Citywire Selector - For Professional Investors

Register to get unlimited access to Citywire’s fund manager database. Registration is free and only takes a minute.

JPM bond chief Michele: unconstrained not under threat

JPM bond chief Michele: unconstrained not under threat

The recent clamour to decry unconstrained bond funds as illiquid and potentially hazardous ignores the long-term potential for this approach, JPM’s Bob Michele has said.

Michele, who is global chief investment officer for global fixed income, currency and commodities, said fears about the asset class were misguided.

Speaking to Citywire Global, Michele was asked if concerns raised by other bond managers – including fellow JPM manager Bill Eigen – were justified.

‘No, as global unconstrained fixed income managers we have strong conviction in this investment style,’ he said.

‘In fact, we are recognising among investors that there is a “great realignment” underway of fixed income portfolios from more traditional, benchmark-oriented strategies to more unconstrained and flexible approaches.

‘Investors are increasingly looking to next-generation debt strategies, investing more globally and leaning to more benchmark-agnostic strategies.’

Michele said these bond fund types, which are proving popular amid the uncertain rising rates environment, have many advantages over standard bond funds.

‘There are three key challenges with traditional fixed income benchmark strategies,’ he said. ‘Duration: significant sensitivity to changes in interest rates, concentration: highest allocation to the most stressed and frequent borrowers, and constraints: limited flexibility to capture returns outside the confines of the index.’

The bond market veteran said the lack of an index for unconstrained bond funds would also prove vitally important if there are any liquidity concerns in the market.

‘A global unconstrained fixed income approach is arguably better poised to handle liquidity challenges if/when they should arise in the bond markets because they have the flexibility to invest without being limited to a benchmark,’ he said.

‘And they can seek out the most compelling opportunities and manage liquidity without the limitations that a traditional bond fund manager would encounter.’

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Events
  • Citywire Luxembourg Forum

    Citywire Luxembourg Forum

  • Citywire DACH 2017

    Citywire DACH 2017

  • Citywire Italy 2017

    Citywire Italy 2017

  • Citywire Berlin 2017

    Citywire Berlin 2017

  • Citywire Miami 2017

    Citywire Miami 2017

  • Citywire Professional Buyer

    Citywire Professional Buyer

  • Citywire Madrid 2017

    Citywire Madrid 2017

  • Citywire Switzerland Retreat 2017

    Citywire Switzerland Retreat 2017

  • Citywire Amsterdam 2017

    Citywire Amsterdam 2017

  • Citywire Frankfurt 2017

    Citywire Frankfurt 2017

  • Citywire Alternative Ucits Retreat 2017

    Citywire Alternative Ucits Retreat 2017

  • Citywire Paris 2017

    Citywire Paris 2017

  • Citywire Milan 2017

    Citywire Milan 2017

  • Citywire Deutschland 2017

    Citywire Deutschland 2017

  • Citywire DACH 2017

    Citywire DACH 2017

  • Citywire Italy 2016

    Citywire Italy 2016

  • Citywire Milan 2016

    Citywire Milan 2016

  • Citywire Alt Ucits 2016

    Citywire Alt Ucits 2016