In addition to assessing the credit risk of the portfolio, we incorporate yield and duration to understand the risk-reward traits. The fund’s 5.9% 30-day SEC yield was above the 5.6% average, while the fund’s duration of 4.1 years was slightly above average. Durbiano explained that fund tended to operate in a tight duration range since it was underexposed to long-term bonds that were downgraded into the speculative-grade universe.

Further supporting CFRA’s four-star rating were the fund’s below-average turnover rate (23% vs. 72%), driven by a long-term cash flow focused approach, and its moderate expense ratio of 0.90% (1.04% for peers). In 2016, the fund’s expense ratio was cut sharply from 1.25% to 0.90%. CFRA thinks funds with below-average fees stand a better chance of maintaining performance success.

Overall, CFRA thinks FHIIX is a strong candidate for investors seeking an actively managed high-yield bond fund.

Originally published on MarketScope Advisor, December 27, 2018. Visit https://newpublic.cfraresearch.com/etf/ to gain access.

Todd Rosenbluth is Director of ETF & Mutual Fund Research at CFRA.

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