The global high yield (GHY) market, which we define as the worldwide market for below-investment grade corporate credit regardless of domicile, has grown dramatically over the past two decades. The representative index, the ICE BofAML Global Non-Financial High Yield Constrained Index covers the US High Yield Index, Pan-European High Yield Index, High Yield CMBS Index, and non-investment grade portion of the Global Emerging Markets Index.
While the US high yield sub-component still represents a significant segment of the GHY market, the European and Emerging corporate debt high yield markets have been expanding at faster rates. The total face value of the global high yield market now exceeds US$4.8 trillion* with the US high yield segment representing 33% of the total.This compares with a US$292 billion market with 94% US market share at the beginning of 2000.
As global high yield markets continue to grow and mature, we believe the opportunity set is broadening for investors seeking diversification and a potential source of alpha. While we believe that global credit markets are integrating, they continue to exhibit secular and cyclical characteristics that are differentiated by market, region, and credit cycle. in our view a global approach to high yield investing offers several benefits:
- Significant increase in the size of the investment universe, allowing investors to participate in some of the fastest growing sectors of the market
- Cross-market and sector allocation process that aims to exploit market inefficiencies and identify relative value opportunities
- Potential for enhanced risk control through diversification across both industry and geographic sectors
Stone Harbor has been managing the Global High Yield strategy since 1996.
We offer a flexible range of high yield portfolios that may be customized to focus on specific credit quality targets such as our High Yield BB & B strategy. Portfolios may include tactical allocations to European high yield, convertibles, loans and special situations. These components of broader strategies are available as stand-alone portfolio offerings.
*Bond Radar and JP Morgan. As of 31 March 2021.