High-yield Funds Start Year 5.4% Higher

April 3, 2003 (PLANSPONSOR.com) -The winning streak that began for high-yield bond funds late last year continued into the first three months of 2003 as investors poured nearly $8.6 billion into high-yield bond funds between January and March 2003.

These funds returned 5.4% on average in the first quarter.   Further, all 354 high-yield bond funds tracked ended the period in positive territory black, preliminary figures from Standard & Poor’s (S&P) fund database showed.

S&P Director Joel Friedman attributes the interest in high-yield bonds to low inflation rates, “which makes their yields look more attractive compared to other fixed-income investments, like Treasuries or money-market funds.”

“Helping the cause is that investors gained confidence in high-yield bonds as default rates for the securities stabilized or declined in recent months,” Friedman continued.   The 12-month rolling average default rate for domestic junk bonds stood at 6.9% on March 10, down from 10.2% in April of 2002.

Individual Performance

As noted before, every fund in the S&P database had a winning quarter, particularly, the first quarter’s top five performing funds:

  • Fidelity Capital & Income (10.4%)
  • Loomis Sayles Institutional High Income (10.4%)
  • Fidelity Advisor High Income (10.1%)
  • MainStay Funds High Yield Corporate Bond (8.3%)
  • Conseco High Yield (8.0%)

Conversely, the first quarter’s worst performers were:

  • Strong Short Term High Yield (2.4%)
  • Neuberger Berman High Income Bond (1.7%)
  • EquiTrust Series:   Stategic Yield (1.6%)
  • Regions Morgan Keegan Select High Income (1.5%)
  • Northeast Investors Trust (0.6%)