Top 5 Highest Yielding High Yield Bond Mutual Funds (May 2011)

High yield securities are the preferred option for investors who have a reasonable appetite for risk and who are willing to forgo equity growth for current income. This category of securities comprises of corporate bonds of low quality, convertible securities and preferred stock, all of which carry a significant amount of risk. Mutual funds are a prudent method to invest in this class of funds as they significantly reduce the risk involved by holding a well diversified portfolio. Such funds may also seek capital appreciation as a secondary objective.

Below we will share with you the 5 highest yielding Zacks #1 ranked high yield mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future.

Mutual Fund Sec Yield
MassMutual Premier High Yield A 9.58%
Transamerica Partners High Yield Bond 9.56%
Oppenheimer Champion Income A 8.72%
Delaware Pooled High-Yield Bond 8.16%
Northern High Yield Fixed Income 7.66%

MassMutual Premier High Yield A (MPHAX) invests a large proportion of its assets in fixed-income securities of lower quality. The fund may also purchase other fixed-income securities such as convertible securities, preferred stocks, warrants and bank borrowings. The high yield mutual fund returned 14.24% over the last one year period.

Scott D. Roth is the fund manager and she has managed this high yield mutual fund since 2010.

Transamerica High Yield Bond (DVHYX) seeks a high level of current income. The fund invests in preferred stocks and high yield debt securities. The majority of the fund’s assets are used to purchase junk bonds and related securities. It utilizes an underlying fund to purchase these instruments. The high yield has a three year annualized return of 11.07%.

The high yield mutual fund has an expense ratio of 1.10% compared to a category average of 1.18%.

Oppenheimer Champion Income A (OPCHX) invests at least 60% of its assets in high yield fixed income securities with lower ratings. The balance of the fund’s assets is utilized to purchase other debt instruments, common stocks or cash equivalents. The high yield mutual fund returned 15.83% over the last one year period.

As of December 2010, this high yield mutual fund held 216 issues, with 2.48% of its total assets invested in Oppenheimer Institutional Money Market E.

Delaware Pooled High-Yield Bond (DPHYX) seeks total return. The fund invests the majority of its assets in high-yield fixed income securities. Not more than 25% of its assets may be utilized to purchase securities issued by companies domiciled abroad. The high yield mutual fund has a five year annualized return of 9.74%.

Chuck M. Devereux is the fund manager and she has managed this high yield mutual fund since 2007.

Northern High Yield Fixed Income (NHFIX) invests the majority of its assets in bond of low quality. The fund may also invest in higher quality securities during temporary defensive periods. It focuses on acquiring domestic securities, but may also purchase foreign instruments. The high yield mutual fund has a ten year annualized return of 6.87%.

The high yield mutual fund has a minimum initial investment of $2,500 and an expense ratio of 0.89% compared to a category average of 1.18%.

To view the Zacks Rank and past performance of all high yield mutual funds, then click here.

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