns arise about potential overexposure to AI stocks, prompting a diversified investment approach.
J.P. Morgan Asset Management is making a compelling case for investing in high-quality fixed income, an area that has seen relatively low investment. According to Priya Misra, a portfolio manager at the firm, there is a unique opportunity for investors in this market segment.
“You can actually take credit risk in the highest quality companies and still get [a] 6.5% [yield],” Misra stated during an appearance on CNBC’s “ETF Edge” this week. “So, you actually don’t have to go down in credit [quality].”
Misra indicated that this strategy is particularly relevant for investors who are wary of excessive exposure to artificial intelligence stocks. She explained, “There’s a huge AI exposure. What fixed income gives you is this diversified set of returns. It’s not just an AI trade or a tech trade. You have the Treasury trade. You have credit outside of AI.”
She is a co-manager of the JPMorgan Core Plus Bond Fund ETF (JCPB), which manages nearly $16 billion in assets. As of August 31, over 75% of the fund’s holdings are rated BBB or above.
Misra noted that the firm has recently increased its exposure to double-B and single-B rated securities due to widening high-yield spreads. “We like some investment grade. And now, we’ve started to increase some duration as well, thinking we may be nearing the end of that rate move,” she commented.
Despite these strategies, the JPMorgan Core Plus Bond Fund ETF has declined over 5% year-to-date as of Friday’s market close, according to FactSet.
Misra highlighted the importance of careful selection, saying, “You want to be looking bond by bond and sort of sector by sector to see where the macro [factors are], and you have to do the bottom-up analysis as well to make sure that companies are not over-levered.” She expressed concern regarding the potential negative impact of rising interest rates on the housing market.
Similarly, Joanna Gallegos, co-founder of BondBloxx, is encouraging investors to capitalize on what she describes as “historically attractive” yields across various debt markets. “You want to really consider getting some corporate debt into your portfolio,” she stated. “It’s really in the investor’s best interest to start looking at the income that’s back in fixed income. It can offset the volatility in your portfolio.”
Gallegos pointed out that high and stable base rates are positive signs for the fixed income sector. “The fundamentals of these corporations are so strong, and the economy continues to grow,” she added. “We really think that’s being lost in the narrative around Treasury rates.”
BondBloxx specializes in fixed-income exchange-traded funds covering sectors such as Treasury, corporate, private credit, and emerging markets. Among its offerings is the BondBloxx Private Credit CLO ETF (PCMM), which has seen a decline of 0.6% so far this year as of Friday’s market close, according to FactSet.
News Courtesy of CNBC
