Improvement in ratings quality in recent years may buttress the high yield bond market’s performance in 2022, even as returns across asset classes could become more subdued.

The coronavirus pandemic has brought about a new investment landscape in which some companies and sectors have fared better than others. Significant market dislocations have also created potential opportunities in the higher quality areas of the credit spectrum.

Alongside pockets of weakness in credit markets come pockets of opportunity for active managers who focus on rigorous bottom-up research and careful credit selection.

The pitfalls and opportunities we see in high yield markets highlight the importance of active portfolio management, rigorous credit analysis, and taking a cautious and selective approach.