2Q26 High Yield Fund Analysis: Funds reduce elevated cash, rotate into BBs, and are close to index in the rapidly growing HPC sector

Research evidence excerpt

2Q26 High Yield Fund Analysis: Funds reduce elevated cash, rotate into BBs, and are close to index in the rapidly growing HPC sector

J P M O R G A N North America Credit Research

22 July 2026

2Q26 High Yield Fund Analysis

Funds reduce elevated cash, rotate into BBs, and are

close to index in the rapidly growing HPC sector

North America Corporate Credit -

Distressed, High Yield and

Leveraged Loans Strategy

Nelson Jantzen, CFA AC

(1-212) 270-1169

nelson.r.jantzen@jpmorgan.com

• Assets: High-yield fund cash balances decreased -23bp q/q in 2Q to 3.51%, US High Yield & Leveraged Loan

which is 6bp above the long-term average (3.46%). The largest quarterly Strategy

inflows since 2Q20 and heavy Rising Star volume helped to offset 2Q’s surge

Tony Linares in net issuance. Meanwhile, HY funds’ allocation to loans decreased -26bp

(1-212) 270-3285

q/q to 3.37%, which is a low since 4Q23 and 24bp below the long-term tony.linares@jpmorgan.com

average. Finally, exposure to alternative assets such as equities, preferred J.P. Morgan Securities LLC

stock, CLOs, convertible bonds, credit derivatives, EM corporate and

sovereigns, and structured notes decreased 5bp q/q to 2.17%.

• Risk profile: Mutual funds became slightly more conservatively

positioned during 2Q and maintain a portfolio yield (7.15%) 10bp below

the HY index. The average portfolio yield has been inside the index for 18

consecutive quarters with only 33% of funds carrying an above benchmark

yield. Notably, HY funds increased their relative exposure to BBs and CCCs

in 2Q and reduced their exposure to Single Bs. For example, MFs increased

exposure to BBs by +35bp q/q relative to index changes, decreased

exposure to Bs by -44bp, and increased exposure to CCCs by +14bp. As