NOT FDIC INSURED | NO BANK GUARANTEE | MAY LOSE VALUE
INVESTMENT INSIGHTS
Building stronger fixed income portfolios
1Q 2017
Still get more from your fixed income portfolio
PLEASE VISIT
Despite recent volatility, interest rates remain near their 60-year lows. Short-term rates and
real yields (i.e. yields after inflation) on some fixed income investments are still close to zero.
jpmorganfunds.com for access to all of
our Insights publications.
The potential for sustained economic growth and subsequent rising rates and inflation has
increased and, as a result, some investors may be tempted to abandon their traditional bond
portfolios. In a low yield environment, there are challenges to navigate, including:
• Producing enough income
• Hedging against possible losses if bond rates rise
• Combating the erosion of purchasing power over time
But investors still need income and the ability to reduce portfolio volatility. J.P. Morgan’s
framework for fixed income diversification can help – even in today’s market environment.
A 30-year bull market for bonds
NOMINAL AND REAL 10-YEAR TREASURY YIELDS
20%
9/30/81: 15.84%
15%
10%
Nominal 10-year Treasury yield
12/31/16: 2.45%
5%
0%
-5%
Real 10-year Treasury yield
12/31/16: 0.31%
’77
’82
’87
’92
’97
’02
’07
’12
Source: Federal Reserve, BLS, J.P. Morgan Asset Management. Data as of 12/31/16. For illustrative purposes only. Past performance is not indicative of future returns. Real 10-year
Treasury yields are calculated as the daily Treasury yield less year-over-year core inflation for that month except for June 2016, where real yields are calculated by subtracting out
May 2016 year-over-year core inflation.
Diversification does not guarantee investment returns and does not eliminate the risk of loss. Investments in fixed income securities are subject to interest rate
risk. If rates increase, the value of the investment generally declines.
INVESTMENT INSIGHTS
BONDS PROVIDE IMPORTANT PORTFOLIO
DIVERSIFICATION BENEFITS
High-quality bonds have negative correlations to equities
CORRELATION TO U.S. STOCKS
While the potential for rising rates may present headwinds for fixed
income investors, it’s important to keep the primary role bonds
play in a well-diversified portfolio front of mind—that they have
successfully diversified equities and are likely to continue doing so.
1.00
0.62
Source: Standard & Poor’s, Barclays Capital Inc., MSCI Inc., DJ UBS, J.P. Morgan Asset
Management. Data as of 12/31/16. Correlation to Core Bonds as represented by the
Bloomberg Barclays U.S. Aggregate Index. Indexes used: U.S. Stocks: S&P 500 Index; Core
Bonds: Bloomberg Barclays U.S Aggregate Index; 1-3 Year Treasuries: Bloomberg Barclays
US Treasury 1-3 Year Index; Intermediate Treasuries: Bloomberg Barclays US Treasury
Index; Municipal Bonds: Bloomberg Barclays US 1-15 blend (1-17) Municipal Bond Index;
High Yield Bonds: Bloomberg Barclays US High Yield Index; Emerging Markets Debt:
Bloomberg Barclays US EMD Index. All correlation coefficients calculated based on monthly
total return data for period 2/1/99 to 12/31/16. This chart is for illustrative purposes only.
-0.09
-0.11
-0.32
-0.35
U.S.
Stocks
Core
Bonds
0.56
1-3 Year Intermediate Municipal
Treasuries Treasuries
Bonds
High Yield Emerging
Bonds
Markets Debt
BONDS MITIGATE THE IMPACT OF OFTEN VOLATILE EQUITY MARKETS
The U.S. stock market has delivered positive returns in 28 of the last 37 years. Since 1980, intra-year declines in the S&P 500 have averaged 14.2%.
But even in good years, equity markets can fall precipitously. Investors benefit from the appreciation of stocks over time, but it can be a rocky path.
Combining a broad mix of stocks with strategically diversified fixed income investments can smooth the path by lowering portfolio volatility and,
ultimately, help investors stay invested through the inevitable market troughs.
A rocky path to equity gains
CALENDAR YEAR EQUITY RETURNS AND INTRA-YEAR DECLINES SINCE 1980 (%)
34
27
26
26
15
-17 -18 -17
27
20
17
15
-7
-13
4
-8 -9
-8 -8
23
20
14
9
7
-7 -6 -6 -5
30
26
12
2
1
-10
31
26
-3
-9
0
-8
-11
-19
-20
11
-8 -7
-12 -10 -13
-17
-14
-8
-10
-30
-1
-10
-16
-23
-34
10
4
3
-2
13
13
-6
-7
-12 -11
-19
-28
-34
-38
-49
’80
’85
’90
’95
’00
’05
’10
’15
Source: FactSet, Standard & Poor’s, J.P. Morgan Asset Management. Returns are based on price index only and do not include dividends. Intra-year drops refers to the largest market
drops from a peak to a trough during the year. For illustrative purposes only. Returns shown are calendar year returns from 1980 to 2016. Guide to the Markets – U.S. Data are as of
December 31, 2016.
