Speakers on a panel discussing high yield fixed income for VettaFi’s Fixed Income Symposium were split on the subcategory. JPMorgan Asset Management’s managing director Cary Fitzgerald expressed bearishness over so-called junk bonds. Meanwhile, Franklin Templeton’s vice president Bryant Dieffenbacher was quite bullish on high yield.
On the panel “Moving Up the Yield Curve in Today’s Market,” Fitzgerald said JPMAM prefers investment-grade credit to high yield fixed income. In fact, JPMAM has significantly reduced its high yield holdings over the past few months.
“It’s the lowest it’s ever been,” Fitzgerald said about JPMAM’s allocation to high yield. “There are other options we see with better value with less risk.”
See more: “The Highs (and Lows) of High Yield”
With yields high across the board and a possible recession on the way, Fitzgerald said that investors don’t need to engage in too much risk to capture yield.
“There are a lot of high-quality bonds that offer significant yield today,” Fitzgerald said. He added that JPMAM sees global banks as the best bet within investment-grade fixed income.
Meanwhile, Franklin Templeton’s Dieffenbacher explained that investors can get equity-like returns with lower volatility within high yield.
“If you dig into the high yield market, it looks a lot better than you may think,” Dieffenbacher said.
Dieffenbacher added that adept managers can avoid areas showing secular decline, which massively mitigates the risk.
“In high yield, as much as it’s about which issuers and bonds you own, it’s about which issuers and bonds you don’t own,” Dieffenbacher said.
The replay of the Fixed Income Symposium is now live; registration to view on-demand is available at the link.
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