H24 : To boost their performance, maturity funds have moved into the high-yield bond market. Between visibility and credit risk, this positioning is the hallmark of ODDO BHF AM, a pioneer in this field since 2009. But is the current market favourable and how is it adapting to maturity funds?
Interview with Alexis Renault, Head of High Yield at ODDO BHF Asset Management.
Alexis Renault: The principle is clear: a maturity fund invests in a portfolio of bonds whose maturities coincide with that of the fund. When it focuses on high yield, the fund concentrates on riskier issuers (i.e. with a greater risk of default) with a rating of between BB+ and CCC. The counterpart of this additional credit risk is a potentially higher return over time.
H24 : How do you analyse the credit environment?
It is showing signs of slowing down, but remains satisfactory overall in my view. The second-quarter results season showed mixed results, due to weak operating performance and a gloomy outlook in a number of sectors such as automotive, packaging, chemicals and basic resources. The announcement of the agreement on tariffs removed the uncertainty. At the same time, the German recovery plan and the increase in EU defence spending should give companies a boost. Barring a major macroeconomic shock, growth should be sufficient to support the high yield asset class.
H24 : What is the current state of the global default rate and how is it expected to evolve?
AR : Despite a slower growth environment, corporate defaults remained relatively limited. Since the beginning of the year, the 12-month global corporate default rate, as calculated by Moody’s, has risen from 4.9% to 4.4% in September 2025, slightly above the long-term average of 4.2%. According to their estimates, this rate should rise to 2.5% over the next twelve months.
H24 : What do you think of the returns offered by this asset class?
AR : Spreads are trading at tight but justified levels in our view. If we take the index representative of the euro high yield bond market(ICE BofA Euro Non-Financial Fixed & Floating Rate High Yield Constrained Index), the yield to maturity is around 5.5% at 30 September 2025, compared with 3.2% at 31/12/2017, when spreads were also below 300 basis points [past performance is no guarantee of future performance]. Consequently, holding high-yield bonds could be the main driver of performance over the coming months.
H24 : Against this backdrop, what do you think would be the best investment approach?
AR : Short maturities are the ideal choice in my view because of the asymmetric nature of the risk of spreads widening. Given the current situation, we believe that short-duration strategies or fixed-duration funds with a short residual duration are an attractive option.
However, these strategies are not without risk, and also impose high demands on their managers, such as careful credit selection. In order to carry out an in-depth credit analysis, managers must have adequate research capacity, i.e. a sufficiently large team. Experience acquired over several credit cycles and prudent risk management can also be key success factors.
