Duration Risks Could Lead to ‘Devastating’ Losses: JPMorgan AM
(Bloomberg) -- With interest rates globally edging higher, JPMorgan Asset Management is talking “to clients a lot about duration risks,” Nandini Ramakrishnan, a London-based strategist at the firm, says at a press briefing.
- Ramakrishnan warns of potentially “devastating losses” for a fund portfolio especially if concentrated in assets such as U.K. gilts; long-end asset classes “suffer quite a lot of duration risks”
- Used a hypothetical 1% rise in interest rates in the local currency and local yield of any asset class to illustrate how U.K. gilts are particularly vulnerable
- Says JPMorgan AM “talking to clients about diversifying across these spaces -- selecting some of the asset classes within fixed income and even provide you positive returns when yields go up”
- “Those are the convertibles, the high yield, even emerging- market debt, which can dampen some of those losses”
- Recommends not remaining focused on core fixed-income for haven and source of yield
- NOTE: BofAML Says High Yield to Rally Near Term, Prefers Low Duration: Link
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HALISTER1Source: BFW (Bloomberg First Word)
Tickers JPM US (JPMorgan Chase & Co)
People Nandini Ramakrishnan (JPMorgan Chase & Co)
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