Exchange-traded funds (ETFs) and other passive investment products have eroded the liquidity premium in high-yield bonds, hedge fund managers say.
“Money is pouring in, making spreads tighter,” said Brett Jefferson, founder and president of Hildene Capital Management, a hedge fund specialising in structured credit. “We assume this will end poorly.”
Jefferson was speaking on a panel at the SALT conference in Las Vegas on May 17.
Junk bond yields have dropped from around 10% in early 2016 to
- Bank risk manager of the year: UBS
- People moves: Asia hires at Credit Suisse, new UBS data role, NatWest takes UBS's Duclos, and more
- Asia moves: BlackRock picks new Asia head, Credit Suisse boosts regional solutions, and more
- Risk solutions house of the year: HSBC
- We need a different approach to supervisory stress-testing