Why consider high yield bonds?

Because of their low correlation with other asset classes, high yield bonds have the potential to enhance a portfolio’s level of diversification. As the chart below indicates, high yield bonds have a modest correlation to stocks and a low correlation to their investment grade peers.

Correlation of high yield bonds to large-cap stocks and investment grade bonds
(June 30, 1983 – Dec. 31, 2011)

  High yield bonds
(Barclays Capital U.S. Corporate High-Yield Index)
High yield bonds (Barclays Capital U.S. Corporate High-Yield Index) 1.00
Large-cap stocks (S&P 500® Index) 0.58
Investment grade bonds (Barclays Capital U.S. Aggregate Index) 0.29

Source: Morningstar Direct (Dec. 2011)

Correlation is a statistical measure of the degree to which two securities (or indices) move in relation to each other.

A correlation coefficient of 1.00 means that asset classes move in perfect unison with each other, while lower numbers indicate a diminished tendency to move together.

Past performance does not guarantee future results.

To learn more about the potential benefits as well as the risks of high yield bonds, and to determine if they may be suitable for you, contact your financial advisor today.

The Barclays Capital US Corporate High-Yield Index is composed of U.S. dollar–denominated, noninvestment grade corporate bonds for which the middle rating among Moody’s Investors Service, Inc., Fitch, Inc., and Standard & Poor’s is Ba1/BB+/BB+, respectively, or below. The Barclays Capital US Aggregate Index is a broad composite of more than 8,000 securities that tracks the investment grade domestic bond market. The S&P 500 Index measures the performance of 500 mostly large-cap stocks weighted by market value, and is often used to represent performance of the US stock market. Index performance returns do not reflect any management fees, transaction costs, or expenses. Indices are unmanaged and one cannot invest directly in an index.

All third-party marks cited are the property of their respective owners.

Carefully consider the Fund’s investment objectives, risk factors, charges, and expenses before investing. This and other information can be found in the Fund’s prospectus and its summary prospectus, which may be obtained by visiting delawarefunds.com/literature or calling 800 523-1918. Investors should read the prospectus and the summary prospectus carefully before investing.


Investing involves risk, including the possible loss of principal.

Fixed income securities and bond funds can lose value, and investors can lose principal, as interest rates rise. They also may be affected by economic conditions that hinder an issuer’s ability to make interest and principal payments on its debt.

The Fund may also be subject to prepayment risk, the risk that the principal of a bond that is held by a portfolio will be prepaid prior to maturity, at the time when interest rates are lower than what the bond was paying. A portfolio may then have to reinvest that money at a lower interest rate.

Interest payments on inflation-indexed debt securities will vary as the principal and/or interest is adjusted for inflation.

High yielding, non-investment-grade bonds (junk bonds) involve higher risk than investment grade bonds. The high yield secondary market is particularly susceptible to liquidity problems when institutional investors, such as mutual funds and certain other financial institutions, temporarily stop buying bonds for regulatory, financial, or other reasons. In addition, a less liquid secondary market makes it more difficult for a fund to obtain precise valuations of the high yield securities in its portfolio.

International investments entail risks not ordinarily associated with US investments including fluctuation in currency values, differences in accounting principles, or economic or political instability in other nations. Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility and lower trading volume. If and when the Fund invests in forward foreign currency contracts or uses other investments to hedge against currency risks, the Fund will be subject to special risks, including counterparty risk.

The Funds may invest in derivatives, which may involve additional expenses and are subject to risk, including the risk that an underlying security or securities index moves in the opposite direction from what the portfolio manager anticipated. A derivatives transaction depends upon the counterparties’ ability to fulfill their contractual obligations.

Diversification may not protect against market risk.