High-yield bonds behave more like stocks than investment-grade bonds. These bonds have significant holdings in smaller companies, considered to have a weaker financial condition but benefit as the economy moves north.
Although 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 the headwinds faced during the Fed’s tightening of monetary policy, with indications coming in from the Fed that it might slow down its steep rate of hikes, these bonds are poised to grow.
Below, we share with you three top-ranked high-yield bond mutual funds, viz., Manning & Napier High Yield Bond Series MNHYX, Fidelity Advisor Floating Rate High Income Fund FFRAX and PGIM High Yield Fund PBHAX. 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 most of its assets in bonds rated below investment grade. MNHYX advisors choose to invest in bank loans, which typically possess a floating interest rate and fall under the non-investment grade category.
Manning & Napier High Yield Bond Series has three-year annualized returns of 8.7%. MNHYX has an expense ratio of 0.90% compared with the category average of 0.95%.
Fidelity Advisor Floating Rate High Income Fund seeks a high level of current income by investing most of its assets in floating rate loans and other floating rate securities. FFRAX also invests its assets in securities of foreign and domestic issuers.
Fidelity Advisor Floating Rate High Income Fund has three-year annualized returns of 7%. As of the end of January 2023, FFRAX held 2.7% of its net assets in BASS PRO GRP LLC TRANCHE.
PGIM High Yield Fund seeks maximum current income and capital appreciation by focusing on junk bonds. PBHAX invests most of its assets in a diversified portfolio of high-yield, fixed-income securities rated Ba or lower by Moody’s Investors Service, or BB or lower by Standard & Poor’s Ratings Group and securities.
PGIM High Yield Fund has three-year annualized returns of 4.7%. Robert Cignarella, has been one of the fund managers of PBHAX since March 2014.
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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