While it has not been a home run, high yield has certainly been a hit for investors this year, especially emerging market and energy issues, said Gary Herbert, portfolio manager for the Legg Mason BW Alternative Credit Fund (LM) - Get Report .

The Legg Mason BW Alternative Credit Fund is up 4.3% thus far in 2016, according to Morningstar. The $393 million fund has returned 43 basis points in the past 12 months, putting it the 56th percentile in Morningstar's long-short credit category. The fund sports a healthy trailing twelve month yield of 4.1%, according to Morningstar.

Herbert said the best performing asset classes in his fund this year are high yield corporate bonds focused on emerging markets and the energy sector and longer duration Treasury instruments.

"We pursue a barbell approach," said Herbert. "We have a large allocation of riskier, higher yielding assets like corporate credit on one end, and a large allocation of lower yield, low risk assets on the other end."

In terms of valuation, Herbert said the high yield market in aggregate is moderately overvalued. But the sectors and segments where he has exposure are the most discounted including the emerging markets, energy and some agency bonds. One year ago, about 70% of LMANX's portfolio was invested in European RMBS.

Herbert said the duration of the fund has varied between 4 to 8 years.

"It's skewed toward the longer duration when we've had extra safe haven assets in the portfolio and toward the shorter duration when we've reduced the extra safe haven assets," said Herbert.

Herbert said the fund expanded its emerging market holdings after the bottom in late January and continued to grow those positions until early April. Nevertheless, he is not adding additional emerging markets or energy assets to the portfolio.

Finally, Herbert said the fund maintains significant credit default swap positions on two sovereigns: Brazil and Argentina.

"We've seen significant spread tightening and we believe there is incremental spread tightening still to come, especially in Argentina," said Herbert.