also having low correlations with one another. Recently, that allocation has skewed heavily toward securitized assets including agency and non-agency mortgage-backed securities, commercial mortgage-backed securities and assetbacked securities. Norelli says these types of assets have specific risk premiums that generally aren’ t correlated.
“ The market environment is more uncertain than normal,” Norelli says, citing worries about tariffs and their potential impact on growth and inflation. He’ s also concerned about the future independence of the Federal Reserve in the post- Jay Powell era.
“ We have a macroeconomic framework to analyze this period of uncertainty, and that framework suggests we should be trading our assets in the front end of the yield curve where there’ s both reduced interest rate sensitivity and credit spread duration sensitivity,” Norelli explains. That’ s reflected in the portfolio’ s recent average duration of 2.32 years, which is on the low side.( Duration measures a debt instrument’ s price sensitivity to interest rate changes.)
“ It so happens we can still build a portfolio of recession-resistant securities in that part of the yield curve that yields [ roughly ] 6 % and doesn’ t have many idiosyncratic or macro risk factors.”
He says many of the best opportunities that fit that bill are higher-quality securitized bonds( those backed by income-generating assets such as loans or mortgages). He notes these assets have offered better spread and yield opportunities than corporate bonds during the past couple of years.
Manager Andrew Norelli Age 45
“ Right now our corporate credit holdings in JPIE and the Income Fund are the lowest they’ ve been in the 11-year history of the strategy,” he says.“ That’ s not because we expect an imminent recession. It’ s due to two other reasons.”
First, he says the relative value skews toward those securitized issues and less so toward corporate bonds and credit.
Second, securitized assets are more available in the part of the yield curve
“ In our income strategy we have some investors who rely on the regular income distribution for their life expenses. We want our shareholders to have confidence that the distributions they receive will be stable and predictable.”
— Andrew Norelli, co-portfolio manager, JPMorgan Income ETF
Professional Background He is managing director and a member of the Global Fixed Income, Currency & Commodities group. Based in Columbus, Ohio, he is a portfolio manager for several multisector fixed-income strategies, both benchmarked and unconstrained, and is a member of the Asset Allocation Committee for JPMorgan’ s Investor Funds. Before joining the firm in 2012, he spent 11 years as a trader at Morgan Stanley, ultimately serving as co-head of the firm’ s emerging markets credit trading desk from 2008 to 2012.
Outside Interests Skiing and mountaineering are his stress relievers.
and maturity horizon his team focuses on.“ The valuation argument is intensified in favor of securitized when you look at the one- to three-year maturity part of the curve,” Norelli says.
That said, corporate high-yield bonds recently represented nearly 14 % of the portfolio; investment-grade corporates represented only about 3 %.
Steady Income According to Morningstar, the fund’ s risk is below average for the multisec- tor bond category. The fund’ s managers stress the importance of producing riskadjusted income as their primary goal( whereas capital appreciation is secondary). But producing income is one thing. Delivering it consistently in a multisector fixed-income product is another.
“ We actively manage the distribution,” Norelli says.“ What that means is in any given month the portfolio will generate a certain amount of income that by its nature is pretty smooth. But there’ s an unavoidable variation in the precise amount of income the portfolio generates in any given month.”
He notes that corporate bonds and Treasurys deliver consistent income streams, whereas holdings in certain types of securities with more variable income streams can result in uneven dividend distributions to shareholders.“ In our income strategy we have some investors who rely on the regular income distribution for their life expenses,” he says.“ We want our shareholders to have confidence that the distributions they receive will be stable and predictable.”
He says that in a typical month the team will hold back a very small portion of the booked income— perhaps they’ ll distribute 98 % and hold back 2 %— in a kind of income bank. So if there’ s a modest income shortfall in a future month they can use the income in the bank to keep the dividend stable without having to return capital.
SEPTEMBER 2025 | FINANCIAL ADVISOR MAGAZINE | 43