Discover the benefits of high yield bonds in your fixed income strategy, such as potentially higher returns and a typically low correlation with investment grade bonds. High yield bonds are one of our core expertise and we manage $8bn+ in high yield bonds for investors globally.
In High Yield assets managed in globally
Fixed Income team members globally
Our team have a 30-year history of investing in high yield bond markets.
Our capabilities allow us to seek attractive income from a broad range of higher yielding bonds from across the globe to help you meet your investment goals. This may include corporate high yield bonds or subordinated debt securities. Our approach is centred on the belief that fundamental research, both top-down and bottom-up, is the best way to determine future returns and we take a suitable amount of credit risk across different market environments.
Fund manager, Rhys Davies, explores why his fund's exposure to B and lower-rated bonds is at an historic low, citing good yields in higher rated bonds and the risks of lower credit quality bonds.
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Understanding the value of high-yield bonds
Rhys Davies explains why the world's bond markets, significantly larger than equities, are becoming exciting again. He explores the case for high-yield bonds in a falling interest rate environment.
High yield bonds have a higher credit risk than investment grade bonds because the issuers are considered to have a higher chance of defaulting, or not being able to meet their contracted obligations. For this reason, high yield bonds tend to offer higher yields, to compensate for the higher risk.
Credit risk is the risk that a debtor fails to meet a contracted obligation – either the payment of a coupon or the repayment of principal.
Bonds are rated according to their risk of default by independent credit rating agencies, such as Moody's, Standard & Poor's and Fitch. Bonds with credit ratings below BBB are generally considered to be high yield bonds. Bonds with lower ratings have higher risks associated with them that investors should consider.
Investment grade bonds are typically favoured when economic conditions are declining. However, when there is optimism regarding the economy, demand for high yield bonds usually increases. Amid stronger global growth, higher yielding bonds have generally outperformed lower yielding ones.
Historically, high yield bonds have been more volatile with higher default risk among underlying issuers versus investment grade bonds. The volatility of the high yield bond market is typically similar to the volatility of the stock market, unlike the investment grade bond market, which typically has much lower volatility.
Investments in high yield strategies can be made through actively managed mutual funds, including investment trusts, or exchange traded funds (ETFs). Invesco offers a broad range of actively managed fixed income funds and fixed income ETFs.
Fundamental research involves analysing data which is expected to impact the price or perceived value of a stock. Some stock fundamentals include the profitability of a business, the cash flow, return on assets, and the level of indebtedness of a company.
