Short Duration High Yield Bonds

The short duration segment of the high yield market offers a compelling risk-reward profile, providing higher current income and limited volatility.

A high yield short duration strategy captures much of the current income and absolute return potential of traditional high yield strategies, while also minimizing credit risk and interest rate exposure. 

By applying our proprietary credit selection process, based on our time-tested, rigorous, in-depth research, to bonds with shorter maturities, SHENKMAN CAPITAL’s short duration strategy looks to capture high current income with even lower volatility than our core high yield bond strategy.

Benefits of a high yield short duration portfolio:

  • Seeks to achieve incremental yield over other income alternatives.
  • Typically performs well during uncertain and challenging markets and in rising rate environments.
  • Default risk declines as a bond approaches maturity.
  • Typically provides lower credit and interest rate risk than traditional high yield portfolios.
  • Given its negative correlation to U.S. Treasuries (or superior “duration coverage”) and comparable volatility, short duration provides a compelling alternative to investment-grade bonds.
  • Typically less sensitive to macro-economic factors than longer-dated maturities.
  • Provides the opportunity to add alpha through the early call or tender of bonds.