“Demand for high yield has been very strong over the past 12 months and yields have been elevated,” he told WealthBriefing. “It would be difficult to have the same returns that we have had in 2023 and 2024, but I am still quite optimistic about the outlook for 2025,” he said. “Although the coming year will provide opportunities and challenges, the fundamentals are quite sound and the technical conditions favourable.” 

Cane also said that European high yield delivers equity like returns, with much less volatility. They have been a lot higher than for European investment grade. With interest rates coming down, it’s a good time for investors with a higher risk appetite to move out of cash and into high yield.

Cane co-manages the Muzinich European Credit Alpha fund which, since its inception, has given gross returns of 21 per cent ahead of the broad European high yield market.

The fund aims to capture the upside of the European high yield credit market with enhanced downside protection. Cane believes that it provides a good approach to capturing the upside with enhanced downside protection in European high yield, reflected by higher returns through the cycle at lower beta and volatility than the broader market.

He believes that current market conditions favour the fund’s long/short strategy. Elevated yields provide an attractive total return opportunity, while spreads are tight enough to merit careful beta management. Low implied volatility combined with high yields means that it has rarely been cheaper for the fund to hedge as a portion of carry; the aim is to continue to outperform the high yield market, he said.

Muzinich Europeyield Fund
Cane also co-manages the Irish-domiciled Muzinich Europeyield Fund which is classified as Article 8 under the EU’s Sustainable Financial Disclosure Regulation (SFDR). The strategy aims to generate attractive returns by investing mainly in European high yield bonds, denominated in euros and sterling issued by corporations from Europe including Eastern Europe, as well as North America and to a lesser extent emerging markets.

Since its launch in 2000, the fund – which invests mainly in cash bonds – has generated a net 4.49 per cent annualised return, with a volatility of 9.44 per cent.

Nadège Dufossé at Luxembourg-headquartered multi-asset manager Candriam and Philip Saunders and Sahil Mahtani at asset manager Ninety One also favour European credit over the US in 2025. See more commentary here.