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3 High-Yield Bond Mutual Funds for Steady Returns

Zacks Equity Research
·2-min read

For an average investor, high-yield bond mutual funds are the best method to invest in bonds rated below investment grade, popularly known as junk bonds. This is because these funds hold a wide range of such securities, which reduces the risk of the portfolio. In addition, these funds provide better returns than investments with higher ratings, including government and corporate bonds. Further, because the yield from such bonds is higher than investment-grade securities, they are less susceptible to interest rate fluctuations.

Below, we share with you three top-ranked high-yield bond mutual funds, viz., T. Rowe Price Floating Rate Fund PAFRX, Neuberger Berman Floating Rate Inc NFIAX and Manning & Napier High Yield Bond Series MNHYX. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future. Investors can click here to see the complete list of funds.

T. Rowe Price Floating Rate Fund invests its assets along with borrowing, if any, in floating rate loans and floating rate debt securities, wherein floating rate loans represent amounts borrowed by companies or other entities from banks and other lenders. PAFRX advisors invest mostly in funds that are below investment grade or junk or unrated securities.

T. Rowe Price Floating Rate Fund has three-year annualized returns of 5.4%. As of the end of February 2024, PAFRX held 50.4% of its net assets in miscellaneous bonds.

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Neuberger Berman Floating Rate Income fund invests in variable rate senior secured loans that are often rated below investment grade. The NFIAX advisor also invests its assets in variable rate instruments, including loans and investment firms that provide exposure to such securities.

Neuberger Berman Floating Rate Income fund has three-year annualized returns of 5.2%. NFIAX has an expense ratio of 0.97%.

Manning & Napier High Yield Bond Series fund invests the majority of its net assets in investment-grade bonds, derivative instruments and exchange-traded funds. MNHYX also invests a portion of its net assets in bank loans, which are, generally, non-investment grade floating rate investments.

Manning & Napier High Yield Bond Series fund has three-year annualized returns of 4.3%. Scott Friedman has been one of the fund managers of MNHYX since February 2021.

To view the Zacks Rank and the past performance of all high-yield bond funds, investors can click here to see the complete list of high-yield bond funds.

 

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Zacks Investment Research