Since their widespread issuance in the 1980s, high yield bonds have become an important component of investors’ asset allocations and have provided the financing necessary to support a large segment of our economy. Many investors in this space prefer the debt of well-known, larger-cap issuers that are often rated just below investment grade (e.g., BB-rated), but there are a myriad of opportunities in smaller, underfollowed issuers.
Have you ever been tempted to take a tactical, market-timing approach to high-yield? After all, waiting for spreads to widen and the market to become “cheap” seems like a lucrative way to play the asset class. However, history has shown us that this approach comes along with a litany of challenges, and that in reality, incremental increases in spread levels do not always translate into increases in total return.
This is the first blog of a series that is designed to provide some insight into the difficulty of applying a tactical, or short-term, mindset to high yield allocations and why, in our view, a strategic, or long-term, allocation to the asset class is optimal.
Here at DDJ, our clients are at the center of everything that we do. We believe that the best partnerships are built upon strong relationships between people. Our “Meet the Team” blog series is designed to let you get to know us better.
Recently, we sat down with our President, David Breazzano, and asked him some questions. Find out about some of his favorite travel destinations, what types of books he recommends, and how he thinks about company culture.