US High Yield Bond – Introduction
A flexible approach that seeks to be a ‘fund for all seasons’
Our goal in this strategy is to be a fund for all seasons in the sense that we want to deliver good returns for our investors in all types of credit environments. Now, while we can invest in other things in a limited band such as convertibles, equities, non-US companies, the goal is to keep this strategy US focused: high yield bonds, cash pay bonds. Generally speaking, over the years about 90% of the portfolio at all times has fitted that mould.
The way we think about the market is: globally there are about 1,700 companies, domestically there’s about 1,200 depending on whose benchmark you look at, and the idea of this fund is to focus mostly on the US part of opportunity set, which is the traditional part of the high yield market.
The nice thing about this fund is that we have the flexibility to invest in other things [for example] non-dollar denominated securities up to 20%, we can invest in things like convertibles, derivatives, EM (emerging market) bonds, corporates, even investment grade bonds that we think are attractive, up to 20%. The traditional way that we’ve actually managed the portfolio is that ‘other stuff’ is only about 10% of the strategy.
Our strategy is a pure high yield strategy made up mostly of US dollar denominated high yield bonds. It’s also a fund for all seasons in the sense that we can get defensive when we feel we’re at an extreme part of the credit cycle and we can get very aggressive when we’re at the extreme part of the credit cycle.
We generally don’t do a lot of derivatives, and the reason for that is that single name CDS (credit default swaps) are not available on a lot of the smaller companies that we like to invest in, and we find that that market is pretty illiquid as well.
Important Information
This material is being furnished for general informational and/or marketing purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, nor is it intended to serve as the primary basis for an investment decision. Prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is not a reliable indicator of future performance. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested.
The material does not constitute a distribution, an offer, an invitation, a personal or general recommendation or solicitation to sell or buy any securities in any jurisdiction or to conduct any particular investment activity. The material has not been reviewed by any regulatory authority in any jurisdiction.
Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources' accuracy or completeness. There is no guarantee that any forecasts made will come to pass. The views contained herein are as of the date noted on the material and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.
The material is not intended for use by persons in jurisdictions which prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request.
It is not intended for distribution to retail investors in any jurisdiction.
202009-1313654