Investors should not look at high-yield corporate bonds as fixed income, but as an alternative to equities, according to Artio Global Investors senior portfolio manager Patrick Maldari.

In the current environment of low global economic growth, high-yield bonds had the potential to deliver better returns than equities at lower volatility, Maldari said.

"Most large-caps strategies try to balance income and total return," he said.

"If you looked, for example, at the S&P 500 [index], over very long periods of time, 40 per cent of its total return was derived from dividends or income and we know that dividends or income-orientated strategies have been an emphasis in this low growth environment.

"We think if the emphasis is on income, why not focus on the asset class that will benefit from a slow growth environment?"

He said when the growth environment was slow, to the point where real gross doemstic product growth was below 3 per cent, it would be evident that credit had done well relative to traditional equity or even alternatives.

High-yield bonds had sustained reputation damage, due to the term 'junk bond', but although those bonds were certainly more risky than traditional fixed income, they were less risky than equities, he said.

"High yield is probably one of the most misunderstood asset classes," he said.

"It is senior to equity. The first loss piece when a company goes bankrupt is equity.

"I think the term 'junk bond' has created this aura around the sector that it is some riskier assets, in fact, it is not as risky as equities, and because it has so much income there is the ability to mitigate a lot of the volatility when it comes to interest rate risk or credit risk."

He said the returns of global high-yield bonds combined with the return of a US dollar currency overlay could generate healthy returns for Australian investors.

"For Australian investors that look to hedge back the foreign currency to local currency, they can pick up an additional 350 to 400 basis points, add that to the yield of the asset class and we are looking at low double-digit returns," he said.

Artio set up in Sydney in July this year and hired former Axa Rosenberg Investment Management co-head of Australia Ian Webber to manage the office.

The firm managed US$4.3 billion in high-yield assets as at the end of October and US$ 49.2 billion in total assets as of May 2011.