The concerns about liquidity in the high yield market are real. Nevertheless, they should not keep investors from increasing their exposure to high yield funds, said Don Plotsky, head of the product group at Western Asset Management. ‘The market dynamics have changed as the banks have been starved for capital on trading desks, so they are not there to step up when things get difficult in the market. That’s really more of a technical concern about high yield,’ said Plotsky. ‘The day will come when there is stress in the market and high yield trades off because of that stress, but what we really focus on are the fundamentals of the issuers in the market.’ Plotsky added that Western has a list of bonds that it will scoop up when they trade off in the market. In his view, investors should trust its seasoned portfolio managers to find those issues instead of running away from the asset class entirely. The Western Asset High Yield fund is up 1.1% year-to-date and sports a trailing 12 month yield of 6.5%, according to fund-tracker Morningstar. As to the energy sector which sank the entire high yield market in the fourth quarter of 2014, Plotsky said many oil companies with solid financials were unnecessarily sold off in a panic.
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