Warning: members of the public are being contacted by people claiming to work for AXA Investment Managers UK Limited.  Find out more information and what to do by clicking here.

High Yield Bonds

We offer a range of high yield strategies investing within and across regions, sectors and maturities.

What is high yield investing?

External ratings agencies assign credit ratings to companies and governments issuing bonds based on an assessment of their credit-worthiness. This rating can help to indicate the issuers likely ability to pay interest and principal as scheduled.

A high credit rating (above BBB or Bba for Standard & Poor’s and Moody’s, respectively) is considered ‘investment grade’ while a low credit rating is considered ‘high yield’ (sometimes called ‘sub-investment grade’ or ‘junk bonds’). High yield bonds are more volatile with higher default risk among underlying issuers versus investment grade bonds.  Issuers with low credit ratings need to pay higher interest as incentive to purchase their bonds. As with most investments, higher potential risks demand higher potential rewards to compensate.

The high yield bond market was born in the US and that remains the largest and most liquid market. However, today there is a global high yield market offering potential benefits such as the diversification of Europe or the stronger growth potential of emerging markets.

Why high yield bonds?

High yield bonds offer a number of potential benefits, alongside some specific risks such as higher volatility and higher default rates. In the current environment of persistently low interest rates, bond investors are finding attractive yield difficult to come by. For those in a position to take on higher levels of credit risk, high yield bonds may provide a significant yield enhancement to a well-diversified portfolio.

1.
Higher yield and diversification

In addition to significantly higher income than investment grade bonds, high yield often behaves differently to other areas of the fixed income universe so can provide important diversification to a broader fixed income portfolio.

2.
Equity-like return with lower volatility

There is also the potential for capital growth. Historically, the high yield market has delivered a long-term return profile broadly in-line with equities1. Like equities, high yield bond prices can increase as a result of improved performance of the issuing company or a wider economic upturn. However, the typically higher income component of high yield bonds means that they are generally less volatile than equities.   

  • Morningstar, as at March 2020. ICE BofA Global HY TR USD and MSCI World NR USD. 1 April 2005 to 31 March 2020
3.
Lower duration

High yield bonds are typically issued with shorter maturities than many investment grade bonds (generally less than 10 years) and therefore tend to have relatively lower duration. This means a high yield strategy may be less exposed to interest rate risk than most investment grade strategies.

Our high yield strategy

Our experienced, dedicated high yield teams employ a consistent investment process which has been tested over a range of market cycles and conditions. This process is centred on the philosophy that the key to superior long-term potential returns in the fixed income market is compounding current income and seeking to avoid principal loss through fundamental credit analysis and macroeconomic research.

Our robust bottom-up credit research process focuses on identifying companies with improving credit trends, while the top-down component seeks to identify risks and opportunities associated with the overall economy and market. In this way we aim to minimise default risk and manage volatility through active management, while pursuing high yielding opportunities and potentially generating capital growth.

Learn more about our high yield strategies

AXA IM offers a range of high yield strategies investing within and across regions, sectors and maturities.

Related Articles

Fixed Income

Where to buy your risk

  • 23 February 2021
  • 5 min read
Fixed Income

Asian Credit Strategies As 2021 begins, market risks favour HY

  • 25 January 2021
  • 5 min read
Fixed Income

US High Yield Market Review

  • 12 January 2021
  • 5 min read
Fixed income

Discover more about Fixed Income investing

Explore our fixed income strategies
Are you a financial advisor, institutional, or other professional investor?

This section is for professional investors only. You need to confirm that you have the required investment knowledge and experience to view this content. This includes understanding the risks associated with investment products, and any other required qualifications according to the rules of your jurisdiction.

    Not for Retail distribution

    This document is intended exclusively for Professional, Institutional, Qualified or Wholesale Clients / Investors only, as defined by applicable local laws and regulation. Circulation must be restricted accordingly.

    This promotional communication does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.

    Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee that forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.

    Before making an investment, investors should read the relevant Prospectus and the Key Investor Information Document / scheme documents, which provide full product details including investment charges and risks. The information contained herein is not a substitute for those documents or for professional external advice.

    The products or strategies discussed in this document may not be registered nor available in your jurisdiction. Please check the countries of registration with the asset manager, or on the web site https://www.axa-im.com/en/registration-map, where a fund registration map is available. In particular units of the funds may not be offered, sold or delivered to U.S. Persons within the meaning of Regulation S of the U.S. Securities Act of 1933. The tax treatment relating to the holding, acquisition or disposal of shares or units in the fund depends on each investor’s tax status or treatment and may be subject to change. Any potential investor is strongly encouraged to seek advice from its own tax advisors.

    Past performance is not a guide to current or future performance, and any performance or return data displayed does not take into account commissions and costs incurred when issuing or redeeming units. The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested. Exchange-rate fluctuations may also affect the value of their investment. Due to this and the initial charge that is usually made, an investment is not usually suitable as a short term holding.

    Risk Warning

    The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested.