HYF Managed High Yield Plus Fund, Inc.

Managed High Yield Plus Fund Inc. (NYSE:HYF) (the “Fund”) is a closed-end management investment company seeking high income, and secondarily, capital appreciation, primarily through investments in lower- rated, income-producing debt and related equity securities.

Fund Commentary for the first quarter of 2015 from UBS Global Asset Management (Americas) Inc. (“UBS Global AM”), the Fund’s investment manager

Market review

The overall US fixed income market posted a positive return during the first quarter. Treasury yields fluctuated amid a background of mixed economic data, the sharply rising US dollar, strong international demand, benign inflation and uncertainties regarding future Federal Reserve Board (the "Fed") monetary policy. All told, the yield on the two-year Treasury fell from 0.67% to 0.56%, whereas the yield on the 10-year Treasury moved from 2.17% to 1.94% during the first quarter. As expected, at its meeting in March, the Fed removed the word "patient" from its official statement regarding when it may start raising interest rates. However, Fed Chair Janet Yellen pointed out that, "…just because we removed the word “patient” from the statement doesn’t mean we are going to be impatient."

The overall US bond market, as measured by the Barclays US Aggregate Index, gained 1.61% during the first quarter.1 Most US spread sectors posted positive total returns during the period, as they were supported by overall solid demand and declining Treasury yields.2 For the quarter, the BofA Merrill Lynch US High Yield Cash Pay Constrained Index (the “Index”) gained 2.52%.3 From a ratings perspective, BB-rated high yield debt generated the best results, as that segment of the Index gained 2.69% for the quarter. Elsewhere B-rated and CCC-rated securities in the Index rose 2.66% and 1.55%, respectively.4

Performance review

The Fund posted a net asset value total return of 3.79% and a market price total return of 8.93% for the first quarter of 2015. On a net asset value basis, the Fund outperformed the Index, which, as previously stated, gained 2.52% for the quarter.

The Fund’s allocations to the printing and publishing, metals and mining, and chemical sectors were the largest contributors to performance during the quarter. In a turnaround from the fourth quarter of 2014, the Fund's energy sector exposure was additive for performance over the first three months of 2015. This occurred as oil prices appeared to stabilize in February. Finally, the use of leverage enhanced the Fund's results given positive performance from the overall high yield market. On the downside, the Fund's allocations to the food and beverage, services and health care sectors were the largest drags on returns for the quarter.

Outlook

US economic data released since the beginning of the year has been rather mixed. Our expectation is for a moderate positive growth outlook, which remains broadly supportive of the high yield market. While recent results have been broadly aligned with our expectations, the outlook for fundamentals has deteriorated recently, reinforcing our belief that the credit quality trend is now past its peak. In terms of defaults, we expect the default rate to continue to remain below the long-term average. However, depending on the price of oil, we might see an uptick in defaults in certain sectors of high yield debt in the US. Liquidity and volatility remain some of the major risks in the high yield market, as transaction costs continue to be elevated. We do not expect liquidity and volatility to recover to pre-financial crisis levels as dealer balance sheet inventory remains low.

 

 

Portfolio statistics as of March 31, 20155

  Top ten corporate bonds, including coupon and maturity   Percentage of total portfolio assets SquareTwo Financial Corp., 11.625%, 04/01/17   1.2% International Lease Finance Corp., 7.125%, 09/01/18   1.1 Sabine Pass Liquefaction LLC, 5.625%, 02/01/21   1.1 First Data Corp., 12.625%, 01/15/21   1.0 Hecla Mining Co., 6.875%, 05/01/21   1.0 Pacific Drilling SA, 7.250%, 12/01/17   0.9 DISH DBS Corp., 7.875%, 09/01/19   0.9 Intelsat Jackson Holdings SA, 7.250%, 10/15/20   0.8 Ineos Group Holdings PLC 6.125%, 08/15/18   0.7 NRG Energy, Inc. 6.250%, 07/15/22   0.7      

Top five industries

 

Percentage of total portfolio assets

Energy - exploration & production   6.9% Media - cable & satellite TV   6.3 Support - services   4.9 Building materials   4.3 Consumer/commercial/lease financing   4.2       Credit quality6   Percentage of total portfolio assets BB- or higher   43.5% B   44.2 CCC+ and lower   9.4 Cash equivalents   2.4 Not Rated   0.5 Total   100.0       Characteristics     Net asset value per share7   $2.17 Market price per share7   $1.92 Weighted average life   5.29 yrs Weighted average life to maturity   6.70 yrs Duration8   4.20 yrs Duration-leverage adjusted8   5.92 yrs Leverage9   29.00%  

Any performance information reflects the deduction of the Fund’s fees and expenses, as indicated in its shareholder reports, such as investment advisory and administration fees, custody fees, exchange listing fees, etc. It does not reflect any transaction charges that a shareholder may incur when (s)he buys or sells shares (e.g., a shareholder’s brokerage commissions).

