Long-term bond investors who are seeking out a higher yielding fixed-income strategy with a steady track record can look to a fallen angel exchange traded fund that has just turned five-years old.
The VanEck Fallen Angel High Yield Bond ETF (NYSEArca: ANGL) is celebrating its five-year anniversary after launching on April 10, 2012.
The VanEck Fallen Angel High Yield Bond ETF, which tracks the BofA Merrill Lynch US Fallen Angel High Yield Index, has generated a 9.8% average annualized return since its inception. In contrast, the Bloomberg Barclays US Aggregate Bond Index has generated a 2.3% return over the past five-year period. Fallen angel bonds have also outperformed the broad high yield space in 10 of the past 13 years.
“We’re proud to be celebrating ANGL’s five year anniversary and its recent recognition by the industry for its positive impact on investors,” Ed Lopez, Head of ETF Product Management and Marketing with VanEck, said in a note. “The investment thesis behind ANGL is a time-tested strategy, well beyond the ETF’s five year history. ANGL’s simple and intuitive approach to capturing quality and value in the high yield market helps it stand out in a growing sea of smart beta ETFs.”
ANGL was the first ETF to provide exposure to “fallen angel” bonds, speculative-grade 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.
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. The higher average quality also helped absorb some of the market volatility we experienced last year.
The fallen angel ETF’s credit profile includes BB 77.7%, B 17.4%, CCC 3.7% and CC 0.1%, leaning toward the upper-end of the speculative-grade debt spectrum.
However, the higher quality means that yields are slightly lower than what most junk bond investors are accustomed to. ANGL comes with a 4.96% 30-day SEC yield, has a 6.37 year duration and a 0.35% net expense ratio.
For more information on the fixed-income market, visit our bond ETFs category.