Short-Term High Yield: The Road Less Traveled

By Christian Brobst
As interest rates normalize, investors are revisiting their asset allocations - and especially their fixed income positions. When it comes to fixed income, many investors may not appreciate the breadth in the asset class and the potential opportunities this diversity provides. As we often say on our team, it's a market of bonds, not a bond market. With active management, a bond allocation can take advantage of many different types of opportunities and market inefficiencies. In this post, I'll take a closer look at one of the less frequently discussed segments of the market: short-duration high-yield securities.
The Potential Benefits of Playing at the Edges of the Style Box Many fixed income investors like to think about the traditional style box when it comes to investing, with interest-rate sensitivity (duration) on one axis and credit quality on the other. This can be a useful tool in characterizing both mutual funds and individual bonds alike. Many managers like to fit strategies neatly within a particular style box to be labelled as a so-called "pure play" strategy. At Calamos, we take an opposing view. We believe selectively expanding our opportunity set beyond the benchmark universe enhances our ability to exploit market inefficiencies and to manage risk and return.
Take the example of short-maturity, below-investment-grade bonds. High-yield investors are most often looking to maintain a high level of yield or maximize current... Read more