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Value Line’s Corporate High-Yield objective group is comprised of funds that invest mainly in corporate fixed-income securities in pursuit of high current income. Some have a secondary objective of growth.  These securities, usually corporate bonds, often have a below investment grade rating.  Such funds usually keep at least 80% of their assets in fixed-income securities at all times. 

One fund with a high year-to-date return through February 28, 2010 is John Hancock High Yield Fund A (JHHBX).  This fund seeks total return, consisting of a high level of current income and capital appreciation.

The fund pursues its objectives by investing at least 80% of its assets, under normal market conditions, in corporate debt securities that are rated, at the time of purchase, below investment-grade.  Up to 30% of its assets may be invested in debt securities of foreign issuers.  It may also invest up to 10% of its assets in domestic and foreign equities of any market capitalization range.

The fund uses a fundamentally driven research process that focuses on current income and capital appreciation, with an emphasis on minimizing the potential loss of capital.  The portfolio is constructed on a two-tier basis.  The first tier draws from a wide variety of industries and has debt comprised of BB- and B- rated issues.  The second tier has debt that is more volatile through a credit cycle, such as issues rated CCC and below, and is often managed with a higher turnover or with shorter investment horizons.  Up to 10% of assets may be invested in securities that are in default at the time of purchase.  The fund may purchase and sell options and futures contracts and other instruments to manage risk and/or enhance returns.

Another fund with a good relative year-to-date return is Nuveen Preferred Securities Fund A (NPSAX).  This fund seeks to provide a high current income and total return. 

The fund pursues its objectives by investing at least 80% of its assets in preferred securities.  These securities generally pay fixed- or adjustable-rate distributions and have preference over the common stock in the payment of distributions and the liquidation of assets.  The fund normally invests at least 60% of its assets in securities rated investment grade at the time of purchase and up to 40% in securities rated below investment grade.  It may also invest up to 20% of its assets in other securities, including corporate and government debt and convertible preferred securities.  Furthermore, it may invest up to 15% of its assets in investments that are illiquid at the time of investment.

A third fund with a relatively good year-to-date return and five-year total return is USAA High-Yield Opportunities Fund (USHYX). This fund’s objective is to provide an attractive total return, primarily through high current income and, secondarily, through capital appreciation. 

To achieve this goal, the fund normally invests at least 80% of net assets in high-yield securities, including bonds rated below investment grade, convertible securities, and preferred stocks.  The fund’s strategy is to position the portfolio in sectors with attractive returns and reasonable margins of safety.  It seeks issues that may be overlooked by investors, which have attractive return potential relative to the perceived risks.

In the table below, we have listed 10 top-performing funds through February 28, 2010 that we follow in our Fund Advisor database.

10 Top Corporate-High Yield Funds Performance

Fund Name

Ticker

% Year-to-date

Total Return

% 1 Month

Total

Return

% 3

Month

Total

Return

% 6 Month

Total

Return

% 5 Year

Total

Return

Annualized

J Hancock High Yield A

JHHBX 

5.49

2.06

13.32

31.35

2.52

 

Nuveen Preferred Securities A

 

NPSAX 

3.52

1.63

8.25

15.47

 

Blackrock High Yield A

BHYAX 

2.92

0.49

6.50

17.27

5.58

 

Equitrust Strategic Yield A

FSYAX 

2.93

0.49

2.24

7.99

 

 

Invesco Floating Rate A

AFRAX 

2.81

0.26

5.67

8.69

 

Henderson Worldwide Income A

HFAAX 

2.75

0.05

4.35

13.07

0.39

USAA High-Yield Opportunities

USHYX 

2.72

0.43

5.39

15.78

5.54

PIMCO High Yield Municipal Bond A

PYMAX 

2.56

1.13

3.70

9.21

 

Aegis High Yield

AHYFX 

2.55

0.87

4.94

14.35

9.11

Blackrock High Income A

MDHIX 

2.08

0.21

5.71

16.87

4.27

Corporate-High Yield Objective Group

 

1.28

0.20

3.19

9.34

2.40