Lowering a portfolio’s volatility can, in and of itself, improve returns. Mathematically, when comparing two portfolios with the same average annual
return, the portfolio with the lower volatility (i.e. the portfolio where each year’s returns are generally closer to the average) will have higher
compounded returns over time. The larger the swings in each year’s compounded return, the lower the total return over time.
2
A LLO C A T ION S O L U T ION S — B UIL DING S TRO NGER F IXED INCO ME PORTFOLI OS
DIVERSIFY ACROSS FIXED INCOME TO LOWER RISK
Rising rates present headwinds
While bonds will likely be adversely impacted by rising rates,
different sectors, structures and maturities respond differently—
and some very differently.
PRICE IMPACT OF A 1% MOVE IN INTEREST RATES
+1%
9.45%
5.96%
4.68%
Source: U.S. Treasury, Barclays Capital, FactSet, J.P. Morgan Asset Management. Fixed
income sectors shown above are provided by Barclays Capital and are represented by Core
Bonds: Barclays U.S. Aggregate; 10-Year Treasuries: 10 Year United States Treasury (UST);
2-Year Treasuries: 2 Year United States Treasury (UST); Municipal Bonds: Bloomberg
Barclays U.S. 1-15 Blend (1-17) Municipal Bond Index; High Yield Bonds: Corporate High
Yield Index; Emerging Markets Debt: Emerging Markets (USD). Data as of 12/31/16. This
chart is for illustrative purposes only.
-1%
5.94%
4.03%
2.00%
-1.90%
-4.92%
-5.83%
-4.20%
-5.32%
-8.55%
Core
Bonds
10-Year
Treasuries
2-Year
Treasuries
Municipal
Bonds
High Yield
Bonds
Emerging
Markets Debt
ACCESS OPPORTUNITY AND INCOME THROUGH DIVERSIFICATION
Investors can benefit from diversification within fixed income
ANNUAL RETURNS FOR KEY FIXED INCOME SECTORS
2007 - 2016
Cum.
Ann.
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
EMD Lcl.
Treas.
High Yield
EMD Lcl.
TIPS
EMD USD
High Yield
Muni
Muni
High Yield
18.1%
13.7%
58.2%
15.7%
13.6%
17.4%
7.4%
8.7%
3.8%
17.1%
105.2%
7.5%
TIPS
MBS
EMD USD
High Yield
Muni
EMD Lcl.
MBS
Corp.
MBS
EMD USD
EMD USD
EMD USD
High Yield
High Yield
11.6%
8.3%
29.8%
15.1%
12.3%
16.8%
-1.4%
7.5%
1.5%
10.2%
94.6%
6.9%
Treas.
Core
EMD Lcl.
EMD USD
Treas.
High Yield
Corp.
EMD USD
EMD USD
EMD Lcl.
Corp.
Corp.
9.0%
5.2%
22.0%
12.2%
9.8%
15.8%
-1.5%
7.4%
1.2%
9.9%
70.3%
5.5%
Core
Muni
Corp.
Corp.
Corp.
Corp.
Div. Port.
MBS
Treas.
Corp.
Div. Port.
Div. Port.
7.0%
1.5%
18.7%
9.0%
8.1%
9.8%
-1.9%
6.1%
0.8%
6.1%
62.9%
5.0%
MBS
Div. Port.
Div. Port.
Div. Port.
Div. Port.
Div. Port.
Core
Core
Core
Div. Port.
Muni
Muni
6.9%
0.1%
14.7%
7.9%
8.1%
7.4%
-2.0%
6.0%
0.5%
4.7%
58.4%
4.7%
Div. Port.
TIPS
TIPS
Core
Core
TIPS
Muni
Div. Port.
Div. Port.
TIPS
TIPS
TIPS
6.7%
-2.4%
11.4%
6.5%
7.8%
7.0%
-2.2%
5.5%
-0.3%
4.7%
53.3%
4.4%
EMD USD
Corp.
Muni
TIPS
EMD USD
Muni
Treas.
Treas.
Corp.
Core
Core
Core
6.2%
-4.9%
9.9%
6.3%
7.3%
5.7%
-2.7%
5.1%
-0.7%
2.6%
53.0%
4.3%
Corp.
EMD Lcl.
Core
Treas.
MBS
Core
EMD USD
TIPS
TIPS
MBS
MBS
MBS
4.6%
-5.2%
5.9%
5.9%
6.2%
4.2%
-5.3%
3.6%
-1.4%
1.7%
52.0%
4.3%
Muni
EMD USD
MBS
MBS
High Yield
MBS
TIPS
High Yield
High Yield
Treas.
Treas.
Treas.
4.3%
-12.0%
5.9%
5.4%
5.0%
2.6%
-8.6%
2.5%
-4.5%
1.0%
47.6%
4.0%
High Yield
High Yield
Treas.
Muni
EMD Lcl.
Treas.
EMD Lcl.
EMD Lcl.
EMD Lcl.
Muni
EMD Lcl.
EMD Lcl.
