Investing Ideas

High yield has shined. Most high-yield managers haven’t

Why a different approach to beating the benchmark may be needed.

By: Nils Bierkamp Jonathan Cain Brian Donnelly David Hays Scott Mensi

Updated: 1/8/2024

Key Takeaways

The U.S. high-yield bond market has provided an attractive return, but most high-yield managers have trailed the asset class benchmark, partly due to high transaction costs—especially for lower-rated high-yield securities.
Reducing exposure to lower-rated high-yield bonds and replacing it with limited equities exposure has provided better returns over time while taking on comparatively less risk.
Since the end of the Global Financial Crisis, stocks have tended to outperform high-yield bonds—even when lower-rated high-yield bonds have performed well.
Therefore, one potential solution to topping the high-yield index is a total return approach that includes adding some equities in the mix.

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High yield has shined. most high-yield managers have not

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