High yield bonds have delivered attractive income in recent years, but today’s market presents a different set of opportunities and risks. In this two-part FundCalibre series, Tom Hanson – co-manager of the Aegon High Yield Bond fund, tells us about the team’s high-conviction, flexible investment approach and why they are taking a different path from many of their peers.
Chatting with the FundCalibre team, Tom explains why the fund is underweight US high yield, where he is finding value across Europe, sterling and emerging markets, and how careful credit selection, risk management and income generation remain central to navigating today’s uncertain market environment.
Why you should listen to the interview: High yield investing is about far more than chasing income.
Tom Hanson offers a clear, practical insight into how professional bond investors assess risk, identify opportunities and position portfolios in changing markets. Whether you’re new to fixed income or an experienced investor, this interview provides valuable perspective on today’s high yield landscape.
This interview was recorded on 15 July 2026. Please note, answers are edited and condensed for clarity. To gain a fuller understanding and clearer context, please listen to the full interview.
Interview highlights:
Why we’re underweight the US
“The key thing when you’re considering our fund is flexibility. We’re going to go where the opportunity set is. We’re going to invest where we think the best risk-adjusted returns are available.
“At this point in time, that isn’t the US high yield market. It’s European high yield, particularly parts of the sterling market, and it’s hard currency emerging markets. That won’t always be the case. If you looked at our historical allocations, there have been periods when we’ve been heavily invested in the US and much less invested in Europe. There have also been times when we’ve had no emerging market exposure at all.
“This year has been difficult. There are concerns around the Middle East, AI disruption, private credit and several other potential pressure points. On top of that, spreads remain tight, so your margin for error is quite thin.
“Our approach has been to focus on the strongest parts of the market while avoiding some of the weaker areas. We’ve had almost no exposure to chemicals, which has been a difficult sector, while we’ve been close to maximum weight in energy.
“Europe has significantly outperformed the US on a currency-hedged basis, sterling has continued to do well, and emerging market high yield has actually been one of the brightest spots in global high yield this year.”
Why sterling high yield still looks attractive
“As a rule, Mark and I like looking for opportunities that are a little bit off the beaten track. Sterling high yield fits that description. You can trace this back to the original Brexit vote in 2016. Before then, sterling high yield was generally perceived as a higher-quality market than its euro equivalent. Since Brexit, however, sterling has consistently traded with a spread premium.
“We’ve had political uncertainty and volatility, and that has meant there’s less of a dedicated buyer base for sterling high yield. The result is that many sterling bonds trade at attractive valuations. Now, it’s not as simple as buying everything in the sterling market. There are winners and losers, just as there are everywhere else. But there is a significant amount of opportunity, and we’ve continued to benefit from that.
“We’re trying to capitalise on areas where we think the market has become inefficient. If we can find those opportunities away from the most crowded parts of the market, so much the better.”
Why income matters more than ever
“Our whole focus today is trying to capture the best of high yield while avoiding the worst.
“Spreads are tight, risks remain elevated, but at the same time the technical backdrop for high yield is still very supportive. There’s no guarantee spreads suddenly widen from here.
“One mistake investors can make is becoming too defensive too early. If you’re extremely high quality and extremely low duration, that’s great when a problem arrives. Until then, though, you’re probably giving up carry.
“We’ve tried to strike a balance. We’ve reduced our CCC exposure significantly, increased shorter-dated single-B holdings and focused on generating income because that’s the most certain part of the return available. Credit fundamentals across the core high yield market actually aren’t that bad. High yield today is a much higher-quality market than it was 20 years ago.
“When I started in the industry, it was dominated by single-B issuers. Today it’s predominantly BB-rated companies, and many of the weaker businesses have migrated into private credit. There are still plenty of opportunities available — it’s just a question of how you navigate the market, and we believe our flexible, concentrated approach puts us in a good position to do exactly that.”
Conclusion: While market conditions remain uncertain, Tom Hanson believes a flexible, disciplined approach is key to uncovering opportunities in today’s high yield market. By combining detailed bottom-up research with a strong focus on downside protection and income generation, the team aims to deliver attractive long-term returns without taking unnecessary risk.
Watch the second part of this FundCalibre video interview here: Part 2
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The writer’s views are their own and do not constitute financial advice.
This information should not be relied upon by retail clients or investment professionals. Reference to any particular investment does not constitute a recommendation to buy or sell the investment.
Main image: video interview, 2h-media-maXRdPd2INc-unsplash