1.9%
-26.2%
-3.6%
4.0%
-1.8%
2.0%
-9.0%
-5.7%
-14.9%
-0.1%
45.5%
3.8%
For both institutional and individual
investors, asset allocation remains a
primary driver of investment returns.
As with stocks, a portfolio
concentrated in one specific fixed
income sector can be volatile.
Diversification across fixed income
sectors is therefore a crucial step
towards increasing income and
improving portfolio performance. For
example, a diversified fixed income
portfolio has outperformed taxable
core bonds over the past 10 years.
Source: Barclays Capital, FactSet, J.P. Morgan Global Economic Research, J.P. Morgan Asset Management. Past performance is not indicative of future returns. Fixed income sectors
shown above are provided by Barclays Capital unless otherwise noted and are represented by Core: Bloomberg Barclays Capital U.S. Aggregate Index; MBS: Fixed Rate MBS Index;
Corporate: U.S. Corporates; Municipals: Muni Bond 10-Year Index; High Yield: U.S. Corporate High Yield Index; Treasuries: Global U.S. Treasury; TIPS: Global Inflation-Linked - U.S. TIPs;
Emerging Debt USD: J.P. Morgan EMBIG Diversified Index; Emerging Debt Lcl.: J.P. Morgan EM Global Index. The Diversified Portfolio assumes the following weights: 20% in MBS, 20% in
Corporate, 15% in Municipals, 5% in Emerging Debt USD, 5% in Emerging Debt LCL, 10% in High Yield, 20% in Treasuries, 5% in TIPS. Diversified portfolio assumes annual rebalancing.
U.S. Data are as of December 31, 2016.
This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be a recommendation for any specific
investment product, strategy, plan feature or other purpose. Any examples used are generic, hypothetical and for illustration purposes only. Prior to making any investment or financial
decisions, an investor should seek individualized advice from a personal financial, legal, tax and other professional advisors that take into account all of the particular facts and
circumstances of an investor’s own situation.
J.P. MORGAN ASSE T MA N A G E ME N T
3
INVESTMENT INSIGHTS
TA X ABLE STRATEGY
FIND THE APPROPRIATE MIX FOR YOUR FIXED INCOME PORTFOLIO
An appropriately diversified fixed income portfolio can potentially deliver better results and help investors achieve their goals with the
right balance of market risk and opportunity.
Institutional investors tend to broadly diversify their fixed income portfolios. Individual investors, who have historically diversified their
equity risk, also need to ensure that their fixed income investments are appropriately diversified. When considering the right mix of
investments, it’s important to:
• Maintain an allocation to core bonds in order to diversify stocks
• Think strategically about augmenting your core bond holdings with complements and extended sectors
• Adjust allocations to reflect your market and interest rate outlook
• Consider your goals, risk tolerance, and investment time horizon1
Core
Core Complements
Extended
• Core bonds provide income and diversification
to stocks, but rising rates and low yields
present challenges.
• Strategies that seek returns uncorrelated to
traditional bond markets and/or benefit from the
impact of inflation can hedge downside risk and
reduce volatility.
• Extended sectors can provide income and the
potential for returns but can also be volatile.
• Active management can help mitigate risk by
selecting bonds with the optimal mix of yield and
return potential versus credit risk and duration.
• Corporate high yield bonds and bank loans
typically outperform during periods of rising
rates and economic growth but require
frequent evaluation.
• Global bonds provide additional diversification
and access to growth.
EXTENDED SECTORS
Seeks income and total return
Emerging
markets
International/global
High yield
Bank loans
CORE COMPLEMENTS
Seeks reduced correlations to core holdings
Absolute return
Inflation hedge
Sector-specific
[Mortgage-backed, corporates, governments, etc.]
CORE HOLDINGS
Seeks lower volatility and
diversification to equities
High-quality intermediate-/short-term
TOP-DOWN
BOTTOM-UP
Shown for illustrative purposes only. Because everyone’s circumstances are unique, these models can provide a framework for discussion between you and your financial advisor.
They should not be taken as one-size-fits-all investment advice. Asset allocation/diversification does not guarantee investment returns and does not eliminate the risk of loss.
1
4
A note about duration and time horizons: Rising rates have the potential to cause a portfolio to suffer from short-term losses. However, in most rate environments, a high-quality
core portfolio that is managed to a specific duration (for example a short- or intermediate-term portfolio) has the ability to largely—or even completely—offset these losses by
reinvesting at higher yields over time. Thus, an investor’s time horizon should be a key determinant of the duration of their core portfolio, assuming that the investor is able to hold
the portfolio until its duration.
A LLO C AT IO N S O L U T ION S — B UIL DING S TRO NGER F IXED INCO ME PORTFOLI OS
PORTFOLIO ALLOCATIONS ARE DEPENDENT ON THE INTERACTION OF SEVERAL FACTORS
Goals
Interest rate and
inflationary environment
Risk tolerance
Time horizon
Will, when and how fast
will rates change?
How much risk are you
willing to accept?
Are you focused on the short
term or long term?
