High-yield bonds are debt securities issued by corporations that can provide a higher yield than investment-grade bonds but are also riskier investments. These corporate bonds represent debt issued by a firm with the promise to pay interest and return the principal on maturity. Junk bonds are issued by companies with poorer credit quality.
They carry lower credit ratings from the leading credit agencies, usually Ba1 or lower by Moody’s or BB+ or lower by Standard & Poor’s or Fitch. 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.
Below, we share with you three top-ranked high-yield bond mutual funds, viz., Neuberger Berman Floating Rate Income Fund NFIAX, Fidelity Series Floating Rate Hi Inc FFHCX and Buffalo High-Yield BUFHX. 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.
Neuberger Berman Floating Rate Income Fund invests in variable-rate senior secured loans issued in dollars by companies, partnerships, and other business organizations in the United States and internationally that are often rated below investment grade. The NFIAX advisor also invests its assets in variable rate instruments, including loans and investment firms that provide exposure to such securities.
Neuberger Berman Floating Rate Income Fund has three-year annualized returns of 5.5%. NFIAX has an expense ratio of 0.99%.
Fidelity Series Floating Rate Hi Inc fund invests mainly in floating rate loans, which are often lower-quality debt securities and other floating rate securities. FFHCX invests part of its assets in the money market, investment-grade debt securities and repurchase agreements.
Fidelity Series Floating Rate Hi Inc. has three-year annualized returns of 6.9%. Eric Mollenhauer has been one of the fund managers of FFHCX since October 2011.
Buffalo High-Yield fund seeks high current income with long-term growth of capital as a secondary objective. BUFHX invests most of its assets in higher-yielding, higher-risk, fixed-income securities.
Buffalo High-Yield has three-year annualized returns of 4.5%. As of June 2022, BUFHX had 4% of its assets invested in Amneal Pharmaceuticals, Inc.
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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