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By: Seth Meyer, CFA and Brent Olson
Portfolio Managers Seth Meyer and Brent Olson look at high-yield bonds and discuss why some investors might consider a strategic allocation to high yield.
Key takeaways:
- High-yield corporate bonds have historically offered an attractive source of yield, with lower interest rate risk compared to the Bloomberg U.S. Aggregate Bond Index.
- Occupying the center ground between investment-grade bonds and equities from a risk-return perspective, they offer the potential for diversification in a portfolio.
- The high degree of idiosyncratic risk in the high-yield bond market means good credit analysis can be rewarded, making it fertile ground for active managers.
High-yield corporate bonds have historically offered an attractive source of yield, which in turn has contributed to competitive total returns.
Occupying the center ground between investment-grade bonds and equities from a risk-return perspective, they offer the potential for diversification in a portfolio and have historically been less sensitive to interest rate risk.
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Originally Posted November 10, 2022 – The case for high-yield bonds
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