Legg Mason's Edmonds: M&A to drive 8% return in high yield

High yield bonds will return 7%-8% in 2011, according to Ian Edmonds of Legg Mason, driven by a surge in M&A and falling default rates.

Edmonds, manager of the group’s £545m Global Multi Strategy Bond fund, said the asset class should repeat returns seen in the first six months of 2011 thanks to favourable conditions. “We continue to think high yield will return 7%-8% for the year,” he said. “It has probably been a bit front end loaded in that high yield is already up around 4% so far, and that is one of the reasons we have cut back slightly and put some protection in place.” He has recently de-risked his portfolio and taken profits in high yield after returning 5.8% on the fund over one year against the Global Bon...