Key takeaways
- Over more than four decades, investors in high yield have been overcompensated for the risk of default
- The high-yield market is significantly higher in quality today than it once was
- Active investors can benefit from persistent mispricing in credit market
When certain segments of the financial press (cough the FT cough) write about high-yield spreads, you might be forgiven for thinking that they are so low, so tight as to effectively guarantee losses in the future. The reality is just as sensational – but in the opposite direction.
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