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Fund Spy

These Tamer High-Yield Bond Funds Are Worth a Look

Short-duration high-yield funds are a less risky way to boost income and get protection from rising rates than most in the broader category.

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With rates at historic lows and compressed credit spreads at the top of many investors' minds, short-duration high-yield bond strategies can be an attractive way to supplement income while limiting interest-rate risk and some of the credit risk found in traditional high-yield funds. While definitions can vary, these strategies focus on high-yield bonds with a maturity of one to five years (these represent roughly 30% to 40% of the broader universe) or a duration (a measure of interest-rate sensitivity) of zero to three years. This group of funds represents a fairly small subset of the high-yield bond Morningstar Category (approximately 25 distinct offerings).

Sam Kulahan does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.