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10 Top-Performing EUR High Yield Bond Funds

Funds from Nordea, Fidelity International, and Neuberger Berman are among the best performers.

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Bond investors who are willing to take more risk can opt for high-yield bonds, which are of lower quality but offer potentially higher returns. However, the chance of default by the issuer is also greater. This category is therefore not suitable for every investor.

“High yield bonds sold off significantly in 2022, on the back of Russia’s invasion of Ukraine, gas shortage fears, broader supply chain disruptions and rising inflation,” Morningstar fund analyst Jeana Marie Doubell says. “But solid fundamental factors, such as strong balance sheets and resilient corporate earnings, have helped support recovery and further spread tightening in the years since then.” Spreads between the yields of high-yield bonds and safer assets such as US Treasuries tighten when investors’ confidence in high-yield bonds increases.

“Default rates have also remained relatively low in recent years, and the high yield cohort- typically sub-investment grade bonds rated BB to CCC- have actually shifted up in quality compared to 10 years ago,” Doubell explains. “Even so, high-yield bonds’ shorter duration profile, a measure of interest rate sensitivity, helped shield the asset class from interest rate volatility in 2022/2023, versus investment grade bonds with higher duration.”

High-yield bond funds once again attracted inflows of investors’ money in late 2024, Morningstar data show. The asset class had enjoyed additional tailwind from limited supply as companies hesitated to issue high yield debt amid rising interest rates in 2023, according to Doubell.

10 Best Performing EUR High Yield Bond Funds

To screen for the top-performing funds in this category, we looked for those with the best returns over the last one-, three-, and five-year periods. All names that passed the screen were actively managed.

EUR High Yield Bond Funds Performance

Over the last 12 months, EUR high yield bond funds have returned 7.09%. On an annualized rate, EUR high yield bond funds have returned 8.01% over the last three years and gained 3.81% over the last five years. That compares with the Morningstar Eurozone Core Bond Index, which has returned 3.84% over the last 12 months, gained 1.06% per year over the last three years, and lost 1.95% per year over the last five years.

What Are EUR High Yield Bond Funds?

EUR high yield bond portfolios primarily invest in sub-investment grade securities with a credit rating of BB or lower, denominated in euros or hedged into euros.

Screening for the Top-Performing EUR High Yield Bond Funds

To find the best EUR high yield bond funds, we looked at returns data from the past one, three, and five years, using data available in Morningstar Direct. We screened for Europe-domiciled open-ended and exchange-traded funds in the top 33% of the category using their lowest-cost primary share classes for those periods. We excluded funds with assets under €100 million. This left 10 funds.

Because the screen was created with the lowest-cost share class for each fund, some may be listed with share classes that are not accessible to individual investors, or they may be aimed at institutional investors and require large minimum investments. The individual investor versions of those funds may carry higher fees, reducing returns to shareholders. In addition, Medalist Ratings may differ among the share classes of a fund.

Fidelity Funds - European High Yield Fund

Over the past year, the €2.8 billion Fidelity Funds - European High Yield Fund rose 9.53%, while the average fund in its category rose 8.15%. The Fidelity International fund, which launched in February 2020, has climbed 9.00% over the past three years and gained 4.60% over the past five years.

“Fidelity European High Yield’s skilled lead-managers have demonstrated skillful top-down management and consistent bottom-up credit selection. The strategy holds an Above Average People rating and earns an upgrade to an Above Average Process rating.”

“Morningstar has enhanced the process for assessing alpha opportunity for funds, a key component in the Morningstar Medalist Rating calculation. More of this strategy’s Medalist Ratings than usual may be impacted with the update, even in the absence/presence of changes to pillar ratings or fund costs.”

“Veteran co-lead managers Andrei Gorodilov and James Durance each boast more than two decades’ investing experience and have worked together on this strategy since 2017. They are supported by US high-yield chief Peter Khan and backed by Fidelity’s vast 44-member credit analyst team, which includes 21 London-based analysts (up from 16 analysts in 2021, as the firm boosted its research capabilities).”

“The team aims to outperform the ICE BofA Global High Yield European Issuers Constrained Index, primarily through a combination of security selection, sector allocation, and top-down credit-market calls. The approach has its riskier qualities, but these have been well-managed by the team over the long term. For example, the benchmark features a 10% stake in US-dollar-denominated Eastern European and Turkish corporate debt (Russia was removed in 2022), which can add volatility to the portfolio during times of emerging-markets turmoil (but the team held only half the benchmark’s stake in the years from 2020 to 2023). In addition, the managers prefer running slightly higher credit-market sensitivity (measured by the portfolio’s average duration times spread) than their benchmark in a typical market environment. They do, however, adjust that positioning in accordance with their top-down outlook, such as in the second half of 2022 when they took the portfolio’s level of credit risk down below their benchmark’s, which helped protect against higher inflation and rates volatility. And while stakes in defaulted issuers stung performance in 2017 and 2019, the team has navigated distressed issuers deftly since then, contributing positively to the strategy’s performance overall.”

