High-yield bonds behave more like stocks than investment-grade bonds. These bonds have significant holdings in smaller companies, which are considered to have a weaker financial condition but benefit as the economy moves north.

Although high-yield bonds are more exposed to credit risk, these have less exposure to interest rate risk, making them a differentiated source of return. Despite the headwinds faced during the Fed’s tightening of monetary policy, with indications coming in from the Fed that it might slow down its steep rate of hikes, these bonds are poised to grow.

Below, we share with you three top-ranked high-yield bond mutual funds, namely American Funds High-income Trust AHITX, Manning & Napier High Yield Bond Series MNHYX and Virtus Newfleet High Yield Fund PHCHX. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future. Investors can click here to see the complete list of funds.

American Funds High-IncomeTrust invests most of its assets in high-yielding and low-quality debt securities of domestic and foreign issuers, which are rated Ba1/BB+ or below by nationally recognized rating organizations or other issues of equivalent quality based on the fund manager’s judgment. AHITX advisors also invest in corporate loan obligations.

American Funds High-Income Trust has three-year annualized returns of 9.1%. As of the end of March 2025, AHITX held 64.2% of its net assets in miscellaneous bonds.

Manning & Napier High Yield Bond Series fund invests most of its net assets in below investment grade and other financial instruments, such as derivative instruments, exchange-traded funds (ETFs), and bank loans, which have similar economic characteristics. MNHYX advisors may also consider investing in U.S. dollar-denominated fixed-income securities issued by U.S. and foreign corporations and governments, including those in emerging markets.

Manning & Napier High Yield Bond Series fund has three-year annualized returns of 9.2%. MNHYX has an expense ratio of 0.90%.

Virtus Newfleet High Yield Fund invests most of its net assets in high-yield, fixed-income securities that are rated below investment grade. PHCHX advisors aim to keep the fund's duration of the fund similar to its benchmark index, the Bloomberg U.S. High-Yield 2% Issuer Capped Bond Index.

Virtus Newfleet High Yield Fund has three-year annualized returns of 9%. David L. Albrycht has been one of the fund managers of PHCHX since December 2011.

To view the Zacks Rank and the past performance of all high-yield bond funds, investors can click here to see the complete list of high-yield bond funds.

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>

View All Zacks #1 Ranked Mutual Funds

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Get Your Free (PHCHX): Fund Analysis Report

Get Your Free (MNHYX): Fund Analysis Report

Get Your Free (AHITX): Fund Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research