Talking factsheet: Sovereign Debt Strategy

Vikram Aggarwal gives an overview of Jupiter’s sovereign debt strategy, how the investment process works, and how the team seek to generate alpha.

Jupiter Global Sovereign Opportunities

Rethinking government bond investments

Our aim when investing in sovereign fixed income is to deliver superior returns versus global sovereign bonds with a similar degree of volatility.

Why invest in Jupiter Global Sovereign Opportunities

Fulfilling the traditional role of sovereign bonds

2. Where are sovereign opportunities?

3. Investment philosophy

Our philosophy when investing in sovereign fixed income

4. Investment process

Unconstrained instrument selection across “Country Complex”

5. Investment toolkit

Typical trades

6. Geopolitically-aware fund

Positioning for the New World Order

 

  • We believe that the unipolar world order has changed to a bi- or multi-polar world order
  • Sovereign fixed income universe is unique as it provides directly-correlated investment instruments to position for geopolitical events
  • Identifying geopolitical (tail-)risks is a natural by-product of our investment process
  • We seek to hedge against or position for these risks, which are often non-linear
  • We often implement this via credit-default-swaps (CDS) – these are effectively put options on the underlying bond(s), offering asymmetric payoff structures
  • Our aim is to achieve portfolio resilience

Fund specific risks

  • Interest Rate Risk – The Fund can invest in assets whose value is sensitive to changes in interest rates (for example bonds) meaning that the value of these investments may fluctuate significantly with movement in interest rates .e.g. the value of a bond tends to decrease when interest rates rise.
  • Credit Risk – The issuer of a bond or a similar investment within the Fund may not pay income or repay capital to the Fund when due.
  • Derivative risk – the Fund may use derivatives to generate returns and/or to reduce costs and the overall risk of the Fund. Using derivatives can involve a higher level of risk. A small movement in the price of an underlying investment may result in a disproportionately large movement in the price of the derivative investment.
  • Emerging Markets Risk – Emerging markets are potentially associated with higher levels of political risk and lower levels of legal protection relative to developed markets. These attributes may negatively impact asset prices.
  • Share Class Hedging Risk – The share class hedging process can cause the value of investments to fall due to market movements, rebalancing considerations and, in extreme circumstances, default by the counterparty providing the hedging contract.
  • Contingent convertible bonds – The Fund may invest in contingent convertible bonds. These instruments may experience material losses based on certain trigger events. Specifically these triggers may result in a partial or total loss of value, or the investments may be converted into equity, both of which are likely to entail significant losses.
  • Sub investment grade bonds – The fund may invest a significant portion of its assets in securities which are those rated below investment grade by a credit rating agency. They are considered to have a greater risk of loss of capital or failing to meet their income payment obligations than higher rated investment grade bonds.
  • Pricing risk – Price movements in financial assets mean the value of assets can fall as well as rise, with this risk typically amplified in more volatile market conditions.
  • 1 Currency (FX) risk – The Fund can be exposed to different currencies and movements in foreign exchange rates can cause the value of investments to fall as well as rise.
  • Counterparty Default Risk – The risk of losses due to the default of a counterparty e.g. on a derivatives contract or a custodian that is safeguarding the Fund’s assets.
  • Charges from capital – Some or all of the Fund’s charges are taken from capital. Should there not be sufficient capital growth in the Fund this may cause capital erosion.

For a more detailed explanation of risk factors, please refer to the “Risk Factors” section of the Prospectus.

The fund may be subject to other risk factors, please see the Scheme Particulars for further information.

 

This is a marketing communication. Investors should carefully read the Key Investor Information Document (KIID), Supplementary Information Document (SID) and Scheme Particulars, particularly to the fund’s investment objective and characteristics including those related to ESG (if applicable), before making any final investment decisions. These are available from the document library.

Important information

  • Interest Rate Risk – The Fund can invest in assets whose value is sensitive to changes in interest rates (for example bonds) meaning that the value of these investments may fluctuate significantly with movement in interest rates .e.g. the value of a bond tends to decrease when interest rates rise.
  • Credit Risk – The issuer of a bond or a similar investment within the Fund may not pay income or repay capital to the Fund when due.
  • Derivative risk – the Fund may use derivatives to generate returns and/or to reduce costs and the overall risk of the Fund. Using derivatives can involve a higher level of risk. A small movement in the price of an underlying investment may result in a disproportionately large movement in the price of the derivative investment.
  • Emerging Markets Risk – Emerging markets are potentially associated with higher levels of political risk and lower levels of legal protection relative to developed markets. These attributes may negatively impact asset prices.
  • Share Class Hedging Risk – The share class hedging process can cause the value of investments to fall due to market movements, rebalancing considerations and, in extreme circumstances, default by the counterparty providing the hedging contract.
  • Contingent convertible bonds – The Fund may invest in contingent convertible bonds. These instruments may experience material losses based on certain trigger events. Specifically these triggers may result in a partial or total loss of value, or the investments may be converted into equity, both of which are likely to entail significant losses.
  • Sub investment grade bonds – The fund may invest a significant portion of its assets in securities which are those rated below investment grade by a credit rating agency. They are considered to have a greater risk of loss of capital or failing to meet their income payment obligations than higher rated investment grade bonds.
  • Pricing risk – Price movements in financial assets mean the value of assets can fall as well as rise, with this risk typically amplified in more volatile market conditions.
  • 1 Currency (FX) risk – The Fund can be exposed to different currencies and movements in foreign exchange rates can cause the value of investments to fall as well as rise.
  • Counterparty Default Risk – The risk of losses due to the default of a counterparty e.g. on a derivatives contract or a custodian that is safeguarding the Fund’s assets.
  • Charges from capital – Some or all of the Fund’s charges are taken from capital. Should there not be sufficient capital growth in the Fund this may cause capital erosion.

The fund may be subject to other risk factors, please see the Scheme Particulars for further information.

 

This is a marketing communication. Investors should carefully read the Key Investor Information Document (KIID), Supplementary Information Document (SID) and Scheme Particulars, particularly to the fund’s investment objective and characteristics including those related to ESG (if applicable), before making any final investment decisions. These are available from the document library.