Talking Factsheet
Jupiter Dynamic 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 Dynamic 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 assess 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 investment 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.
Meet the team
Jupiter Fixed Income Team
Investors in the fund can benefit from the expertise and experience of our fund managers and credit analysts, who optimise exposure to all parts of the global bond market in any environment. The team is headed by Ariel Bezalel, Head of Strategy, Fixed Income, who has over 20 years of experience in sovereign and credit markets, along with Fund Manager Harry Richards, Fund Manager Vikram Aggarwal, a team of dedicated credit analysts led by Luca Evangelisti, Head of Credit Research, with additional expertise provided by Matthew Morgan, Investment Director, Fixed Income. The whole team is based in London, with the single location fostering strong team interaction, communication, and agility of active fund management.
Fund specific risks
- Investment risk – 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, even if the share class is hedged against the main currency of the Fund.
- High Yield bond risk – The fund can invest a significant portion of the portfolio in high yield bonds and bonds which are not rated by a credit rating agency. While such bonds may offer a higher income, the interest paid on them and their capital value is at greater risk of not being repaid, particularly during periods of changing market conditions.
- Interest rate risk – Bonds are very sensitive to interest rate changes and it is possible that issuers of bonds will not pay interest or return the capital promised. Bonds may also be downgraded by rating agencies. These events can reduce the value of bonds and have a negative impact on performance.
- Liquidity risk – In difficult market conditions, reduced liquidity in bond markets may make it harder for the manager to sell assets at the quoted price. This could have a negative impact on the value of your investment. In extreme market conditions, certain assets may become hard to sell in a timely manner or at a fair price. This could affect the Fund’s ability to meet investors’ redemption requests upon demand.
- 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.
- Short Selling risk – There is a risk that any company providing services such as safe keeping of assets or acting as counterparty to derivatives may become insolvent, which may cause losses to the Fund.
- Capital Erosion risk – All the share class charges are taken from income. Should there not be sufficient income charges will be taken from capital.
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.