Talking Factsheet
Jupiter Strategic Bond Fund
Ariel Bezalel gives an overview of Jupiter’s global flexible bond strategy, how the investment process works, and how the team seek to generate alpha.
"The aim of the strategy is to give investors an income, but also, on top of that, to give investors the opportunity for some capital gains. And the way we achieve that is by investing in fixed income securities. And these are securities from companies and governments from all over the world. So we as well as looking at developed markets, we do invest in emerging markets as well.
And we also look at opportunities across the rating spectrum, from government bonds to investment grade bonds and into high yield bonds. And typically, just to summarize in terms of how we allocate across those three different markets, when we're feeling a bit more nervous about the economic outlook, and we see the prospect for lower inflation, lower interest rates and slower growth, you'll typically find a higher allocation to government bonds.
And what we're feeling a bit more optimistic about the economic outlook. You'll tend to find a higher allocation to corporate bonds and within that high yield bonds.
The strategy is a top down and bottom up strategy. What do I mean by that? Well, the top down macro view that we formulate between us, allows us to determine our tolerance for duration, risk, tolerance for credit risk, and how we think about allocating different sub sectors of the market as well as, industry sectors as well.
And of course, we pull those levers, to try and deliver the best performance we can for our clients on the bottom up side. We try and, find in the market alongside our credit analysts the best opportunities that can help deliver that return. And what we tend to look for is deleveraging, credit stories. And that takes a lot of work.
And we we put that together in a portfolio that we think is best suited for our macroeconomic outlook when it comes to a couple of other things that we do that I think are quite unique. We tend to do a lot of thematic investing. We tend to look for special themes out there in the market that can help drive Alpha.
These are typically, individual situations or sectors or parts of the market with a very, very strong tailwind. And last but not least, we do want to perform like a bond fund where markets get tricky. We want to offer clients diversification away from risk assets. And so when we're putting the portfolio together, we use all the levers at our disposal to try and deliver that.
So what we really love are these thematic sector ideas. So since we launched the strategy, some of the sector ideas include the likes of, pub securitizations or rig financing. These kind of some of them pretty unique ideas. Outside the box ideas have really helped to generate returns and help us find those returns. We've got a really well-resourced team, of analysts, covering, different sectors.
And what's beautiful is the fact that we can go anywhere around the world. So more markets, more opportunities, for our clients and also what we've done really effectively is, with the flexibility of the strategy. We do have the ability to use derivatives, such as credit derivatives, to help, mitigate risk in the portfolio. And we can also use government bond derivatives to also mitigate, duration or any interest rate risk we possibly see, on the horizon as well."
Flexible, active and unconstrained fixed income
The Jupiter Strategic Bond Fund is a ‘go anywhere,’ high-conviction fund, meaning the managers are able to seek out the best opportunities within the fixed interest universe on a global basis while carefully managing downside risk.
Experienced, diversified
The highly experienced fund management team constantly assesses the dynamics of global fixed income markets, managing risk in the portfolio through adjustments to asset allocation, security selection and duration management. The result is a flexible and highly diversified, global, unconstrained bond fund that can be the cornerstone of an investor’s fixed income allocation.
Go anywhere approach
The fund managers aim to deliver returns for investors through a range of market conditions by diversifying across different types of debt and across the credit spectrum. As a ‘go anywhere’ bond fund, the team have the freedom to seek the best opportunities in the global fixed income universe. The team is structured to be able to react quickly to new ideas and changing market circumstances rather than having to go through investment committees.
No benchmark
The unconstrained approach means that investors are not tied to a benchmark, as the fund shifts between government, investment grade and high yield bonds. It also has access to more complex assets such as derivatives with the aim of generating returns and/or reducing the overall costs and risks of the Fund.
Diversification potential
The ability of the fund managers to balance the portfolio between different subsectors of the fixed income universe can allow the fund to perform through a range of market conditions. Fixed income assets can act as a diversifier to investments in equities as the asset classes typically exhibit relatively low correlation to one another. The income stream from bonds may be more consistent than that provided by shares due to the defined nature of coupon payments. Furthermore, bonds can offer a means of providing an income above the interest rates available on savings accounts.
Investment philosophy
The team aims to maintain a balance between macro and credit risk. Long-term fundamental research underpins the active views. The team has an unconstrained investment approach and an emphasis on special themes. They favour credits with a clear commitment to de-leveraging and aim to identify and manage downside risk.
