Jupiter launches Strategic Bond Fund

Ariel Bezalel, manager of the newly-launched Jupiter Strategic Bond Fund will focus on investment grade bonds issued by large European/US banks, with about a third of the portfolio held in financials. Ariel said: "As a consequence of the ongoing credit squeeze, banks will need to continue raising capital through further rights issues and bond issuance. In the future I expect to see less leverage, tighter regulation and more transparency in this sector. In addition, there are prospects for further consolidation, following the Bear Stearns/JP Morgan deal, and that means stronger balance sheets. All of this is good news for bond investors and the Fund will be overweight high quality financials to take full advantage of the opportunities in the credit market at this time."

"I believe the major economies will slow down over the next couple of years and so there is still potential for some earnings risk. However, markets are pricing in a high level of default risk for investment grade bonds from blue chip companies and this seems extremely unlikely - in fact we are already seeing financials starting to outperform." continues Ariel.

"Compared to the investment grade market, high yield corporate bonds are still looking expensive to me, considering the macro backdrop. While I intend to take positions in high yield bonds I will be looking at defensive sectors and credits that are well protected by a large equity cushion. Preferably we will seek to position ourselves as high up the capital structure as possible." comments Ariel.

The Jupiter Strategic Bond Fund, which launched today, has a 7% target yield and will be managed on a ‘go-anywhere' basis with the ability to invest globally and across the ratings spectrum. This allows Ariel to position the portfolio to benefit from a variety of investment conditions. At launch, he is aiming to position 60% of the portfolio in investment grade bonds and 40% in high yield bonds and intends to have an average BBB- credit rating at launch.

Ariel Bezalel takes a top down/bottom up approach to investment. This means a lot of time is spent meeting management and researching company fundamentals, as well as gathering information and opinions from sector specialists on the sell side and within Jupiter. He then takes a macro-economic view of issues such as inflation and the interest rate outlook which helps shape the portfolio.