Jay Pestrichelli – Inflows Into The High Yield Space Are Back, For Now

By Jillian Baker

Many advisors who utilize ZEGA’s Buffered Indexed Growth saw some movement towards the end of 2018 into short-duration high-yield vehicles. Remember, we shift equity risk for short duration high-yield hold to maturity risk, which enables the strategy to buffer against equity losses through the first 25% down.

As a large component of the portfolio, any change in short-term market values can impact account performance. One of the things we observed was that high-yield assets were seeing outflows, which caused bond prices to drop. Jay Pestrichelli noted during that time that he expected the values of our exchange traded funds to revert higher – a change that is already taking place.

Jay also noted in a recent Bloomberg article how a reduction in fear has abated, drawing investors back into equities and the high-yield space. More details can be found in the Bloomberg link, and the graph above shows the sharp reversal of flows back to high-yield assets.