J.P. Morgan Asset Management is concentrating its bond portfolio primarily in government bonds and is willing to further de-risk if there was a rebound in risk assets.
In an update, the firm said its portfolios were mainly concentrated in developed and emerging government bonds, US agency mortgages and European corporate debt.
Meanwhile, it felt it ‘too soon’ to add any US corporate credit as it was hard to tell if the Federal Reserve would seek to purchase corporate debt.
Bob Michele, global head of fixed income, said: “It is too soon to add US corporate credit. Without knowing whether we will see a fiscal package aimed at companies, or broader industries, and whether or not the Federal Reserve will seek to purchase corporate debt – it is just an educated guess as to what the market has priced in.
“What is different this time is the size of the private equity and credit markets and it is unknown what the knock-on effect to the public credit markets could be in crisis.”
Looking ahead, Michele said the team would be willing to further de-risk its portfolios if there was rebound in risk assets.
“We are expecting a rebound in risk assets as we hit a bottom and the aggregate policy response starts to gain credibility. We would de-risk further on that bounce in expectation of a return to the lows as the economic reality of a global economic shutdown becomes evident.”
The Reserve Bank of Australia has cut rates to 0.5% and a further rate cut is likely before the central bank embarks on a policy of quantitative easing. In the US, the Federal Reserve made an emergency cut to bring rates down to 0%-0.25%.
The JPMAM Global Strategic Bond fund has lost 2.3% since the start of the year to 17 March, according to FE Analytics, versus returns of 0.2% by its benchmark of the Bloomberg AusBond Bank Bill.