FUND SELECTOR HIGH YIELD BONDS
High yield bonds
We analyse the best, newest and biggest high yield bonds funds. Commentary from
Lee Robertson, CEO at Investment Quorum
Top ranked funds 3-year performance
Top funds – 3-year risk/return
Return (%)
90
SEI GMF Hi-Yld Fix Inc
£ Hedge Wealth B Inc
FUND PICKER’S COMMENT
LEE ROBERTSON, CEO,
INVESTMENT QUORUM
If you look at current performances,
over one, three
and five years, there are, in
our opinion, three standout
funds.
The SEI GMF High Yield
Fixed Income Fund, managed
by Gregg Soeder, aims
Top 10 high yield bond funds by 3-year performance
Kames UK High
Yield Bond A Inc
80
JPM Global
High Yield
Bd A Net Inc
Marlborough High
Yield Fixed Interest
Kames High Yield Global Bond A £
Aviva Investors High Yield Bond SC1
70
Baillie Gifford HY Bond A
Threadneedle High Yld Bd Ret Net
60
50
Axa Global High
Income R Inc
Skandia Specialist High Yield Bond
Sector average
2
3 4
Standard deviation (%)
5 6
To 17 Nov’11. Source: Morningstar
to maximise total return
from investing primarily in
high yield fixed income
securities in a base currency
of dollars. Under normal
conditions, at least 65% of
its net assets are in fixed
income securities rated
below investment grade. It
may invest in equity, investment
grade fixed income
and money market securities
as appropriate and for
risk mitigation. A lowerthan-expected
default rate
has meant the fund has
been able to deliver a
strong performance.
The JPMorgan High
Yield Bond Fund, which is
co-managed by Robert
Cook and Thomas Hauser,
has a global mandate. It
Top 3 performing funds vs indices
160 60
120 20
80
%
40
0
Kames UK High
Yield Bond A Inc
BofAML £ High Yield
GIF SB £ High
Yield Bond
FUND ANALYSIS
currently has 92% invested
in US corporations and
therefore the dollar, so it
appears to have been
rather adroit at side-stepping
much of the downturn
of the European bond
markets and the associated
euro problems. As such, it
is this global approach
with access to lesser grade
investments as well as government
securities that
offers investors the potential
of higher yields.
3-year 3-year 3-year 3-year 3-year Morningstar Fund Domicile
% chg Alpha Beta R² mth vol Rating size (£m)
SEI GMF Hi-Yld Fx Inc £ Hedge Wealth B Inc 82.18 0.57 0.53 0.73 3.01 ���� 173.2 Ireland
Kames UK High Yield Bond A Inc 81.49 0.23 0.66 0.82 3.49 ���� 477.28 UK
Marlborough High Yield Fixed Interest 77.33 -0.78 1.08 0.81 5.78 �� 49.24 UK
Kames High Yield Global Bond A £ 74.93 0.24 0.6 0.87 3.09 ���� N/S Ireland
JPM Global High Yield Bond A Net Inc 70.81 0.62 0.49 0.6 3.07 ���� 164.62 UK
Baillie Gifford High Yield Bond A 70.52 -0.11 0.74 0.64 4.44 ���� 215.45 UK
Aviva Investors High Yield Bond SC1 70.11 0.08 0.63 0.79 3.43 ����� 43.55 UK
Axa Global High Income R Inc 67.98 0.41 0.5 0.75 2.8 ���� 59.75 UK
Skandia Specialist High Yield Bond 67.4 0.55 0.48 0.56 3.11 ��� 101.09 UK
Threadneedle High Yield Bond Ret Net 66.26 0.1 0.59 0.81 3.16 ���� 722.77 UK
To 17 Nov ’11. Bid to bid, £, gross income, no cap. Source: Morningstar
SEI GMF HY Fix Inc
£ Hedge Wealth B Inc
-40 40
Marlborough High Yield Fixed Interest
Nov ’08 May ’09 Nov May ’10 Nov May ’11
To 17 Nov ’11. Source: Morningstar
� Marlborough High Yield Fixed Interest is run by Paul Reed who
invests in fixed, variable rate and index-related securities issued
by corporates, governments, supranational institutions and local
and regional agencies, both in the UK and internationally. As of
December 2011, the fund held 89 stocks with a portfolio turnover
rate of 60%.
28 PORTFOLIO ADVISER [www.portfolio-adviser.com] JANUARY 2012
Nov
The Kames Capital High
Yield Bond Fund, managed
by Philip Milburn, is
also doing well. The manager
currently has a defensive
stance which we feel
is working well at the
moment with uncertainty
in all markets. He has benefited
from healthcare and
gaming as well as consolidation
in the energy sector.
His current cautious
approach should mean
that capital has some limited
degree of protection
as the team’s strategy of
‘averaging in’ to high yield
has led to a lower beta
than the market and given
compelling valuations it
makes sense to add risk at
the margin. The fund has
also benefited this year
from its global approach
relative to pure European
high yield investors, but
funds with the majority of
their assets in the US have
tended to fare better.
It also has little exposure
to the banking sector,
the area most obviously
affected by the sovereign
crisis. There has been benefit
to investors within the
fund through both profit
taking on bonds held, such
as the cinema group
Odeon, and bond issuers
taking positive action by
crystallising bond discounts,
thereby generating
profits to the fund.
The approach taken by
the team tends to share
upside with bondholders
and produces a reduction
of risk; both positive outcomes
for investors.
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