Northeast Investors Trust (the “Trust”) was established in Boston, Massachusetts on March 1, 1950 by Hollis P. Nichols, Richard W. Burgevin and Dexter Newton. Ernest E. Monrad, formerly of the law firm Herrick, Smith, Donald, Farley & Ketchem, joined the Trust in December 1960 and was appointed Trustee.
The Trust is a no-load high-yield bond fund whose primary objective is the production of income and is managed by its Trustees. In the early years, the Trust invested in high yielding equity securities. As bond yields rose and equity yields declined in the mid 60’s, the Trust shifted its focus to high-yield bonds. In the early 70’s, the majority of high-yield bonds that were available for investment were “ fallen angel’s” or “junk bonds” which were downgraded bonds of companies that originally had investment grade ratings.
New issue high-yield bonds were introduced to the marketplace in the late 70’s and this asset class began to prosper. This new market was largely created by Drexel Burnham Lambert, an investment bank whose lead trader was Michael Milken. In the 1980’s, higher interest rates, defaults, scandals and legal issues regarding Drexel soured the asset class.
The Trust’s operations are overseen by its Trustees and the Trustees principally responsible for the day-to-day management of the Trust’s portfolio are Ernest Monrad and Bruce Monrad. Ernest Monrad has served as a Trustee of the Trust since 1960 and served as its Chairman from 1969-2000. Bruce Monrad has been associated with the Trust since July 1989 when he joined the firm as a co-portfolio manager. In May 1993, he was appointed as a Trustee and in May 2000 he was elected Chairman.
Currently the US high-yield bond issuance is over $1.3 trillion, up from $150 billion in 1990. Over 40% of all outstanding corporate debt is high yield. Although high-yield bond investing involves risk, high-yield bonds offer higher income potential versus other investments, defense against rising interest rates & inflation, and diversification to investment portfolios.