Average investors often don’t stick around in certain markets long enough to see their patience rewarded. That can be especially true in the sometimes volatile high-yield bond market, where income seekers are drawn to rich yields but can be tempted to flee when the market swings.
Mike Kirkpatrick, portfolio manager for the Virtus Seix High Yield fund (ticker: HYPSX), tries to smooth out the portfolio’s performance over time by staying flexible. He and portfolio co-manager James FitzPatrick do that by selecting higher-quality credits that can minimize losses during selloffs, while also looking for mispriced securities to improve performance. Kirkpatrick says too many high-yield managers tend to stick to their style no matter where in the cycle the economy is, which can cause investors to leave when that investing style is out of favor.
“To some degree, this puts the burden on the investor to know when to pivot from a defensive manager to a more aggressive manager, and vice versa. We want to be the one-stop shop to ride through the cycle,” Kirkpatrick says, as the managers aspire for the fund to be a core fixed-income holding.