High yield has historically improved efficiency and reduced risk for traditional portfolios of stocks and bonds. However, high yield is not without risk. To capture the attractive coupon—and allow income to compound over time—investors must navigate the asset class with prudence, discipline and a focus on downside protection.
Skilled Analysis is Key.
The default potential of credit instruments gives high yield an asymmetric risk profile. However, investors can mitigate this risk by demanding more stringent covenants and conducting prudent and thorough credit analysis. A disciplined focus on fundamentals throughout the credit cycle helps our clients navigate this often misunderstood, but worthy asset class.
Smart Strategies Make Use of Interest.
The maturity and depth of the high yield market allows investors to capture the value of compound income better than at any time in history. This dynamic is very important in today’s “near-zero” interest rate environment.