There are a number of market inefficiencies and structural challenges that investors in this asset class must confront – but these factors are not reflected in benchmarks
High yield exchange-traded funds (ETFs) have historically underperformed their respective indices on account of structural factors. and we estimate at least 50 basis points per year of unattributed costs are incurred by using indices as a benchmark for performance evaluation.
In this paper, we outline why we view high yield indices as an inappropriate comparator for portfolio managers and recommend that high yield funds be evaluated within peer groups instead.