Does this concentration represent a risk or a golden investment opportunity for high yield bond managers?
Andrew Wilmont: At AXA Investment Managers (AXA IM) we believe that high yield fund performance should first and foremost come from bond coupons and not from price appreciation of the individual securities we own. On average, high yield bonds exhibit a negative skew with limited price upside while retaining a potential for large price downside. It is because of this that we have strict limitations on the percentage of holdings per issue, issuer and industry within our portfolios. While in the short term this might very well create a deviation from the global high yield index, in the long run we believe that the risk/reward trade off will be maximised through a more diversified portfolio (100-140 names). Or to put it another way, due to the nature of the risk we take in high yield, prudent portfolio management dictates that we diversify away as much of the individual company risk as we can. To achieve this, the majority of the fund managers now use a constrained benchmark which caps ind
