High Yield Bonds – Enhancing Portfolio Resilience and Returns

Pictet Asset Management’s September 2025 Fixed Income analysis, led by Nicolas Musolino and Nithin Mallya, evaluates the role of high yield bonds in multi-asset portfolios.

• Risk-adjusted performance: Replacing part of equity allocations with high yield bonds reduces drawdowns and improves risk-return efficiency, even in equity bull markets.

• Downside protection: Value-at-Risk (VaR) shows high yield bonds suffer smaller losses (-2.4%) versus equities (-6.6%) during downturns.

• Portfolio optimization: A balanced portfolio achieves stronger outcomes with a meaningful high yield allocation, supported by contracted coupon income and pull-to-par dynamics.

Could high yield serve as a more stable growth engine in today’s volatile market landscape? The full report explores the case in depth.