NHS - NHS: Hard To Justify Buying This Fund At The Current Price

2025-03-20 10:22:54 ET

Summary

• The Neuberger Berman High Yield Strategies Fund offers a 14.23% yield, significantly higher than major bond indices and its peers, raising concerns about sustainability.
• The NHS closed-end fund's high yield may indicate market skepticism about its ability to maintain distributions, necessitating a closer look at its finances.
• The fund appears to be increasing its exposure to fixed-rate securities, which is likely the correct move as the Federal Reserve reduces interest rates.
• The fund covered its distributions in the most recent fiscal year, but it has failed to do so since October.
• The fund trades at a 1.06% premium to NAV and has high expenses, making it less attractive at current prices.

The Neuberger Berman High Yield Strategies Fund ( NHS ) is a closed-end fund, or CEF, that provides income-seeking investors with a way of achieving their goals. The fund does a very good job at this, as its current 14.23% yield is one of the highest yields available in the market right now. As can be clearly seen here, this is substantially higher than any of the major fixed-income indices:

Indeed, as clearly shown, the current yield of the Neuberger Berman High Yield Strategies Fund is more than double that of any of the major bond indices. It is even more than double the current yield that is obtainable from domestic junk bonds, which is perhaps the most relevant here because this fund primarily invests in junk bonds. Admittedly, it is probably not surprising that the fund’s current yield exceeds that of an index fund. After all, this is the case with most leveraged funds due to the fact that the leverage boosts the effective yield that the fund can earn from its portfolio. However, most fixed-income closed-end funds are not able to achieve a yield that is more than double the yield of the most comparable index. This could suggest that we will want to take a look at the fund’s finances in order to ensure that it is not paying out more in distributions than it can realistically afford....

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