Our High Yield Bull/Bear strategy was built on the premise that high yield bonds, when used in a tactical setting, can deliver solid returns with minimal downside risk. To boost returns, the strategy can also short equities during downtrending markets.
While the live results for that strategy have been solid over the past three years, we decided to create a long-only version of our High Yield Bull/Bear Strategy, where we stripped out the "Bear" part of the "Bull/Bear" to see what happens when the strategy is reconfigured for those looking for tactical long-only exposure. What we found, using the same trade parameters we've used for three years live, was truly impressive.
We stripped out the "short" side of the equation from our existing High Yield Bull/Bear Strategy.
While the bulk of these results are hypothetical (the strategy went "live" on 11/1/2013), keep in mind we have been using the same long signals within our High Yield Bull/Bear Strategy since early 2011. Be that as it may, after deducting a 2% annual fee on the backtested data to arrive at a realistic net, we are very pleased with the results.
High Yield bonds offer a unique investment opportunity within the tactical strategy space. You typically can get high single-digit results with minimal drawdowns and very low volatility. Matter of fact, in our backtested data listed above, you don't even see a negative year.
As we said, Tactical High Yield strategies offer very strong, consistent results with minimal drawdowns. Minimal meaning low single-digits. Keep in mind, this backtested data covers 2000-2013. That means two devastating -50% equity bear markets happened during this time period. These kind of Risk/Return statistics are very hard to come by.
With all of the uncertainty in the fixed income arena, carving out an allocation for Tactical High Yield makes sense. Please contact us to discuss the potential value that can be added to your client accounts.