A Smarter Way for Investors to Get Core Fixed Income Exposure

Fixed-income investors should begin to consider smarter ways to implement core bond exposure to meet challenges ahead in the markets.

In the upcoming webcast, A Smarter Way for Investors to get Core Fixed Income Exposure, Samantha Azzarello, Vice President, Global Market Strategist, J.P. Morgan Asset Management; and Josh Rogers, Investment Specialist, Beta Strategies, J.P. Morgan Asset Management, will outline a factor-based fixed-income strategy that could help diminish downside risks and enhance a traditional fixed-income portfolio mix.

Specifically, the factor-based JP Morgan US Aggregate Bond ETF (NYSEArca: JAGG) holds a diversified portfolio of high-quality fixed income securities, including corporate bonds, U.S. Treasuries and government, and agency securities. Unlike the traditional market cap-weighted bond index funds, the ETF applies a multi-factor credit screening process that seeks exposure to corporate debt issuers with attractive value, quality and momentum characteristics.

“We believe that applying this screening process to the corporate component of the Agg can enhance the outcome that clients seek, providing excess returns during equity market drawdowns through better issuer selection. Given the growth in lower-quality investment-grade corporate exposure within the Agg, we believe that the impact of this process will be even more substantial in the current environment than in the past,” Eric Isenberg, Portfolio Manager for J.P. Morgan Asset Management, said in a note.

Investing In Assets

The portfolio managers will seek to invest in assets based on a systematic investment process focusing on security selection. First, within the corporate sub-sectors of the Bloomberg Barclays U.S. Aggregate Index, the manager will apply a systematic multi-factor screening process that finds exposure to debt issuers that have attractive “factor” characteristics. The three “factors” used include Value, Quality, and Momentum.

The Advisor identified a set of these three fixed-income investment return sources that have distinct risk and return profiles, and each factor represents a potential source of investment return that results from, among other things, assuming a particular risk or taking advantage of behavioral bias.

Lastly, the portfolio manager tries to realign the duration and sectors of the Fund to match the duration and sectors of the Bloomberg Barclays U.S. Aggregate Index.

Financial advisors who are interested in learning about the fixed-income strategy can register for the Tuesday, November 12 webcast here.