Three Essential Reasons to be Active in High Yield

 

We believe active strategies can tap US high-yield opportunities while avoiding passive investing issues such as downside risk, inefficient benchmarks, and inflexible trading. Discover three advantages for optimizing returns and managing risk effectively.

 

Three Reasons Why Active Management Matters
in High-Yield
 

MANAGING RISKS
  • MANAGING RISKS
  • COMPETITIVE EDGE
  • UNLOCKING FLEXIBILITY

Active Strategies for High-Yield Bonds

In high-yield bonds, avoiding defaults is just as important as finding winners. Unlike in passive strategies, active-strategy managers may detect early signs of deteriorating credit, adjust exposure and reduce risk. Since 2019, the AB High Yield ETF (HYFI) has avoided two-thirds of the defaults in the Bloomberg High Yield Index, helping investors protect capital while still capturing yield.

Bar chart comparing High Yield Index and AB High Yield over a five-year period, with categories on the X-axis and default rates on the Y-axis.
 


Takeaway:
 

Active management has the potential to minimize downside risks, offering a smarter, more resilient approach to high-yield investing.

 
 

How to Take Action

When it comes to low-cost high-yield bond ETFs, investors should take a closer look at the AB Short Duration High Yield ETF (NYSE: SYFI) and the AB High Yield ETF (NYSE: HYFI).

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Embrace the Active Advantage

Empower your clients’ portfolios with AB’s actively managed investment solutions offering high income, stability, and adaptability in a shifting market.

 

Investing in ETFs involves risks, including loss of principal.
 

Investors should consider the investment objectives, risks, charges and expenses of the Fund/Portfolio carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abfunds.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.


The Morningstar Rating™ for funds, or star rating, is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. The star rating is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product’s monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The Morningstar Rating does not include any adjustment for sales loads. The top 10.0% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35.0% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10.0% receive 1 star. The Overall Morningstar Rating™ for a managed product is derived from a weighted average of the performance figures associated with its three-, five- and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36–59 months of total returns, 60% five-year rating/40% three-year rating for 60–119 months of total returns and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods. 

AB Short Duration High Yield ETF was rated against the following numbers of Multisector Bond funds over these time periods: 4 stars against 342 funds in the last three years, 4 stars against 291 funds in the last five years and 4 stars against 204 funds in the last 10 years.

AB High Yield ETF was rated against the following numbers of High Yield Bond funds over these time periods: 3 stars against 592 funds in the last three years and 4 stars against 543 funds in the last five years. The fund does not yet have 10-years of history.

Market Risk: The market values of the Portfolio’s holdings rise and fall from day to day, so investments may lose value.
 

Interest-Rate Risk: As interest rates rise, bond prices fall and vice versa—long-term securities tend to rise and fall more than short-term securities.
 

Credit Risk: A bond’s credit rating reflects the issuer’s ability to make timely payments of interest or principal—the lower the rating, the higher the risk of default. If the issuer’s financial strength deteriorates, the issuer’s rating may be lowered and the bond’s value may decline.
 

Inflation Risk: Prices for goods and services tend to rise over time, which may erode the purchasing power of investments.
 

Foreign (Non-US) Risk: Non-US securities may be more volatile because of political, regulatory, market and economic uncertainties associated with such securities. Fluctuations in currency exchange rates may negatively affect the value of the investment or reduce returns. These risks are magnified in emerging or developing markets.
 

Derivatives Risk: Investing in derivative instruments such as options, futures, forwards or swaps can be riskier than traditional investments, and may be more volatile, especially in a down market.
 

Leverage Risk: Trying to enhance investment returns by borrowing money or using other leverage tools magnifies both gains and losses, resulting in greater volatility.
 

Below-Investment-Grade Securities Risk: Investments in fixed-income securities with lower ratings (commonly known as “junk bonds”) tend to have a higher probability that an issuer will default or fail to meet its payment obligations.
 

Alpha: The risk-adjusted measurement of “excess return” over the benchmark.
 

AllianceBernstein ETFs are distributed by Foreside Fund Services, LLC, in the US only.
 

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