Active interest rate risk management
The possibility to flexibly alter the portfolio duration of the fund provides the managers with an additional lever to cushion portfolio risk or even to benefit from changes in interest rates.
Please note
Market and exchange rate movements can cause the value of an investment to fall as well as rise, and you may get back less than originally invested. The views expressed are those of the individuals mentioned at the time of writing, are not necessarily those of Jupiter as a whole, and may be subject to change. This is particularly true during periods of rapidly changing market circumstances.
Jupiter Strategic Bond Fund
The fund can invest a significant portion of the portfolio in high yield and non-rated bonds. These bonds may offer a higher income but carry a greater risk of default, particularly in volatile markets. Quarterly income payments will fluctuate. The fund uses derivatives, which may increase volatility; the fund’s performance is unlikely to track the performance of broader markets. Losses on short positions may be unlimited. Counterparty risk may cause losses to the fund. In difficult market conditions, it may be harder for the manager to sell assets at the quoted price, which could have a negative impact on performance. In extreme market conditions, the Fund’s ability to meet redemption requests on demand may be affected. The Key Investor Information Document, Supplementary Information Document and Scheme Particulars are available from Jupiter on request. This fund can invest more than 35% of its value in securities issued or guaranteed by an EEA state.
Meet the team
Jupiter Fixed Income Team
Ariel Bezalel (Lead Investment Manager) started in the industry in 1998 and has gained experience in sovereign and credit markets. He has managed Jupiter’s Global Unconstrained Bond Strategy since its inception in 2008 with the launch of the Jupiter Strategic Bond Fund. The scope of the strategy expanded with the launch of the Jupiter Dynamic Bond SICAV in May 2012.
Harry Richards joined Jupiter in 2011 and became an Investment Manager with Ariel Bezalel in 2016.
The team is supported by Matthew Morgan and Valerio Angioni as investment directors, who are responsible for business development and commercial strategy.
Fund specific risks
- Interest Rate Risk – The Fund can invest in assets whose value is sensitive to changes in interest rates (for example bonds) meaning that the value of these investments may fluctuate significantly with movement in interest rates. e.g. the value of a bond tends to decrease when interest rates rise.
- Pricing Risk – Price movements in financial assets mean the value of assets can fall as well as rise, with this risk typically amplified in more volatile market conditions.
- Contingent convertible bonds – The Fund may invest in contingent convertible bonds. These instruments may experience material losses based on certain trigger events. Specifically these triggers may result in a partial or total loss of value, or the investments may be converted into equity, both of which are likely to entail significant losses.
- Credit Risk – The issuer of a bond or a similar investment within the Fund may not pay income or repay capital to the Fund when due.
- Derivative risk – the Fund may use derivatives to generate returns and/or to reduce costs and the overall risk of the Fund. Using derivatives can involve a higher level of risk. A small movement in the price of an underlying investment may result in a disproportionately large movement in the price of the derivative investment.
- Counterparty Risk – the risk of losses due to the default of a counterparty e.g. on a derivatives contract or a custodian that is safeguarding the Fund’s assets.
- Sub investment grade bonds – The Fund may invest a significant portion of its assets in securities which are those rated below investment grade by a credit rating agency. They are considered to have a greater risk of loss of capital or failing to meet their income payment obligations than higher rated investment grade bonds.
Important information
Market and exchange rate movements can cause the value of an investment to fall as well as rise, and you may get back less than originally invested. The views expressed are those of the speaker at the time of recording, are not necessarily those of Jupiter and may change in the future. This is particularly true during periods of rapidly changing market circumstances.
This communication is intended for investment professionals and is not for the use or benefit of other persons, including retail investors. This communication is for informational purposes only and is not investment advice. Market and exchange rate movements can cause the value of an investment to fall as well as rise, and you may get back less than originally invested. The views expressed are those of the Investment Manager(s) at the time of preparation, are not necessarily those of Jupiter as a whole and may be subject to change. This is particularly true during periods of rapidly changing market circumstances. Every effort is made to ensure the accuracy of any information provided but no assurances or warranties are given. Issued by Jupiter Unit Trust Managers Limited (JUTM), registered address: The Zig Zag Building, 70 Victoria Street, London, SW1E 6SQ, which is authorised and regulated by the Financial Conduct Authority. No part of this document may be reproduced in any manner without the prior permission of JUTM.