The Fund returned 3.07%, outpacing the 2.89% return of the Barclays U.S. Corporate High Yield 2% Issuer Cap Index. At a time when intermediate- and lower-quality securities outperformed, the Funds overweight positions in securities rated CCC, along with an underweight to BB bonds, enhanced performance. Overweights to the life insurance and consumer cyclical services sectors, along with an underweight to electric utilities, also contributed to returns. Detractors included underweight positions in metals and building materials.
We expect economic indicators, the outlook for Fed policy, and geopolitical risk to remain key drivers of high-yield performance in the months ahead. However, we believe that the high-yield market should continue to be supported by stable fundamental factors and a low default rate.
If you are an aggressive investor seeking high current income and the potential for capital appreciation for a portion of your assets, you may find this Fund provides an attractive complement to a well-diversified portfolio. It is best suited for long-term investors willing to assume the additional risks associated with investing in high yield securities including above-average share price fluctuations.
- Invest primarily in high-yielding, lower-rated corporate debt. Lower-rated debt is commonly referred to as "junk bonds."
- Take steps to properly manage downside risk by maintaining a broadly diversified portfolio.
- Rely on our extensive credit research capabilities in an effort to manage risk and minimize defaults.