High yield bonds behave more like stocks than investment grade bonds. These bonds hold large stakes in smaller companies, which are considered to be in a weaker financial position, but which benefit from the shift in the economy to the north. Although high yield bonds are more exposed to credit risk, they are less exposed to interest rate risk, making them a differentiated source of return. Despite the headwinds encountered in the early months of the pandemic, demand for high yield has recovered since the Fed cut rates and the economy reopened. Improving economic activity has renewed the search for yield and, given the current scenario, these bonds are poised to grow.
Below, we share with you three top-ranked high-yield bond mutual funds, namely BlackRock High Yield Bond Portfolio Investor A Stocks BHYAX, Strategic Advisors Income Opportunities Fund FPIOX and U.S. Funds U.S. High Income Trust AHIFX. Everyone won a Zacks Mutual Fund Ranking #1 (Strong Buy) and is expected to outperform its peers going forward. Investors can click here to see the full list of funds.
BlackRock High Yield Bond Portfolio Investor A Stocks seeks to maximize total return alongside income generation and prudent investment management. BHYAX invests most of its assets in non-investment grade bonds with maturities of ten years or less, and in convertible and preferred securities. The fund has returned 2.6% over the past three years.
As of December 2021, BHYAX had 71.5% of its assets invested in Total Misc Bonds.
Strategic Advisors Income Opportunities Fund invests primarily in income-generating debt securities, preferred stocks and convertible securities, with an emphasis on lower quality debt securities. REIT also invests a portion of its assets in non-income producing securities, including defaulted securities and common stocks. The fund has returned 3.2% over the past three years.
Charles Sterling has been one of FPIOX’s fund managers since 2018.
U.S. Funds U.S. High Income Trust invests primarily in high yielding and generally lower quality debt securities. AHIFX also invests a portion of its assets in securities of issuers domiciled outside the United States. The fund has returned 3.6% over the past three years.
AHIFX has an expense ratio of 0.40% compared to the category average of 0.95%.
To view the Zacks ranking and past performance of all high yield bond funds, investors can click here to see the full list of high yield bond funds.
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