Invesco US High Yield Fallen Angels GBP Hedged UCITS ETF

Issuer: Invesco

Asset Class: Fixed Income

TER: 50bps

Trading Currency: GBX

Pays Income: False

Listing Date: 18 Oct 2017

Ticker: FAGB

ISIN: IE00BYVTN047

This investment strategy focuses on a unique segment of the corporate bond market known as 'fallen angels'. These are bonds that were originally issued with an investment-grade credit rating but have subsequently been downgraded to high-yield, or 'junk', status. The core premise is that the market often overreacts to such downgrades, leading to indiscriminate selling by investors who are mandated to hold only investment-grade debt. This selling pressure can depress the bonds' prices below their intrinsic value, creating a potential buying opportunity for investors with a different risk appetite.

The strategy aims to capitalize on this potential mispricing. By acquiring these bonds at a discount, investors gain exposure to assets that may be poised for a price recovery as the initial market shock subsides. Furthermore, fallen angels typically possess a higher average credit quality than bonds that were originally issued in the high-yield category. Many of the underlying issuers are large, established companies that may be actively working to improve their financial health and regain their investment-grade rating, a scenario which could lead to significant capital appreciation.

This approach provides a distinct way to access the high-yield market, offering the potential for enhanced returns compared to broader high-yield strategies. It is designed for investors seeking higher income and total return potential, who understand the risks associated with below-investment-grade debt but are attracted to the specific value proposition offered by the fallen angel phenomenon.