Fallen Angel ETFs: A Guide to Investment and Analysis

A fallen angel ETF is essentially a bond fund that invests in bonds that were previously considered investment-grade but have since been downgraded to junk bond status.

These bonds are issued by companies that have experienced financial difficulties, making them riskier investments.

Investing in fallen angel ETFs can be a way to potentially profit from the debt of struggling companies.

The risk is high, but the potential reward can be substantial, making fallen angel ETFs a popular choice among investors seeking high returns.

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Fallen angel bonds were once investment-grade bonds, but their credit rating was downgraded.

They now carry a higher interest rate to compensate for the increased risk.

These bonds were downgraded due to a company's financial difficulties.

Investors who buy fallen angel bonds are essentially taking on more risk in hopes of earning a higher return.

The author of this article has been a high-yield bond skeptic for nearly 30 years.

Take a look at this: Long Duration Bonds

However, they recently initiated a small position in a fallen angel high-yield bond ETF.

This investment is a type of exchange-traded fund (ETF) that tracks a portfolio of fallen angel bonds.

The author's change in investment strategy is a notable example of how investors can adapt to changing market conditions.

The author's experience highlights the importance of staying open-minded and considering new investment opportunities.

Fallen angel bonds can be a way for investors to earn higher yields in a low-interest-rate environment.

However, it's essential to carefully evaluate the risks and potential returns before investing in these bonds.

A different take: Etf Junk Bonds

Fallen angel ETFs focus on bonds that were once investment grade but have been downgraded to junk status due to their issuer's financial trouble. These bonds pay higher returns than investment-quality bonds but come with increased risk.

A fallen angel is a bond that has been reduced to junk status because its issuer has fallen into financial trouble, typically due to declining revenues and increasing debt. This can create an attractive opportunity for contrarian investors seeking to capitalize on a company's potential recovery.

Some bond funds and ETFs, such as the VanEck Fallen Angel High Yield Bond ETF, aim to replicate the performance of the ICE BofAML US Fallen Angel High Yield Index.

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ANGL, the VanEck Fallen Angel High Yield Bond ETF, offers a 6.32% SEC yield, making it an attractive option for investors seeking higher returns.

The primary reason for a downgrade is a decline in revenues, which jeopardizes the ability of the issuers to pay the interest due on their bonds.

ANGL has outperformed other high-yield bond ETFs over the past, with a 6.4% annual return over the past 11 years since inception.

A fallen angel is a bond that has been reduced to junk status because its issuer has fallen into financial trouble. Its bonds pay higher returns than investment-quality bonds but are riskier.

Some bond funds and ETFs focus on fallen angels, like ANGL, which aims to replicate the performance of the ICE BofAML US Fallen Angel High Yield Index.

Here's a breakdown of ANGL's sector weighting:

The current yield of 7.3% suggests even stronger future returns for ANGL.

ETF flows have changed in response to recent uncertainty in the financial sector, a trend that's been observed across exchange traded funds.

This shift in investment flows is largely driven by the issues seen across the financial sector, which has led to a significant change in investor behavior.

Recent data shows that investment flows have been affected by the volatility in the market, with some ETFs experiencing a surge in demand while others have seen a decline.

The winners in this volatile market have been ETFs that focus on safe-haven assets, such as gold and bonds, which have seen a significant increase in investment flows.

Investors are increasingly looking for ways to protect their portfolios from market volatility, which is why ETFs that offer a stable and secure investment option are gaining popularity.

A change in investment flows can be seen over time, and in this case, it's clear that investors are adjusting their strategies to navigate the current market conditions.

A different take: Sector Etfs

Junk bond ETFs are a type of investment vehicle that allows you to buy into a portfolio of junk bonds. These bonds are typically issued by companies with lower credit ratings, which means they're considered riskier investments.

There are several junk bond ETFs available, including the VanEck Fallen Angel High Yield Bond ETF, which invests in bonds that were once investment grade but have since been downgraded. This ETF has a 7.3% yield and has returned 6.4% annually over the past 11 years.

One unique feature of ETFs is their transparency, allowing investors to see the underlying portfolio securities on a daily basis. The VanEck Fallen Angel High Yield Bond ETF, for example, has a 52-week range of $26.98 to $29.47, and its average volume over the past 10 days has been 974,306 shares.

The table below shows the top 4 strong high-yield corporate bond ETFs, with yields ranging from 5.2% to 7.4%:

These ETFs offer a way to invest in junk bonds, which can provide higher yields than investment-grade bonds but also come with higher risks.

The ANGL ETF has been a surprising performer since its inception, outpacing the market by a significant margin. Its investment strategy focuses on fallen angel bonds, which are high-yield bonds that were once investment-grade but have since been downgraded.

These fallen angel bonds can present value in the high-yield category, but only if the issuer has a reasonable chance of recovering from the conditions that caused the downgrade. As a result, investors must carefully evaluate the issuer's prospects before investing.

The actual downgrade to junk status drives more selling pressure, particularly from funds restricted to holding investment-grade debt exclusively. This can create opportunities for savvy investors to pick up fallen angel bonds at a discount.

Investing in the ANGL ETF requires a long-term perspective, as the fund's performance can be volatile in the short term. However, for those willing to ride out the ups and downs, the potential rewards can be substantial.

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I recently initiated a small position in the VanEck Fallen Angel High Yield Bond ETF, which invests in bonds that were once investment grade but have since been downgraded to junk status.

This ETF has a decades-long track record of market-beating returns, a trend which I expect will continue.

The fund has outperformed since inception, and by a very hefty margin. It's one of the four strong high-yield corporate bond ETFs with yields of 5.2% to 7.4%.

The current yield of 7.3% suggests even stronger future returns, with the fund returning 6.4% annually over the past 11 years since inception.

Here are some key facts about the VanEck Fallen Angel High Yield Bond ETF:

The actual downgrade to junk status drives more selling pressure, particularly from funds that are restricted to holding investment-grade debt exclusively.

Fund Classification is a crucial aspect of Junk Bond ETFs. There are two notable examples of fallen angel bond funds that cater to investors seeking high-yield opportunities.

The VanEck Vectors Fallen Angel High-Yield Bond ETF is a notable investment option. It focuses on bonds that have been downgraded, which as of September 2021, included bonds from Sprint Capital Corp., Vodafone Group PLC, and Freeport McMoran, among others.

The iShares Fallen Angels USD Bond ETF is another example of a fund that invests only in dollar-denominated fallen angels. This fund provides a unique investment opportunity for those seeking high-yield bonds.

These fallen angel bond funds are classified as a type of Junk Bond ETF. They are designed to provide investors with high-yield returns by investing in bonds that have been downgraded.

Here's a breakdown of the fund classification for the iShares Fallen Angels USD Bond ETF: