It would be hard to find a more passionate advocate for high-yield (HY) bonds – bonds issued by borrowers with a rating below investment grade (IG).
Donald Phillips, Head of Credit at Liontrust Asset Management, is passionate about the HY market. He has been working for the British fund management company for over eight years (which, contrary to what finews reported, does not have an office in Zurich but does distribute its products in Switzerland) and previously spent a good nine years at asset manager Baillie Gifford, naturally also in the HY division. Together with his colleague Sharmin Rahman, he also manages the Liontrust GF High Yield Bond fund launched by Liontrust in 2018, which currently has assets under management of USD 413m (as of 17/06/26)
In the lobby of an American-style hotel in Zurich, finews met with the HY advocate and endeavoured to ask him as many uncomfortable questions as possible.
Mr Phillips, the credit spreads that HY offers investors compared to government bonds have been very tight for some time now. Isn’t that a clear signal that the risks associated with high-yield bonds are not being adequately compensated?
Yes, the spreads are below average, but the yields are nonetheless attractive. The world has changed. Volatility in long-dated government bonds such as US Treasuries or UK Gilts is, in some cases, greater than in high-yield bonds. Many governments are taking on ever-increasing levels of debt, and doubts about the sustainability of that debt are growing. By contrast, most corporate balance sheets are quite robust, and the economy is growing steadily.
