iShares Fallen Angels USD Bond ETF

FALN

Market cap $1.82B

FALN offers the strongest upside among fallen angel ETFs, earning a strong buy rating versus a simple buy for ANGL. FALN's pure US focus, higher yield sustainability, and greater sensitivity to imminent Fed rate cuts position it for superior short-term returns. Both FALN and ANGL provide high yields and low volatility, but FALN's sectoral exposure and higher duration make it more attractive in the current environment.

High-yield corporate bond ETFs provide investors with strong yields, albeit somewhat elevated credit risk. There are lots of high-yield bond ETFs available to investors. Some with higher yields, some with better performance track-records, some focusing on more niche areas of the market. A quick overview of five of these follows. ETFs include simple, cheap vanilla ETFs, smart beta ETFs, and those targeting niche, best-performing bonds.

FALN invests in fallen angels, or corporate bonds recently downgraded from investment-grade to non-investment grade. Fallen angels tend to experience forced selling, and then significant gains as prices recover. Focusing on fallen angels is an incredibly strong investment strategy, with a strong performance track record, and one benefitting from macro trends.

The ongoing trade war has led to a massive increase in uncertainty and bearish sentiment. Credit spreads have widened as a result, going from their lowest levels in history, to solidly above-average. Investing in high-yield corporate bond funds seems like an easy way to profit from these changes.

Recent trends show narrowing spreads between Treasuries and investment-grade bonds, pushing us to explore slightly below investment-grade bond portfolios for better yields. We analyze iShares Fallen Angels USD Bond ETF and Western Asset Premier Bond Fund for their yield potential and risk profiles. FALN offers a 6.88% yield to maturity with a "BB-" credit score equivalent, while WEA provides a 7.27% potential yield with a "BB+" credit score equivalent.

On Seeking Alpha, I focus on dividend ETFs targeted towards income investors and retirees. Of these, six currently stand out for their comparatively high yields, strong overall risk-return profile. ETFs vary in risk, from similar to cash, to leveraged high-yield bonds and loans.

The largest bond ETFs are almost exclusively index funds focusing on the broader bond market, or on specific bond sub-asset classes. These ETFs are reasonable investments, but investors can do much better than reasonable. Lots of ETFs offer higher yields, returns, and risk-adjusted returns than these larger ETFs, with extra advantages to boot.

A strong economy and falling interest rates have been a great combination for investors in high-yield bonds.

iShares Fallen Angels USD Bond ETF (FALN) invests in junk bonds whose issuers previously had an investment grade rating. FALN has outperformed other junk bond ETFs and its closest competitor ANGL. However, FALN has lagged inflation in value and suffered a decay in distribution.

While ETF popularity continues to grow, education remains key. Some advisors and investors use ETFs along with mutual funds or individual securities.