J.P Morgan Asset Management's latest fund launch aims to outperform inflation and deliver real returns across inflationary or economic cycles for pension investors.
With returns on risk-free assets still at historic lows and inflation remaining above target in the UK, the Jersey and UK-listed JPM Diversified Real Return Fund is aimed at those saving for, or already in retirement, who are increasingly concerned about how to safeguard the value of the funds they have built up for their pension.
The UCITS fund is based on a successful strategy launched by the firm’s Global Multi-Asset Group (GMAG) in the US in 2011, and will blend inflation-linked bonds with real assets and inflation-sensitive equities to produce a portfolio that can outperform inflation as well as provide a positive return in a range of inflationary or economic conditions.
Commenting on the launch, John Stainsby, Head of UK Institutional at J.P. Morgan Asset Management, said: “The popularity of index-linked government bonds in the past few years of above-target inflation has driven yields down to extremely low levels. The JPM Diversified Real Return Fund has been designed for investors who want to diversify their exposure beyond index-linked bonds to other inflation-sensitive assets. Its ability to invest across many inflation-sensitive asset classes makes it appropriate for those who want to achieve real returns and recognise the problems that an inflationary environment can pose to long-term investors.”
The fund’s official benchmark is the 1-10 Year Barclays Capital Index-Linked Gilts Index. The fund aims to achieve an annual return before fees of 3% in excess of the UK Retail Price Index, with 40-60% the volatility of equities. It will do this by investing in a blend of inflation-linked bonds, investment grade credit, inflation overlays, and real assets or their related equities.
Value will be added through strategic and tactical asset allocation and a ‘smart’ rebalancing strategy. The team has identified that the best portfolio returns while meeting the RPI + 3% target and minimising volatility can be achieved with a mix of around 65% lower-volatility assets, such as index-linked gilts, corporate bonds with inflation overlays and cash alternatives, and 35% higher-volatility assets such as real estate investment trusts, commodities, natural resources equities and infrastructure equities.
Structured as an OEIC under the UCITS rules, the A share class has a minimum investment of £1,000 lump sum or £100 a month.
Institutional share classes suitable for pension scheme clients and other institutional investors will come on stream over the coming months.
Since November 2008
Share issue oversubscribed
PARTNER INSIGHT: For many advisers, outsourcing to a multi-manager or discretionary fund manager makes sense, allowing them to focus on the adviser-client relationship
Events, information and other services
An added tier of asset management can of course deliver additional benefits for certain investors, writes Graham Bentley - just be sure you can justify it to the regulator and, especially, the client