Winnersrationale

The demand for liquid alternatives to diversify and meet return goals rose further in 2021 as investors’ struggled with higher volatility and the inability of bonds to provide much cushion for equity losses. Needless to say, this led to liquid alternatives solutions playing a more significant role in a holistic portfolio.

J.P. Morgan Asset Management’s Macro Strategies team offers just what investors search high and low for: return enhancement on the one hand and portfolio diversification on the other. Macro Strategies aims to deliver attractive positive returns and through varying market environments, so the portfolio is lowly correlated to traditional asset classes in the long term, and on top of that, it offers daily liquidity to investors.

During September and October 2020, the flagship SICAV JPMorgan Investment Funds – Global Macro Opportunities Fund held short-bias equity via futures and options for protection, due to concerns over growing COVID-19 cases. The positions through futures and options delivered 1.62% and 0.52% respectively, allowing a modest net positive return over the period compared to the negative 5.9% drawdown in the MSCI World Index.

Quickly into November 2020, seeing a more supportive backdrop with vaccine developments and stronger upside in equity markets after the corrections, the Fund reversed its short position and benefited from the equity rally in the ensuing months. From January to April 2021, based on the view that the economy was in a cyclical expansion, the Fund’s bullish positions in US banks and semiconductor manufacturers strategies — implemented via selected names — contributed 1.5% and 1.2% to the Fund’s gross performance respectively.

These are examples of the Fund’s flexibility, precision and effective hedging strategies, built on top-down regional analysis and bottom-up security research. The team takes into account the structural changes shaping the world, as well as the cyclical economic backdrop and any potential near-term event risks. The Fund determines the current phase of the macro cycle by looking at four key components: growth, inflation, sentiment and liquidity across five key regions, and deploys quantitative techniques that are integrated into deep qualitative analysis.

In the 12 months ending on 31 August 2021, the Fund delivered a return of 11.8% with unparalleled risk-reward, as exampled by its Sharpe ratio of 2.58. Its performance has been recognised by private banking investors and witnessed US$1.6 billion net inflows across all global distribution channels in the past 12 months.

J.P. Morgan Asset Management is Asian Private Banker’s Best Fund Provider — Liquid Alternative.