High Yield Spotlight

Despite their reputation, not every closed-end fund pays a high yield. Some, such as the SRH Total Return Fund (STEW), maintain a fairly straightforward objective and look a lot like traditional equity funds. In STEW’s case, it targets quality companies trading at below their intrinsic value. But sometimes those strategies have drawbacks.

Now that the United States and China have agreed to a temporary trade truce, it might unleash another rally for junk bonds. Lower-grade debt started to turn higher ahead of that finally finding some resolution and it could be that the outperformance is poised to continue. The Allspring Income Opportunities Fund (EAD) targets not just the junk bond market, but also the senior loan and preferred markets for a little extra juice.

Convertibles are an interesting option for investors for several reasons. They’ve been slightly above average as a fixed income product, but have demonstrated the ability to participate in some equity upside in the right conditions. A fund that has characteristics of both stocks & bonds can be valuable to manage the volatility. The Calamos Convertible & High Income Fund (CHY) starts with a convertible core and uses other high yielding asset classes as satellite holdings.