High-yield managers continued to assert their dominance over their peers, claiming the top 10 spots among highest performing fixed-income strategies for both the one- and five-year periods ended June 30.

The performance data comes from the Morning¬star Separate Account/Commingled Fund Database.

For the year ended June 30, the top 10 performers in the composite U.S. taxable bond category — which includes nearly all domestic bond strategies in the market — were all high-yield strategies. In the two previous quarters, nine out of the top 10 performers in the 12-month rankings also were high-yield managers.

High-yield strategies also locked down all 10 top spots for the five-year period.

ABN AMRO’s U.S. High Income Property Strategy had the top performance for both the 12-month and five-year periods ended June 30, returning 24.5% for the year and a compound annualized 26% for the five years.

Advisor’s Asset Management, Monument, Colo. had the second-best performance for the year with 23.7%, followed by Pioneer Investment Management, Boston, with 16.2%. Seix Advisors, Upper Saddle River, N.J. was fourth with 15%, followed by Denver Investment Advisors. Denver, with 14.5%.

The top 10 was rounded out by DDJ Capital Management LLC. Waltham, Mass. with 14.1%; Loomis, Sayles & Co. Boston, with 14%, Wellington Management Co. Boston, 14%, PENN Capital Management Inc. Cherry Hill, N.J. with 13.8% and Delaware Investments. Philadelphia, with 13.5%.

High-yield managers generally performed well during the 12-month period. The median high-yield strategy returned 10.97% while the overall median fixed-income strategy returned 6.18%. The Lehman Brothers U.S. Government/Credit Bond Index returned 6% over the same time period.

But many of the top performing high-yield managers say they bested their competition by having the freedom to invest outside the parameters of the high-yield asset class. The top performers also gave credit to their analysts.

“In high yield, it’s 100% the analysts that make or break you,” said Scott Colyer, president and chief investment officer of Advisor’s Asset Management.

Advisor’s strategy was helped by an alpha-producing component. While about 75% to 80% of the portfolio is invested in traditional high-yield securities, the remainder is invested in alpha-producing opportunities such as commodities, convertible bonds or other bonds in distressed situations. “It’s an aggressive discipline, so we can take more risk than a more conservative (high-yield) account,” Mr. Colyer said.

Pioneer Investment Management’s high-yield strategy also benefited from being able to invest a portion of the portfolio outside of high-yield bonds, said Tracy Wright, portfolio manager. The strategy invests 14% in equity and 22% in convertible bonds.

Like Mr. Colyer, Ms. Wright attributed outperformance to Pioneer’s analysts. “Our analyst team is very senior,” she said, noting that the most junior analyst has 12 years’ experience. She said going through full market cycles helps analysts. “The last downturn was in 2002. Five years ago is a long time. Everyone has been here through a couple of cycles.”

ABN AMRO executives declined to talk about their strategy, which had the top performance among fixed-income managers.

Foreign boost

Loomis Sayles has 20% of its portfolio invested outside of the U.S. Those investments boosted performance significantly, said Matthew Eagan, vice president and portfolio manager for the strategy. Sovereign debt issued by the Brazilian government “was one of our biggest non-dollar holdings,” Mr. Eagan said.

Mr. Eagan cited Canadian company Bombardier Inc. and Irish biotechnology company Elan Corp. PLC as particularly high-performing bonds. Elan had developed a drug to treat multiple sclerosis that was pulled off the market. Now that drug is back on the market — with a required warning on the label — and the company has a couple of other new drugs coming out. “People are becoming more comfortable with their story now,” Mr. Eagan said.

In the U.S. Mr. Eagan found bonds issued by Goodyear Tire and Rubber Co. Akron, Ohio, to be undervalued. “They’re coming off tough times and struck a positive agreement with their union, causing strong performance,” he said.

DDJ Capital Management executives attributed their performance to the fact their strategy focuses on lower quality bonds in the high-yield market, typically B and CCC bonds. “This is the more inefficient segment of the high-yield market,” said David J. Breazzano, principal and co-founder of the firm.

Those bonds tend to be less correlated to macroeconomic factors like interest rate swings or movements in credit spreads, making performance more consistent, Mr. Breazzano said. “Our belief is that year in and year out, we can identify 60 to 80 issuers that will outperform the market on a consistent basis,” he said.

Short duration

Over the past year, DDJ Capital has kept duration short in its portfolio and made sure the companies can weather a credit crunch. “When spreads are at historical lows, that’s a time to be very conservative,” Mr. Breazzano said.

For the five-year period in the U.S. taxable bond category, ABN AMRO was first with 26%, followed by AllianceBernstein (AB ) LP (AB ), New York, with 19.2%. The top five spots were rounded out by two strategies run by SMH Capital Advisors, Fort Worth, Texas, with returns of 18.9% and 17.7%, and the DDJ Capital strategy, which returned 17.5%. All returns of more than one year are compound annualized.

The median five-year return for managers in the U.S. taxable bond category was 4.73%. The Lehman Brothers U.S. Government/Credit Bond Index returned 4.7% over the same time period.

High-yield managers also dominated the fixed-income collective trust portion of the Morningstar study, taking all 10 top spots for the year and the top nine spots for the five-year period. The median fixed income collective trust returned 6.15% during the past year and 4.7% for the five years.

One-year performance in that category was led by General Motors Asset Management, New York, with 13.4%; Putnam Investments. Boston, with 12.8%; Pyramis Global Advisors. Boston with 12.3%; Capital Guardian Trust Co.. Los Angeles, 11.8%; and Bradford & Marzec Inc.. Los Angeles, with 11.7%.

Five-year performance in the fixed-income collective trust portion of Morningstar data was also led by General Motors with 13%, followed by Pyramis with 12%; Capital Guardian with 11.7%; and two strategies from TCW Group. Los Angeles, with 10.5% and 10.2%.

While it has been a dominating run for high-yield managers, that might change for the current quarter. “July was one of the worst sell-offs in the high-yield market,” said Loomis Sayles’ Mr. Eagan.

While the performance of high-yield strategies is expected to generally decline, managers remained optimistic about the high-yield market over a longer time horizon. “Long term, high yield is still an attractive asset class in the fixed-income sector because of low default rates and strong economic growth,” said Pioneer’s Ms. Wright.