As we look at much of the secondary high yield market, especially many of the B and CCC names that have been out of favor over the past several months, we are seeing a more attractive buy-in for selective, active managers, which we believe lowers our risk. And there remains a segment of “high yield” that isn’t at prices or yields that we would consider attractive, and we will avoid investments in those securities. Alpha generation involves buying what we see as undervalued securities with the goal of generating excess yield and/or potential capital gains. Today, we are seeing this opportunity for potential alpha generation for active managers.
1 Barclays Capital US High Yield Index yield to worst as of 1/30/15. Formerly the Lehman Brothers US High Yield Index, this is an unmanaged index considered representative of the universe of US fixed rate, non-investment grade debt.
2 Based on our analysis of the Barclays Capital High Yield index constituents as of 1/30/15.
This article was written by Heather Rupp, CFA, Director of Research for Peritus Asset Management, the sub-advisory firm of the AdvisorShares Peritus High Yield ETF (HYLD).