Jupiter unveils defensive HY fund as yield curve inverts

Jupiter has spied an opportunity for a more defensive take on high yield allocations as it launches a short-duration fund for its fixed income team.

The Global High Yield Short Duration Bond Sicav will be managed by Adam Darling (pictured), who currently co-manages the Jupiter Corporate Bond fund with Harry Richards. He joined Jupiter in 2015 and previously worked in corporate credit analysis, with prior experience of bank lending and private equity investment.

Jupiter Corporate Bond performance

Source: FE Analytics

Darling said short duration high yield represented a compelling risk-adjusted investment in the prevailing global low yield environment.

The launch comes as the yield curve inverts in the US and UK and 30-year treasury yields reach a record low of 2.0813%.

Tilney managing director Jason Hollands said the short maturities of the bonds in the fund would provide a more defensive opportunity for investors in the asset class.

“For several months now investors have been debating the when the next recession is due and the latest German GDP data suggest the Eurozone could lead the way,” Hollands said in reference to Europe’s largest economy contracting 0.1% in Q2.

“Whenever that happens, high yield defaults which have been incredibly low for a very long time will undoubtedly be expected to rise.

“It is therefore understandable that Jupiter spy demand for a short-dated high yield fund to cater for asset allocators who want to position their high yield allocations defensively.”

The fund will hold around 75 bonds with maturities shorter than five years. It will aim for income and capital gains over the medium to long term.

Darling will report to Jupiter head of strategy for fixed income Ariel Bezalel, whose fund returned to net inflows in H1 2019 after being the main contributor to recent Jupiter outflows with investors pulling £4.4bn from the Sicav strategy in 2018.