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Northern High Yield Fund Beat Q1 Benchmark on Duration, Credit Picks
NHFIX returned 1.2% in Q1, beating the 0.8% index return. A short duration stance, overweight to BB-rated cable/telecom, and underweight energy drove outperformance. The portfolio avoided the worst downgrades.
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Northern High Yield Fixed Income Fund (NHFIX) beat its benchmark by 0.4 percentage points in the first quarter, despite the volatility triggered by the Iran conflict. The fund returned roughly 1.2% over the period. The Bloomberg U.S. Corporate High Yield Index returned 0.8%, according to the fund's commentary.
Managers leaned into short duration and high-quality BB-rated bonds. The portfolio's duration ended the quarter at 3.2 years, about 0.4 years shorter than the benchmark. That positioning limited losses when Treasury yields rose on inflation concerns tied to war-related supply disruptions. The Federal Reserve held rates steady in March, adding pressure on longer-dated bonds.
Only two holdings were downgraded to CCC or lower during the quarter. The managers said both names had already been trimmed before the cuts, reducing the hit to net asset value. The portfolio's average credit quality stayed at BB-, with no exposure to the distressed CCC bucket that dragged on the index.