Yield chasers have made high-yield debt one of the most popular asset classes this year, pushing returns to near record lows, and some analysts are concerned the segment is becoming too risky.
"We joke in high yield that it's the asset class formerly known as high yield, because the yield in today's market is below 5 percent," said Todd Youngberg, head of high yield at Aviva Investors, which has around $400 billion under management. He expects returns of around 3-6 percent this year for the high-yield segment, which is often referred to as "junk bonds" for their low credit ratings and higher default risks.
But he noted the ownership of the asset class has changed over the past few years, going from primarily institutional holders to around "half and half" institutional and retail investors. He considers that one of the top risks for the sector.
While institutional investors tend to be longer-term holders of assets, retail investors have a tendency to chase rallies and then rush for the exits when markets are pressured.