NEW YORK — A focus on strong balance sheet fundamentals and a low default rate drove high-yield bond managers to rack up the biggest gains in calendar 2004.
In a year when the returns in investment-grade bonds were weak — the median return of core and core-plus bond managers was just 4.7% — high-yield managers were able to once again dominate the fixed-income universe in terms of returns. Seven out of the top 10 best performing strategies for the year were high-yield portfolios, according to Morningstar Inc.'s manager performance database.
Manager rankings available here
The Citigroup Broad Investment Grade Bond index returned 4.5% for the year, while the Lehman Brothers High-Yield Bond index returned 11.1%.
Overall, the top performing fixed-income manager was Zazove Associates LLC, Northbrook, Ill., which produced a 23.6% return in its high-yield convertible securities strategy. Second place went to Credit Suisse Asset Management LLC, New York, whose Total Commodity Return portfolio notched an 18.4% return.
Coming in third place was Hyperion Capital Management Inc., New York, with a 16.6% return in its High Yield Commercial Mortgage-Backed strategy. Fourth place went to SMH Capital Advisors Inc., Fort Worth, Texas, with a 15.9% return in its high income portfolio. Delaware Investments, Philadelphia, came in fifth by notching a 15.2% return in its high-yield strategy, and DDJ Capital Management LLC, Boston, was sixth, with a 15.1% return for its high-yield bond account.