Disclaimers Regarding Fund Commentary - The Fund Commentary is intended to assist shareholders in understanding how the Fund performed during the period noted. The views and opinions were current as of the date of this press release. They are not guarantees of performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and the Fund and UBS Global AM reserve the right to change views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund’s future investment intent.

Past performance does not predict future performance. The return and value of an investment will fluctuate so that an investor's shares, when sold, may be worth more or less than their original cost. Any Fund net asset value ("NAV") returns cited in a Fund Commentary assume, for illustration only, that dividends and other distributions, if any, were reinvested at the NAV on the payable dates. Any Fund market price returns cited in a Fund Commentary assume that all dividends and other distributions, if any, were reinvested at prices obtained under the Fund's Dividend Reinvestment Plan. Returns for periods of less than one year have not been annualized. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends and other distributions, if any, or on the sale of Fund shares.

Investing in the Fund entails specific risks, such as interest rate risk, the greater credit risks inherent in investing primarily in lower-rated, higher-yielding bonds as well as the increased risk of using leverage (that is, borrowing money to invest in additional portfolio securities). Further detailed information regarding the Fund, including a discussion of principal objectives, principal investment strategies and principal risks, may be found in the fund overview located at http://www.ubs.com/closedendfundsinfo. You may also request copies of the fund overview by calling the Closed-End Funds Desk at 888-793 8637.

©UBS 2015. All rights reserved.

The key symbol and UBS are among the registered and unregistered trademarks of UBS

  1 The Barclays US Aggregate Index is an unmanaged broad-based index designed to measure the US dollar-denominated, investment grade, taxable bond market. The index includes bonds from the Treasury, government-related, corporate, mortgage-backed, asset-backed and commercial mortgage-backed sectors. The index is not leveraged. Investors should note that indices do not reflect the deduction of fees and expenses. 2 A spread sector refers to non-government fixed income sectors, such as investment grade or high yield bonds, commercial mortgage-backed securities (CMBS), etc. 3 The BofA Merrill Lynch US High Yield Cash Pay Constrained Index is an unmanaged index of publicly placed nonconvertible, coupon-bearing US dollar-denominated below investment grade corporate debt with a term to maturity of at least one year. The index is market-capitalization weighted, so that larger bond issuers have a greater effect on the index’s return. However, the representation of any single bond issue is restricted to a maximum of 2% of the total index. The index is not leveraged. Investors should note that indices do not reflect the deduction of fees and expenses. 4

Credit ratings range from AAA, being the highest, to D, being the lowest when based on ratings assigned by Standard & Poor's Financial Services LLC, a part of McGraw-Hill Financial ("S&P"). Ratings of BBB or higher are considered to be investment grade quality. Further information regarding S&P's rating methodology may be found on its website at www.standardandpoors.com.

5 The Fund's portfolio is actively managed, and its portfolio composition will vary over time. 6

Credit quality ratings shown in the table are based on those assigned by Standard & Poor’s Financial Services LLC, a part of McGraw-Hill Financial (“S&P”), to individual portfolio holdings. S&P is an independent ratings agency. Credit ratings range from AAA, being the highest, to D, being the lowest based on S&P’s measures; ratings of BBB or higher are considered to be investment grade quality. Unrated securities do not necessarily indicate low quality. Further information regarding S&P’s rating methodology may be found on its website at www.standardandpoors.com. Please note that any references to credit quality made in the commentary preceding the table may reflect ratings based on multiple providers (not just S&P) and thus may not align with the data represented in this table.

7 Net asset value (NAV) and market price will fluctuate. 8 Duration is a measure of price sensitivity of a fixed income investment or portfolio (expressed as % change in price) to a 1 percentage point (i.e., 100 basis points) change in interest rates, accounting for optionality in bonds such as prepayment risk and call/put features. Duration is unadjusted for leverage. Duration-leverage adjusted is estimated by dividing duration by an amount equal to 1 minus the leverage percentage. 9 As a percentage of adjusted assets. Adjusted net assets equals total assets minus liabilities, excluding liabilities for borrowed money.  

UBS Global Asset ManagementClosed-End Funds Desk: 888-793-8637ubs.com