J.P. Morgan Asset Management is making a bullish call on an underinvested market group: high-quality fixed income.
Priya Misra, a portfolio manager at the firm, sees a once in a generation opportunity for investors.
“You can actually take credit risk in the highest quality companies and still get [a] 6.5% [yield], Misra told CNBC’s “ETF Edge” this week. “So, you actually don’t have to go down in credit [quality].”
She suggested the strategy is particularly well suited for investors concerned about having too much exposure to artificial intelligence stocks.
“There’s a huge AI exposure,” Misra said. “What fixed income gives you is this diversified set of returns. It’s not just an AI trade or a tech trade. You have the Treasury trade. You have credit outside of AI.”
Misra co-manages the JPMorgan Core Plus Bond Fund ETF (JCPB). The fund has almost $16 billion in assets under management, with just over three-quarters of its holdings in BBB-rated debt and above, according to the firm’s website as of Aug. 31.
“We’ve actually been increasing some of the double-B [and] single-B exposure because there has been a widening in high yield spread,” she said. “We like some investment grade. And now, we’ve started in the last few days to increase some duration as well, thinking we may be nearing the end of that rate move.”
The JPMorgan Core Plus Bond Fund ETF is down more than 5% so far this year as of Friday’s close, according to FactSet.
“You want to be looking bond by bond and sort of sector by sector to see where the macro and you have to do the bottom up as well to make sure that companies are not over levered,” noted Misra, who’s concerned about how higher rates could hurt the housing market.
BondBloxx co-founder Joanna Gallegos is also advising investors to take advantage of “historically attractive” yields across debt markets.
“You want to really consider getting some corporate debt into your portfolio,” Gallegos said in the same interview. “It’s really in the investor’s best interest to start looking at the income that’s back in fixed income. It can offset the volatility in your portfolio.”
Part of her bull case: Base rates are high, and they’re stable.
“The fundamentals of these corporations are so strong, and the economy continues to grow,” added Gallegos. “We really think that’s being lost in the narrative around Treasury rates.”
Her firm BondBloxx is known for fixed-income exchange-traded funds in sectors including Treasury, corporate, private credit and emerging markets.
One of its funds includes the BondBloxx Private Credit CLO ETF (PCMM). As of Friday’s close, it’s down 0.6% so far this year, according to FactSet.