Are you seeking capital
preservation, income or a
combination of both?
INTEREST RATE ENVIRONMENTS
INCOME
RANGE-BOUND
Extended 30–40%
Extended 35–45%
Complements 10–20%
Complements 15–25%
Complements 20–30%
Core 50–60%
Core 40–50%
Core 30–40%
Extended 20–30%
Extended 25–35%
Extended 25–35%
Complements 10–20%
Complements 25–35%
Complements 45–55%
Core 55–65%
Core 35–45%
Core 15–25%
Emerging markets
International/global
High yield
Bank loans
Intermediate top-down
Intermediate bottom-up
Short-term
CAPITAL PRESERVATION
RAPID RISE
Extended 25–35%
Absolute return
Inflation hedge
GOALS
RISING RATE
Emerging markets
International/global
High yield
Bank loans
Absolute return
Inflation hedge
Intermediate top-down
Intermediate bottom-up
Short-term
Emerging markets
International/global
High yield
Bank loans
Absolute return
Inflation hedge
Intermediate top-down
Intermediate bottom-up
Short-term
Emerging markets
International/global
High yield
Bank loans
Absolute return
Inflation hedge
Intermediate top-down
Intermediate bottom-up
Short-term
Emerging markets
International/global
High yield
Bank loans
Absolute return
Inflation hedge
Intermediate top-down
Intermediate bottom-up
Short-term
Emerging markets
International/global
High yield
Bank loans
Absolute return
Inflation hedge
Intermediate top-down
Intermediate bottom-up
Short-term
Shown for illustrative purposes only. Because everyone’s circumstances are unique, these models can provide a framework for discussion between you and
your financial advisor. They should not be taken as one-size-fits-all investment advice.
J.P. MORGAN TAXABLE FIXED INCOME FUNDS
GLOBAL BOND OPPORTUNITIES FUND
Global
HIGH YIELD FUND
A GBOAX | SELECT GBOSX
EMERGING MARKETS DEBT FUND
Designed to deliver total return primarily from a portfolio
of emerging market debt instruments.
• Invests in bond and currency sectors across developed
and emerging markets without benchmark constraints.
• Invests primarily in sovereign debt securities from
emerging market issuers.
• Combines insights from over 200 sector specialists with
global perspectives to develop high-conviction ideas
while actively managing risk.
• Allocates opportunistically to emerging markets
corporates and local currency debt.
• Dynamically shifts sector and duration exposure in
response to changing market conditions.
A OHYAX | SELECT OHYFX
Emerging markets
STRATEGIC INCOME OPPORTUNITIES FUND
A
JSOAX | SELECT JSOSX
• Invests primarily in below-investment-grade floating
rate securities.
Bank loans
UNCONSTRAINED DEBT FUND
• Invests opportunistically across different markets
and sectors.
• Utilizes a flexible approach that allows the fund to shift
portfolio allocations in changing market conditions.
• Uses an opportunistic, go-anywhere approach that includes
long/short strategies.
A JIMAX | SELECT JRBSX
Core complement
• Utilizes a dynamic approach that combines traditional
fixed income with opportunistic investing.
• Actively manages inflation swaps and makes tactical trades
to deliver returns.
CORE BOND FUND
A PGBOX | SELECT WOBDX
Designed to deliver total return from a portfolio of
investment grade intermediate and long-term bonds.
• Invests primarily in a diversified portfolio of intermediateterm, high-quality bonds.
• Leverages a team of dedicated credit analysts.
Intermediate bottom-up
• Utilizes value-driven, bottom-up security selection process
with an emphasis on risk management.
A JMTAX | SELECT JMTSX
Designed to deliver high total return through investing
in a wide range of debt securities.
• Invests in a core portfolio of bonds in combination with
inflation swaps.
Inflation hedge
• Combines local insights with global perspectives to
develop high conviction ideas.
TOTAL RETURN FUND
Designed to deliver inflation protected total return.
• Complements traditional fixed income by offering positive
return potential in a rising interest rate and inflationary
environment.
A JSIAX | SELECT JSISX
Designed to deliver long-term total return.
• Allocates assets among a broad range of fixed income
securities, including cash and short-term investments in
an attempt to deliver positive returns over time.
INFLATION MANAGED BOND FUND
• Combines value-oriented, bottom-up research process
with fundamental credit analysis to identify opportunities
across sectors, industries and structures.
• Utilizes disciplined approach to manage fluctuations in
interest rates.
Designed to deliver high total return by investing in a
broad range of fixed income securities.
• Dynamically shifts allocations across traditional and
alternative fixed income while managing duration and
actively hedging.
A JPHAX | SELECT JPHSX
Designed to deliver current income with a secondary
objective of capital appreciation through a portfolio of
floating rate instruments.
• Leverages a dedicated team of credit analysts.
• Seeks to provide less interest rate sensitivity while
navigating changing economic environments.
• Seeks individual fixed income investments that should
perform well over market cycles.
FLOATING RATE INCOME FUND
• Invests primarily in a diversified portfolio of
intermediate term below investment-grade debt
securities.
