Mutual funds that seek to provide impressive returns by investing in below investment-grade bonds are generally known as high yield bond mutual funds or junk bonds. These funds are expected to provide higher returns than those investing in investment-grade securities. Moreover, the high-yield feature of junk bonds makes them less vulnerable to interest rate fluctuations. Though junk bonds are considered riskier than investment-grade debt securities, mutual funds maintaining a well-diversified portfolio of such securities may reduce the level of risk.
Below we share with you three top-ranked high-yield bond mutual funds. 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 high-yield bond mutual fundsto view their Zacks Rank and past performance.
AllianzGI High Yield Bond Fund Class A (AYBAX - Free Report) seeks growth in capital and current income. A large share of its assets is invested in high-yield debt securities like junk bonds. AYBAX also invests in a wide range of fixed income securities below investment grade rated or unrated. AllianzGI High Yield Bond Fund Class Ahas three-year annualized returns of 2.6%.
As of June 2017, AYBAX held 173 issues, with 2.02% of its total assets invested in Reorganized 16-10238 Holdco Pfd.
PIMCO High Yield Spectrum Fund Class D (PHSDX - Free Report) invests primarily in a wide range of portfolio of high-yield securities or junk bonds, which include convertibles, warrants or derivatives such as swap agreements. These securities are rated below investment grade by Moody's, or equivalently by the S&P or Fitch. PIMCO High Yield Spectrum Fund Class D has three-year annualized returns of 4.6%.
PHSDX has an expense ratio of 0.95% compared with the category average of 1.05%.
BlackRock High Yield Bond Portfolio Investor A Shares (BHYAX - Free Report) seeks maximization of returns along with growth of income. BHYAX invests the lion’s share of its assets in high-yield bonds. The fund may invest almost 30% of its assets in bonds that are non-dollar denominated and issued by companies based outside the United States. The fund may also invest its assets in convertible as well as preferred securities. BlackRock High Yield Bond Portfolio Investor A Shares has three-year annualized returns of 3.7%.
James Keenan is one of the fund managers of BHYAX since 2007.
To view the Zacks Rank and past performance of all high-yield bond mutual funds, can click here to see the complete list of high-yield bond mutual funds.
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