“Skilled security selection and sensible implementation of the fund’s risk-taking approach have resulted in strong performance on an absolute and risk-adjusted basis under this team’s leadership, pushing it into the top quartile of its euro-denominated high-yield bond Morningstar Category over multiple trailing periods.”

- Jeana Marie Doubell, analyst

Neuberger Berman European High Yield Bond Fund

Over the past year, the €716.1 million Neuberger Berman European High Yield Bond Fund rose 8.40%, while the average fund in its category rose 8.15%. The Neuberger Berman fund, which launched in February 2018, has climbed 10.51% over the past three years and gained 6.10% over the past five years.

Nordea 1 - European High Yield Credit Fund

Over the past year, the €356.8 million fund has gained 8.54%, while the average fund in its category is up 8.15%. The Nordea fund, which launched in December 2011, has climbed 9.54% over the past three years and gained 4.40% over the past five years.

BNP Paribas Funds Euro High Yield Bond

The €694.3 million fund has climbed 8.55% over the past year, underperforming the average fund in its category, which rose 8.15%. The BNP Paribas fund, which launched in May 2013, has climbed 9.23% over the past three years and gained 4.86% over the past five years.

Candriam Bonds Euro High Yield

The €3 billion fund has climbed 7.80% over the past year, underperforming the average fund in its category, which rose 8.15%. The Candriam fund, which launched in October 2017, has climbed 9.81% over the past three years and gained 4.70% over the past five years.

“Candriam Bonds Euro High Yield stands apart from the competition, thanks to its experienced and tight-knit investment team that implements a risk-aware, research-driven process. It earns High People and Above Average Process Pillars.”

“Nicolas Jullien has successfully maintained this fund’s compelling track record since taking over as a lead manager from his predecessor Philippe Noyard in January 2020. Having joined the firm in 2009, Julien first served as a comanager for a decade before taking over the helm when Noyard was promoted to the head of global credit. That transition was a smooth one, and a similar transfer of responsibilities is again underway in 2024. Ahead of Noyard’s 2025 retirement, Julien has been tapped to take over as the global head of fixed income in January 2025. In addition to his new leadership responsibilities (including oversight of the firm’s global bond, investment-grade credit, and emerging-markets debt capabilities), Julien will continue to lead this fund and the high-yield team. A number of factors make this transition less disruptive than it might seem. For one, Thomas Joret (comanager here since 2020 and lead manager on the team’s global high-yield strategies) will be promoted to deputy head of high yield in January 2025—providing valuable support in terms of team management and resource allocation. Joret will also assist Julien with chairing the group’s credit committee. Furthermore, additional support comes from comanager Sichong Qi, named here in 2023, who also maintains research coverage of the automobile sector as one of six dedicated analysts for this team.”

“The investment process is based on fundamentally driven security selection combined with relative value considerations. The managers also use derivatives in moderation to adjust the portfolio’s overall credit market sensitivity or to gain exposure to certain highly traded issuers at a lower cost. Unlike many competitors in the euro high-yield bond Morningstar Category, the strategy avoids the financials sector, which the managers argue carries policy risks inappropriate for a high-yield portfolio. That restrained opportunity set has not held the strategy back from beating its more broadly invested peer group. The strategy handily outpaces most euro high-yield bond category peers over three, five, and 10 years, with lower volatility.”

- Jeana Marie Doubell, analyst

BlackRock Global Funds - European High Yield Bond Fund

Over the past year, the €586.6 million fund has gained 8.89%, while the average fund in its category is up 8.15%. The BlackRock fund, which launched in July 2015, has climbed 9.58% over the past three years and gained 4.74% over the past five years.

“Our conviction has grown in the two skilled managers here, who employ a proven approach to high-yield investing and are backed by one of the biggest credit analyst teams in the space. BGF European High Yield Bond has earned an upgrade of its People Pillar to High from Above Average, while it retains its Above Average Process rating.”

