Summary
This document is a technical report that discusses the strategic case for high yield (HY) investments within fixed income portfolios. It outlines the characteristics of leveraged credit, which includes high yield bonds and leveraged loans, and their potential benefits as a complement to traditional fixed income assets. The report details the risk-adjusted returns of these investments, highlighting their historical performance over the past two decades, which includes periods of significant market volatility. It presents data indicating that both high yield bonds and leveraged loans have provided superior annualized returns compared to investment-grade corporate bonds and government securities. Additionally, the report explains the unique features of high yield bonds and leveraged loans, including their risk profiles and market dynamics. The document emphasizes the importance of understanding the risks associated with leveraged credit while considering its inclusion in investment strategies aimed at enhancing portfolio diversification and returns.
