Grab These 3 High-Yield Bond Funds for Solid Returns
High-yield bonds behave more like stocks than investment-grade bonds. These bonds have significant holdings in smaller companies, which are considered to have a weaker financial condition but benefit as the economy moves north. Though high-yield bonds are more exposed to credit risk, these have less exposure to interest rate risk, making them a differentiated source of return. Despite headwinds faced in the early months of the pandemic, demand for high yield has recovered since the Fed’s rate cut and reopening of the economy. The improving economic activity renewed the search for yield, and given the current scenario, these bonds are poised to grow.
Below we share with you three top-ranked high-yield bond mutual funds, namely Manning & Napier High Yield Bond Series MNHYX, Fidelity Advisor Floating Rate High Income Fund Class A FFRAX and Fidelity Capital & Income Fund FAGIX. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future. Investors can click here to see the complete list of funds.
Manning & Napier High Yield Bond Series invests the majority of its assets in bonds that are rated below investment grade and other financial instruments, mainly derivative instruments and ETFs, with economic characteristics similar to non-investment grade securities. MNHYX may invest a part of its assets in bank loans. The fund has returned 6.8% over the past three years.
As of December 2021, MNHYX has 15.8% of its assets invested in Total Misc Bonds.
Fidelity Advisor Floating Rate High Income Fund Class A aims for a high level of current income by investing the majority of its assets in floating-rate loans and securities. FFRAX invests in companies in troubled or uncertain financial conditions, using the fundamental analysis of each issuer's financial condition and industry position, and market and economic conditions. The fund has returned 3.8% over the past three years.
Eric Mollenhauer has been one of the fund managers of FFRAX since 2013.
Fidelity Capital & Income Fund invests in equity and debt securities, including defaulted securities, with an emphasis on lower-quality debt securities. FAGIX invests in companies in troubled or uncertain financial conditions using fundamental analysis. The fund has returned 8.5% over the past three years.
FAGIX has an expense ratio of 0.68% compared with the category average of 0.95%.
To view the Zacks Rank and the past performance of all high-yield bond funds, investors can click here to see the complete list of high-yield bond funds.
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