High-Yield Bond Funds Gain Traction as Economic Growth Resumes
Demand for high-yield bond mutual funds has rebounded as broader economic expansion and reduced interest rates encourage investors to search for higher income. High-yield debt instruments carry elevated credit risk because they hold positions in smaller firms with weaker balance sheets, but they offer lower sensitivity to interest rate changes than investment-grade debt.
Key funds in the sector have delivered notable multi-year performance. Neuberger Floating Rate Income (NFIAX), which concentrates on senior-secured floating-rate loans and below-investment-grade debt, holds a three-year annualized return of 7.1%. Franklin High Income (FHAIX), managed by Glenn Voyles since 2015, invests in lower-rated bonds, notes, and convertibles, posting an 8.4% three-year annualized return.
AB High Income (AGDAX) targets income across global government, corporate, and emerging market debt, generating an 8.7% three-year annualized return with an expense ratio of 0.86%. Going forward, market participants will be watching how corporate credit quality and economic activity shape performance across lower-rated debt issuers.
Key points
- High-yield bonds offer less interest rate risk than investment-grade debt but carry greater credit exposure to smaller corporate issuers.
- Neuberger Floating Rate Income (NFIAX) focuses on floating-rate senior loans and has a three-year annualized return of 7.1%.
- Franklin High Income (FHAIX), led by portfolio manager Glenn Voyles since 2015, achieved an 8.4% three-year annualized return.
- AB High Income (AGDAX) recorded an 8.7% three-year annualized return across global debt markets with a 0.86% expense ratio.
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How do high-yield bonds differ from investment-grade bonds?
High-yield bonds carry more credit risk due to holdings in smaller companies with weaker financial standing, but they are less exposed to interest rate risk and tend to benefit during economic growth.
What returns have top high-yield bond funds produced?
Three-year annualized returns for leading funds include 7.1% for Neuberger Floating Rate Income (NFIAX), 8.4% for Franklin High Income (FHAIX), and 8.7% for AB High Income (AGDAX).
What is the expense ratio for AB High Income (AGDAX)?
AB High Income (AGDAX) carries an expense ratio of 0.86%.