Invesco US High Yield Fallen Angels UCITS ETF (Acc)
| Issuer: Invesco |
| Asset Class: Fixed Income |
| TER: 45bps |
| Trading Currency: USD |
| Pays Income: False |
| Listing Date: 29 Jul 2022 |
| Ticker: HYFC |
| ISIN: IE0009D6K2A2 |
This fund provides exposure to the US high-yield corporate bond market, specifically focusing on "fallen angels." Fallen angels are bonds that were originally issued with an investment-grade credit rating but have since been downgraded to high-yield or "junk" status. The strategy is based on the premise that the market often oversells these bonds immediately following a downgrade, creating a potential value opportunity. As the initial selling pressure subsides, these bonds may recover in price, offering attractive total returns. The fund aims to capture this potential mispricing effect by physically replicating an index of such securities.
By investing in fallen angels, the fund holds debt from companies that, despite their recent downgrade, may still possess stronger underlying fundamentals than companies that have always been in the high-yield category. This can lead to a higher average credit quality within the high-yield spectrum. The investment process is rules-based, tracking a specific index designed to identify and invest in these securities. This approach provides a systematic way to tap into the unique characteristics and return potential of the fallen angel segment of the bond market, offering a distinct alternative to broad high-yield bond strategies.
This investment could appeal to investors seeking higher income potential than is typically available from investment-grade bonds, combined with the possibility of capital appreciation. The fallen angel theme offers a contrarian approach to credit investing, capitalizing on market inefficiencies and potential credit quality improvements. It can serve as a diversifying component within a broader fixed-income allocation, providing exposure to a specific niche that has historically exhibited strong performance characteristics relative to the general high-yield market. However, investors should be aware that high-yield bonds carry a higher risk of default compared to investment-grade debt.
