VanEck US Fallen Angel High Yield Bond UCITS ETF A USD Acc

Issuer: Van Eck

Asset Class: Fixed Income

TER: 35bps

Trading Currency: GBP

Pays Income: False

Listing Date: 06 Sep 2023

Ticker: ANGB

ISIN: IE000J6CHW80

This fund offers exposure to a unique segment of the high-yield bond market known as 'fallen angels.' These are corporate bonds that were initially 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 to holding only investment-grade securities. This technically driven selling pressure can depress the bond's price below its fundamental value, creating a potential investment opportunity.

The core thesis behind this strategy is that fallen angels, as a group, tend to be of higher quality than the broader universe of original-issue high-yield bonds. Because these companies were once considered investment-grade, they often possess better business fundamentals and a stronger will to regain their higher credit rating. This can lead to outperformance through price appreciation as the market re-evaluates the issuer's creditworthiness or if the bond is eventually upgraded back to investment grade, becoming a 'rising star.' Historically, this segment has offered attractive risk-adjusted returns compared to the broader high-yield market.

By tracking a specialized index, the fund provides a diversified and rules-based approach to capturing this potential market inefficiency. It is designed for investors seeking to enhance the yield of their fixed-income portfolio while taking on a specific type of credit risk. This strategy can serve as a strategic or tactical allocation, offering a distinct risk-return profile that differs from both traditional investment-grade and broad high-yield corporate debt.