Andrew Norelli has been immersed in financial markets for nearly a quarter of a century. He holds a BA in Economics from Princeton University. «The financial crisis was my best business school,» he says during a meeting in Zurich. His career began as a credit trader for emerging markets at Morgan Stanley in London, before moving to the buy-side, eventually joining J.P. Morgan Asset Management in Columbus, Ohio, in 2012.

There, in 2014, under his leadership, the JPMorgan Income Strategy was launched – a fixed-income product now managing around $30 billion (across multiple vehicles and mandate segments). The strategy is characterized by targeted management of interest rate and credit risks, with lower volatility than traditional corporate bond portfolios.

Volatility as the New Normal

Today, Norelli primarily analyzes markets from a macro perspective: currencies, geopolitical tensions, interest rate curves. And he doesn't shy away from skepticism. The current geopolitical environment – from widening rifts between the U.S. and Europe to conflicts in the Middle East and uncertainty surrounding Trump's foreign and trade policy agenda – leads him to one conclusion: «Uncertainty is here to stay.»

Norelli identifies de-dollarization as a key risk theme that institutional investors should closely monitor. In his view, two main factors drive this trend:

The real – or even just hypothetical – possibility that foreign currency reserves could be forcibly sold or converted into ultra-long-term U.S. Treasury bonds. Trump-aligned economists like Stephen Moran have not only floated but publicly defended such proposals.

The erosion of the four pillars supporting the U.S. dollar’s global reserve currency status: trust, currency stability, rule of law, and military protection.

Portfolio Response to Geopolitical Risks

What does this mean for portfolio allocation? The J.P. Morgan Income Strategy is positioned for a bear steepening (rising long-term yields) – in sharp contrast to the typical duration extension usually seen during uncertain periods.

Currently, the fund holds net short positions in 20- and 30-year U.S. Treasuries and concentrates its exposure in shorter maturities. «You know a lot more about a borrower’s ability to pay you back in two years than you do in twelve,» Norelli explains. This positioning allows the portfolio to combine low interest rate and spread duration with a target return of 6 to 7 percent (not guaranteed) – all with significantly lower volatility than comparable high-yield strategies.

In addition, around half of the fund’s risk budget is currently allocated to non-dollar currencies. While unusual for a U.S.-focused income fund, this reflects heightened sensitivity to currency risks and the strategic flexibility the fund seeks to maintain.

A U.S. Fund with European Relevance

The risk that geopolitical upheaval could impact capital flows and further weaken the dollar is, in Norelli’s view, real. The Income Fund, he argues, offers a resilient solution: «If de-dollarization continues, this fund should outperform. If not, it still delivers a decent return.»

Personal Commitment

Norelli’s personal investment in the strategy – alongside many of his colleagues at J.P. Morgan Asset Management – underscores his conviction. «We treat this portfolio like our own accounts,» he says. And while the fund has performed strongly so far, there's no time to rest. For the portfolio manager, the next challenge is always around the corner:
«Whether you make a good or bad decision – you always have to make the next one.»