HEAD-TO-HEAD: BNY Mellon vs JP Morgan

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Darius McDermott, Chelsea Financial Services and Fund Calibre

Introduction

Last year investors struggled to find income-earning assets, unless they were prepared to take on additional credit risk. Three interest rate cuts by the US Federal Reserve amid rising concerns about a severe economic slowdown sent the yield on the benchmark 10-year US Treasury bond crashing to a three-year low of 1.44% in September.

Global bonds returned 8.2% in 2019, the best performance by the asset class for 18 years, according to research by Citi Private Bank. Investment grade and high yield bond yield spreads compressed as investors scrambled to lock in guaranteed income, while many fund managers offered fixed maturity products which promised incremental yield from a mixed basket of corporate and emerging market debt issues.

However, expectations for an extended rally in fixed income securities this year are muted, with spreads well-below their 10-year average for all categories except Asia high yield, according to research by JP Morgan Asset Management.

Investors will likely need to look for alternative income sources. Equity funds that target high-dividend stocks is an alternative, especially if they also offer the potential for capital growth.

FSA asked Darius McDermott, managing director at Chelsea Financial Services and Fund Calibre, to compare two global equity income products: the BNY Melon Global Equity Income Fund and the JPM Global Dividend Fund.

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