Absolute return
A JEDAX | SELECT JEMDX
Designed to deliver total return from a global, diversified
bond portfolio.
Designed to deliver a high level of income from a
portfolio of below investment grade securities.
High yield
• Employs a top-down, macro-driven approach to help
mitigate risks of benchmark-constrained strategies.
Intermediate top-down
• Selects investments by analyzing the performance potential of individual securities and different market sectors.
CORE PLUS BOND FUND
A ONIAX | SELECT HLIPX
Designed to deliver a high level of current income from a
portfolio of investment grade and non-investment grade
securities.
• Invests primarily in investment-grade bonds, with the flexibility to tactically add up to 35% in high-yield and foreign debt.
• Combines bottom-up security selection with dynamic sector
allocation.
Intermediate bottom-up • Uses macro analysis to guide yield curve positioning, dura-
tion and portfolio risk.
J.P. MORGAN ASSE T MA N A G E ME N T
6
INVESTMENT INSIGHTS
MUNICIPAL BOND STRATEGY
FIND THE APPROPRIATE MIX FOR YOUR MUNICIPAL BONDS
Tax-sensitive investors who include municipal bonds in their portfolios face an additional layer of challenges:
• Periods of demand-supply imbalance can put pressure on yields
• At the same time, illiquidity risk has risen as dealer support for municipal bonds has shrunk
• Public sector credits are under pressure; headline risk and downgrades can be costly
• Because municipal bonds are typically callable, their duration can increase dramatically when rates rise
Nevertheless, a prudent asset allocation combined with disciplined and experienced active management can help municipal bond
investors navigate risks, generate income and access opportunities. Investors should always consider their goals, risk tolerance, and
investment time horizon.2
Core
Core Complements
Extended
• Higher-quality municipal bonds can lower
volatility and hedge downside credit risk.
• Strategies that seek returns uncorrelated to
traditional municipal bond markets and/or
benefit from the impact of inflation can hedge
• Active management can help mitigate risk by
downside risk and reduce volatility.
selecting bonds with the optimal mix of yield and
return potential versus credit risk and duration.
• Municipal high-yield bonds are especially prone
to duration extension (i.e., interest rate risk).
• Corporate high-yield markets are more liquid
and can have comparable after-tax yields.
Closed end
Long duration
High yield
Bank loans
EXTENDED SECTORS
Seeks income and total return
CORE COMPLEMENTS
Seeks reduced correlations to core holdings
CORE HOLDINGS
Seeks lower volatility and
diversification to equities
• Extended sectors can provide income and the
potential for returns but can also be volatile.
Absolute return
Inflation hedge
High-quality
National and/or state-specific
Intermediate-/short-term
Shown for illustrative purposes only. Because everyone’s circumstances are unique, these models can provide a framework for discussion between you and your financial advisor.
They should not be taken as one-size-fits-all investment advice. Asset allocation/diversification does not guarantee investment returns and does not eliminate the risk of loss.
2
7
A note about duration and time horizons: Rising rates have the potential to cause a portfolio to suffer from short-term losses. However, in most rate environments, a high-quality
core portfolio that is managed to a specific duration (for example a short- or intermediate-term portfolio) has the ability to largely—or even completely—offset these losses by
reinvesting at higher yields over time. Thus, an investor’s time horizon should be a key determinant of the duration of their core portfolio, assuming that the investor is able to hold
the portfolio until its duration.
A LLO C A T IO N S O L U T ION S — B UIL DING S TRO NGER F IXED INCO ME PORTFOLI OS
MUNICIPAL BOND PORTFOLIO ALLOCATIONS ARE DEPENDENT ON THE INTERACTION OF THE SAME FACTORS
Goals
Interest rate and
inflationary environment
Risk tolerance
Time horizon
Will, when and how fast
will rates change?
How much risk are you
willing to accept?
Are you focused on the short
term or long term?
Are you seeking capital
preservation, income or a
combination of both?
INTEREST RATE ENVIRONMENTS
INCOME
RANGE-BOUND
Extended 30–40%
Extended 35–45%
Complements 10–20%
Complements 20–30%
Complements 20–30%
Closed end
Long duration
High yield
Bank loans
Closed end
Long duration
High yield
Bank loans
Closed end
Long duration
High yield
Bank loans
Absolute return
Inflation hedge
Absolute return
Inflation hedge
Core 35–45%
Core 30–40%
National/state-specific
intermediate
Short-term
National/state-specific
intermediate
Short-term
Extended 20–30%
Extended 25–35%
Extended 25–35%
Complements 15–25%
Complements 30–40%
Complements 50–60%
Core 50–60%
Core 30–40%
Core 10–20%
Core 45–55%
National/state-specific
intermediate
Short-term
CAPITAL PRESERVATION
RAPID RISE
Extended 30–40%
Absolute return
Inflation hedge
GOALS
RISING RATE
Closed end
Long duration
High yield
Bank loans
Absolute return
Inflation hedge
National/state-specific
intermediate
Short-term
Closed end
Long duration
High yield
Bank loans
Absolute return
Inflation hedge
National/state-specific
intermediate
Short-term
Closed end
Long duration
High yield
Bank loans
Absolute return
Inflation hedge
National/state-specific
intermediate
Short-term
Shown for illustrative purposes only. Because everyone’s circumstances are unique, these models can provide a framework for discussion
between you and your financial advisor. They should not be taken as one-size-fits-all investment advice.
