• Home
  • Equities
    • UK
    • Global
    • Europe
    • US
    • Asia
    • Emerging markets
    • Specialist
  • Bonds
  • Multi-asset
  • ESG
    • ESG
    • Sustainable Investment
    • Sustainable Investing
  • Funds
    • Unit trusts/OEICs
    • Investment Trusts
    • VCTs/EIS
    • Platforms
    • ETFs
    • Pensions
  • Regulation
  • Diversity
  • People moves
  • Events
  • Financial library
  • Industry blogs
  • Digital Edition
  • Newsletters
  • Sign in
    • logged-in-corporate-menuYou are currently accessing Investment Week via your Enterprise account.

      If you already have an account please use the link below to sign in.

      If you have any problems with your access or would like to request an individual access account please contact our customer service team.

      Phone: +44 (0) 1858 438800

      Email: [email protected]

      • Sign in
     
      • Account details
      • Newsletters
      • Contact support
      • Sign out
     
  • Follow us
    • Twitter
    • LinkedIn
    • Newsletters
    • Facebook
    • YouTube
    • Instagram
  • Register
  • Events
    • Upcoming events
      event logo
      Investment Week Select 2021

      Investment Week is delighted to announce the first 2021 date of the popular Select event, taking place on the afternoon of 26th January!

      • Date: 26 Jan 2021
      • ONLINE, ONLINE
      event logo
      Sustainable and ESG Market Briefing

      This interactive briefings will bring together senior fund selectors with leading fund managers running sustainable and ESG strategies to hear how they are navigating this rapidly-evolving part of the market, cutting through the greenwash and where they are finding opportunities.

      • Date: 09 Feb 2021
      • ONLINE, ONLINE
      event logo
      UK Equities Market Briefing

      Industry commentators have forecast a turnaround in fortunes for the unloved UK market in 2021 as vaccines are rolled out and the country starts to recover from the Covid-19 pandemic, while the threat of a no-deal Brexit has now been removed. During this event, fund managers running portfolios investing across the market-cap spectrum will give their views on potential tailwinds for the UK market and identify where they are finding the most compelling value opportunities in a post-Brexit world.

      • Date: 23 Feb 2021
      • ONLINE, ONLINE
      event logo
      Professional Adviser Working Lunches 2021

      A series of invitation only "meet the manager" virtual lunches to discuss how a multi-asset strategy can benefit your clients and your business.

      • Date: 24 Feb 2021
      • ONLINE, ONLINE
      View all events
      Follow our events

      Sign up to receive email alerts about our events

      Sign up

  • White papers
    • Fidelity logo whitebackground1200 630px 1 120x194
      The ETF Evolution

      In this exclusive magazine exploring the evolution of quality and income ETF strategies, King reveals that each ETF follows an investment strategy developed by the group's in-house research team that leverages fundamental active insights to inform the factor definitions and applies portfolio construction principles to mitigate the unintended biases.

      Download
      7ded04ac5957a69da8d1df41c8f21a0c33988d8f 1 120x194
      A bet on the UK bounce back

      David Cumming, Aviva Investors' chief investment officer for equities, last year witnessed turbulent times for UK equities but he remains positive about the market in which he has a personal as well as a professional stake.

      Download
      Find white papers
      Search by title or subject area
      View all white papers
  • Industry blogs
  • Digital Edition
Investment Week
Investment Week
Sponsored by BMO
  • Home
  • Equities
  • Bonds
  • Multi-asset
  • ESG
  • Funds
  • Regulation
  • Diversity
  • People moves
  • logged-in-corporate-menuYou are currently accessing Investment Week via your Enterprise account.

    If you already have an account please use the link below to sign in.

    If you have any problems with your access or would like to request an individual access account please contact our customer service team.

