Investors remain concerned with what will happen once the Fed stops its quantitative easing program and interest rates finally rise, so they continue to seek protection for their bond portfolios, says James Dudnick, portfolio manager for the AllianzGI Short Duration High Income Fund. Dudnick says the duration of his fund is currently around 1.5 years and the yield approximately 4.5%. He looks for companies that are not overly leveraged and sees a few pockets within the high yield universe becoming overvalued, most notably Triple C rated bonds. Finally, Dudnick says supply is not a problem because the calendar has been full of refinancings which in turn strengthens corporate balance sheets.
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