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        The Evergreen Case for a Strategic Allocation to High Yield

        High Yield bonds have evolved into a globally diversified, high-income asset class. Offering shorter recovery times, resilience, and cost-efficient access, HY serves as a strong portfolio diversifier with lower volatility than equities.

        Srinivasan Margabandu
        Fixed Income Portfolio Specialist
        • The High Yield (HY) market has grown and matured. It has changed from a niche exposure to a globally diversified, highly rewarding asset class worth investing in — albeit not without risks.
        • Outsized contribution of income/yield to total returns has led HY to experience shorter recovery periods from market drawdowns. It serves a dual purpose in a balanced portfolio — as both a satellite allocation for core fixed income, and a less-volatile alternative to equities. Even a 5–10% reallocation into HY from equities could see investors benefit.
        • Growth of electronic trading and ETFs have made indexing in HY viable — with investors ultimately benefiting from gaining access in a cost-efficient manner.
        • With a soft landing for the global economy becoming increasingly viable and as both fundamentals and technicals remain strong, we stay constructive in the medium term — even in the face of tight spread valuations.
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