Short Term High Yield Bonds May be Good as Fed Floods Market

Central banks have pushed their stimulus programs as far as they can go, leaving very few areas for a bond investor to make money other than high yield, said Carl Kaufman, portfolio manager for the Osterweis Strategic Income Fund (OSTIX) - Get Report . 'We may still have some room to go if they go helicopter money, but we are in the tenth inning here,' said Kaufman. 'I think returns are going to be low for sovereign and investment-grade bond investors, but there is still some room on the high yield side.' The Osterweis Strategic Income Fund is up 6.3 percent so far in 2016, according to Morningstar. The $4.9 billion fund has returned an average of three percent annually over the past three years, placing it in the 65th percentile in Morningstar's high yield bond category. The fund sports a trailing twelve month yield of 5.7 percent, according to Morningstar. Over 80 percent of Kaufman's fund is in short duration high yield securities. Kaufman said the fund has less than 80 names that are chosen on a bottoms up basis and are purchased with the intent of holding them to maturity. As of the end of June, some of the fund's larger allocations were in issues from Rite Aid, Regis Corp and Hertz, according to Morningstar.