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By Brian Moriarty | 11-27-2017 03:00 PM

A High-Yield Fund With a Unique Approach

Shenkman Short Duration High Income takes a conservative strategy that should hold up well in a rising rate environment.

Brian Moriarty: Shenkman Short Duration High Income offers investors a unique approach to high-yield bond investing. Like the name suggests, this is a short duration fund, which means it buys bonds with short maturities and has less interest-rate risk than peers. This means that during an interest-rate spike, when most peers would lose money, this fund should hold up relatively well.

The fund also stands out for its conservative approach to high-yield bond-picking. Analysts rank companies based on a variety of factors including free cash flow, operating trends, enterprise value, senior management, and capital structure. Only the highest-scoring companies are even considered for inclusion in the portfolio.

Investors should be aware that the conservative approaches to both interest-rate risk and credit risk mean the fund is likely to lag during most periods, but it really shines during market downturns. In the fourth quarter of 2015, this fund lost less than half a percent, while the average peer lost 2%. Over a long period of time, that strong downside performance has given the fund one of the strongest risk-adjusted return profiles in the high-yield bond category.

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