Bringing you live news and features since 2006 

Managers believe high yield offers best risk-adjusted returns

RELATED TOPICS​

With investment grade credit more susceptible to interest rate risk and equities priced for recovery, fund managers believe high yield will offer the best risk-adjusted returns in 2010, says Standard & Poor’s Fund Services in its latest update on the high yield sector.

“High yield continues to look favourable with most managers forecasting high single-digit returns for 2010, with yield, rather than capital appreciation driving most of the total return this year,” says S&P Fund Services lead analyst James Mashiter.

Mashiter points to Anthony Robertson, manager of the BlueBay High Yield Bond Fund, who takes the consensus view that high yield is being supported by improving fundamentals and strong technicals. 

Robertson believes that the asset class would be able to keep pace with equities in a V-shaped recovery but would offer much better downside protection should growth disappoint. 

He argues that default rates should continue their downward trend, buoyed by a better earnings outlook and broader access to capital.

Most managers, including the team at Goldman Sachs Global High Yield Portfolio, expect security selection to be crucial as the market discriminates more between stronger and weaker credits. 

“Managers agree that performance will be more alpha-and less-beta driven, with spreads at more ‘normalized’ levels,” says Mashiter.

Despite the loss in momentum in high yield in late January/early February due to Greece’s debt problems, some managers do not see this as a material threat to the improving fundamentals and strong technical bid. Fidelity’s Harley Lank and Invesco’s Peter Ehret used this market correction as a buying opportunity, favouring low duration issues. Ehret has also reduced some subordinated financials exposure and rotated into consumer cyclicals.

Conversely, New Star’s James Gledhill cautions that recent economic data has been more mixed. This together with sovereign debt concerns in the eurozone and continued tightening of Chinese lending may cause some uncertainty in the near term, he says. Gledhill expects 12 month default rates to fall sharply as the high default months fall out of the annual figures.

Latest News

Saving and investing app, Moneybox, has doubled the number of ETFs available on the platform, in the light of ‘growing..
Global X ETFs has announced the appointment of Ryan O'Connor as its Chief Executive Officer effective as of April 8, 2024. ..
Value-driven structured credit investing firm, Angel Oak Capital Advisors, LLC, has announced the completed conversions of two of its mutual..
Confidence in the continuing strength of bitcoin and Ethereum is driving wider interest in altcoins and other digital assets, according..

Related Articles

Sal Esposito, Zacks Investment Management
Zacks Investment Management started doing investment research in 1978 and in 1992 started its investment management arm, initially with SMAs...
Jeremy Senderowicz, Vedder Price
Jeremy Senderowicz, a member of the Investment Services Group at law firm Vedder Price, has witnessed a steady upswing in...
Graham MacKenzie, Toronto Stock Exchange
The evolution of ETFs has been a multi-decade experience for Toronto Stock Exchange says Graham MacKenzie, managing director, Exchange Traded...
Frank Koudelka, State Street Global Services
ETF data provider and ETF Express data partner, Trackinsight, has published its Global ETF Survey 2024 Report: ‘50+ Charts on...
Subscribe to the ETF Express newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by