Why This Go-Anywhere JPMorgan Bond ETF Is Thriving
A flexible mandate and solid bond-picking have helped the JPMorgan Income ETF deliver above-average returns with low volatility.
Stocks, schmocks. Lately, bonds have been a rewarding place to be, too, if the recent performance of Kiplinger ETF 20 member, JPMorgan Income ETF (JPIE), is any guide.
The multisector bond fund, which aims to maximize income for a prudent level of risk, delivered a 6.9% return over the past 12 months, with less than half the volatility of the Bloomberg U.S. Aggregate Bond Index. It currently yields 5.6%.
The fund's managers, led by Andrew Norelli, have a flexible mandate. They are free to invest in any sector and any bond they deem attractive, whether it's rated investment grade (triple-A to triple-B) or below, or whether it is short or long in maturity.
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That leeway, along with good bond-picking, has enabled them to deliver above-average returns with below-average volatility since the exchange-traded fund's late-2021 launch.
Over the past three years, "even the Aggregate Bond index has had twice the volatility and returned less," says Norelli.
Lately, the managers have favored short-term securitized loans, which Norelli says offer more income than other bonds, including government and corporate debt, without lowering the quality of the portfolio. At last report, nearly 66% of the portfolio held securitized debt, much of it in government-guaranteed mortgage-backed bonds.
Norelli and his comanagers have an optimistic outlook for 2026, in part because of good economic growth numbers in recent quarters. But certain risks, such as central bank moves and the continued gradual shift away from the dollar as the primary currency for international trade and government reserves, make them cautious about interest rates and bonds with long-term maturities.
The fund's current two-year duration (a measure of interest rate sensitivity) is relatively low for this strategy, which at other points in recent years has been as high as six years. (Bond prices and yields move in opposite directions; a two-year duration implies a 2% drop in net asset value if interest rates rise by one percentage point, and vice versa.) The duration of the Agg index, at last report, was 5.8 years.
Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
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