GHY - GHY: Global But Wait For It

2023-07-25 16:40:00 ET

Summary

• PGIM Global High Yield Fund, Inc. is a closed-end fund that aims to offer a high level of current income primarily by investing in below investment-grade fixed income.
• The fund's investment portfolio is diversified across different geographies and industries, with the United States accounting for the largest single country exposure.
• While the annualized results might appear modest, it's important to remember that bond investing can certainly see sizable declines.

Prophesy is a good line of business, but it is full of risks. - Mark Twain.

The PGIM Global High Yield Fund, Inc. ( GHY ) is a closed-end fund, or CEF, that aims to offer a high level of current income primarily by investing in below investment-grade fixed income instruments worldwide. The mix of securities is interesting, and I think this could be one to watch after a credit event occurs.

The fund's investment portfolio is diversified across different geographies and industries, with the United States accounting for the largest single-country exposure. The portfolio also includes assets in the United Kingdom, Mexico, Canada, Brazil, Colombia, South Africa, India, among others. I tend to favor emerging markets long term, but timing, as always, is everything.

Performance

Being globally diversified has been a drag for most funds for some time given US dominance in terms of both equity and bond market momentum. Despite the fund's global focus, the total NAV returns have only slightly lagged behind its category, which is important should the cycle begin to favor bond markets outside the U.S.

While the annualized results might appear modest, it's important to remember that bond investing can certainly see sizable declines. This is evident in last year's performance of many fixed-income funds, including GHY. However, the fund remains an interesting choice for investors looking to gain global bond exposure.

Credit Quality and Geographic Breakdown

The credit quality of GHY's portfolio primarily falls into the BB and B-rated categories. However, the fund does have a significant allocation in the CCC-rated and below category.

Industry Exposure

GHY's portfolio is well-diversified across various industries, with no single industry accounting for more than 7% of the total assets. The top ten industries in the portfolio include Energy - Upstream, Retailers & Restaurants, Consumer Non-Cyclical, Telecom, Electric & Water, Cable & Satellite, Gaming & Lodging & Leisure, Building Materials & Home Construction, Health Care & Pharmaceutical, and Energy - Midstream.

Risks Associated with Investing in GHY

Investing in GHY involves several risks, including market risks, credit risks, and liquidity risks. The fund primarily invests in high yield ("junk") bonds, which are subject to greater credit and market risks, including a higher risk of default. The fund also invests in derivative securities, foreign securities, and emerging markets securities, all of which carry their unique risks.

It's also worth noting that as is the case with CEFs, it does trade at a 10% discount currently.

Conclusion

PGIM Global High Yield Fund, Inc. offers an opportunity for investors looking for high current income through investments in below investment-grade fixed income instruments worldwide. Despite the various risks associated with investing in GHY, the fund's extensive diversification, focus on high-yield investments, and global exposure make it an interesting investment choice. I just don't think the time is right just now. Risks are elevated on a delayed effect by the bond market to Fed policy in terms of credit spreads. Default risk can suddenly kick in and create a dislocation in anything and everything that is high yield. I suspect there will be a great opportunity to allocate to GHY, but we need to see more stress in my view to make it worthwhile.

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