Bond heavyweights exit high yield positions on valuation fears

Leading bond managers including Jim Leaviss at M&G are moving away from high yield debt on concerns over rising leverage in the US and high valuations.

Managers said increasing flows into the asset class – driven by a search for yield from investors left unsatisfied by paltry returns available on government debt – have had a knock-on effect on high yield. Yields have fallen, leaving investors facing high risks without being offered adequate compensation. Leaviss, manager of the £1.2bn M&G Global Macro Bond fund, has only 9% invested in high yield in his fund, predominantly in core European companies such as Sunrise Telecommunications and KPN, and is avoiding high yield in the main on valuation grounds. “The portfolio’s exposure to de...