4Q2025 - U.S. Opportunistic High Yield Commentary
During the quarter, high yield bond yields fell as investors absorbed two more Fed rate cuts. Although leveraged loans lagged their fixed rate peers, a resilient economy and a dovish Fed were viewed positively by loan investors.
- The Polen Credit U.S. Opportunistic High Yield Composite underperformed both the ICE BofA U.S. High Yield Index and the S&P UBS Leveraged Loan Index (net of fees) in the fourth quarter.
- Material Sciences and Asurion contributed the most to total returns, while Oldcastle BuildingEnvelope and Realtruck Group were the largest detractors during the quarter.
- Over the period, portfolio positioning did not change materially. Most trading activity involved purchases and sales in existing holdings.
- Despite tariff uncertainty and the prolonged government shutdown, we believe that the U.S. macro environment remains constructive, supported by policy tailwinds, robust AI related investment, and a durable though increasingly uneven consumer and corporate backdrop.
- Given historically tight spreads but still attractive yields, active managers need to look beyond headline valuations to identify idiosyncratic opportunities, using discipline during market dislocations to capitalize on inefficiencies over time.