Q&A: JPM Global Macro Opportunities Fund
What is the underlying strategy of the fund?
The fund uses a research-oriented, global macro approach to capitalise on the opportunities created by eight compelling macro themes developed by an experienced team of macro investors and strategists. The fund aims to provide positive returns over a rolling three-year period, regardless of the market environment, by reflecting these macro views dynamically in the portfolio using a broad range of investment strategies across asset classes and regions, within a risk-controlled framework.
Could you explain one or two of the current investment themes?
Low inflation has been a dominant theme at various points in the past three years, and while the probabilities around our low inflation core scenario vs. reflation and deflation have evolved over time, our core view of a low inflation environment across many developed economies and even emerging market economies, has persisted. As spare capacity diminishes, inflation will likely drift higher but a sharp acceleration seems unlikely, although we acknowledge that some regions, such as the United States of America (USA), are closer to reaching their inflation targets than others. We reflect our view of lower-than-expected inflation globally in part through our exposure to long defensive equity sectors, such as global healthcare.
Are there any areas you are particularly excited about?
Over the next couple of quarters (in late 2016 and early 2017) we face a very complex macro environment, so we are somewhat excited by the potential investment opportunities ahead. The US election, an uncertain growth environment, possible policy normalisation in the US, limitations on monetary policy in Europe and Japan, and the Organisation of the Petroleum Exporting Countries (OPEC) deal, are all factors that can drive asset prices in their own right, but which have simultaneously hit our investment horizon. We believe we are well equipped to navigate these markets, supported by the strength of our macro research platform and the dynamic and nimble nature of our investment process.
In what conditions/environment should we see strong performance from the fund?
The primary driver of returns in the portfolio is whether our macro views are correct, and secondary to this are the investment strategies chosen to implement these views. All investment decisions in the fund are directly linked to the macro themes that have been identified by the portfolio managers and macro strategists, and since the themes incorporated within the investment process are not explicitly market directional, there are no biases that we believe would cause the fund to perform better or worse in particular market conditions. Indeed it is possible to express the themes in ways that are either positively or negatively correlated to the market, and can therefore be considered as either risk on or risk off. Thus a portfolio expressing these themes has the potential to generate returns at all stages of the market cycle.
What benefit can an investor get from investing in this type of instrument alongside traditional bond and equity assets?
In today’s higher volatility, lower return environment, a traditional balanced approach is unlikely to deliver the returns or diversification that investors have enjoyed in the past. The fund aims to provide a solution by targeting positive returns whilst managing volatility. The fund can provide a greater degree of diversification to investors’ traditional portfolios by using a vast investment opportunity set and flexibly shifting exposures to reflect the team’s macro views and current dynamics, in order to generate returns that have low correlations to equities and fixed income when they look less attractive.
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