When it gets hairy in the fixed income market, it is usually the high yield bonds that suffer the longest night of the soul as investors flee risk.
So it’s interesting that a glance at our ESG database shows that allocators in this space have reacted to the volatility of the past year by changing very little.
The most owned high yield bond fund, indeed the only one owned by more than one allocator is M&G Sustainable Global High Yield Bond, which appears in four of the portfolios we cover.
This is a good number considering the product only came to market in 2020, but can also be seen in the context of the fund being just £35mn in size.
It should also be seen in the context of there being only two funds in the IA Sterling High Yield sector which market themselves as being ESG friendly. The other one - Federated Hermes SDG Engagement High Yield Credit - is owned by one allocator in our database.
There have been no buys or sells associated with this strategy over the past year, a period in which it has made 5 per cent, compared with an average return of 8 per cent for the sector.
Since launch, the fund has actually lost 4.6 per cent, and while it came to market at an absolutely horrendous time for a fixed income fund, just months before bond prices collapsed, in the same time period, the peer group returned over 4 per cent.
Whether more fund houses will dip their toes into the world of sustainable high yield bonds, only time will tell.
