Joshua Rank, Portfolio Manager for Principal Fixed Income, joined Keith Black, Managing Director of RIA Channel, to discuss the evolution of the high yield market.
Rank highlights how the high yield market has upgraded, with BB-rated companies representing a larger share of the market and CCC-rated companies accounting for a significantly smaller share than 15 to 20 years ago. As the market has become broader, more diversified, and higher quality, Rank notes that more investors are treating high yield as a strategic or core fixed income allocation. Despite relatively tight spreads, he believes yields remain attractive, offering potential income opportunities.
Since global markets have become increasingly interconnected, Rank emphasizes the importance of a global perspective when investing in U.S. high yield bonds. He explains that developments across international markets can impact domestic issuers’ earnings and credit quality. He also highlights Principal’s fundamental credit research process, which evaluates business quality, cash flow, liquidity, and downside risks.
Rank also highlights the Principal Active High Yield ETF (YLD), which generally holds approximately 75 issuers. Built on Principal’s research-driven investment process, the ETF focuses on high-conviction security selection with the goal of generating attractive income alongside disciplined risk management. Rank explains that YLD seeks to balance diversification with conviction while maintaining the flexibility to adjust as market conditions change.
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