, Columnist
Junk-Bond Traders Are Increasingly Just Buying Stocks
They see low returns in debt and less risk in equities. But this will end badly.
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If you peel back the hood on this year's most successful corporate-debt funds, one thing becomes apparent: The more risk they took, the better they did.
While in some cases that meant diving into lower-rated credit, in others it meant leaving the junk-bond world entirely and just buying more stocks. Indeed, the best-performing fund in the high-yield debt category so far this year, as ranked by Morningstar Inc., is the Fidelity Capital & Income Fund, which boosted its equity allocation to more than one-fifth of its fund earlier this year, according to data compiled by Bloomberg. It has returned more than 10 percent so far this year.