As the Corporate Cycle Matures, U.S. Consumers Tighten the Belt

Voya’s fixed income suite provides multiple ways to access the relative strength of the U.S. consumer.

New Cycle, New Risks

Overleveraged Consumers Helped Spark the 2008 Crisis – Today It’s Corporations Investors Need to Watch

History rhymes, as the saying goes, but does not repeat. Since the 2008 crisis, U.S. consumer leverage has steadily declined. Corporate leverage, on the other hand, has increased as more than a decade of extraordinarily accommodative Fed policy has fueled a surge of corporate debt issuance.

Consumers Have Largely De-Levered Since 2007

Consumer Debt / Nominal GDP: 2007 – 2019

Consumers Have Largely De-Levered Since 2007

Source: Federal Reserve and Voya Investment Management. As of 09/30/2019. Average as represented by the average of quarterly observations for the period Q1 2003 – Q3 2019.

Changes by Component: 2007 – 2019

Changes by Component: 2007 – 2019

Portfolio Playbook: Overweight Securitized Credit

Securitized Credit Offers Broad Exposure to the Relative Strength of the U.S. Consumer

In our multi-sector fixed income portfolios, we believe securitized credit, with its U.S. focused, consumer and real estate centric risk drivers, is an effective way to diversify a portfolio otherwise dominated by corporate credit debt. For investors seeking standalone exposure, the Voya Securitized Credit Fund tactically invests across the full spectrum of securitized credit.

Multiple Ways to Access the U.S. Consumer

Multiple Ways to Access the U.S. Consumer

Source: Voya Investment Management. As of 12/31/2019. Note: Intermediate Bond and Strategic Income Opportunities Funds invest across the full spectrum of fixed income markets. The weights above only reflect securitized allocations and do not account for the funds’ investments in corporate bonds, Treasuries and emerging market debt securities. The Securitized Credit Fund invests exclusively in the securitized market (numbers do not sum to 100% because of an allocation to Cash/Treasuries).

It’s A Bond Picker’s World: Corporate Credit Risk is More Nuanced than Headlines Imply

While corporate credit risk is undoubtedly elevated, we believe risk is idiosyncratic, not systemic. For example, among corporations, the sharp spike in recent leverage is coming from companies that are levering from a very low base. Leverage trends for highly leveraged companies are sideways, meaning companies with a lot of leverage are not adding more.

In our portfolios, this view has enabled us to take advantage of volatility. When credit volatility spiked in 4Q18, we bought into this weakness and increased our exposure to both IG Corporates and High Yield. While we remain underweight relative to securitized credit, we continue to view volatile credit markets as fertile ground for identifying oversold individual bonds with strong fundamentals.

“Fear-based” Selling Creates Opportunities to Purchase Oversold Credits

High Yield and IG Credit Spreads (Combined OAS)*

High Yield and IG Credit Spreads (Combined OAS)*

*Represents the sum of OAS for the Bloomberg Barclays HY 2% Issuer Capped Index and Bloomberg Barclays U.S. Corporate Index.

Source: Bloomberg Barclays, Voya Investment Management. As of 12/31/2019. Fund allocations to “credit” defined as IG credit and high yield.

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Past performance is no guarantee of future results. Principal Risks: Voya Securitized Credit Fund. All investing involves risks of fluctuating prices and the uncertainties of rates of return and yield inherent in investing. High-Yield Securities, or “junk bonds”, are rated lower than investment-grade bonds because there is a greater possibility that the issuer may be unable to make interest and principal payments on those securities. To the extent that the Fund invests in Mortgage-Related Securities, its exposure to prepayment and extension risks may be greater than investments in other fixed-income securities. The Fund may use Derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses and have a potentially large impact on Fund performance. Foreign Investing does pose special risks including currency fluctuation, economic and political risks not found in investments that are solely domestic. As Interest Rates rise, bond prices fall, reducing the value of the Fund’s share price. Other risks of the Fund include but are not limited to: Credit Risks; Credit Default Swaps; Currency; Interest in Loans; Liquidity; Other Investment Companies’ Risks; Prepayment and Extension; Price Volatility Risks; U.S. Government Securities and Obligations; Sovereign Debt; and Securities Lending Risks.

