Jupiter fixed income manager Mark Nash divested from long-dated government bonds, including US Treasuries and UK gilts, ahead of the recent sell-off. He attributed the market rout partly to the Federal Reserve's July decision to maintain US interest rates at 3.50-3.75%, which he viewed as a missed opportunity to control inflation. This strategic shift has seen him focus on shorter-dated bonds.
Nash, who manages funds such as the $474 million Jupiter Strategic Absolute Return Bond, has expressed concerns about the sustainability of the US government's recent move to buy back long-dated debt. He believes that effective policy is needed to stabilize the long end of the gilt market, rather than interventions. He also noted the relative weakness of the UK economy, suggesting that its fragility means gilts are likely to sell off if the US experiences long-term problems.
Despite the broader sell-off, Nash is considering increasing exposure to shorter-term gilts, anticipating that the Bank of England may not hike rates amid the current market environment. His funds have also taken currency positions, increasing exposure to the Swiss franc as a safe haven and going short on the US dollar, reflecting concerns about global fundamentals and volatility.
The Jupiter Strategic Absolute Return Bond fund achieved a 5.2% return in the last year, outperforming the Sterling Overnight Interbank Average Rate (SONIA) by 1.3%. However, over three- and five-year periods, the fund has slightly underperformed its benchmark, with 14% returns over three years and 19.9% over five years, compared to SONIA's 14.9% and 20.3% respectively.
This move by Nash contrasts with other Jupiter fund managers, such as Harry Richards, who zeroed out US Treasury holdings in July in the $1.7 billion Strategic Bond Fund due to signs of an "overheating" US economy and the likelihood of further interest rate hikes there.
