Investing in high yield bonds
We offer a range of high yield strategies investing within and across regions, sectors and maturities.
Why invest in high yield bonds?
Yield and diversification
In addition to significantly higher income than investment grade bonds, high yield often behaves differently to other areas of the fixed income universe providing important diversification for a broader fixed income portfolio.
Equity-like returns with lower volatility
Like equities, high yield bond prices are affected by the performance of the issuing company or wider economic moves. However, the higher income component of high yield bonds means that they are generally less volatile than equities.
Lower duration
High yield bonds are typically issued with shorter maturities than many investment grade bonds (generally less than 10 years) and therefore tend to have relatively lower duration. This means a high yield strategy may be less exposed to interest rate risk than most investment grade strategies.
Our expertise
Consistent approach
Our experienced, dedicated high yield teams employ a consistent investment process that has been tested over a range of market cycles and conditions. This process is centred on the philosophy that the key to long-term potential returns in high yield bonds is compounding current income and seeking to avoid principal loss through fundamental credit analysis and macroeconomic research.
Quality focus
Our robust bottom-up credit research process focuses on identifying companies with improving credit trends, while the top-down component seeks to identify risks and opportunities associated with the overall economy and market. In this way we aim to minimise default risk and manage volatility through active management, while pursuing high yielding opportunities and seeking to generate capital growth.
Extensive resources
We combine decades of experience managng fixed income portfolios, with a highly skilled global team of over 100 investment professionals. Our approach is based on the same underlying philosphy that guides all our fixed income strategies: to minimise loss of principal while aiming to provide coupon-income generated returns.
Our high yield strategies
Our high yield offering provides exposure to different regions and segments of the market suit investors’ precise investment needs.
US high yield
Aims to generate income by investing in dollar-denominated high yield debt securities while avoiding risk of default.
Explore fundEuropean high yield
Investing in high yield European currency debt markets.
Explore fundGlobal high yield
Investing in high yield bonds in global debt markets, aiming to provide an income and capital growth over the long term (being a period of five years or more).
Explore fundCombining perspectives to navigate volatility
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Important information
Marketing communication. For professional investors only.
Past performance or achievement is not indicative of current or future performance. Performance is calculated net of fees unless otherwise stated.
Any views expressed here are those of the author as of the date of publication, based on available information, and subject to change without notice. This material does not constitute investment advice.
Investments are subject to market fluctuations and the risks inherent in investments in securities. The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial investment. There is no guarantee that the performance objective will be achieved.
This document is directed only at person(s) who have professional experience in matters relating to investments (“relevant persons”). Any investment or investment activity to which this document relates is available only to and will be engaged in only with Professional Clients as defined in the rules of the Financial Conduct Authority. Any person who is not a relevant person should not act or rely on this document or any of its contents.
Fixed income sub-funds may be exposed to other risks defined below:
CAPITAL LOSS RISK: The value of the investments in Financial Instrument(s) and the returns generated by the described funds may go down as well as up. Investors may not get back the amount they originally invested.
INTEREST RATE RISK: The value of an investment may be affected by interest rate fluctuations. Interest rates may be influenced by several elements or events, such as monetary policy, the discount rate, inflation, etc.
CREDIT RISK: This is the risk that may derive from the rating downgrade of a bond issuer to which the sub-funds are exposed, which may therefore cause the value of the investments to go down. Sub-funds investing in high-yield bonds present a higher than average risk due to the greater fluctuation of their currency or the quality of the issuer.
COUNTERPARTY RISK: This risk relates to the quality or the default of the counterparty with which the Management Company negotiates, in particular involving payment for/delivery of financial instruments and the signing of agreements involving forward financial instruments. This risk is associated with the ability of the counterparty to fulfil its commitments (for example: payment, delivery and reimbursement). This risk also relates to efficient portfolio management techniques and instruments. If counterparty does not live up to its contractual obligations, it may affect investor returns.
MMFs ARE NOT GUARANTEED INVESTMENTS. An investment in MMFs is different from an investment in deposits, there is a risk that the principal invested in an MMF is capable of fluctuation. The MMF does not rely on external support for guaranteeing the liquidity of the MMF or stabilising the NAV per unit or share. The risk of loss of the principal is to be borne by the investor.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) INVESTMENT RISK: The lack of common or harmonized definitions and labels integrating ESG and sustainability criteria at EU level may result in different approaches by managers when setting ESG objectives. This also means that it may be difficult to compare strategies integrating ESG and sustainability criteria to the extent that the selection and weightings applied to select investments may be based on metrics that may share the same name but have different underlying meanings. In evaluating a security based on the ESG and sustainability criteria, the Investment Manager may also use data sources provided by external ESG research providers. Given the evolving nature of ESG, these data sources may for the time being be incomplete, inaccurate or unavailable. Applying responsible business conduct standards in the investment process may lead to the exclusion of securities of certain issuers. Consequently, the Sub-Fund’s performance may at times be better or worse than the performance of relatable funds that do not apply such standards.
This is not an exhaustive list of risks. For a full description of risks associated with each fund, please consult a client relationship manager or the global BNP Paribas Asset Management website: www.bnpparibas-am.com.