Jupiter: Jupiter Strategic Bond: update on performance and positioning

We would like to share an update on the Jupiter Strategic Bond Fund, reflecting on 2025 performance and how our positioning has evolved in response to a complex macroeconomic backdrop.

As always, please do not hesitate to get in touch with your usual Jupiter representative if you have any additional questions. 

Summary

• The Strategy adapted tactically in 2025, with more dynamic rate and credit positioning;
• Duration exposure was actively managed in response to US tariff policy and anticipation of curve shape developments;
• We shifted rate exposure from the US to other developed markets (UK, Australia, New Zealand) and then continued to reallocate across those markets;
• We increased net credit exposure in April as spreads remained well supported;
• Strategy performance rebounded in 2025, returning to typical peer-relative levels;
• Strong contributions to return were demonstrated across all sub-components of the fixed income asset class, especially developed market government bonds, high yield and emerging markets.

Revisiting Our Performance in 2022 and 2024

Before we deep dive into 2025, it’s important for us to recognise that 2022 and 2024 in particular were challenging periods for our investors. The Jupiter Strategic Bond Fund is built to deliver on a clear aim: to offer our clients a comprehensive and diversified fixed income allocation that delivers compelling long-term risk-adjusted returns. While recent years have tested this ambition, they have also reinforced our commitment to continuous improvement.

Calendar year performance

Source: Morningstar, NAV to NAV, gross income reinvested, net of fees, in GBP, as at 31.12.25. Past performance does not predict future returns. *Fund launched on 02.06.08. IA = The Investment Association. Performance since 19.09.11 is for the I Acc share class. Performance since 03.06.08 and until 18.09.11 is for the L Acc share class.** On 15.05.23 the Funds Objective, Policy and Target Benchmark changed. From that date the Target Benchmark of the IA £ Strategic Bond Sector average was removed, and the Fund no longer has a Target Benchmark. The IA £ Strategic Bond Sector average has been retained as a Comparator Benchmark for performance comparison purposes only.

Our approach combines top-down macro-driven allocation with bottom-up credit selection, supported by our experienced credit research team. Historically, the Fund has demonstrated resilience and adaptability during periods of significant market dislocation – including the Eurozone sovereign debt crisis, the 2015 High Yield sell-off, and the COVID pandemic in 2020. We aim to anticipate major macroeconomic shifts and position the portfolio accordingly, which has often led to strong performance during episodes of spread widening.

Our macroeconomic framework has always drawn upon a wide range of indicators with historically strong predictive power. This has enabled us to navigate sudden macro shifts with agility, supporting timely allocation decisions and delivering attractive risk-adjusted returns.

While our macro framework has historically supported strong allocation decisions, the environment in 2022 and 2024 proved particularly challenging. In 2022, we were cautious about the ability of developed markets to sustain elevated interest rates, drawing on precedents like the US slowdown in 2018–2019. In hindsight, economies – especially the US – showed greater resilience than we had anticipated.

Throughout 2022-2024, we consistently observed a degree of market complacency regarding the risk of a growth slowdown or a deflationary bust. Meanwhile, government bond yields rose to levels not seen in nearly two decades, significantly improving the value proposition of duration exposure.

Our rate positioning evolved in line with this macro view – increasing or holding steady rather than oscillating. This was not a static stance, but a reflection of a stable macroeconomic thesis supported by increasingly compelling valuations. Periods of stronger government bond performance, such as Q4 2023 and Q3 2024, reinforced our conviction. In those moments, we viewed reducing rate exposure as premature, given that our thesis was beginning to play out and cuts were increasingly anticipated by the market.

Our Approach to 2025

In response to the evolving macro and market environment, over the past 12 months we have been far more tactical. The team has always adhered to the principle that ‘when the facts change, we shall adjust our views accordingly’ and this has certainly been put into practice this year.

Our interest rate allocation illustrates this clearly. Since the start of 2025, our duration exposure has adjusted meaningfully to reflect rapid changes in the macro landscape – driven by US tariff policy, geopolitical developments, and data releases.

Strategic Bond Duration Contribution by Curve

Source: Jupiter, as at 31.12.25.

In Q1, we maintained elevated duration exposure, particularly in the US. Following the US Liberation Day (2 April 2025), we reduced our exposure to the US curve, closing positions at the long end but maintained sizeable exposure to the short end (more specifically to 2-year and 5-year US treasuries via futures). Initially, markets interpreted the event as negative for growth, pushing yields lower. However, as the new tariff policy came to be seen as a structural decoupling of the US from global trade, the curve steepened sharply. We responded by initiating a short position on the 30-year segment as part of a curve steepener which worked well for the strategy. We closed the steepener in late summer, locking in gains following a period of significant curve movement in our favour.

