US High Yield Bond Fund

Risk Considerations

The Fund is actively managed and invests mainly in a diversified portfolio of high yield corporate debt securities from issuers in the United States.
Investment in the Fund involves risks, including general investment risk, geographic concentration risk and exclusion criteria risk which may result in loss of a part or the entire amount of your investment.
The investment in debt securities is also subject to credit/counterparty risk, interest rate risk, downgrading risk, credit rating risk, risk associated with high yield debt securities which are generally rated below investment grade or unrated, risk associated with investments in debt instruments with loss-absorption features and valuation risk.
The Fund may use derivatives for hedging, efficient portfolio management and investment purposes or to create synthetic short positions in debt securities and credit indices, and is subject to derivatives risk. Exposure to derivatives may also lead to a risk of significant loss to the Fund.
For Class Ax, dividend are paid on a discretionary basis. Dividend may be paid directly out of capital and/or effectively out of the capital of the share class by distributing all gross income prior to the deduction of any fees and expenses attributable to the share class. Payment of dividends directly out of capital and/or effectively out of capital amounts to a return or withdrawal of part of an investor’s original investment or from any capital gains attributable to that original investment. Any such distribution may result in an immediate reduction of net asset value per share. This could also erode capital and constrain future growth.
The value of the Fund can be volatile and could go down substantially.
Investors should not invest in the Fund solely based on this website.

Investment involves risk. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.

Overview

Manager's Outlook

Despite the year-to-date sell-off, we maintain a favorable fundamental outlook for high yield. Spreads widened significantly in the second quarter and are now wider than their historical averages, while default rates remain well below their long-term averages. Though defaults may tick slightly higher from here due to inflation and a more hawkish Fed, they should stay below their historical averages for the foreseeable future, as recent refinancing activity by companies has extended upcoming maturity walls. Technical conditions remain supportive as year-to-date outflows have been met with a quiet new issue calendar. Our new issue participation has been very limited, and we continued to find better opportunities in the secondary market.

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Though our outlook for high yield remains constructive, risks remain. Inflation represents a key risk moving forward, as issuers' borrowing costs will likely increase as central banks raise rates to combat price pressures. Amid rising borrowing costs and persistent inflation, we are targeting issuers with healthy levels of capital and limited borrowing needs in the future. We are also closely monitoring issuers' ability to pass higher costs through to consumers and will favor companies that are able to do so most effectively. Lastly, given increased risks around the potential for a recession, we continue to stress-test credits for resiliency in such an environment.

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We started the year with tight spreads and average prices near par. However, the year-to-date sell-off has led to wider spreads, lower dollar prices, and has created more total return opportunities in our market. Additionally, as rates have risen year-to-date, yields are higher today than they were at the start of the year. Thus, prospects for income have improved. Our focus will continue to be on security selection driven by fundamental, bottom-up research as our primary source of alpha, as it has been for us over the long term.

Strategy

Fund Summary

Actively managed and invests mainly in a diversified portfolio of high yield corporate debt securities from issuers in the United States.

Performance - Net of Fees

Past performance is not a reliable indicator of future performance.

Disclosure on Vendor Indices can be found here.

Risks

Typical Investor