Giant high yield funds stall as liquidity dries up

High yield analysts and managers have warned some of the largest funds in the sector are being hit by a liquidity crisis.

The sector’s popularity has rocketed since the financial crisis of 2008, as investors seek opportunities outside low-yielding investment grade and sovereign debt markets.  However, a corresponding drop in liquidity has meant managers with large funds or a single area bias, as well as mandates unable to use credit default swaps (CDS), are struggling to find opportunities, and will face difficulties when interest rates begin to rise.    Top performers The top four funds over one year in the IMA’s Sterling High Yield sector are all sub-£100m in size, with £1bn-plus vehicles from Ne...