Get a 6.5% Yield With a Stew of Junk Bonds

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published 7 December 2016

Too many cooks have yet to spoil the broth at Northern Multi-Manager High Yield Opportunity (symbol NMHYX), which divides its assets among three firms, each with its own philosophy for buying bonds with below-average credit ratings. Northern’s Chris Vella, who oversees the portfolio, says the strategies offer three different ways to generate market-beating returns. High Yield Opportunity, as a unified entity, hasn’t always achieved that goal, but over the past year it ranked in the top 5% of all junk-bond mutual funds.

Invest in This Index Fund for Bonds From Exotic Locales

Vella gives the subadvisers considerable autonomy over their chunks of the portfolio. Neuberger Berman, which manages 40% of the $312 million fund’s assets, uses what Vella calls a “traditional” high-yield strategy to assemble a diversified package of bonds with below-investment-grade credit ratings. DDJ Capital (30% of assets) invests mostly in debt of midsize firms, with a large allocation to floating-rate bank loans. Nomura (also 30%) uses big-picture analysis of the high-yield market to select bonds.

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Ryan joined Kiplinger in the fall of 2013. He wrote and fact-checked stories that appeared in Kiplinger's Personal Finance magazine and on Kiplinger.com. He previously interned for the CBS Evening News investigative team and worked as a copy editor and features columnist at the GW Hatchet. He holds a BA in English and creative writing from George Washington University.