In today’s environment, precise curve positioning is more critical than ever. Fiscal uncertainty has made long-end government bonds a less reliable hedge against downturns. This view led us to shift our UK exposure on a duration neutral basis from the long end to the 10-year maturity and more recently to add exposure to the 5-year segment of the curve (via swaps), where we see more balanced risk-reward especially with the upcoming budget on the horizon. Those segments of the curve are more closely linked to the evolution of inflation, growth and policy decisions relative to the long end.

As we reduced exposure to US rates, we identified opportunities in other developed and select emerging markets. With US rates outperforming, we saw room for markets like the UK and Australia to catch up. New Zealand was a notable example: we increased exposure early in the year as markets priced in only modest easing. As growth weakened, yields declined meaningfully, and we locked in gains by trimming our position. More recently, however, as data in Australia showed more persistent inflation and a recovery in economic growth we decided to meaningfully reduce our exposure there. Exposure to emerging market local currency bonds, focused on Brazil and Mexico, have also been a key driver of performance, with an overall contribution of above 140bps to 2025 total returns.

Strategic Bond, exposure to EM Local Currency, and performance vs Index

Source: Jupiter, as at 31.12.25.

There have also been trades that did not provide a positive contribution in 2025, like exposure we held on German bunds or Japanese long end. We were relatively quick and pragmatic in these situations and closed the trades relatively early on however, shifting our focus to Italian BTPs, where we saw meaningful spread compression potential.

In credit, we have also remained quite pragmatic. While valuations were stretched for much of the year, the post–US Liberation Day environment revealed several supportive factors keeping spreads contained. In April, we increased net credit exposure by closing our hedges via index CDS – a tactical move that added positively to performance.

Our corporate credit book continued to provide a strong positive contribution (as seen also in 2023 and 2024). The year saw a number of positive stories:

• Strong contribution came from telecommunications, driven by core holdings like VMED and by positive developments for Altice France as bid speculation garnered traction.
• Our high conviction thematic trade on private hospital operators in the US (e.g. Community Health Systems, Prime Healthcare Services) which we have spoken about on prior webcasts provided a strong contribution.

Strategic Bond, exposure to US Private Hospitals, and performance vs Index

Source: Jupiter, as at 31.12.25.

• Financials contributed strongly as well, with our holdings in AT1s performing particularly well.
• Satellites exposure delivered handsome returns also across several names as that sector saw a material repricing. Viasat and Inmarsat performed especially well.
• Exposures added to the energy space following Liberation Day sell-off also contributed positively to fund returns (e.g. W&T Energy, Baytex, Saturn).

Hard currency emerging market debt was also a positive story for us with excellent returns coming both from selected corporate stories in the likes of the Czech Republic and India as well as from special situations (Venezuela, Lebanon and Argentina). Please note that holding examples are for illustrative purposes only and are not a recommendation to buy or sell. 

Still optimistic for the future

The nimble approach to interest rate and credit risk management, combined with the aforementioned credit stories have been the key drivers of the Fund’s rebound in 2025. Relative performance versus peers and quartile rankings have returned to more typical levels, reflecting the effectiveness of our active positioning:

Finally, notwithstanding a positive year, we are still very optimistic on the prospects for future returns. We feel that today the Strategy is offering a unique value proposition in terms of yield per credit quality. To illustrate this with numbers, in GBP Hedged terms the portfolio is out-yielding even some HY-rated credits, while keeping IG average quality:

Strategic Bond Yield to Maturity vs. GBP Corporate Bond Market Segments

Quoted yields are not a guide or guarantee of the expected level of distributions to be received. The yield may fluctuate significantly during times of extreme market and economic volatility. Source: ICE BofA, Jupiter, as at 31.12.25. Yields are for ICE BofA GBP Corporate Bond sub -Indexes and GBP High Yield Sub Indexes.

Fund 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.
• 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.
• 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.
• 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.
• Counterparty Default Risk - the risk of losses due to the default of a counterparty on a derivatives contract or a custodian that is safeguarding the Fund's assets.
• 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.

Please refer to the latest Prospectus and to the Key Investor Information Document (KIID) before making any investment decision.  Particularly to the fund/sub-fund investment objective, characteristics including those related to ESG (if applicable), and additional risk factors. These documents are available for download from www.jupiteram.com or can be obtained free of charge upon request. 

Authors:

Ariel Bezalel

Investment Manager, Fixed Income

Harry Richards

Investment Manager, Fixed Income