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 be