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Newly Rated Junk Bond Fund's Relatively Smooth Ride

Tue, 7 Mar 2017

Principal High Yield Bond Fund earns a Bronze rating for its higher quality focus, sensible strategy, and some of the lowest fees in the peer group.


Video Transcript

Brian Moriarty: Principal High Yield Bond Fund was rated for the first time in February and was given a Morningstar Analyst Rating of Bronze. This high-yield bond fund is distinguished by a sensible strategy that combines both top-down economic guidance and bottom up security selection. The top-down outlook guides the fund's risk framework, but it leaves plenty of room for the investment team to focus on their best ideas.

The investment team focuses on what they believe to be higher quality companies, looking for healthy cash flows and positive outlooks. This means the fund will occasionally have a lower yield than peers, but it has also resulted in a smoother ride for investors. The fund's volatility, as measured by standard deviation, has been consistently lower than peers since the managers took over in May 2009.

The process has produced impressive results. Over the trailing five years, the fund's 7% annualized return has beaten nearly 90% of peers. Add in some of the lowest fees in the peer group, and this is a fund that deserves to be on investors' radars. 

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