What are fallen angels?

It is a terms used in financial sector to describe bonds that have been downgraded from investment grade ratings. They still provide good returns and on average, have historically outperformed the broad high yield corporates market.

Is now a good time to invest in a Fallen Angels ETF?

The pandemic caused a lot of economic distress which has lead to a lot of well-known companies being downgraded. The price of these bonds fell down even more because institutional investors were forced to sell off these securities as they are restricted by mandates to only allow investments in the investment-grade bonds universe only.

What are the risks of investing in a Fallen Angels ETF?

A portion of Fallen Angels ETF is being invested in securities that are denominated in foreign currencies. This exposure makes the returns of the fund susceptible to changes in exchange rates between the base and foreign currency. This is only one of the risks associated with investing in Fallen Angels ETF.

Fallen Angels ETF

Access to Corporate Bonds Downgraded to High Yield

ETF Video

VanEck Fallen Angel ETF allows a diversified access to corporate bonds originally issued as investment grade and then downgraded to high yield. A strategy with a strong track-record offering a contrarian sector exposure and leveraging a potentially oversold market dynamic. Opportunity to choose between the global or the US domestic market.

We Offer Global Fallen Angel ETF

VanEck Global Fallen Angel High Yield Bond UCITS ETF

Exposure to global fallen angels bonds with a pure-play approach
Diversification among countries, currencies and sectors
Reinvestment of income
0.4% total expense ratio

ETF Details

Basis-Ticker: GFA
ISIN: IE00BF540Z61
TER: 0.40%
AUM: $39492192.6 (as of 05-12-2023)
SFDR Classification: Article 6

Lower risk

Higher risk

Typically lower reward

Typically higher reward

VanEck US Fallen Angel High Yield Bond UCITS ETF

Exposure to usd denominated fallen angel bonds issued in the us domestic market
Strategy leveraging a contrarian approach and an oversold market dynamic
Reinvestment of income
0.35% total expense ratio

ETF Details

Basis-Ticker: USFA
ISIN: IE000J6CHW80
TER: 0.35%
AUM: $5283960.1 (as of 05-12-2023)
SFDR Classification: Article 6

Lower risk

Higher risk

Typically lower reward

Typically higher reward

What Makes a Fallen Angels ETF Special?

Fallen angels, on average, have historically outperformed the broad high yield corporate bonds market.¹Access this outperformance through a Fallen Angels ETF.

¹ When comparing ICE BofAML Global Fallen Angel High Yield Index and ICE BofAML Global High Yield Index over 3, 5 and 10 year periods. Parameters taken into consideration are credit quality, total return and annualised return. Past performance is not indicative of future results. Data starting at 31 December 2004.

The Opportunity Offered by Fallen Angels Bonds

The strategy adopted by a Fallen Angels ETF leverages a contrarian approach: corporate bonds that have just been downgraded to high yield, oftentimes come from sectors undergoing economic turmoil. Examples include the financial services sector in the aftermath of the Global Financial Crisis or the energy sector after the oil price collapse in 2014.

Investing in fallen angels bonds means exploiting an historically proven market anomaly. Many institutional investors are required to hold only investment grade securities. Accordingly, when the downgrade takes place, an excessive selling pressure might be present, leading to a potential undervaluation. Outperformance may occur, if so called “rising stars” regain investment grade status. Historically, fallen angels have exhibited a stronger tendency to be upgraded again, than the broad US high yield spectrum.

Global Fallen Angel Universe
As visible from the following graph the number of global fallen

Consistent Historical Outperformance
Fallen Angels consistently outperform the broad High Yield

Higher Credit Quality
Fallen Angels present on average a higher credit quality

Diversification
The global Fallen Angels portfolio provides investors...

Key Documents and Links

Fact sheet

KID

Prospectus

Fund page

Main Risk Factors of a Fallen Angels ETF

Foreign Currency Risk
Emerging Markets Risk
High Yield Securities Risk

Because all or a portion of a Fallen Angels ETF is being invested in securities denominated in foreign currencies, the Fund’s exposure to foreign currencies and changes in the value of foreign currencies versus the base currency may result in reduced returns for the Fund, and the value of certain foreign currencies may be subject to a high degree of fluctuation.

Investments in emerging market countries are subject to specific risks and securities are generally less liquid and less efficient and securities markets may be less well regulated. Specific risks may be heightened by currency fluctuations and exchange control; imposition of restrictions on the repatriation of funds or other assets; governmental interference; higher inflation; social, economic and political uncertainties. That is one of the key risk factors of a Fallen Angels ETF.

The prices of junk bonds are likely to be more sensitive to adverse economic changes or individual issuer developments than higher rated securities possibly leading to junk bond issuers not being able to service their principal and interest payment obligations. The secondary market for securities that are junk bonds may be less liquid than the markets for higher quality securities. This is another risk factor of a Fallen Angels ETF.

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Please contact us for more information:

Phone: +41 (0)44 562 40 65
Email: EMEAinfo@vaneck.com