Launched in October 2008, the fund is co-managed by Eigen, Charlie McCarthy, Jarred Sherman and Jeffrey Wheeler. It has returned 9.8% over the past three years until the end of February and ranks 23 out of 61 Liquid Alternative - Bond Strategies funds tracked by Citywire.
A JPM spokesman confirmed the fund's February cash position.
The fund, which actually had as much 49.6% in cash at the end of December 2017, has systematically used cash and short positions to dampen portfolio volatility and preserve capital, according to a recent fact sheet.
In a commentary published on February 28, Eigen wrote that the fund’s position in cash ‘now yields around 2% due to expectations of the Fed interest hike in March and is adding to fund returns at a greater pace.’
‘We view this as attractive compared to traditional fixed income options, given how flat global yield curves remain. More importantly, volatility has remained historically muted,’ wrote Eigen. ‘Traditionally, providing liquidity in times of stress has allowed the fund to capture illiquidity premiums.’
Eigen has also shifted his $3.4 billion JPM Income Opportunity fund, a Ucits fund, to 50% cash due to a lack of opportunities and uncertainty caused by central bank policy shifts, Citywire’s sister publication Citywire Selector reported.
Eigen told Citywire Selector that he had fluctuated cash levels in the Ucits fund from a high of 67% in 2014 to 18% in 2016 given changing market risk profiles.
‘Central banks globally are acknowledging the global economic strength and removing accommodation. This has profound implications for valuations, since indiscriminate central bank demand has had dramatic impact on bond prices, essentially disconnecting them from fundamentals,’ he wrote in a statement to Selector.
‘The era of artificially low rates and easy monetary policy is coming to an end. This will create volatility and great opportunities for fundamental investors with liquidity.’