Nomura High Income Fund Q1 2026 Commentary
The Nomura High Income Fund underperformed its benchmark in the first quarter of 2026, returning -1.91% compared to the index's -0.55%, as geopolitical tensions and AI-related market volatility weighed on performance. Sector allocations and security selection in media, leisure, and structured products detracted from returns, while energy and healthcare contributed positively. The fund anticipates ongoing pressure on high yield fundamentals due to elevated rates, persistent inflation, and the Middle East conflict. Defensive positioning and rigorous credit selection are expected to be critical in the coming quarters.
- ▪Nomura High Income Fund Institutional Class (IVHIX) returned -1.91% in 1Q2026, underperforming the ICE BofA US High Yield Constrained Index which declined 0.55%.
- ▪Geopolitical events, including Operation Epic Fury and rising Middle East tensions, contributed to market volatility and higher oil prices, reaching $100 per barrel for WTI crude.
- ▪AI-related investor anxiety in February triggered a risk-off environment, increasing return dispersion across high yield sectors and ratings.
- ▪Sector performance varied widely, with energy up 2.46% while paper/packaging fell 4.37%, highlighting the importance of sector selection.
- ▪The 12-month par-weighted US high yield default rate was 2.07% at quarter-end, with expectations for rising defaults in 2026 due to weakening growth and elevated rates.
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