high-yield bond fund

(redirected from Junk Bond Funds)

High-Yield Bond Fund

A mutual fund that invests predominantly or exclusively in junk bonds. Because junk bonds have low credit ratings, they offer a comparatively high return. High-yield bond funds generally have portfolios containing at least two-thirds junk bonds. They provide a way for investors to take advantage of the return offered by a junk bond while also avoiding the risk of investing in a single bond at a high risk of default. See also: Investment grade.

high-yield bond fund

An investment company that attempts to produce unusually high income for its shareholders by maintaining a corporate bond portfolio that contains at minimum two thirds lower-rated bonds (Baa by Moody's; BBB by S&P).
References in periodicals archive ?
"Investors have been seeking yield in the current low interest rate environment, and junk bond funds have offered an alternative, but average investors do not expect to be cut off from trading in an open-end investment company registered under the '40 Act," Galvin said in a statement.
Fearing the Fed might raise rates faster than expected, investors pulled billions of dollars out of junk bond funds in July.
In May, junk bond funds took in $2.61 billion, and then the withdrawals began.
Riskier high-yield junk bond funds, meanwhile, attracted $1 billion, according to the Bank of America Merrill Lynch report, which also cited data from fund-tracking firm EPFR Global.
The thinking here is similar to junk bond funds, where the pitch was that individual risks of default, while real, could be mitigated by portfolio analysis when you brought enough different types of high-yield bonds together.
The new measures assign the scope of junk bond funds and require stipulations and disclosures to be made in the investment contract and prospectus for junk bond funds.
Ninety percent of the $6 billion that flowed into longer-term taxable bond funds last month went into junk bond funds. Even Warren Buffett, the oracle of Omaha-based Berkshire Hathaway Inc., has acknowledged that he has been dabbling in the junk market, which is enjoying a strong rally.
If you want to live on the wild side, you can even invest in socially responsible junk bond funds these days.
Junk bond funds attracted huge amounts of investor capital in the 1980s.
For example, many high-yield junk bond funds boosted returns in 1993 by investing in debt from developing countries like Argentina and Mexico.
Investors in those vehicles saw that surprisingly, for the second year running, junk bond funds earned top honors hands down.