J.P. MORGAN MUNICIPAL FIXED INCOME FUNDS
HIGH YIELD FUND
High yield
TAX FREE BOND FUND
Designed to deliver high level of federal tax-exempt current
income while maintaining stability of principal.
• Invests primarily in a diversified portfolio of
intermediate term below investment-grade debt
securities.
• Invests in municipal securities across all maturities.
• Leverages a dedicated team of credit analysts.
• Aims to help minimize tax liability while preserving capital.
• Seeks to provide less interest rate sensitivity while
navigating changing economic environments.
A TXRAX | SELECT TXRSX
• Uses a value-oriented approach that combines credit
research with extensive risk/reward analysis.
Long duration
TAX AWARE INCOME OPPORTUNITIES FUND
Designed to deliver total return with lower volatility than
traditional municipal bonds across all market environments.
• Invests primarily in a portfolio of municipal obligations
whose interest payments are excluded from federal
income taxes.
• Seeks absolute returns regardless of market conditions
by utilizing a tax-sensitive, opportunistic, go-anywhere
approach.
• Utilizes inflation swaps in combination with core portfolio
of municipal bonds.
• Dynamically shifts allocations to capitalize on inefficiencies in the municipal bond market while managing
duration and actively hedging.
• Actively manages inflation swap portfolio and tactically
trades to deliver incremental returns.
A JTIAX | SELECT JTISX
Absolute return
• Invests at least 80% of its assets in municipal securities.
MUNICIPAL INCOME FUND
Designed to deliver a high level of after-tax income through
investing in a portfolio of fixed income investments.
• Uses value-oriented approach to investing in municipal
securities.
• Seeks competitive yield and higher after-tax returns
by blending core municipal strategies with higher
yielding bonds.
• May invest up to 35% in securities rated below investment
grade, which offer a higher yield than investment-grade
securities but involve a high degree of risk.
INTERMEDIATE TAX FREE BOND FUND
A JITAX | SELECT VSITX
National intermediate
• Invests in a core fixed income portfolio of municipal
bonds, with emphasis on municipal mortgage-backed
and asset-backed securities.
• Conducts an extensive risk/reward analysis of factors
such as income, interest rate risk, credit risk and the
transaction’s legal/technical structure.
SHORT-INTERMEDIATE MUNICIPAL BOND FUND
Designed to deliver monthly income (excluded from federal
gross income) and capital preservation by investing in
municipal bonds.
A OSTAX | SELECT PGUIX
Designed to deliver high level of federal tax-exempt current
income while maintaining stability of principal.
• Invests primarily in municipal bonds that are exempt
from federal income taxes.
• Invests primarily in a diversified portfolio of intermediateterm municipal bonds in an effort to protect after-tax
investment value.
• Selects individual securities following risk/reward
evaluation of interest rate risk, credit risk, and the
complex legal and technical structure of the transaction.
• Aims to help minimize tax liability while producing income.
• Conducts extensive risk/reward analysis to select securities.
A OTBAX | SELECT HLTAX
Designed to deliver current income exempt from federal
income taxes by investing primarily in a portfolio of
municipal securities.
• Invests in municipal bonds, including housing authorities
mortgage securities.
National intermediate
A JTAAX | SELECT JTASX
Designed to maximize after-tax returns while minimizing the
potential impact of inflation.
TAX AWARE HIGH INCOME FUND
National intermediate
A PMBAX | SELECT PRBIX
Designed to deliver a high level of income from a
portfolio of below investment grade securities.
TAX AWARE REAL RETURN FUND
Inflation hedge
A OHYAX | SELECT OHYFX
National short-term
• Aims to uncover opportunities in high-quality, short-term
municipals in an effort to achieve repeatable results
through market cycles.
