Chart of the week

Active managers to take center stage as market drivers shift?

See why a notable shift in what’s driving high yield bond returns this year may renew investor interest in actively managed strategies.

October 25, 2019 | 2 minute read
  • High yield bonds have returned nearly 12% this year thanks in large part to an accommodative Fed and strong investor demand.1
  • Higher-rated bonds have largely led the way this year, driving the asset class’s returns in 2019. This contrasts to the past several years, when CCC rated bonds solidly outperformed their higher-rated peers. Year to date, BB rated bonds have returned 13.8% compared to 6.5% for CCC rated bonds.1
  • This year’s shift could indicate a late-cycle cautiousness by investors as both economic growth and corporate earnings growth slow. Looking closer within the CCC universe, the healthcare, energy and telecom industries, which comprise approximately 36% of all CCC issuers, have dragged on performance.2
  • We’ve seen shades of similar market transitions within the equity markets this year as value stocks have begun to outperform growth stocks following years of underperformance.
  • Amid such transitions, actively managed strategies may help investors navigate rapidly changing market environments.

  • Based on ratings categories of the ICE BofAML High Yield Master II Index, as of October 24, 2019.

  • J.P. Morgan.

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