Invesco US High Yield Fallen Angels UCITS ETF
| Issuer: Invesco |
| Asset Class: Fixed Income |
| TER: 45bps |
| Trading Currency: GBX |
| Pays Income: False |
| Listing Date: 05 Sep 2016 |
| Ticker: FAHY |
| ISIN: IE00BD0Q9673 |
This investment vehicle provides targeted exposure to a unique segment of the high-yield bond market known as 'fallen angels'. These are corporate bonds that were originally issued with an investment-grade credit rating but have subsequently been downgraded to high-yield or 'junk' status. The downgrade often triggers forced selling by institutional investors, such as pension funds and insurance companies, whose mandates restrict them from holding non-investment-grade securities. This technically-driven selling pressure can depress the bonds' prices beyond what their fundamentals might suggest, creating a potential value opportunity for investors who are able to purchase them at a discount.
The core strategy is to capitalize on the market inefficiency surrounding these downgrade events. By systematically acquiring these fallen angel bonds, the fund aims to capture both the higher yields on offer and the potential for price appreciation if the issuer's financial health stabilizes or improves, or if the market simply re-prices the bond to reflect its intrinsic value. Historically, fallen angels have exhibited superior risk-adjusted returns compared to the broader high-yield market, as they tend to be issued by larger, more established companies than those that issue original high-yield debt. This approach offers a distinct quality tilt within the high-yield universe.
For an investor's portfolio, this fund can act as a strategic or tactical allocation to enhance fixed-income returns. It offers a differentiated source of yield and potential capital gains compared to traditional bond funds. While it carries the inherent credit and interest rate risks associated with the high-yield market, its specific focus on fallen angels provides a measure of diversification. It is suitable for those with a higher risk tolerance seeking to add a layer of sophisticated, factor-based fixed-income exposure to their holdings.
