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Vanguard High-Yield Fund Could Reopen Soon : (VWEHX)
Many fund companies/management are watching the likes of Pimco, Doubleline, MetWest and others with excellent teams in place, and using the special tools; to bring forth yearly returns which defy the name of the bond fund(s).
I know high yield bonds have been expensive, but still, I wondered if Vanguard's fund was on the more conservative side. But even PIMCO's highest yielding fund has an SEC yield of 5.19%: http://investments.pimco.com/Products/pages/468.aspx?ShareClassCode=D (5.52% for institutional class)
Seems like a lot of risk to take for predicted future return of ~5%.
Dan Wiener in the December issue of The Independent Adviser for Vanguard Investors, in part said this:
"As I said before, I think investors are missing the point. The worst erosion of relative yields has occurred among the riskiest junk bonds and funds. As manager Michael Hong wrote, "The market is underestimating the credit risks associated with the lowest quality segment and paying too much for the incremental yield." High-Yield Corporate is not like those other funds. Sure, its yield advantage over the bond market has declined. But it's been nothing like some of the risky, higher-yielding, higher-returning funds or bonds in the category.
I still think High-Yield Corporate is a worthy investment for investors looking for a combination of higher yields and "relative" safety compared to other junk bond funds or even the stock market.
In the phrasing "High-Yield Corporate['s] ... been nothing like some of the the higher-yielding, higher returning funds ... in the category", Mr. Wiener is not comparing high yield corporates to other types of high yield bonds.
Rather, he is comparing Vanguard High Yield-Corporate Bond Fund to other bond funds in the same category (M* High Yield Bond Funds, Lipper High Yield Funds). There are two tipoffs in the writing - one is that High-Yield Corporate is capitalized (the name of a specific fund, not a category); the other is the phrase "in the category", not "in other categories". Another clue, though one needs context here, is that Mr. Wiener writes about, and is a staunch advocate of, Vanguard funds (so he would tend to be comparing Vanguard funds to others, peer to peer).
Claimui demonstrated with SEC yield that Vanguard's fund is indeed on the conservative side (more so if one adds in the 73 basis point expense difference between VWEHX and PHSDX to see a gross difference in SEC yield of 1.09%). M* says the same thing: “This fund’s higher-quality take on high-yield investing is appropriate for conservative types seeking a steady stream of income. For more aggressive investors, however, a fund that emphasizes lower-rated credits might be a better fit.”
Thank you for a "good" look at the write. I, apparently; was a bit on the shortside of the caffine and time of day for my reading/comprehension skills during my reading period.
I got into FEHIX last year for a small position in our IRA's. Not as inexpensive as Vanguard but I like the First Eagle family and have been happy with the high yield fund.
Reply to @claimui: yes, vanguard has been on a very concervative side. during a market rout it will hold better. but since there is no free lunch, its yields are lower.
As the company has a good reputation with investors I guess Vanguard must feel the " expert consensus" that high yield is a poor investment at this time is wrong or else they would not reopen the fund. I suppose a more cynical view would be that to protect current investors they wanted to have more "cash" in the fund to reduce risk. In a year we might know.
Comments
I know high yield bonds have been expensive, but still, I wondered if Vanguard's fund was on the more conservative side. But even PIMCO's highest yielding fund has an SEC yield of 5.19%: http://investments.pimco.com/Products/pages/468.aspx?ShareClassCode=D (5.52% for institutional class)
Seems like a lot of risk to take for predicted future return of ~5%.
Dan Wiener in the December issue of The Independent Adviser for Vanguard Investors, in part said this:
"As I said before, I think investors are missing the point. The worst erosion of relative yields has occurred among the riskiest junk bonds and funds. As manager Michael Hong wrote, "The market is underestimating the credit risks associated with the lowest quality segment and paying too much for the incremental yield." High-Yield Corporate is not like those other funds. Sure, its yield advantage over the bond market has declined. But it's been nothing like some of the risky, higher-yielding, higher-returning funds or bonds in the category.
I still think High-Yield Corporate is a worthy investment for investors looking for a combination of higher yields and "relative" safety compared to other junk bond funds or even the stock market.
Rather, he is comparing Vanguard High Yield-Corporate Bond Fund to other bond funds in the same category (M* High Yield Bond Funds, Lipper High Yield Funds). There are two tipoffs in the writing - one is that High-Yield Corporate is capitalized (the name of a specific fund, not a category); the other is the phrase "in the category", not "in other categories". Another clue, though one needs context here, is that Mr. Wiener writes about, and is a staunch advocate of, Vanguard funds (so he would tend to be comparing Vanguard funds to others, peer to peer).
Claimui demonstrated with SEC yield that Vanguard's fund is indeed on the conservative side (more so if one adds in the 73 basis point expense difference between VWEHX and PHSDX to see a gross difference in SEC yield of 1.09%). M* says the same thing: “This fund’s higher-quality take on high-yield investing is appropriate for conservative types seeking a steady stream of income. For more aggressive investors, however, a fund that emphasizes lower-rated credits might be a better fit.”
Thank you for a "good" look at the write. I, apparently; was a bit on the shortside of the caffine and time of day for my reading/comprehension skills during my reading period.
Regards,
Catch
http://quote.morningstar.com/fund/f.aspx?t=FEHIX
consensus" that high yield is a poor investment at this time is wrong or else they would not reopen the fund. I suppose a more cynical view would be that to protect current investors they wanted to have more "cash" in the fund to reduce risk. In a year we might know.