Muzinich's Muller: The opportunities in 'dislocated' high yield

Last year a mini-tornado blew through energy markets as oil prices tumbled. This swept up many firms at the heart of the US fracking boom that had grown through high yield debt. The wider high yield market took a fair bit of collateral damage.

At the end of January 2016, we thought valuations looked attractive. We could see little evidence of deteriorating fundamentals or any developing systemic crisis to justify such historic spreads. High yield markets have subsequently recovered and risen by around 6%. Current valuations no longer appear cheap. With enthusiasm in the wake of Q1 earnings faltering and growth prospects modest, we have concerns for equities. We believe that against this wider backdrop US high yield in particular still offers some appeal. Recovering energy prices could begin to fuel modest inflation this yea...