A Fallen Angel Bond ETF for Fixed-Income Portfolios

Investors looking into high-yield bonds to augment their fixed-income portfolio may consider a fallen angel speculative-grade debt-related exchange traded fund.

On the recent webcast, Fine Tune Your High Yield Strategy, Francis Rodilosso, Portfolio Manager at VanEck, explained that recent and potential sector growth will contribute to support fallen angel bonds and related VanEck Fallen Angel High Yield Bond ETF (NYSEArca: ANGL), which tracks so-called fallen angel speculative-grade rated debt, or debt securities that were initially issued with an investment-grade rating but were later downgraded to junk territory.

Fallen angel issuers tend to be larger and more established than many other junk bond issuers. Furthermore, since these fallen angels were formerly on the cusp of investment-grade status, the group of junk bonds typically has a higher average credit quality than many other speculative-grade debt-related funds.

Related: A Smart-Beta, High-Yield ETF Strategy for Quality

Rodilosso said that fallen angel bonds offer a potential value play as the debt securities typically experience a steep sell-off from institutional forced selling prior to being added to the fallen angels group. Looking ahead sector themes can help support potential price appreciation. Additionally, the groups’ higher average credit quality can help diminish market volatility.

Investors have kept an eye on high-yield bonds as credit spreads remain above historical 615 basis point average since mid-November, with 50% of U.S. junk bonds trading below par.


The commodity price collapse, notably in crude oil, has weighed on the junk bond market, but the damage may be limited to lower credit quality.