Navigating Complexity: A Deep Dive into the Thrivent High Yield Fund

Well, what a quarter it was, wouldn't you say? Here at the Thrivent High Yield Fund, Q3 2025 certainly kept us on our toes, presenting a mosaic of challenges and opportunities across the fixed-income landscape. We often joke that no two quarters are ever truly alike, and this one was no exception, characterized by a persistent tug-of-war between inflation concerns, evolving interest rate expectations, and, of course, the ever-present narrative surrounding global economic growth. It's a tricky balance, as you can imagine, but our team remained keenly focused on navigating these currents, always with an eye toward delivering consistent value for our investors.

Looking back, the broader high-yield market experienced something of a mixed bag during the third quarter. Initially, there was a palpable sense of optimism, perhaps even a touch of exuberance, as some economic indicators suggested a potential 'soft landing' for the economy. This spurred some tightening in credit spreads, which was certainly welcome. However, as the quarter progressed, we saw a re-emergence of inflationary jitters and, consequently, a renewed hawkish stance from central banks. This shift led to an uptick in longer-term Treasury yields, creating a bit of a headwind for fixed-income assets generally, including parts of the high-yield segment. It truly underscored the importance of active management and granular credit analysis.

So, how did our fund, the Thrivent High Yield Fund, fare amidst all this? I'm pleased to report that our disciplined approach truly shone through. While the overall market saw some fluctuations, our careful security selection and sector positioning helped us maintain a resilient profile. We deliberately tilted our portfolio toward issuers with stronger credit fundamentals, those companies we believe are better equipped to withstand potential economic headwinds and, crucially, service their debt obligations even if conditions become a bit choppier. This wasn't about chasing the highest yield at any cost, but rather about uncovering value where we felt adequately compensated for the risks involved. Our underweight in some of the more interest-rate sensitive sectors, for instance, proved beneficial when yields unexpectedly spiked mid-quarter.

You see, our strategy isn't just about reacting to headlines; it's about anticipating trends and, more importantly, understanding the underlying health of the businesses we invest in. During Q3, we made a few tactical adjustments. We selectively trimmed positions in a couple of industries where we felt credit metrics were beginning to show signs of strain, or where valuations simply no longer offered the margin of safety we demand. Conversely, we identified new opportunities in sectors like specialized industrials and certain parts of the technology infrastructure space, where strong cash flow generation and improving balance sheets presented compelling entry points. We also paid close attention to call risk, mindful of the potential for bonds to be refinanced as market conditions shift.

As we cast our gaze forward beyond Q3 and into the final stretch of 2025, the landscape for high-yield remains intriguing, to say the least. We anticipate continued volatility, particularly as central banks navigate the delicate balance between controlling inflation and supporting economic growth. Credit spreads might widen or tighten based on incoming economic data, but our conviction in fundamental credit research remains unwavering. We believe that companies with robust business models, conservative capital structures, and proven management teams will continue to outperform over the long term. Our focus remains firmly on rigorous bottom-up analysis, seeking out those diamonds in the rough that offer attractive risk-adjusted returns, regardless of the broader market noise. We’re ready for whatever comes our way.