T Rowe Price Group has closed its high yield bond funds, including the Investor Class shares (PRHYX) and the Advisor Class shares (PAHIX) of the High Yield Fund and the separate Institutional High Yield Fund (TRHYX).
The mutual funds were closed to protect the interests of existing investors. However, the funds will continue to accept additional investments from existing shareholders and direct rollovers from qualified retirement plans into new T Rowe Price IRAs.
T Rowe Price manages USD21 billion in dedicated high yield portfolios, including USD9.2 billion in the High Yield Fund and USD2.5 billion in the Institutional High Yield Fund as of 31 March, 2012. The high yield funds invest primarily in a diversified portfolio of high yield corporate ("junk") bonds and floating rate bank loans.
The funds were last closed in February 2004 and reopened in February 2007. T Rowe Price offers other funds that provide investors with exposure to high yield investments, including the Tax-Free High Yield Fund (PRFHX), Floating Rate Fund (PRFRX), Spectrum Income Fund (RPSIX), and Strategic Income Fund (PRSNX).
"The high yield market has seen an incredible rally over the past three years, which has helped the High Yield Fund generate a 21% net annualized return over that time frame," says Mark Vaselkiv, portfolio manager of the High Yield Fund and head of the taxable high yield bond team. "Capital appreciation has significantly increased both high yield funds’ assets and enhanced investor demand. The low interest rate environment has also prompted income-seeking investors to consider this sector, and some of the strong flows into our high yield funds reflect their increased appetite for yield.
"If flows were to continue at this pace, though, it could eventually strain our ability to invest efficiently and result in an over-diversified fund with a less effective investment strategy. We are committed to investing in a manner consistent with the funds’ objectives," says Vaselkiv.
