Domestic high-yield bond managers dominated other fixed-income strategies in the performance sweepstakes for the 12 months ended June 30.
According to the Morningstar Inc. Separate Account/Commingled Fund Database, eight of the 10 top-performing fixed-income managers for the year ended June 30 were high-yield managers. Horizon Asset Management Services Inc., New York, took first place with its high-yield strategy, which returned 17.2%. PENN Capital Management, Cherry Hill, N.J., was second with an 11.9% return on its high-yield bond strategy; DuPont Capital Management, Wilmington, Del., was third with 9.3%; DDJ Capital Management, Waltham, Mass., was fourth with 8.9%. Rounding out the top five was Pasadena, Calif.-based Western Asset Management with its ultrashort bond portfolio, which returned 8.9%.
The one-year return for the Lehman High Yield index was 4.8%, compared with -0.72% for the Lehman Aggregate Bond index.
The median performance of fixed-income managers in the Morningstar database for the year was 0.3%, while the Citigroup Broad Investment Grade Bond index was -0.81% for the period.
Scott Berry, a mutual fund analyst for Morningstar Inc., Chicago, said high-yield funds have continued to perform well because "there's really been no default to speak of in the high-yield universe. Without default, there's been nothing to spook investors."
Mr. Berry thinks the high performance is likely to continue. "As the high-yield market rallied, you have default and interest rates to consider. If rates were to go higher or the markets tanked, things would be different for high yield," said Mr. Berry.
He called General Motors Corp. and Ford Motor Co. "two of the big stories in high yield (in the past quarter). GM has seemed to tackle their problems and has been encouraging for high-yield managers. They are getting their costs under control," he said.