Principal Risks: Voya Strategic Income Opportunities Fund. All investing involves risks of fluctuating prices and the uncertainties of rates of return and yield inherent in investing. Foreign Investing does pose special risks including currency fluctuation, economic and political risks not found in investments that are solely domestic. Emerging Market securities may be especially volatile. The Fund may use Derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses and have a potentially large impact on Fund performance. The Fund is subject to both Credit and Interest Rate Risk. The Fund’s share price and yield will be affected by interest rate movements, with bond prices generally moving in the opposite direction from interest rates. Credit Risk refers to the bond issuers and senior loan issuers ability to make timely payments of principal and interest. High-Yield Securities, or junk bonds are rated lower than investmentgrade bonds because there is a greater possibility that the issuer may be unable to make interest and principal payments on those securities. To the extent that the Fund invests in Mortgage-Related Securities, its exposure to prepayment and extension risks may be greater than investments in other fixed-income securities. Other risks of the Fund include but are not limited to: Borrowing/Leverage Risks; Debt Securities Risk; Non-Diversification Risks; Other Investment Companies Risks; Price Volatility Risks; Inability to Sell Securities Risks; Securities Lending Risks; and Portfolio Turnover Risks. Investors should consult the Fund’s Prospectus and Statement of Additional Information for a more detailed discussion of the Fund’s risks.

Principal Risks: Voya Intermediate Bond Fund. All investing involves risks of fluctuating prices and the uncertainties of rates of return and yield inherent in investing. Foreign Investing does pose special risks including currency fluctuation, economic and political risks not found in investments that are solely domestic. Emerging Market securities may be especially volatile. The Fund may use Derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses and have a potentially large impact on Fund performance. The Fund is subject to both Credit and Interest Rate Risk. The Fund’s share price and yield will be affected by interest rate movements, with bond prices generally moving in the opposite direction from interest rates. Credit Risk refers to the bond issuers and senior loan issuers ability to make timely payments of principal and interest. High-Yield Securities, or junk bonds are rated lower than investmentgrade bonds because there is a greater possibility that the issuer may be unable to make interest and principal payments on those securities. To the extent that the Fund invests in Mortgage-Related Securities, its exposure to prepayment and extension risks may be greater than investments in other fixed-income securities. Other risks of the Fund include but are not limited to: Borrowing/Leverage Risks; Debt Securities Risk; Non-Diversification Risks; Other Investment Companies Risks; Price Volatility Risks; Inability to Sell Securities Risks; Securities Lending Risks; and Portfolio Turnover Risks. Investors should consult the Fund’s Prospectus and Statement of Additional Information for a more detailed discussion of the Fund’s risks.

An investor should consider the investment objectives, risks, charges and expenses of the Fund(s) carefully before investing. For a free copy of the Fund’s prospectus, or summary prospectus, which contains this and other information, visit us at www.voyainvestments.com or call (800) 992-0190. Please read the prospectus carefully before investing.

This information is proprietary and cannot be reproduced or distributed. Certain information may be received from sources Voya Investment Management (“Voya IM”) considers reliable; Voya IM does not represent that such information is accurate or complete. Certain statements contained herein may constitute “projections,” “forecasts” and other “forward-looking statements” which do not reflect actual results and are based primarily upon applying retroactively a hypothetical set of assumptions to certain historical financial data. Actual results, performance or events may differ materially from those in such statements. Any opinions, projections, forecasts and forward looking statements presented herein are valid only as of the date of this document and are subject to change. Nothing contained herein should be construed as (i) an offer to buy any security or (ii) a recommendation as to the advisability of investing in, purchasing or selling any security. Voya IM assumes no obligation to update any forward-looking information.

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