For an average investor, high-yield bond mutual funds are the best to invest in bonds rated below investment grade, popularly known as junk bonds. This is because these funds hold a wide range of securities that reduce portfolio risk. In addition, these funds provide better returns than investments with higher ratings, including government and corporate bonds. Further, since the yield from such bonds is higher than that of investment-grade securities, they are less susceptible to interest rate fluctuations.
Below, we share with you three top-ranked high-yield bond mutual funds, namely PIMCO High Yield Spectrum PHSAX, Nuveen High Yield Income Fund NCOAX and Manning & Napier High Yield Bond Series MNHYX. 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.
PIMCO High Yield Spectrum fund invests most of its net assets in high-yield investment bonds, which may be represented by convertibles, warrants, forwards or derivatives such as swap agreements. PHSAX advisors may also invest in derivative instruments, such as credit default swap agreements and total return swap agreements.
PIMCO High Yield Spectrum fund has three-year annualized returns of 10.1%. As of the end of September 2025, PHSAX held 71.1% of its net assets in miscellaneous bonds.
Nuveen High Yield Income Fund invests most of its assets, along with borrowings, if any, below investment grade debt instruments, such as bonds and loans issued by domestic companies and in U.S. dollar-denominated debt issued by foreign companies that is traded over-the-counter or listed on an exchange. NCOAX advisors also invest in unrated bonds, which, according to the fund's portfolio managers, are of comparable quality.
Nuveen High Yield Income Fund has three-year annualized returns of 9.9%. NCOAX has an expense ratio of 1%.
Manning & Napier High Yield Bond Series fund invests most of its net assets in below investment grade and other financial instruments, such as derivative instruments, exchange-traded funds (ETFs), and bank loans, which have similar economic characteristics. MNHYX advisors may also consider investing in U.S. dollar-denominated fixed-income securities issued by U.S. and foreign corporations and governments, including those in emerging markets.
Manning & Napier High Yield Bond Series fund has three-year annualized returns of 9.8%.Scott Friedman has been the fund manager of MNHYX since March 2021.
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).
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