PineBridge Investments argues that high yield bond markets are increasingly rewarding active management, especially in today’s environment of elevated interest rates and idiosyncratic credit risks.
While passive investment strategies have been gaining market share over the years, the asset manager notes that they may not be the best choice for high yield bonds. PineBridge attributes this to the market’s structure and composition, which create opportunities that passive approaches often overlook—and the risks that passive strategy might struggle to manage or potentially even worsen.
“We believe active management offers distinct advantages when investing in high yield bonds. Inefficiently priced credit risk and the over-the-counter market structure have benefited active investors, which have historically recorded superior risk-adjusted returns compared with passive strategies,” says Andrew Karlsberg, Portfolio Risk Manager and Investment Strategist, Leveraged Finance, at PineBridge.
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