Bonds

8 Top-Performing High Yield Bond Funds

By 
February 16, 2025
5 mins read


High-yield bond funds have had a strong year, returning more than double the overall bond market. To screen for the top-performing funds in this category, we looked for those with the best returns over the last one-, three-, and five-year periods. Franklin Templeton stood out, with three of the eight funds, two of which come from BrandywineGlobal.

  • American Funds American High-Income Trust RITGX
  • Artisan High Income Fund APHFX
  • BlackRock High Yield Portfolio Fund BRHYX
  • BrandywineGLOBAL – Corporate Credit Fund BGISX
  • BrandywineGLOBAL – High Yield Fund BGHSX
  • Fidelity Advisor Capital & Income Fund FIQTX
  • Franklin High Income Fund FHRRX
  • SPDR Portfolio High Yield Bond ETF SPHY

High-Yield Bond Funds Performance

Over the last 12 months, high-yield bond funds have returned 8.99%. On an annualized rate, these funds have returned 4.01% over the last three years and 3.80% over the last five. Meanwhile, the Morningstar US Core Bond Index, which has returned 3.44% over the last 12 months, lost 1.03% per year over the last three years and 0.40% per year over the last five.

What Are High-Yield Bond Funds?

High-yield bond portfolios concentrate on lower-quality bonds, which are riskier than those of higher-quality companies. These portfolios generally offer higher yields than other types of portfolios, but they are also more vulnerable to economic and credit risk. These portfolios primarily invest in US high-income debt securities where at least 65% or more of bond assets are not rated or are rated by a major agency such as Standard & Poor’s or Moody’s at the level of BB (considered speculative for taxable bonds) and below.

Screening for the Top-Performing High-Yield Bond Funds

To find the best high-yield bond funds, we looked at returns data from the past one, three, and five years, using data available in Morningstar Direct. We screened for open-ended and exchange-traded funds in the top 33% of the category using their lowest-cost primary share classes for those periods. We also filtered for funds with a Morningstar Medalist Rating of Bronze, Silver, or Gold. We excluded funds with assets under $100 million and analyst coverage that was not 100%. This left eight funds.

Because the screen was created with the lowest-cost share class for each fund, some may be listed with share classes that are not accessible to individual investors outside of retirement plans, or they may be aimed at institutional investors and require large minimum investments. The individual investor versions of those funds may carry higher fees, reducing returns to shareholders. In addition, Medalist Ratings may differ among the share classes of a fund.

American Funds American High-Income Trust

Over the past 12 months, the $23.2 billion fund has gained 11.37%, while the average fund in its category is up 8.99%. The American Funds fund, launched in May 2009, has climbed 5.52% over the past three years and 5.83% over the past five.

Morningstar director Alec Lucas says: “American Funds American High-Income Trust’s late 2020 recentering of the portfolio on the midquality portion of the high-yield bond universe has proven effective, earning the fund a Process upgrade to Above Average from Average. Years of underperformance set the stage for that recentering. For much of the decade prior to April 2018, when David Daigle took over as principal investment officer, the strategy’s wide-ranging focus on income included a healthy dose of emerging-markets sovereign bonds and a penchant for double-digit overweighting in CCC-rated credits. That made for poor results, even after Daigle took over.”

Artisan High Income Fund

The $9.1 billion fund has climbed 10.26% over the past 12 months, outperforming the average fund in its category, which rose 8.99%. The Artisan Partners fund, launched in October 2016, has climbed 5.28% over the past three years and 6.03% over the past five.

Morningstar associate director Brian Moriarty says: “Manager Bryan Krug runs Artisan’s credit franchise and this fund, which launched in December 2013 and March 2014, respectively. Over the past decade, the team has gone from a startup to a high-functioning group with deep research skills. Franchise assets have grown to over $10 billion, and the fund has earned one of the best records in the high-yield bond Morningstar Category.”

BlackRock High Yield Portfolio Fund

Over the past 12 months, the $26.6 billion fund has gained 10.21%, while the average fund in its category is up 8.99%. The BlackRock fund, launched in November 1998, has climbed 5.10% over the past three years and 4.68% over the past five.