“Lead managers Jose Aguilar and James Turner have half a century of high-yield-investing experience between them and have worked closely together on this strategy for six years. Aguilar, BlackRock’s head of European high yield, joined the firm in 2009 and has been named on this strategy since its 2015 inception. Turner joined BlackRock in 2018 as head of European leveraged finance and joined the roster here in 2019. The managers collaborate evenly on bottom-up security selection and top-down macro calls, with equal share in risk-taking and idea contribution. Both have seen their responsibilities within the firm expand in recent years; in 2024, Turner was promoted to co-head of European fixed income and now oversees the European investment-grade research team, while Aguilar assumed oversight of the leveraged-finance research team. However, these additional duties should not meaningfully detract from the time and attention the managers devote to running this strategy and its global high-yield sibling. Indeed, the duo’s strong record of collaboration here, along with BlackRock’s continued investment in credit resources—Aguilar and Turner are now supported by one of the largest leveraged-finance research teams in the industry, boasting 15 dedicated European leveraged finance analysts—support an upgrade of the strategy’s People rating to High.”

“The team follows a disciplined investment process, similar to the tried-and-tested approach implemented at BlackRock’s global high-yield strategies since 1999. The strategy relies primarily on bottom-up security selection and sector allocation to drive alpha generation, complemented by top-down inputs. It boasts an impressive long-term track record, with successful security selection across a wide range of sectors making up the bulk of excess returns.”

- Jeana Marie Doubell, analyst

UBS (Lux) Bond Fund - Euro High Yield (EUR)

Over the past year, the €2.8 billion fund has gained 8.95%, while the average fund in its category is up 8.15%. The UBS fund, which launched in October 2012, has climbed 10.06% over the past three years and gained 5.44% over the past five years.

“UBS Euro High Yield is a bottom-up-driven European high-yield bond strategy that benefits from experienced management implementing a proven and structured investment process. While turnover has been a problem in the past, signs of stabilization among the European credit analyst team are promising.”

“Lead portfolio manager Zachary Swabe has been at the helm here since 2012 and was joined by comanager Jonathan Mather in 2015. Their decade-old partnership forms part of a five-member high-yield portfolio manager group, which collaboratively discusses macro themes across Europe, the US, and Asia. They are further supported by an eight-member European credit analyst team, averaging a moderate 12 years of industry experience, and whose coverage is split between high-yield and investment-grade names. Tenure is on the lower side here relative to peers following a slew of unrelated departures in 2022 (and their subsequent replacements), which has resulted in five of the current eight members having been with the firm for two years or less. Turnover here has since stabilized here and throughout the 33-member global fixed-income research team. That’s encouraging considering that this strategy relies heavily on fundamental research.”“The managers aim to outperform their benchmark (the ICE BofA Merrill Lynch EUR High Yield 3% Constrained Index) by 1-2 percentage points per year, gross of fees, over a market cycle while keeping volatility in check. The moderately diversified portfolio typically holds 125-175 issuers and will often exhibit an average yield higher than its benchmark, a result of the managers’ penchant for bargain-hunting amongst lower-quality B and CCC rated names. While the managers primarily focus on the European high-yield market, they also make active use of their flexibility to invest up to 30% of the portfolio in bonds issued in non-euro currencies (hedged back into euros) and can extend to investment-grade credit, emerging-markets credit, and government bonds. These off-benchmark exposures together have ranged between 10% and 27% of assets since 2017.”

“By consistently implementing their robust investment process, the managers have built a strong track record over time. Over Swabe’s tenure as lead manager, from May 2012 through June 2024, the fund’s K-1-Acc share class lands in the top decile of the euro-denominated high-yield bond Morningstar Category, both on an absolute and risk-adjusted basis (as measured by Sharpe ratio).”

- Jeana Marie Doubell, analyst

Muzinich Europeyield Fund

Over the past year, the €990.8 million Muzinich Europeyield Fund rose 8.08%, while the average fund in its category rose 8.15%. The Muzinich fund, which launched in May 2014, has climbed 9.62% over the past three years and gained 4.66% over the past five years.

Nordea 1 – European High Yield Opportunities Fund

Over the past year, the €118.3 million Nordea 1 – European High Yield Opportunities Fund rose 7.67%, while the average fund in its category rose 8.15%. The Nordea fund, which launched in March 2020, has climbed 10.20% over the past three years and gained 6.09% over the past five years.

Nomura Funds Ireland PLC - European High Yield Bond Fund

Over the past year, the €111.9 million fund has gained 8.91%, while the average fund in its category is up 8.15%. The Nomura fund, which launched in November 2017, has climbed 9.30% over the past three years and gained 5.16% over the past five years.

This article was generated with the help of automation and reviewed by Morningstar editors. Learn more about Morningstar's use of automation

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.

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