The best global High Yield Unit Trusts are keeping pace with High Yield Index ETFs.

FSMOne has the widest range of unit trusts you can look up among iFast.

You can use them Fund selector to help you filter to the unit trust you are interested in.

These are my filters:

1. Asset class: Fixed income
2. Geographic Sector: Global
3. Specialized Sector: High efficiency
4. Currency: USD
5. Switch: Display in product currency (from display in SGD)

We have approximately nine global high yield unit trusts.

I want to contrast them with the iShares Global High Yield Corp Bond UCITS ETFan Irish-based ETF listed on the London Stock Exchange that you can buy through Interactive real estate agents. The ETF tracks the Markit iBoxx Global Developed Markets Liquid High Yield Capped Index.

There are some share classes that are important:

1. HYLA: USD accumulating | Founded in October 2017
2. PLANK: USD Distribution | Founded in November 2012

There are more classes covered such as USD, EUR and GBP that might be of interest to some of you.

I’ve included the name of the fund and the benchmark index, and its 5- and 10-year annualized performance versus the HYLD:

Some of these funds are cumulative (no distribution is paid) and distributed, but officially the returns on the fact sheets are total returns, which are returns that take into account capital gains and distributions.

The problem with funds is that you have no idea what a manager was trying to do, and looking at their listed benchmark might give you some clues because that’s what you’re trying to beat. One fund HSBC’s US Short Duration High Yield Bond has no benchmark.

The strange thing is that JPMorgan’s global high yield bonds uses an American high yield index. What’s going on there? If you look at the fact sheet, you would realize that in the US it is about 94.4%.

5 years and 10 years are not always long time frames in my opinion and more considered intermediate time frames, but they easily give me some data on how the actively managed unit trust is performing. And almost all of them underperform the iShares Global High Yield Corp Bond UCITS ETF.

The one that performed better was… the JPMorgan’s global high yield bonds fund. I’m not sure if it’s their direction to be so much in the US, but we can always compare performance to iShares $ High Yield Corp Bond UCITS ETF (SHYU) to see how a more US high yield focus fund does against a US index ETF. SHYU did 5.0% for 5 years and 5% for 10 years.

In a sense, JPMorgan kept pace with the index despite the higher compensation.

BlackRock’s global high yield performed as well as the index over a ten-year period.

If you’re wondering if there are benefits to owning actively managed high yield fixed income for better performance or greater peace of mind, the answer seems to be: not so much.

There is no advantage there, despite a lot of talk about being able to time it based on economic regimes.

At least not this group of managers.

Even they are doing well, they kept pace.

One thing you might also notice is… probably that’s 5-year and 10-year returns lower than the yield to maturity of the high-yield fixed-income securities.

Why is that?

The return they earn is part of the equation. You would give back through fees, the manager’s decision, but also when the fixed income amount defaults.

In the table below I have outlined some statistics that will help us better understand each of their current portfolios:

Most of their average yield to maturity is higher than the iShares ETF, and their credit quality is generally worse. This shows that fund managers strive for lower quality in order to increase returns. I also listed the amount of fixed income they own that is CCC credit quality, because that’s where the high default rates lie if things go haywire.

Almost all bonds have a higher CCC rating and bonds with a lower yield, with BlackRock and Goldman Sachs high yield having the highest allocation.

Duration measures the sensitivity of fixed income securities to changes in interest rates. In general, you will realize that high yield has a much shorter duration, meaning they are less sensitive to interest rate increases. They are more sensitive to an economic recession.

So keep in mind that the features are different.

The duration is influenced by how large the coupon is and how long the term is. If a fixed income has a longer term, the duration is higher. If the coupon is larger, the duration is shorter.

Because high yield coupons are generally more significant, the duration is generally lower.

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You can read more about my thoughts on Interactive Brokers in this Interactive Brokers Deep Dive series, starting with how to easily create and fund your Interactive Brokers account.

Kyith is the owner and sole writer behind Investment Moats. Readers tune in to Investment Moats to learn and build stronger, more solid wealth foundations, how to pursue a passive investing strategy, learn about investing in REITs, and the basics of active investing.

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Kyith worked as an IT Operations Engineer from 2004 to 2019. He currently works as a Senior Solutions Specialist at Insurance Start-up Havend. All opinions expressed on Investment Moats are his own and do not represent the views of Providend.

You can view Kyith’s current portfolio herewho uses his Free Google Stock Portfolio Tracker.

His favorite investment broker is Interactive real estate agentsallowing him to invest in securities from various stock exchanges around the world, at very low commission rates, without custody fees, near spot currency rates.

You can read more about Kyith here.