T. Rowe Price has launched a UK-domiciled global high yield bond fund.
The fund will target exposure to the US, as well as a 50 per cent weighting in credits from Europe and emerging markets, the company said today (November 23).
It is hedged to sterling, for UK-based investors, and aims to capitalise on the “continued worldwide expansion of the sub-investment grade credit space”.
The fund will be run by Michael Della Vedova, who runs several of T. Rowe Price’s global and regional strategies.
Despite the recent elevated volatility within bond markets, high yield credit continues to exhibit resilient fundamentals – including a near-zero default rate, high recovery rates, declining leverage, and improved liquidity, he said.
“The market also contains some of the highest interest coverage ratios we have seen in more than a decade.
“When the risk-free rate and credit spreads reach levels such as those observed today, we have historically seen strong one-year forward returns in the high yield asset class. This bodes well for high yield performance in 2023.”
Nataline Terry, head of distribution, UK and Ireland, at T. Rowe Price, added that a unique feature of high yield debt is the yield ‘buffer’ it offers.
“High coupons should provide consistent and meaningful income, which helps dampen price volatility and has delivered attractive risk adjusted returns over time.
“This year’s jump in yields has meant this buffer is back again, providing investors with a powerful compounding effect.”
sally.hickey@ft.com
