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April 30, 2013updated 04 Apr 2017 3:17pm

Poor sentiment towards high yield exposure a buying opportunity: JP Morgan

Even though several multi-asset allocators and US mutual funds have been selling down exposure to the asset class as it has been understood that value has dried up after a strong 2012, JP Morgan Asset Management's international CIO for global fixed income and currency, Nick Gartside, views the poor sentiment towards the asset class as a buying opportunity.

By Verdict Staff

Even though several multi-asset allocators and US mutual funds have been selling down exposure to the asset class as it has been understood that value has dried up after a strong 2012, JP Morgan Asset Management’s international CIO for global fixed income and currency, Nick Gartside, views the poor sentiment towards the asset class as a buying opportunity.

Gartside has taken exposure in the GBP647million (US$1004.4 million) Strategic Bond fund up to its maximum 50% level.

Gartside said: "The unintended consequence of monetary easing is that it traps capital, meaning the difference in returns from the top and bottom performing high yield securities is far greater. It also leads to low default rates, which at 1% are extremely low.

"Another positive which is being overlooked is the fact 66% of high yield corporates are now paying down debt whereas, pre-crisis, just 33% were doing so."

He added: "Valuations may be low from a yield perspective at 5.5%, but the spread at 4.5% is wide compared to history, which a lot of investors do not take into account. We believe it is an important metric as we live in a world where asset classes compete against one another."

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