Strategic Guide to High Yield Bond Investing: Three Fund Options Worth Considering

For most individual investors, high yield bonds offer a compelling alternative to traditional fixed-income investments. Unlike their investment-grade counterparts, these below-investment-grade securities provide significantly higher yields while allowing investors to build diversified portfolios through mutual funds. The key advantage lies in holding multiple securities simultaneously, which substantially reduces the risk that comes with picking individual bonds. Moreover, the attractive yield profiles make high yield bonds less sensitive to interest rate movements compared to higher-rated debt instruments.

Why High Yield Bonds Warrant Serious Consideration

The rationale for including high yield bonds in a diversified portfolio extends beyond simple yield-chasing. Below-investment-grade debt instruments have historically delivered superior returns relative to government and corporate bonds of higher ratings. This performance advantage stems from the risk premium embedded in their pricing. Additionally, because yields on these securities are naturally elevated, their valuations fluctuate less dramatically when the Federal Reserve adjusts interest rates—a characteristic that can provide stability during volatile market periods.

Recent portfolio analysis shows that three specific mutual funds have consistently demonstrated strong risk-adjusted returns. According to Zacks Mutual Fund Research, these funds have each achieved a Rank #1 (Strong Buy) designation, indicating they are expected to outperform peer funds in their category moving forward.

Three Leading High Yield Bond Funds: A Detailed Comparison

PIMCO High Yield Spectrum stands out as one of the most comprehensively managed high yield bond funds available. The fund maintains the majority of its assets in below-investment-grade bonds, with flexibility to incorporate convertible securities, warrants, and sophisticated derivatives like swap agreements. This multimodal approach allows the fund managers to capitalize on diverse market opportunities within the high yield space. As of late 2025, the fund had allocated 71.1% of its net assets to miscellaneous bonds, demonstrating a concentrated yet diversified strategy. PHSAX has delivered three-year annualized returns of 10.1%, placing it ahead of many competitors in the high yield category.

Nuveen High Yield Income Fund takes a different approach by emphasizing direct exposure to below-investment-grade debt instruments issued by both domestic and international borrowers. The fund invests substantially in bonds and loans issued by U.S. companies, as well as foreign companies that issue dollar-denominated debt traded on major exchanges. One distinguishing feature is the fund’s willingness to invest in unrated bonds that, according to its portfolio managers, maintain quality equivalent to formally rated securities. With an expense ratio of 1% and three-year annualized returns of 9.9%, NCOAX positions itself as a cost-effective option within the high yield funds landscape.

Manning & Napier High Yield Bond Series offers yet another variation on high yield bond strategy. MNHYX invests broadly across below-investment-grade instruments, including exchange-traded funds, bank loans, and derivative instruments with similar economic characteristics. The fund also maintains flexibility to include fixed-income securities from both developed and emerging market corporations and governments. This global perspective adds another dimension to its diversification. With Scott Friedman serving as fund manager since March 2021, MNHYX has achieved three-year annualized returns of 9.8%, demonstrating consistent performance management.

Making Your Choice Among High Yield Bond Options

The three funds discussed represent different strategic approaches to high yield bond investing, each with distinct characteristics suited to different investor preferences. PIMCO emphasizes sophisticated derivatives alongside traditional bonds, Nuveen focuses on direct lending exposure with cost efficiency, and Manning & Napier provides emerging market access through a global lens. For investors seeking exposure to high yield bonds, these three options each hold Strong Buy recommendations from Zacks Investment Research, indicating solid potential for outperformance relative to category peers. Selecting among them depends on your specific risk tolerance, investment timeline, and preference for geographic diversification within the high yield space.