Forget the high yield myths: rethinking a USD 2.2 trillion market

We think it’s time to forget the myths about high yield fixed income. With a resilient economic outlook and generally robust corporate health, the once-niche segment of financial markets has grown to more than USD 2.2 trillion. High yield is becoming an integral part of fixed income portfolios, providing a useful source of return and diversification.

Key takeaways

High yield bonds can play an important role in boosting a portfolio’s return potential, demonstrating an ability to outperform other fixed income segments over the longer term. High yield returns tend to have relatively low correlations with other asset classes, allowing diversification benefits.
A relatively stable economic outlook, strong fundamentals of companies and a record level of bond proceeds used to refinance existing debt are factors that we think bode well for high yield.
We think allocating to a global rather than a regional high yield strategy could provide more scope to outperform the broad market and produce a well-diversified portfolio.