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Can Fallen Angel ETFs Strike the Right Mix of Risk and Reward?
The
ANGL seeks to replicate as closely as possible the price and yield performance of the ICE BofAML US Fallen Angel High Yield Index. The index is comprised of below investment grade corporate bonds denominated in U.S. dollars that were rated investment grade at the time of issuance.
In fact, ANGL is all the more useful at a time when 10-year Treasury yields are rising. Historical data confirm as much.
“While rising rates are generally negative for rate sensitive asset classes like fallen angel high yield bonds, the reason behind the latest rate moves may provide support for fallen angels,” writes VanEck analyst Nicholas Fonseca. “Historically, the fallen angels index has provided positive returns and outperformance vs the broad high yield index in most rising rate periods. Higher rates reflect expectations for stronger growth, which is generally positive for high yield bonds. The fallen angels index, in parti
The Consistency of Fallen Angel High Yield Bond Returns
By William Sokol, Senior ETF Product Manager
After essentially completing a market cycle in just three quarters in 2020, high yield spreads are back below historical averages and yields are as low as they’ve ever been. High yield investors may be asking what might drive performance going forward, and how to navigate an environment characterized by both tight spreads and higher corporate leverage, as well as continued low rates in the face of higher economic growth. We believe that in this uncertain environment, high yield investors should be selective and focus on fallen angel bonds which are bonds originally issued with investment grade ratings as a potential source of outperformance relative to the broad high yield bond market. Fallen angels have provided outperformance in 13 of the last 17 calendar years, a level of consistency that we believe may be attractive in a changing market environment such as the one we are curre
February 19, 2021
Investors are often lead to believe that bonds are steady investments. They can also be wired to think that junk bonds are exceptionally volatile.
Yet many fallen angels funds like the
ANGL seeks to replicate as closely as possible the price and yield performance of the ICE BofAML US Fallen Angel High Yield Index. The index is comprised of below investment grade corporate bonds denominated in U.S. dollars that were rated investment grade at the time of issuance.
“We believe that in this uncertain environment, high yield investors should be selective and focus on fallen angel bonds which are bonds originally issued with investment grade ratings as a potential source of outperformance relative to the broad high yield bond market,” writes William Sokol, VanEck senior ETF product manager. “Fallen angels have provided outperformance in 13 of the last 17 calendar years, a level of consistency that we believe may be attractive in a changing market environment
New Angles on the ANGL ETF: Improving Credit Quality for Investors
Part of the allure of fallen angel bonds and the
ANGL seeks to replicate as closely as possible the price and yield performance of the ICE BofAML US Fallen Angel High Yield Index. The index is comprised of below investment grade corporate bonds denominated in U.S. dollars that were rated investment grade at the time of issuance.
“Credit ratings upgrades from high yield to investment grade (“rising stars”) may provide a more meaningful source of value for high yield investors this year compared to 2020, given expectations for US economic growth to accelerate this year,” writes VanEck analyst Nicholas Fonseca.