    Phone: +44 (0) 1858 438800

    Email: [email protected]

    • Sign in
 
    • Account details
    • Newsletters
    • Contact support
    • Sign out
 
  • Trending
  • IW 18 Jan issue
  • Past IW issues
  • US rejoins Paris Accord
  • Q4 round-up
  • Sustainable Inv Festival
  • Investment

Industry Voice: Why High Yield Doesn't Have to Mean High Risk

  • John Yovanovic, CFA Portfolio Manager, Head of High Yield Portfolio Management, PineBridge Investments, Houston
  • Tweet  
  • Facebook  
  • LinkedIn  
  • Share on Whatsapp
  • Send to  
0 Comments

It's no surprise that the higher return potential of high yield bonds usually comes with greater default risk than investment-grade corporate and government debt securities. But painting the asset class with a broad brush can mask big differences in defaults among the underlying rating tiers - a factor that's especially critical to assessing opportunities and risks in uncertain times.

For instance, the lion's share of high yield defaults historically have affected CCC rated issuers, which make up only about 12% of the high yield market today. Over the past 15 years, the average trailing-12-month default rates for BB and B rated credits - which represent 88% of today's market - were 0.5% and 1.7%, respectively, compared with a significantly higher 14.1% for CCC rated securities.1

Lower-rated bonds have also tended to suffer much more in slow-growth and recessionary economic environments, as well as during periods of elevated market volatility. For example, in the aftermath of the 2008 financial crisis, the trailing-12-month default rates for CCCs peaked at 51.9%, versus 15.6% for B rated credits and just 3.7% for BB rated credits.2A similar trend is found in previous economic downturns. And today, as the economy continues to grapple with the ramifications of the Covid-19 crisis, the trailing-12-month default rate for CCCs has reached 42.9%, while B and BB rated credits have maintained defaults at 1.65% and 0.14%, respectively, as of 30 September 2020.3

The magnitude of these rating-tier differences may be underappreciated by many investors, who could miss out on opportunities in the asset class as a result.

 

For further insight on the high-yield risk/reward spectrum, read the full version of this article.

 

Footnotes

1Bank of America Merrill Lynch as of 30 September 2020.

2Bank of America Merrill Lynch as of 30 September 2020. CCC default rate peak as of 31 July 2019; B default rate peak as of 31 March 2009; BB default rate peak as of 30 September 2009.

3Bank of America Merrill Lynch. CCC default rate peak as of 31 August 2020; BB and B default rates as of 30 September 2020.

 

Disclosure
Investing involves risk, including possible loss of principal. For professional investor use only, not for retail distribution. The information presented herein is for illustrative purposes only and should not be considered reflective of any particular security, strategy, or investment product. This material does not constitute investment, financial, legal, tax, or other advice; investment research or a product of any research department; an offer to sell, or the solicitation of an offer to purchase any security or interest in a fund; or a recommendation for any investment product or strategy. PineBridge Investments is not soliciting or recommending any action based on information in this document. Any opinions, projections, or forward-looking statements expressed herein are solely those of the author, may differ from the views or opinions expressed by other areas of PineBridge Investments, and are only for general informational purposes as of the date indicated. For important information on PineBridge, please visit www.pinebridge.com/global-disclosure.

  • Tweet  
  • Facebook  
  • LinkedIn  
  • Share on Whatsapp
  • Send to  
  • Topics
  • Investment
  • PineBridge
  • PineBridge Investments
  • Industry Voice
blog comments powered by Disqus
Back to Top
Trustpilot

 

  • Contact us
  • Marketing solutions
  • About Incisive Media
  • Terms and conditions
  • Policies
  • Careers
  • Twitter
  • LinkedIn
  • Newsletters
  • Facebook
  • YouTube
  • Instagram

© Incisive Business Media (IP) Limited, Published by Incisive Business Media Limited, New London House, 172 Drury Lane, London WC2B 5QR, registered in England and Wales with company registration numbers 09177174 & 09178013

Digital publisher of the year
Digital publisher of the year 2010, 2013, 2016 & 2017
Loading