Fewer HY opportunities and more challenges

EUROPEAN HIGH YIELD

High-yield returns will be more muted than in previous years as the cycle continues to compress valuations, according to David Ennett, manager of the Higher Income and European High Yield Bond funds at Standard Life Investments.

The past few years have been nothing short of stellar for the European high-yield market, with the asset class comfortably the best performing in the fixed income universe over that period. However, the grim reality of bond mathematics leads us to re-examine the merits of the asset class. Importantly, investors need to separate the secular growth story from the more familiar cyclical factors which have driven the European high-yield market in the recent cycle. Beyond the well-spun themes of the ‘hunt for yield’, there has been a secular growth story under way in the market. At face va...