For the average investor, high yield bond mutual funds are the best method to invest in bonds rated below investment grade, popularly known as junk bonds. This is because these funds hold a wide range of such securities, significantly reducing portfolio risk. In addition, these funds provide better returns than investments with higher ratings, including government and corporate bonds. Further, because the yield from such bonds is higher than investment grade securities, these investments are less susceptible to interest rate fluctuations.
Loomis Sayles High Income A (NEFHX - MF report) seeks high total return with a combination of high current income and capital growth. The fund invests a minimum of 65% of its assets in fixed income derivatives that are rated below investment grade. A major portion of its assets get invested in fixed income instruments issued by domestic corporate bodies or in US dollar denominated securities approved by foreign corporate organizations. It may also invest a maximum of 20% of its assets in fixed income securities that are denominated in foreign currency, including that from emerging economies. It may also invest in other derivatives such as zero-coupon securities, futures and swaps. This high yield mutual fund has a three-year annualized return of 9.5%.
As of October 2014, this high yield mutual fund held 332 issues, with 3.67% of its total assets invested in US Treasury Note 0.625%.
Lord Abbett High Yield A (LHYAX - MF report) invests a lion’s share of its assets in “junk” bonds or high-yield bonds including corporate debt and convertible instruments. The fund may invest a maximum of 20% of its assets in non-US securities and may invest not more than 20% of its assets in municipal securities. It may also consider senior loans for investment. The fund seeks high total return. This high yield mutual fund has a three-year annualized return of 9.4%.
The high yield mutual fund has an expense ratio of 0.95% compared to a category average of 1.08%.
MassMutual Premier High Yield A (MPHAX - MF report) seeks high total return by investing in high yielding securities. The fund invests major portion of its assets in below grade domestic debt instruments which also include default securities. These debt instruments include corporate bonds, mortgage-backed securities and obligations that are approved by the US government or by its affiliates. The fund is expected to maintain a dollar-weighted maturity that may vary from 4 to 10 years. This high yield mutual fund has a three-year annualized return of 9%.
Scott D. Roth is the fund manager and he has managed this high yield mutual fund since 2010.
RidgeWorth Seix High Yield A (HYPSX - MF report) invests heavily in lower rated debt securities that are expected to provide high yield. These securities include corporate obligations, floating rate loans and other debt obligations. The fund invests in debt securities throughout the globe. It may also invest a maximum of 20% of its assets in investment grade instruments. This high yield mutual fund has a three-year annualized return of 7.1%.
The high yield mutual fund has an expense ratio of 0.81% compared to a category average of 1.08%.
Northern High Yield Fixed Income (NHFIX - MF report) seeks high current income. It invests the majority of its assets in lower rated bonds, commonly known as "junk bonds". The fund may also invest a share of its assets in high quality securities. For a temporary time being, the fund may also invest 100% of its assets in high quality securities in order to take a defensive stance. Although it focuses on acquiring domestic securities, the fund may also invest in foreign securities to a lesser extent. This high yield mutual fund has a three-year annualized return of 7.8%.
As of September 2014, this high yield mutual fund held 208 issues, with 0.75% of its total assets invested in Meritage Homes 7.15%.
To view the Zacks Rank and past performance of all high yield bond mutual funds, investors can click here to see the complete list of funds.
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