Jupiter Asset Management has done something that would have looked almost radical a year ago: it zeroed out US Treasury holdings in one of its main bond funds. The £47 billion ($63.5 billion) asset manager swapped that exposure for European government notes and deepened an already significant emerging-markets position instead.
What changed, and why
Portfolio manager Ariel Bezalel has been vocal about two interconnected concerns. First, he thinks the US economy is running too hot for comfort. Second, he believes market pricing of European Central Bank rate hikes has gotten ahead of itself, with traders now pricing in three hikes from the ECB.
Bezalel’s view, in plain terms: three ECB hikes is too aggressive an assumption, which makes shorter-dated European government bonds look attractive on a relative basis. If the ECB hikes less than the market expects, those bond prices hold up better than the consensus trade would suggest.
Jupiter is specifically targeting shorter-dated German government bonds. The firm is also keeping its distance from UK gilts. Bezalel cited both excessive rate-hike pricing baked into UK debt and broader political risk as reasons to stay away.
