PACE High Yield Investments

Scorecard
4 / 5 Stars
Lipper
4 4 1 2 2
Zacks Investment Research
2 (Buy)
Standard & Poor's
4 / 5 Stars
TheStreet.com
C (Hold)

U.S. News evaluated 174 High Yield Bond Funds. Our list highlights the top-rated funds for long-term investors based on the ratings of leading fund industry researchers.

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Note: Profile written for different share class.

Performance

The fund has returned 7.37 percent over the past year and 7.94 percent over the past three years.

Trailing Returns Updated 02.28.2014
Year to date 2.5%
1 Year 7.4%
3 Years (Annualized) 7.9%
5 Years (Annualized) 17.3%
10 Years (Annualized) N/A

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Summary

For UBS Pace High Yield, it's all about finding gems among the junk. 

As of March 05, 2014, the fund has assets totaling almost $440.06 million invested in 306 different holdings. Its portfolio consists primarily of junk bonds.

High-yield bonds--often referred to as junk bonds--are those rated BB or lower. (Ratings agencies like Standard & Poor's, Fitch, and Moody's evaluate the riskiness of bonds--whether issued by governments or corporations--and assign ratings to the individual securities.) High-yield bonds are considered risky because the issuers have a higher probability of defaulting on their debt than do those whose bonds have higher ratings. Because of that risk, junk bonds offer higher yields than their tamer counterparts. The goal of the high-yield manager is to pick out bonds whose low ratings overstate the likelihood of default. 

Over the past few years, high-yield funds have experienced somewhat of a roller-coaster ride. In 2008, when defaults abounded, the category got hammered. That year, the average fund in Morningstar's high-yield bond category lost upward of 26 percent; in the bond market, that's a staggering figure. This fund managed to keep a lid on its losses, and while its 19 percent dive was still painful, it wasn't nearly as bad as what many of its peers experienced. Since 2009, though, high-yield bond funds have been undergoing a heated rally. That's not the only reason why investors have been paying attention to this fund and others like it. With interest rates still at historic lows, yield-starved investors have been eyeing junk bonds with increased enthusiasm. The fund has returned 7.37 percent over the past year and 7.94 percent over the past three years. 

Investment Strategy

Given the risks inherent in the high-yield market, one of management's biggest priorities is to shield this fund from some of the big losses that its peers can take in bad years. Occasionally, that means that management will sacrifice chances for huge swings in the right direction in order to minimize the risk of painful missteps. Still, that's not to say that the fund won't experience deep losses when defaults are prevalent. Lately, the fund has been betting on the auto industry, and some of its top holdings include debt from Ford and General Motors.

Role in Portfolio

This is a niche fund. 

Management

A team of four managers runs the fund.

Fees

PACE High Yield Investments has an expense ratio of 1.02 percent. 

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Risk

In exchange for high yields, the fund risks being stung by defaults.

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