Alternative to Vanguard's High-Yield Corporate Bond Fund

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Alternative to Vanguard's High-Yield Corporate Bond Fund

Postby muffinmaker » Wed May 22, 2013 7:25 pm

Vanguard's high-yield corporate bond fund is closed (VWEHX/VWEAX). What is the next best alternative for a bond fund investing in junk corporate bonds?

I've already made the decision to place a particular pot of money into a high-yield corporate bond fund. Perhaps somebody on this forum knows of a good alternative to VWEHX/VWEAX, something with a low expense ratio.

Many thanks,
MuffinMaker
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Re: Alternative to Vanguard's High-Yield Corporate Bond Fund

Postby joe8d » Wed May 22, 2013 7:51 pm

T Rowe Price has a Hi Yd Corporate Bond Fund.I've used it in the past for TLH my VG fund.
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Re: Alternative to Vanguard's High-Yield Corporate Bond Fund

Postby grabiner » Wed May 22, 2013 8:47 pm

There are a lot of high-yield bond ETFs at expense about 0.4-0.5%, but you'll have to check the prospectus to see what they hold, and how that fits your high-yield needs.
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Re: Alternative to Vanguard's High-Yield Corporate Bond Fund

Postby pkcrafter » Wed May 22, 2013 9:07 pm

I'll second TRPrice. It has a bit lower duration than Vanguard HY, but it's also a bit lower in quality, which means the risk is a little higher. Limit allocation to about 20% of bonds.

Paul
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Re: Alternative to Vanguard's High-Yield Corporate Bond Fund

Postby mass_biker » Wed May 22, 2013 10:01 pm

T Rowe price HY is closed to new investors. Great fund though.
At current yields though, the broad high yield market is anything but.
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Re: Alternative to Vanguard's High-Yield Corporate Bond Fund

Postby investor » Wed May 22, 2013 11:12 pm

If you must have a Junk Bond fund then:
You might also look at METROPOLITAN WEST High Yield Bond Fund MWHYX..
ER is high at 0.82% but it is still open.
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Re: Alternative to Vanguard's High-Yield Corporate Bond Fund

Postby Valuethinker » Thu May 23, 2013 2:37 am

grabiner wrote:There are a lot of high-yield bond ETFs at expense about 0.4-0.5%, but you'll have to check the prospectus to see what they hold, and how that fits your high-yield needs.


Travel carefully. An ETF where the underlying bonds are so illiquid could:

- have a big bid-offer spread
- have a volatile price
- be part of a 'crowded trade' if the market turns against the underlying asset, ie a need to liquidate, no easy route to do so, sharp moves in NAV
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Re: Alternative to Vanguard's High-Yield Corporate Bond Fund

Postby Valuethinker » Thu May 23, 2013 2:47 am

muffinmaker wrote:Vanguard's high-yield corporate bond fund is closed (VWEHX/VWEAX). What is the next best alternative for a bond fund investing in junk corporate bonds?

I've already made the decision to place a particular pot of money into a high-yield corporate bond fund. Perhaps somebody on this forum knows of a good alternative to VWEHX/VWEAX, something with a low expense ratio.

Many thanks,
MuffinMaker


Don't rush into this. HY bonds are trading at almost record low spreads against safe bonds, and covenant quality of new issues is declining.

https://www.fidelity.com/mutual-funds/n ... -companies

How about a mixture of:


- Focused High Income Fund
- High Income Fund

(not clear on the distinction between the 2?

http://www.pyramis.com/fileadmin/templa ... parian.pdf

I happen to like leveraged loans (usually with a floating interest rate, these rank higher in the capital structure, ie on liquidation, than HY or junk bonds). However you will have lower returns at least until interest rates start rising.

https://fundresearch.fidelity.com/mutua ... /315916783
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Re: Alternative to Vanguard's High-Yield Corporate Bond Fund

Postby Dandy » Thu May 23, 2013 7:45 am

I realize that the fixed income market is a mess. Vanguard is a responsible mutual fund company to close their High Yield Fund. I assume that they are concerned that they could not wisely invest the incoming money in the High Yield market. As people try to find some decent yield many have put money into the high yield market and have driven yields for this risky segment of the fixed income market down.

I can't say where people should put their fixed income dollars - it is a real challenge. But when a company closes a fund to new investors they are turning away short term profit to maintain their integrity. That would make me wary of buying into any one's High Yield Fund. Even though T Rowe is a also very good company it would still give me pause even for a modest portion of my fixed income allocation.

Good luck
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Re: Alternative to Vanguard's High-Yield Corporate Bond Fund

Postby mass_biker » Thu May 23, 2013 7:55 am

Re fixed income...with rates this low it is better to stay short and safe...and wait until yields/spreads gap out to get back in if you are thinking opportunistically (assuming you are as you are contemplating HY).
Echo the recommendation on floating rate funds. Also, with yields this low, expense ratios are key as it always a net yield game.
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