uploads///Credit Rating Breakdown PAHIX

PAHIX: A Large Fund with Moderately Liquid Corporate Bonds


Dec. 31 2015, Updated 11:29 a.m. ET

PAHIX: Credit rating breakdown

The T. Rowe Price High Yield Fund – Advisor Class (PAHIX) is invested in bonds of companies like Bombardier (BDRBF), TransDigm Group (TDG), United Continental Holdings (UAL), and Penske Automotive Group (PAG), among others.

As of September 2015, the latest available information, 46.7% of its assets were invested into B rated papers. Another 23.0% were invested into papers rated below B and unrated papers combined. BB rated papers formed a little more than one-fourth of the fund’s holdings.

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The fund has about one-fifth of its assets in below B rated papers. This is a bit of a concern. Also, a sizable quantum is invested in B rated papers. If things don’t take too awkward of a turn, B rated papers should be good. However, if credit conditions worsen, these papers, along with papers rated even lower, can cause some concern for investors in the fund.

N-Q filing

PAHIX had filed its latest N-Q form on October 29, 2015. The information in the filing is as of August 31, 2015.

The fund had been managing assets worth $9.1 billion at the end of November. It had all of its corporate bond and note holdings classified as Level 2. A look at securities other than corporate bonds and notes shows that most of the investments are rated as Level 1. It has nearly negligible investment in Level 3. All of it’s in common stocks.

PAHIX shouldn’t be in trouble even if liquidity dries up a bit. Since all of its corporate bonds are classified as Level 2, it wouldn’t have much difficulty if there’s redemption pressure.

Overall assessment

PAHIX has a sizable portion of its assets rated B and below. If we look at its risk, combined with the N-Q filing, it doesn’t appear that investors in the fund should be worried. It ‘s a large fund and all of its corporate bonds are moderately liquid.

Next, we’ll look at the Ivy High Income Fund – Class A (WHIAX) in the next article.


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