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Fixed Income

An Underappreciated Subset of High Yield

2019-02-22 00:00:00 - 7 min read

For investors willing to surrender a nominal amount of yield in favor of greater protection given a default, global senior secured bonds can be an attractive option in a recessionary environment.

As we enter what may be the twilight hours of an elongated credit cycle, an increase in defaults is not only possible, but probable. Against this backdrop, a credit-intensive, global approach to high yield investing is key. While the pendulum of investor sentiment has swung from one extreme to another, seasoned investors who have followed the market through multiple credit cycles and downturns have made the observation: For those willing to surrender a nominal amount of yield in favor of greater protection given a default, global senior secured bonds—a lesser known and perhaps underappreciated subset of high yield—can be an attractive option due to their seniority in the capital structure.

Why should investors consider adding this asset class to their portfolio? Here are five reasons.