Morningstar - Q4 2020 - 69

Strategies

A Standout Approach
BlackRock High Yield Bond leverages impressive resources.

BEST IDEAS: MANAGER

Benjamin Joseph

BlackRock High Yield Bond BHYIX

This article is adapted from the fund's Morningstar Global Fund Report dated
Sept. 16, 2020.

Stats 09/30/20

BlackRock High Yield Bond BHYIX takes a distinctive and versatile
approach that benefits from one of the strongest teams in its category. The
managers have leveraged an expansive toolkit and the firm's impressive
resources to navigate through various market environments and maintain
the strategy's edge over time. This strategy's cheapest shares earn
a Morningstar Analyst Rating of Gold, while more expensive ones are rated
Silver, Bronze, and Neutral.

Morningstar Category
High Yield Bond

Expense Ratio
0.62%

Fee Level
Below Avg

10-Yr Annlzd Return
6.64%

10-Yr % Rank in Cat
4

People
High

Parent
Above Avg

Morningstar Pillars 09/30/20
Process
Above Avg
Growth of 10K 09/30/20

Instead of targeting a specific spot on the credit-quality spectrum, the
managers aim to make the most of their flexible approach, turning
cautious when riskier bonds offer paltry compensation and bold when
risk-taking pays. Given the strategy's girth-the $25.8 billion fund represents
roughly half of the team's high-yield market footprint-staying nimble
in the cash bond market is easier said than done. The team attempts
to overcome those challenges by broadening the scope to include bank loans
and investment-grade corporates on the defensive side and equities
(up to 10%) on the aggressive end. In recent years, the strategy has typically
invested 5% to 10% in exchange-traded funds, credit default swaps,
and total-return swaps to quickly gain diversified market exposure when
cash bonds are scarce.

$12K
11.28

BlackRock High Yield Bond

11.25

11

10

Morningstar US High Yield Bond

9
10/2017

10/2018

10/2019

Style Map 08/31/2020

Morningstar Ratings 09/30/2020

Interest Rate Sensitivity
High

Data surveyed
from the
fund company.

Low

Mid

Credit Quality

Entering 2020's market sell-off, the portfolio carried slightly more risk than the
overall market, and despite underweightings to industries that were the
most affected by COVID-19 like airlines, autos, and leisure, the strategy lagged
peers on the downside. The biggest change of an otherwise fairly stable
positioning was an opportunistic increase of the investment-grade allocation
up to 10.8% at the end of June from below 4% in December 2019. The
managers saw a lot of value in the active new issuance market, especially
in the BBB and low-A rated segments.

Morningstar Analyst Rating
Œ

Ltd

Mod

Period

Mstar
Return

Mstar
Risk

Mstar
Rating

3-Yr

Above Avg Average

QQQQ

5-Yr

Above Avg Average

QQQQ

10-Yr

High

QQQQQ

Average

QQQQQ

Overall Rating

Ext

Credit Quality 08/31/2020

Sectors

■ Fund 

❙ Category Average

BB

While this strategy's eclectic style won't always work, it has impressed
over time. Since manager Jimmy Keenan took the lead in January 2009 through
August 2020, the institutional shares' 10.8% annualized return outpaced 90%
of rivals on both an absolute and volatility-adjusted basis. K

AAA

Benjamin Joseph is a senior manager research analyst with Morningstar.

Not Rated

3-Yr Avg
34.9

B

33.8

Below B

14.9

32.6

37.5

42.7

35.0

15.8

16.5

2.2 2.5

1.2
1.4

2.1 3.0

0%

10

20

30

morningstar.com/lp/magazine

40

50
69
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