Navigating High-Yield Investing: Insights from Kathryn Glass of Federated Hermes

At Extreme Investor Network, we believe understanding the dynamics of high-yield investing is essential for navigating today’s often volatile market conditions. That’s why we’re excited to highlight the insights of Kathryn Glass, co-head of the high-yield fixed-income group at Federated Hermes. With over 27 years of experience, Glass provides a unique perspective on the challenges and opportunities within the high-yield space, which our readers will find invaluable.

From Literature to High-Yield: A Unique Journey

Kathryn Glass’s career path is anything but conventional. Despite initially pursuing a degree in Japanese language and literature at the University of Pittsburgh and advancing into a Master’s at Cornell, she found her true calling in finance—a testament to the dynamic nature of career trajectories. Dropping out of her Ph.D. program, Glass secured an internship at Federated Hermes, which ultimately led her back to her hometown of Pittsburgh.

At Federated, Glass’s journey began in the municipal bond and money market groups, where her knowledge of Japanese banks proved useful. Her knack for numbers and an innate curiosity about the market enabled her to transition into the high-yield fixed-income group, where she now co-heads a team managing approximately $13 billion in U.S. high-yield fixed income strategies.

The Art of High-Yield Investing: Finding the Right Stories

In the realm of high-yield investing, Glass emphasizes a narrative-driven approach. “High yield, it’s stories,” she explains. This philosophy underscores her team’s investment strategy, which relies heavily on in-depth research and understanding the companies behind the securities. Instead of focusing solely on macroeconomic trends, Glass and her team concentrate on a bottom-up approach, examining balance sheets and management priorities—a method that resembles small-cap equity analysis.

This rigorous dedication to due diligence helps them sift through myriad opportunities, ensuring they identify solid investments while curating a portfolio that’s as agile as it is profitable. “Our job is to get to know the management teams, understand their priorities, and continue to monitor it for the life of the investment,” says Glass, highlighting the importance of ongoing interaction and assessment.

Notably, Federated’s Institutional High Yield Bond Fund (FIHAX) has garnered praise from Morningstar, recognized for its long-tenured management team and unique investment strategies. With a current 30-day SEC yield of 5.96% and a 0.75% net expense ratio, it stands as a strong contender in the competitive landscape of high-yield funds.

Cautious Optimism: The Current Market Landscape

Navigating today’s high-yield market isn’t without its challenges, as Glass candidly remarks on the current tight spreads—the excess return of junk bonds over risk-free Treasurys. “It’s almost a Goldilocks-type scenario,” she says, noting the struggle to find attractive opportunities amid rising valuations.

Her strategic pivot toward lower-spread names emphasizes her team’s adaptability. While these investments still fall under the junk category, the market conditions suggest they are viewed as higher quality issuers. “It’s essential to position ourselves cautiously,” notes Glass, as they await the inevitable buying opportunities that market shocks can trigger.

Glass warns, “We are priced to perfection at this point,” indicating that investors must be vigilant. Her belief in a disciplined approach resonates through her advice on maintaining caution while remaining poised to enter the market aggressively when circumstances shift.

Join the Conversation at Extreme Investor Network

At Extreme Investor Network, we are dedicated to equipping investors with the insights they need to thrive, particularly in challenging environments. As we dissect and interpret trends from seasoned professionals like Kathryn Glass, we invite our readers to engage with us. Explore more of our resources to deepen your understanding of high-yield investing and discover actionable strategies that align with your financial goals.

In a world where the dynamics of investing are always evolving, maintaining an edge is crucial. Familiarize yourself with the intricacies of high-yield investments and prepare to take informed steps towards your financial success. Your journey starts here!