J.P. MORGAN ASSE T MA N A G E ME N T
9
NOT FDIC INSURED | NO BANK GUARANTEE | MAY LOSE VALUE
INVESTMENT INSIGHTS
RISKS ASSOCIATED WITH INVESTING IN MUTUAL FUNDS
The following risks could cause the fund to lose money or perform more poorly than other investments. For more complete risk information, see the prospectus. JPMorgan Core Bond Fund Investments in
bonds and other debt securities will change in value based on changes in interest rates. If rates rise, the value of these investments generally drops. JPMorgan Core Plus Bond Fund Investments in bonds
and other debt securities will change in value based on changes in interest rates. If rates rise, the value of these investments generally drops. JPMorgan Emerging Markets Debt Fund Investments in bonds
and other debt securities will change in value based on changes in interest rates. If rates rise, the value of these investments generally drops. International investing bears greater risk due to social,
economic, regulatory and political instability in countries in “emerging markets.” This makes emerging market securities more volatile and less than liquid developed market securities. Changes in
exchange rates and differences in accounting and taxation policies outside the U.S. can also affect returns. JPMorgan High Yield Fund Securities rated below investment grade are considered “high-yield,”
“non-investment grade,” “below investment-grade,” or “junk bonds.” They generally are rated in the fifth or lower rating categories of Standard & Poor’s and Moody’s Investors Service. Although these
securities tend to provide higher yields than higher-rated securities, they tend to carry greater risk. JPMorgan Floating Rate Income Fund Securities rated below investment grade are considered “highyield,” “non-investment grade,” “below investment-grade,” or “junk bonds.” They generally are rated in the fifth or lower rating categories of Standard & Poor’s and Moody’s Investors Service. Although
these securities tend to provide higher yields than higher-rated securities, they tend to carry greater risk. JPMorgan Global Bond Opportunities Fund Investments in bonds and other debt securities will
change in value based on changes in interest rates. If rates rise, the value of these investments generally drops. International investing bears greater risk due to social, economic, regulatory and political
instability in countries in “emerging markets.” This makes emerging market securities more volatile and less than liquid developed market securities. Changes in exchange rates and differences in
accounting and taxation policies outside the U.S. can also affect returns. JPMorgan Inflation Managed Bond Fund Investments in bonds and other debt securities will change in value based on changes in
interest rates. If rates rise, the value of these investments generally drops. Unlike conventional bonds, the principal or interest of inflation-linked securities, such as TIPS, is adjusted periodically to a specific
rate of inflation. These securities may lose value in the event that the actual rate of inflation is different than the rate of the inflation index. JPMorgan Strategic Income Opportunities Fund Securities rated
below investment grade are considered “high-yield,” “non-investment grade,” “below investment-grade,” or “junk bonds.” They generally are rated in the fifth or lower rating categories of Standard &
Poor’s and Moody’s Investors Service. Although these securities tend to provide higher yields than higher-rated securities, they tend to carry greater risk. International investing bears greater risk due to
social, economic, regulatory and political instability in countries in “emerging markets.” This makes emerging market securities more volatile and less than liquid developed market securities. Changes in
exchange rates and differences in accounting and taxation policies outside the U.S. can also affect returns. JPMorgan Total Return Fund Securities rated below investment grade are considered “highyield,” “non-investment grade,” “below investment-grade,” or “junk bonds.” They generally are rated in the fifth or lower rating categories of Standard & Poor’s and Moody’s Investors Service. Although
these securities tend to provide higher yields than higher-rated securities, they tend to carry greater risk. Investments in derivatives may be riskier than other types of investments. They may be more
sensitive to changes in economic or market conditions than other types of investments. Many derivatives create leverage, which could lead to greater volatility and losses that significantly exceed the
original investment. JPMorgan Unconstrained Debt Fund Investments in bonds and other debt securities will change in value based on changes in interest rates. If rates rise, the value of these investments
generally drops. Securities rated below investment grade are considered “high-yield,” “non-investment grade,” “below investment-grade,” or “junk bonds.” They generally are rated in the fifth or lower
rating categories of Standard & Poor’s and Moody’s Investors Service. Although these securities tend to provide higher yields than higher-rated securities, they tend to carry greater risk. JPMorgan
Intermediate Tax Free Bond Fund Investments in bonds and other debt securities will change in value based on changes in interest rates. If rates rise, the value of these investments generally drops. Some
investors may be subject to the Federal Alternative Minimum Tax and to certain state and local taxes. JPMorgan Municipal Income Fund Investments in bonds and other debt securities will change in value
based on changes in interest rates. If rates rise, the value of these investments generally drops. Some investors may be subject to the Federal Alternative Minimum Tax and to certain state and local taxes.
