Three Best Bond Funds for Income Growth: A Guide to High-Yield Opportunities

Are you looking for reliable investment options that balance income generation with manageable risk? High-yield bond funds represent some of the best bond funds available for investors seeking better returns than traditional investment-grade securities. These funds excel at what they do because they hold diverse portfolios of below-investment-grade debt instruments, naturally spreading risk across multiple securities rather than concentrating it in a single position. The result? Portfolio diversification that doesn’t compromise on yield potential.

Why High-Yield Bond Funds Matter for Your Portfolio

For most investors, navigating the bond market means choosing between safety and returns—but high-yield securities offer a more nuanced approach. These funds invest in bonds rated below investment grade (sometimes called “junk bonds”), which offer substantially higher yields than their safer counterparts. The beauty of this strategy lies in the portfolio construction: instead of holding a single risky bond, you’re holding dozens or hundreds, each with different credit profiles and maturity dates.

High-yield bonds also demonstrate interesting resilience against interest rate changes. Since their returns come primarily from credit spreads rather than coupon rates, rising interest rates don’t necessarily hammer your portfolio the way they might with investment-grade bonds. This characteristic makes them particularly valuable during periods of monetary policy uncertainty.

PIMCO High Yield Spectrum: Leading the Pack with 10.1% Returns

PIMCO High Yield Spectrum (PHSAX) stands out as one of the best bond funds in its category, combining sophisticated investment strategies with solid performance. This fund invests predominantly in high-yield bonds, including convertible securities, warrants, and forward contracts. The investment team doesn’t limit itself to traditional bonds—they actively use derivatives and swap agreements to optimize returns and manage credit exposure.

As of Q3 2025, PHSAX maintained 71.1% of net assets in miscellaneous bonds, with three-year annualized returns reaching 10.1%. The fund’s systematic approach to combining traditional high-yield securities with derivative strategies positions it as a dynamic option for income-focused investors.

Nuveen High Yield Income Fund: Diversified Below-Investment-Grade Exposure

Nuveen High Yield Income Fund (NCOAX) takes a more straightforward approach to high-yield investing, concentrating on below-investment-grade debt instruments issued by both domestic and foreign companies. The fund has the flexibility to utilize borrowings to enhance returns and isn’t limited to only rated bonds—managers actively evaluate unrated securities they believe meet comparable quality standards.

Delivering three-year annualized returns of 9.9%, NCOAX maintains an expense ratio of 1%, making it among the more cost-efficient best bond funds available. The fund’s disciplined approach to unrated securities evaluation adds an extra layer of due diligence that many investors appreciate.

Manning & Napier High Yield Bond Series: Comprehensive Fixed-Income Strategy

Manning & Napier High Yield Bond Series (MNHYX) rounds out this trio with a versatile investment framework. Beyond below-investment-grade bonds, the fund utilizes ETFs, bank loans, and other derivative instruments with similar economic characteristics. This flexibility extends the strategy to include U.S. dollar-denominated fixed-income securities from both U.S. and foreign issuers, including emerging market opportunities.

Scott Friedman has managed MNHYX since March 2021, bringing consistent leadership to the fund. With three-year annualized returns of 9.8%, the fund appeals to investors seeking broad exposure to the high-yield universe without excessive concentration in any single security type.

Comparing the Three Best Performers: Key Metrics at a Glance

When evaluating the best bond funds for your portfolio, quick comparisons help clarify differences:

Performance Leadership: PHSAX leads with 10.1% annualized returns, followed by NCOAX at 9.9% and MNHYX at 9.8%—a relatively tight clustering that suggests consistent market conditions across these fund categories.

Investment Approach: PHSAX emphasizes derivatives and sophisticated strategies, NCOAX maintains disciplined debt evaluation with opportunity for leverage, and MNHYX provides broad diversification through multiple asset types including bank loans and ETFs.

Cost Efficiency: NCOAX explicitly discloses a 1% expense ratio, representing competitive pricing in the high-yield fund space. The other funds’ expense ratios weren’t specified in their profiles but remain competitive.

Management Philosophy: Each fund reflects its parent company’s distinctive approach—from PIMCO’s derivatives expertise to Nuveen’s fundamental evaluation methods to Manning & Napier’s multi-asset flexibility.

How to Get Started with the Best Bond Funds for Your Goals

Choosing among the best bond funds means aligning your income needs with your risk tolerance. The three funds highlighted here have all demonstrated strong performance metrics and earned recognition from investment research organizations.

For investors prioritizing maximum current yield, PHSAX’s 10.1% return may appeal most. Those seeking a balance of yield and cost-efficiency might prefer NCOAX’s explicit 1% expense ratio. Investors wanting the broadest high-yield exposure could favor MNHYX’s multi-strategy approach.

Begin by clarifying your specific goals: Are you seeking monthly income, capital appreciation potential, or a blend? How much portfolio volatility can you comfortably tolerate? These questions will guide you toward the best bond funds for your individual situation. Consider consulting with a financial advisor to ensure high-yield bond funds fit appropriately within your broader investment strategy.