News & Insights

Q3 2021 High Yield Market Update

Portfolio Manager Patrick Meegan reviews:

  • Performance drivers in the third quarter of 2021
  • A discussion on inflation and the potential path of interest rates
  • Our assessment of high yield valuations, fundamentals, and technicals



All investments contain risk and may lose value. This podcast is for general information only and should not be relied on for investment advice or recommendation of any particular security, strategy, or investment product.

The portfolio manager’s views and opinions expressed in this podcast are as of October 15, 2021. Such views are subject to change and may differ from others in the firm, or the firm as a whole. The portfolio manager’s comments may include estimated and/or forecasted views, which are believed to be based on reasonable assumptions within the bounds of current and historical information. However, there is no guarantee that any estimates, forecasts or views will be realized. In the event of new information or changed circumstances, H&W reserves the right to change its investment perspective and outlook and has no obligation to provide revised assessments and opinions. The podcast may also contain views that are forward-looking statements. Due to various risks and uncertainties, actual events/results or the performance of the High Yield strategy may differ materially from those reflected or contemplated in such forward-looking statements.

Investment returns include reinvestment of dividends, interest and capital gains. Valuation is based on trade-date information. Net performance results are presented after actual management fees and all trading expenses but before custodial fees. The High Yield strategy’s returns for different time periods and market cycles can result in significantly different performance results. An account’s investment guidelines, timing of transactions, market conditions at the time of investment and other factors may lead to different performance results. The Composite includes all High Yield discretionary accounts. The High Yield strategy seeks high current income combined with the opportunity for capital appreciation to maximize total return primarily through investments in high yield securities and rated below investment grade fixed income instruments.  It may also use futures, swaps and other derivatives, mortgage- or asset-backed securities and restricted securities that are sold in private placement transactions. Additional performance disclosures are included in the strategy’s GIPS Report.

The portfolio manager’s views on the high yield market should not be construed as the high yield strategy’s expected performance. There is no guarantee of the future performance of the high yield market, nor the high yield strategy. H&W does not provide any assurance that the high yield strategy’s objectives and goals will be achieved. The High Yield strategy’s benchmark refers to the ICE BofA BB-B U.S. High Yield Constrained Index. Unless otherwise noted, the high yield market refers to the ICE BofA U.S. High Yield Index. The ICE BofA BB-B US High Yield Constrained Index contains all securities in the ICE BofA US High Yield Index rated BB+ through B- by S&P (or equivalent as rated by Moody’s or Fitch), but caps issuer exposure at 2%. Index constituents are capitalization weighted, based on their current amount outstanding, provided the total allocation to an individual issuer does not exceed 2%.

Any discussion or view of a particular company is as of the publication date but may be sold and no longer held in the High Yield strategy at any time, for any reason, without notice, subsequent to the publication date. The securities reflected herein are intended to be for illustrative purposes only and are not intended to be, and should not be construed as, investment recommendations or investment advice. Past performance of these securities, or any other investments, is not an indicator of future results.  H&W’s opinions regarding these securities are subject to change at any time, for any reason, without notice. No assurance is made that any securities identified, or all investment decisions by H&W were or will be profitable.

Investing in high yield securities is subject to certain risks, including market, credit, liquidity, issuer, interest-rate, inflation, and derivatives risks. Lower-rated and non-rated securities involve greater risk than higher-rated securities. Investments in debt securities typically decreases in value when interest rates rise. This risk is usually greater for longer-term debt securities. Investing in smaller and/or newer companies involves greater risks than those associated with investing in larger companies, such as business risk, significant stock price fluctuations and illiquidity.

Credit Quality weights by rating were derived from the highest bond rating as determined by S&P, Moody's or Fitch. The ICE BofA index data referenced is the property of ICE Data Indices, LLC (“ICE BofA”) and/or its licensors and has been licensed for use by Hotchkis & Wiley. ICE BofA and its licensors accept no liability in connection with its use. See Index definitions for full disclaimer.

Market Disruption: The global coronavirus pandemic has caused disruption in the global economy, unprecedented business and travel disruption and extreme fluctuations in global capital and financial markets. H&W is unable to predict the consequences of the upheaval caused by coronavirus pandemic, which has the potential to negatively impact the firm’s investment strategies and investment opportunities.

©2023 Hotchkis & Wiley. All rights reserved. No portion of the podcast may be published, reproduced, transmitted or rebroadcast in any form without the express written permission of H&W.

Past performance is not indicative of future performance.