High-yield bonds behave more like stocks than investment-grade bonds. These bonds have significant holdings in smaller companies, which are considered to have a weaker financial condition but benefit as the economy moves north. Though high-yield bonds are more exposed to credit risk, these have less exposure to interest rate risk, making them a differentiated source of return. Despite headwinds faced in the early months of the pandemic, demand for high yield has recovered since the Fed’s rate cut and the reopening of the economy. The improving economic activity renewed the search for yield, and given the current scenario, these bonds are poised to grow.
Below, we share with you three top-ranked high-yield bond mutual funds, namely Neuberger Berman Floating Rate Income NFIAX, Franklin High Income FHAIX and AB High Income AGDAX. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future. Investors can click here to see the complete list of funds.
Neuberger Berman Floating Rate Income primarily allocates its net assets to floating-rate securities, loans and other instruments tied to companies that offer exposure to such securities. NFIAX advisors focus on floating-rate, senior-secured loans and below-investment-grade debt, issued in U.S. dollars by both domestic and international issuers.
Neuberger Berman Floating Rate Income has three-year annualized returns of 7.8%. As of October 2025, NFIAX held 75.1% of its net assets in Total Miscellaneous Bonds.
Franklin High Income primarily invests in high-yield, lower-rated debt instruments, which offer higher returns to offset added risk, including bonds, notes, convertibles and other below-investment-grade securities commonly known as junk bonds.
Franklin High Income has three-year annualized returns of 8.4%. Glenn Voyles has been the fund manager of FHAIX since May 2015.
AB High Income seeks income from government, corporate, emerging market and high-yield sources, investing across diverse fixed-income securities in developed and emerging markets. Its portfolio may include U.S. and international corporate and sovereign debt, with no restriction on allocations to U.S. Dollar- or non-U.S. Dollar-denominated securities.
AB High Income has three-year annualized returns of 8.9%. AGDAX has an expense ratio of 0.86%.
To view the Zacks Rank and the past performance of all high-yield bond funds, investors can click here to see the complete list of high-yield bond funds.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
