If You Are Curious About 'High Yield' Funds in [Derivative Products ABC]

[Asia Economy Reporter Park Jihwan] As the low interest rate trend continues for a long time, attention is focusing on high-risk and high-return products such as high yield funds. This is because the world is expected to maintain a zero interest rate environment for the time being. Experts predict that advanced countries like the United States will maintain zero interest rates for about 3 to 4 years, while emerging currency countries will continue this state for about 1 to 2 years.

High yield funds roughly indicate the nature of the product from their name. "High yield" means high returns. They are called high yield because they can potentially generate high returns if managed well.

This product is a fund that invests in bonds issued by companies with low credit ratings that cannot raise funds in the indirect financial market. Because of this, it offers high returns but carries a high risk of default by the issuer. Since it focuses on speculative-grade bonds with low credit ratings, it compensates with high bond yields. The high yield is also partly due to the closed-end nature of the fund, which does not allow early redemption until maturity.

The main investment targets are speculative-grade bonds rated BB+ or below and commercial papers (CP) rated B+ or below, with more than 50% of the fund's assets invested in these. The rest is invested in investment-grade bonds such as government bonds, stocks, and liquid assets. It mainly diversifies investments in various senior secured high yield bonds in the United States and Europe. Generally, it has higher returns and risks than typical bond funds but is more stable than general equity funds.

Last month, a large amount of market funds flowed into public offering high yield funds. This was due to expectations for IPO stocks such as SK Biopharm, with funds concentrating on high yield funds that have an advantage in securing allocations.

According to domestic capital market law, to facilitate smooth fundraising for companies with low credit ratings, high yield funds that meet certain requirements during IPO subscription are allocated more than 10% of the shares. Depending on the time of establishment, if non-investment grade bonds and KONEX-listed stocks make up more than 45% of total assets, and domestic bonds account for about 60% or more of the total, preferential allocation benefits can be enjoyed.

This content was produced with the assistance of AI translation services.