As investors reassess their fixed income allocations, we believe the European high yield (HY) market is emerging as a compelling opportunity. European HY has matured into a robust and diversified asset class, offering attractive risk-adjusted returns and strategic diversification benefits.
The European HY market has developed significantly over the past two decades. It is now a mature, sizeable, and well-diversified segment of the capital markets. While US capital markets remain larger in absolute terms than those in Europe, the respective HY markets are comparable in relative terms. European HY is roughly one-third the size of the STOXX 600, just as US HY is about a third of the size of the S&P 500.
Not only does the European HY market have depth, but it also possesses breadth; with 354 issuers across 18 sectors and 57 sub-sectors, the market provides broad exposure and mirrors the sectoral diversity found in US HY. This diversity creates opportunities for an active manager to move to sectors where there is most value.
“The European HY market is now a mature, sizeable, and well-diversified segment of capital markets.”
The European edge
First and foremost, the European HY market has outperformed the US HY market over five, 10 and 20 years. Despite a high correlation between the two markets, Europe’s superior long-term performance underscores its resilience and relative value.
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