Following a month for corporate bonds that wasn’t great in general, with $5-6 million in outflows and the Fed having stopped buying making things look pretty dire, the VanEck Vectors Fallen Angel High Yield Bond ETF (NASDAQ: ANGL) was actually the only corporate bond ETF to have inflows. ETF Trends spoke with the team from VanEck Global about where this ANGL success came from, whether institutional or advisor-based, or whatever helped prove it to be a sharp contrast to what was happening elsewhere.
William Sokol, Senior ETF Product Manager for VanEck, explained how there had been flows coming in from many different channels. Advisors, model portfolios, insurance companies, and more all show how ANGL is spreading broadly across the market.
“It’s grown in size, meaning it has institutional interest for sure, but the story resonates across a pretty wide audience,” Sokol states. And even with $3 billion, ANGL is still smaller than funds such as HYG or JNK. At the same time, while the outflows from those funds could fix themselves fairly quickly, ANGL still has its notable qualities in other areas.
The Insurance Factor
Insurance, as mentioned, has been a factor. It’s received attention thanks to NISC elements getting passed through the system, and insurance companies beginning to believe they can handle so much more. Concerning VanEck and ANGL, it’s handled on a case by case basis. Still, some firms are more interested in examining the methodology and the index to have a grasp on how the portfolio was traded. Others are less in need of that kind of attention.
With the new ratings, the higher quality aspect of ANGL is something that appeals to insurance companies in particular. In turn, this is resonating broadly with high yield investors, but it still comes down to quality for Insurance companies. So the interest remains thanks to that support.
As far as investors, advisors now how a couple of the main themes last quarter came down to managing risk better and finding income. In the last few months, spreads got a lot tighter, and people stopped worrying as much about this wave of downgrades and defaults. That said, there’s still a lot of uncertainty, and according to Sokol, their outlook is that over the next year, there will be more downgrades, and defaults will remain elevated.
In turn, this will continue driving the interest in ANGL. “Even this past month, we saw a few new names come into the index at a price around 91, which, compared to where people are seeing bonds priced right now, that’s a big discount,” Sokol notes.
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