JPMorgan Tax Aware High Income Fund Tax aware strategies may reduce the amount of an investor’s taxable income but will not eliminate it. These strategies may require trade-offs that reduce pre-tax
income. The value of investments in mortgage-related and asset-backed securities will be influenced by the factors affecting the housing market and the assets underlying such securities. The securities
may decline in value, face valuation difficulties, become more volatile and/or become illiquid. They are also subject to prepayment risk, which occurs when mortgage holders refinance or otherwise repay
their loans sooner than expected, creating an early return of principal to holders of the loans. Securities rated below investment grade are considered “high-yield,” “non-investment grade,” “below
investment-grade,” or “junk bonds.” They generally are rated in the fifth or lower rating categories of Standard & Poor’s and Moody’s Investors Service. Although these securities tend to provide higher
yields than higher-rated securities, they tend to carry greater risk. JPMorgan Tax Aware Income Opportunities Fund Tax aware strategies may reduce the amount of an investor’s taxable income but will
not eliminate it. These strategies may require trade-offs that reduce pre-tax income. Securities rated below investment grade are considered “high-yield,” “non-investment grade,” “below investmentgrade,” or “junk bonds.” They generally are rated in the fifth or lower rating categories of Standard & Poor’s and Moody’s Investors Service. Although these securities tend to provide higher yields than
higher-rated securities, they tend to carry greater risk. Investments in derivatives may be riskier than other types of investments. They may be more sensitive to changes in economic or market conditions
than other types of investments. Many derivatives create leverage, which could lead to greater volatility and losses that significantly exceed the original investment. JPMorgan Tax Aware Real Return Fund
Tax-aware strategies may reduce the amount of an investor’s taxable income but will not eliminate it. These strategies may require trade-offs that reduce pre-tax income. Unlike conventional bonds, the
principal or interest of inflation-linked securities, such as TIPS, is adjusted periodically to a specific rate of inflation. These securities may lose value in the event that the actual rate of inflation is different
than the rate of the inflation index. JPMorgan Short-Intermediate Municipal Bond Fund Investments in bonds and other debt securities will change in value based on changes in interest rates. If rates rise,
the value of these investments generally drops. Some investors may be subject to the Federal Alternative Minimum Tax and to certain state and local taxes. JPMorgan Tax Free Bond Fund Investments in
bonds and other debt securities will change in value based on changes in interest rates. If rates rise, the value of these investments generally drops. Some investors may be subject to the Federal
Alternative Minimum Tax and to certain state and local taxes.
INVESTMENT RISK DESCRIPTIONS
Fixed income securities are subject to interest rate risk. If rates increase, the value of the Funds’ investments generally declines. The risk of defaults is generally higher in the case of sub-prime mortgagerelated and asset-backed securities that include so-called “sub-prime” mortgages. The structure of some of these securities may be complex and there may be less available information than other types
of debt securities. These securities that may or may not be guaranteed by governments and their agencies, supranational organizations, corporations, or banks. The value of these assets will be influenced
by factors affecting the assets underlying such securities. During periods of declining asset values, the asset-backed securities may decline in value. Futures contracts, swaps, options and derivatives often
create leverage, thereby causing the Fund to be more volatile than it would be if it had not used derivatives. Emerging markets and foreign/international securities involve special risks, including
economic, political and currency instability — especially in emerging markets. The Funds’ investments in emerging markets could lead to more volatility in the value of the Funds’ shares. The small size of
securities markets and the low trading volume may lead to a lack of liquidity, which leads to increased volatility. Emerging markets may not provide adequate legal protection for private or foreign
investment or private property. Securities rated below investment grade (i.e., “high yield” or “junk bonds”) are generally rated in the fifth or lower rating categories of Standard & Poor’s and Moody’s
Investors Service. Although these securities tend to provide higher yields than higher-rated securities, there is a greater risk that the Funds’ share prices will decline. Short sales: There is no guarantee that
the use of long and short positions will succeed in limiting the Funds’ exposure to domestic stock market movements, capitalization, sector swings or other risk factors. Investment in a portfolio involved in
long and short selling may have higher portfolio turnover rates. This will likely result in additional tax consequences. Short selling involves certain risks, including additional costs associated with covering
short positions and a possibility of unlimited loss on certain short sale positions. Investments in equity securities may rise or fall because of changes in the broad market or changes in a company’s
financial condition, sometimes rapidly or unpredictably. When the value of a fund’s securities goes down, an investment in a fund decreases in value. The income from municipal securities is exempt from
federal income tax. The risk of a municipal obligation generally depends on the financial and credit status of the issuer. For some investors, income may be subject to the Alternative Minimum Tax. Capital
gains, if any, are federally taxable. Income may be subject to state and local taxes.
Contact JPMorgan Distribution Services, Inc. at 1-800-480-4111 for a prospectus. Carefully consider the fund’s objectives, risks, charges and expenses before
investing. The prospectus contains this and other fund information. Read it carefully before investing.
Past performance is no guarantee of future returns.
J.P. Morgan Asset Management is the marketing name for the asset management businesses of JPMorgan Chase & Co. Those businesses include, but are not limited to, J.P. Morgan Investment Management
Inc., Security Capital Research & Management Incorporated and J.P. Morgan Alternative Asset Management, Inc.
This commentary is intended solely to report on various investment views held by J.P. Morgan Asset Management. Opinions, estimates, forecasts and statements of financial market trends that are based
on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable but should not be assumed to be accurate or complete.
These views and strategies described may not be suitable for all investors. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be,
and should not be interpreted as, recommendations. The information is not intended to provide, and should not be relied on for, accounting, investment, legal or tax advice. Past performance is no
guarantee of future results. Please note that investments in foreign markets are subject to special currency, political and economic risks. The manager seeks to achieve the stated objectives. There can be
no guarantee the objectives will be met.
J.P. Morgan Funds are distributed by JPMorgan Distribution Services, Inc., which is an affiliate of JPMorgan Chase & Co. Affiliates of JPMorgan Chase & Co. receive fees for providing various services to the
funds. JPMorgan Distribution Services, Inc. is a member of FINRA/SIPC.
© JPMorgan Chase & Co., February 2017
II-FIXINC-ALL