Some exchange-traded funds serve as reminders that what may seem like too much of a nuanced concept upon inception can ultimately be validated by the market and investors. The VanEck Vectors Fallen Angel High Yield Bond ETF ANGL may be a prime example of that theme.
Indeed, ETFs have made the world of high-yield corporate bond investing more accessible to a broader swath of investors. However, chances are many investors that were alive during the 1980s had at least heard of junk bonds. It is not a stretch to say that when ANGL debuted five years ago that a small percentage of the investment community, particularly non-professional investors, knew about fallen angel bonds.
The Transformational Power Of ANGL
ANGL, which is celebrating its fifth birthday, changed that. The ETF made an investing that is actually rather simple accessible to a broader audience. Fallen angel bonds are corporate debt born with investment-grade ratings that are later downgraded to junk territory. Historical data confirm that these bonds often outperform traditional junk bonds with less risk due in part to the fact that fallen angels often stand a better chance of reclaiming investment-grade status than regular high-yield corporates.
In 2015, ANGL benefited because its exposure to then controversial energy debt was well below that of traditional junk bond ETFs. Last year, the fallen angels from the energy patch that have entered ANGL are making the ETF a juggernaut when it comes to performance and asset-gathering proficiency.
ANGL, Flying High
As of April 4, ANGL had $763.7 million in assets under management, according to VanEck data. Predictably, ANGL's success has inspired some competition, but the one ETF that is a direct competitor to ANGL has just $10.9 million in assets under management.
ANGL was the first ETF to focus on fallen angels, “a category of high yield bonds that were originally issued as investment grade but which have since experienced a downgrade to junk status. Fallen angels have had historically higher average credit quality than the broad high yield universe, and the category has outperformed the broad high yield space in 10 of the last 13 years, including 2016,” according to VanEck.
ANGL holds 235 bonds and has an effective duration of just under 6.4 years. Over 95 percent of the ETF's holdings are rated BB or B.
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