Global fixed income fund managers are launching high-yield bond funds in Asia on the premise that these may be the best-positioned asset class under an environment where markets are highly volatile throughout the course of 2019.

At least two asset managers are on their roadshow this week, having launched their high-yield bond strategies in Hong Kong targeting institutional and retail investors. These are Allianz Global Investors and Barings.

All the strategies are premised on a general slowdown in both the global economy and the US economy as well as a dovish Fed and not too aggressive interest rate hikes this year.

High-yield bonds are also an equity-like asset class with the potential to offer comparable returns with lower volatility.

High-yield bonds performed relatively well in 2018 in a market where only cash - particularly the US dollar - performed well, when compared to all other asset classes. The Bloomberg Barclay's U.S. Corporate High Yield Bond Index had a total return of 1.05% and the Credit Suisse Leveraged Loan Index was up 4.46% as of October 11.

"We think that for 2019, we've seen the peak of growth in the US. Are we calling for a recession as our investment team and our outlook for 2019? No. Do we think that growth will be below trend globally? Yes. And I think this is what the market has been pretty much re-pricing region by region," says Malie Conway, chief investment officer for global fixed income at Allianz Global Investors.

Allianz GI has repositioned an old fund that was actually launched in 2015 as the "global government unhedged (in dollars) strategy" into a "total return opportunistic with Libor-plus-400 return" strategy last November 2018.

When asked why the strategy has been repositioned, she replies: "As you know the market was very worried about inflation and the total debt outstanding. And if you look at the global benchmarks, we think that absolute rates will probably rise over the next cycle. So from that perspective if you're tied to a benchmark you might have negative returns."

Because of this Allianz GI wanted to have an opportunistic fund that can ride all market conditions and be very active in terms of asset allocation.

Barings, on the other hand, launched two new high-yield bond funds in Asia. These are the Barings Global High Yield Bond Fund and the Barings Global Senior Secured Bond Fund.

The Barings Global High Yield Bond Fund invests in high-yield fixed and floating rate corporate debt instruments, primarily listed or traded on recognized markets in North America or Europe.

"Relative to other fixed income asset classes – such as loans and investment grade bonds – high yield bonds have over time offered the opportunity to pick up additional yield relative to the perceived incremental credit or default risk," says Martin Horne, head of the global high yield investment group for Barings.

The Barings Global Senior Secured Bond Fund invests mainly in a diversified pool of senior and secured high-yield bond instruments in Europe and the US and is the first-of-its-kind in the Hong Kong retail market.

"While still subject to risks in the event of a default, senior secured high-yield bonds are more senior in the capital structure than traditional high-yield instruments, meaning bondholders are positioned higher during the restructuring process. In addition, this asset class is also backed by issuer collateral or some form of assets," says Horne.

"As a result, it may have a higher recovery rate of principal invested relative to unsecured high-yield bonds. Senior secured high-yield bonds may potentially offer better risk-adjusted returns compared to traditional high yield bonds," Horne says.