High yield: Equity-like returns… with half the risk

High-yield products may look like other bond offerings, but they do not act like them, writes Arif Husain, director of fixed income at AllianceBernstein.

The volatility of the last few months has been a stark reminder of the stormy ride the equity markets can offer. Investors seeking to reduce and control volatility in their equity portfolios, while still maintaining return potential, could find that high-yield bonds provide an effective solution. A typical approach to moderating equity volatility is to reallocate assets to the greater stability of investment-grade bonds, or even cash. But this can exact a heavy cost in sacrificed return potential. High-yield bonds, on the other hand, can reduce risk without sacrificing much return. In...