Morningstar analyst Jeana Marie Doubell says: “Portfolio managers Mitchell Garfin and David Delbos, co-heads of BlackRock’s US leveraged finance team, have collaborated for nearly a decade as the day-to-day managers at this strategy, sold in the US as BlackRock High Yield Bond and in Europe and Asia as BGF US Dollar High Yield Bond. Together, the duo boasts half a century of experience in leveraged finance, making this management crew one of the most seasoned in the high-yield bond Morningstar Category, and they are responsible for both top-down macro calls and bottom-up security selection here.”

BrandywineGLOBAL – Corporate Credit Fund

Over the past 12 months, the $2.3 billion BrandywineGLOBAL – Corporate Credit Fund rose 9.85%, while the average fund in its category rose 8.99%. The Franklin Templeton fund, launched in December 2011, has climbed 5.59% over the past three years and 5.39% over the past five.

Morningstar analyst Max Curtin says: “The team goes against the grain in more ways than one. Its value focus limits the need for a deep bench of leveraged finance specialists supporting most other top-rated managers. Zox and McClain are keenly aware of the tactical advantages afforded to them by their lean size, both in headcount and assets under management. Reacting quickly to opportunities in the secondary market, especially with smaller, lesser-known issuers, is a competitive advantage Zox and McClain look to exploit. It is precisely this corner of the high-yield market they view as having the greatest pricing inefficiencies, as evidenced by the portfolio’s de minimis exposure to its ICE Bank of America Corporate & High Yield Index’s top 10 holdings (0.2% as of March 2024 versus 11.3% for the index).”

BrandywineGLOBAL – High Yield Fund

Over the past 12 months, the $3.3 billion fund has gained 10.74%, while the average fund in its category is up 8.99%. The Franklin Templeton fund, launched in December 2014, has climbed 6.07% over the past three years and 6.55% over the past five.

Curtin says: “This strategy is an excellent high-yield option. Limiting drawdowns while still participating on the upside has contributed to the strategy’s stellar record over Zox and McClain’s nine-plus year partnership, which began in January 2015. The institutional shares’ 7.24% annualized return and 0.76 Sharpe ratio ranked among the best among distinct high-yield bond Morningstar Category peers through July 2024.”

Fidelity Advisor Capital & Income Fund

Over the past 12 months, the $2.4 billion Fidelity Advisor Capital & Income Fund rose 11.84%, while the average fund in its category rose 8.99%. The Fidelity fund, launched in October 2018, has climbed 5.88% over the past three years and 6.69% over the past five.

Curtin says: “This strategy stands out among even the most aggressive in the high-yield bond Morningstar Category for its hefty equity stake. Notkin will make full use of the strategy’s 20% internal equity cap during periods when he views the yield premium afforded in high yield as unattractive relative to stocks. Only a select few high-yield bond managers allocate even 1% to equities.”

Franklin High Income Fund

The $2.8 billion fund has climbed 9.93% over the past 12 months, outperforming the average fund in its category, which rose 8.99%. The Franklin Templeton fund, launched in May 2013, has climbed 5.30% over the past three years and 4.95% over the past five.

Morningstar strategist Maciej Kowara says: “The team’s fundamental approach centers on intensive issuer analysis, examining balance sheets, cash flows, and long-term business prospects to identify relative-value opportunities. Macro is not much of the investment process, which generally is a positive, apart from some fairly commonsensical biases, such as avoidance of sectors or industries in secular decline (for example, retail, telecom). While the fund struggled in 2014-15 owing to overly bold energy calls, it has managed to avoid similar sector-level missteps since.”

SPDR Portfolio High Yield Bond ETF

The $7.3 billion fund has climbed 10.17% over the past 12 months, outperforming the average fund in its category, which rose 8.99%. The State Street fund, launched in June 2012, has climbed 4.75% over the past three years and 4.55% over the past five.

This article was generated with the help of automation and reviewed by Morningstar editors.
Learn more about Morningstar’s use of automation.



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