WAHYX
Western Asset High Yield-I
Introduction to Western Asset High Yield-I
Western Asset High Yield-I (WAHYX) is a mutual fund designed to maximize total return through strategic investments in U.S. dollar-denominated debt or fixed income securities rated below investment grade. Managed by Franklin Templeton Investments, this fund primarily targets junk bonds, offering investors a high yield potential of 7.53%. With an expense ratio of 0.75%, WAHYX is positioned as a competitive option for those seeking substantial income from high-risk, high-reward investments. The fund’s strategy is particularly appealing to investors with a higher risk tolerance who are looking to capitalize on the potential for significant returns in the junk bond market.
At A Glance
Executive Summary
WAHYX offers a high yield of 7.53% with a focus on U.S. dollar-denominated junk bonds, providing strong returns for risk-tolerant investors.
High yield of 7.53% for income-focused investors. Strong performance with 14.92% 1-year return. Low beta of 0.59 indicates lower volatility.
Higher expense ratio of 0.75% compared to peers. Concentration in energy and healthcare sectors. Potentially higher risk due to junk bond focus.
Impressive Recent Performance
WAHYX has demonstrated impressive performance over the past year, achieving a 14.92% return. This outpaces its benchmark, the BBG Barclay Agg Bond- US Composite TR Ix, which posted a 1-year return of 7.85%. The fund’s strong performance can be attributed to its strategic allocation in high-yield bonds, which have benefited from favorable market conditions. The fund’s alpha of 7.06% indicates its ability to generate returns above the benchmark, while a Sharpe Ratio of 1.71 suggests a favorable risk-adjusted return. This performance highlights WAHYX’s potential as a lucrative investment for those seeking high returns in the fixed income space.
Sector Allocation: Energy and Healthcare Focus
A notable aspect of WAHYX is its concentrated sector allocation, with significant investments in the energy (61.81%) and healthcare (38.19%) sectors. This strategic focus allows the fund to capitalize on the growth potential within these industries, particularly as energy markets continue to evolve and healthcare remains a critical sector. However, this concentration also introduces sector-specific risks, which investors should consider. The fund’s exposure to these sectors is a double-edged sword, offering both opportunities for high returns and potential volatility, depending on market conditions. Investors should weigh these factors when considering WAHYX for their portfolio.
Risk Metrics and Volatility
WAHYX exhibits a relatively low beta of 0.59, indicating less volatility compared to the broader market. This is complemented by a standard deviation of 1.19%, suggesting that the fund experiences less fluctuation in its returns. The Treynor Ratio of 11.95 further underscores the fund’s ability to deliver returns relative to its risk. Despite its focus on junk bonds, WAHYX manages to maintain a balanced risk profile, making it an attractive option for investors who are cautious about volatility but still seek high yields. The fund’s downside risk, measured at 0.60, is relatively contained, providing some reassurance to risk-averse investors.
Competitive Comparison with Similar Funds
When compared to similar funds, WAHYX holds its ground with a competitive yield of 7.53% and a 1-year return of 14.92%. While its expense ratio of 0.75% is higher than some peers like BlackRock High-Yield Bond-Inst (BHYIX) with an expense ratio of 0.58%, WAHYX’s performance metrics, such as its alpha and Sharpe Ratio, justify the cost for many investors. Other similar funds, such as Lord Abbett High-Yield-I (LAHYX) and Victory High Yield-Y (RSYYX), offer comparable returns, but WAHYX’s strategic sector allocation and risk management metrics provide a unique value proposition. Investors should consider these factors when evaluating their options in the high-yield bond market.
Portfolio Composition and Top Holdings
The portfolio of WAHYX is predominantly composed of corporate bonds, accounting for 86.57% of its holdings. This focus on corporate debt is complemented by a small allocation to securitized assets (8.86%) and derivatives (3.01%). The fund’s top holdings include notable names such as CCO Holdings, LLC and Ford Motor Company, which contribute to its high yield. The fund’s asset allocation strategy is designed to maximize returns while managing risk, with a significant portion of its assets in bonds (96.85%). This composition reflects the fund’s commitment to providing high income through strategic investments in high-yield corporate debt.
Max Drawdown and Recovery Analysis
WAHYX has demonstrated resilience in managing drawdowns, with a maximum drawdown of -2.1% and a swift recovery period. The fund’s ability to recover quickly from market downturns is indicative of its robust risk management strategies. The drawdown length and recovery length both stand at one period, showcasing the fund’s capacity to bounce back from adverse market conditions. This resilience is a critical factor for investors who are concerned about potential losses in volatile markets. WAHYX’s performance during drawdowns highlights its strength in maintaining stability and protecting investor capital, even in challenging market environments.
Conclusion: Suitability for Risk-Tolerant Investors
In conclusion, Western Asset High Yield-I (WAHYX) stands out as a compelling option for investors seeking high yields from junk bonds. With a yield of 7.53% and a strong 1-year return of 14.92%, the fund offers substantial income potential. Its strategic sector allocation in energy and healthcare, combined with effective risk management, makes it suitable for risk-tolerant investors. While the expense ratio is higher than some peers, the fund’s performance metrics and resilience in managing drawdowns provide a strong case for its inclusion in a diversified portfolio. Investors looking for high returns in the fixed income market should consider WAHYX as a viable option.
Similar Securities
AMHYX: Invesco High-Yield-A | High-Yield Income Fund
AMHYX offers a 6.71% yield with a focus on high current income from non-investment grade debt, outperforming peers with a 13.74% 1-year return.
AMHIX: American High-Income Municipal Bond-A | Tax-Exempt Income Investment
AMHIX offers a 3.84% yield with a focus on tax-exempt income, outperforming its benchmark with a 13.83% 1-year return and a competitive 0.66% expense ratio.
JNHYX: Janus Henderson High-Yield-D | High-Yield Bond Investment
JNHYX offers a 6.55% yield with a focus on high-yield bonds, featuring a competitive expense ratio and strong risk-adjusted returns.
SMHYX: Invesco SMA High Yield Bond | High Yield, Low Expense
SMHYX offers a high yield of 8.43% with a minimal expense ratio of 0.01%, focusing on below investment grade bonds for high returns.
PAIHX: TRPrice Global High Income Bond-Adv | High Yield Junk Bond Fund
PAIHX offers a 6.37% yield with a focus on high yield bonds, boasting a strong 1-year return of 14.35% and a low beta of 0.42.
Futher Reading
https://finance.yahoo.com/quote/WAHYX/”>Yahoo: Western Asset High Yield-I
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