iShares Fallen Angels High Yield Corp Bond UCITS ETF USD (Acc)
| Issuer: iShares |
| Asset Class: Fixed Income |
| TER: 50bps |
| Trading Currency: USD |
| Pays Income: False |
| Listing Date: 12 Apr 2018 |
| Ticker: WIAU |
| ISIN: IE00BDFJYP58 |
This investment vehicle provides targeted exposure to the global 'fallen angel' high-yield corporate bond market. Fallen angels are bonds that were originally issued with an investment-grade credit rating but have since been downgraded to high-yield status. The strategy is based on the premise that the market often overreacts to these downgrades, pushing bond prices below their intrinsic value. This creates a potential opportunity for recovery as the issuing company stabilizes its financial position or as the market reassesses the risk. The fund physically holds a diversified portfolio of these bonds from developed and emerging market issuers, excluding the financial sector.
Investing in fallen angels offers a distinct approach to the high-yield bond segment. Historically, fallen angel bonds have demonstrated higher returns compared to the broader high-yield market. This is often attributed to forced selling by institutional investors who are mandated to hold only investment-grade debt, which creates pricing inefficiencies at the time of the downgrade. By systematically buying these recently downgraded bonds, the fund aims to capture the potential price appreciation that can occur as the bonds 'season' within the high-yield universe. Furthermore, fallen angel issuers are typically larger and more established companies than original-issue high-yield issuers, which can translate to a higher average credit quality within the junk bond spectrum.
This fund is suitable for investors seeking to enhance their fixed-income returns and who are willing to accept the higher risks associated with the high-yield market. It can serve as a tactical or strategic satellite holding within a diversified portfolio, offering a potentially more attractive risk-reward profile than broad high-yield bond funds. However, investors should be aware that high-yield bonds are subject to greater credit risk, default risk, and price volatility, especially during periods of economic stress. The global nature of the portfolio also introduces currency risk, though the underlying bonds are primarily denominated in major global currencies.
