High yield: the quiet success story for attractive yields

BONDS

Investors in the best-performing high yield funds have been receiving an annual income in the region of 10%. And all the indications are this will continue.

This level of income was accompanied by average capital growth of 30% in the sector over the 12 months to the beginning of June – and in the case of at least one high yield fund, almost 50% – although this should be viewed in the context of recovering ground lost during the worst of the financial crisis. In a low interest rate economy, in which the Bank of England base rate has been pegged at 0.5% since March 2009, the appeal is obvious. Consider the failure of equities to make sustained upward progress and the less than exciting yields delivered by government bonds and ‘investment grade...