What informs that credibility? “It goes back to the clarity of the communication strategy and always having an exit plan,” Mr Gartside says. “When the history books are written, the Fed’s QE Infinity policy could be seen as a mistake. Markets might not like it that QE is about to end, but at least they can price it in. That is what the other central banks have done.”
The JPMAM way is to consider how assets compete with each other, and for bond managers such as Mr Gartside, how different fixed income instruments compete with each other. He says a “great rotation” from benchmarked strategies towards unconstrained strategic bond-style strategies is afoot, and while retail investors’ appetite for fixed income has waned, institutions are “rotating” from equities into fixed income to meet their liabilities to an ageing population.
“There is a disconnect between how those two [investor] groups operate,” he says. Drawing on the factors he considers drive markets – fundamentals, technical factors and valuation – Mr Gartside favours high yield (roughly 7 per cent, default rates at 2-3 per cent and the next redemption cycle in 2018), “select” investment-grade bonds and a short bias to government bond.
He describes all bond fund managers as “natural sceptics”. “If you are lending money, you want it back and the interest paid. Equity investors are buying a share of future profits, so they are bound to be more optimistic.”
In this environment, with markets perhaps responding in more of a knee-jerk fashion than before the crisis, it is good to be a sceptic.
Anna Lawlor is a freelance journalist
CV
Nick Gartside
2010-present
International chief investment officer, JPMorgan Asset Management
2002-10
Euro government bond manager, global government bond portfolio manager and head of global fixed income, Schroder Investment Management
1997-2002
Portfolio manager, Mercury Asset Management/Merrill Lynch Investment Managers
