Diversification is the key factor in bond investment

high yield

High-yield bonds are finally seeing much improved annual results. But with higher-yielding bonds performing similarly to equities, it is important to ensure your clients have an adequate spread of assets

Annual returns in excess of 20% are what some investors may once have expected from the equity market. However, in 2003 high-yield bonds in Europe, the US and the UK all provided returns well in excess of that figure. In Europe, the high-yield market generated a return of 30.2% for the year ending 31 December 2003, while the local currency return for high-yield bonds in the US was 28.1%. In the UK, the smallest of these three markets, investors received a stunning 39.5% for the year. Given these results, many investors are likely to question whether such returns can be repeated and whether...