As compared with investment-grade bonds, high-yield corporate bonds offer higher interest rates because they have lower credit ratings. As treasury yields fall, high-yield bonds can seem increasingly attractive. However, high-yield bonds carry a higher risk of default than investment grade corporate bonds and treasurys. Bond funds can help to lower this risk by allowing you to easily own a broad portfolio of high-yield bonds. This means that any single default won't be as damaging to your portfolio.
Below, we've selected the top three high-yield corporate bond funds for 2020 by 1-year total return. The best-performing high-yield corporate bond fund, based on performance over the past year, is the Metropolitan West High Yield Bond Fund (MWHYX). All figures are as of April 14, 2020. We have excluded funds with under $100 million in assets under management (AUM), as low-AUM funds sometimes lack sufficient liquidity to be easily investable. Similarly, funds not open to new investors and those with a minimum investment of more than $10,000 were excluded.
Metropolitan West High Yield Bond Fund (MWHYX)
- 1-Year Total Return: 4.1%
- 1-Year Trailing Dividend Yield: 4.10%
- Expense Ratio: 0.85%
- Assets Under Management: $436.9 million
- Inception Date: September 30, 2002
- Fund Family: Metropolitan West Funds
This fund aims to provide exposure to the full high-yield bond universe, repositioning itself over the course of the credit cycle in order to better manage risk-adjusted performance. The fund's top holdings are bonds from the healthcare services company, HCA Healthcare Inc.(HCA); the food and drink packaging supplier, Reynolds Consumer Products (REYN); and healthcare services provider, Centene (CNC).
- 1-Year Total Return: 2.8%
- 1-Year Trailing Dividend Yield: 5.21%
- Expense Ratio: 0.45%
- Assets Under Management: $104.3 million
- Inception Date: June 12, 2018
- Fund Family: Fidelity Investments
FDHY typically invests at least 80% of its assets in high-yield bonds in its goals of seeking a high level of income and capital appreciation. Currently, the fund's top holdings are bonds from healthcare services provider, Centene; wireless infrastructure company, SBA Communications Corp. (SBAC); and credit scoring company, Fair Isaac Corp. (FICO).
- 1-Year Total Return: 1.5%
- 1-Year Trailing Dividend Yield: 4.74%
- Expense Ratio: 0.20%
- Assets Under Management: $151.3 million
- Inception Date: January 11, 2018
- Fund Family: Xtrackers
The Xtrackers Low Beta High Yield Bond ETF aims to match the performance of the Solactive USD High Yield Corporates Total Market Low Beta Index. This cap-weighted index is designed to mirror the performance of the low-yielding segment of the USD-issued high-yield corporate bond market. The fund's top holdings are bonds from aerospace component manufacturer, TransDigm Group (TDG); media company, Clear Channel Outdoor Holdings, Inc. (CCO); and medical services company, Centene Corp.
The comments, opinions and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described on our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.