The Barings Global High Yield Bond Fund is looking for an equity like return but for the lower risk required from bonds. Buying lower quality bonds means it can find coupons paying around 5% in the current climate. That is way above high-grade bonds and compares with high-paying dividend stocks but, of course, comes with the extra protection of being a bondholder rather than an equity investor should anything go wrong, as can happen.
Craig Abouchar believes that high-yield bonds are a key component of anyone’s asset allocation strategy, sitting somewhere between bonds and equities on the risk spectrum. He leads a team at Barings that concentrates first and foremost on company specific factors - in other words, how likely an issuing company is to go bust. A large team of around 23 analysts means they can conduct robust research on bond risks to construct a high-yielding and diversified portfolio of bonds.
Craig joined me in the studio to discuss this approach in the interview below.
The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Investors should note that the views expressed may no longer be current and may have already been acted upon. This fund invests in overseas markets, so the value of investments can be affected by changes in currency exchange rates. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. There is a risk that the issuers of bonds may not be able to repay the money they have borrowed or make interest payments. When interest rates rise, bonds may fall in value. Rising interest rates may cause the value of your investment to fall. Sub-investment grade bonds are considered riskier bonds. They have an increased risk of default which could affect both income and the capital value of the Fund investing in them. This fund uses financial derivative instruments for investment purposes, which may expose the fund to a higher degree of risk and can cause investments to experience larger than average price fluctuations. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.
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