{"id":53868,"date":"2023-08-28T07:55:18","date_gmt":"2023-08-28T11:55:18","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/faln-fallen-angels-the-best-of-high-yield-bonds\/"},"modified":"2023-08-28T07:55:24","modified_gmt":"2023-08-28T11:55:24","slug":"faln-fallen-angels-the-best-of-high-yield-bonds","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=53868","title":{"rendered":"FALN: Fallen Angels, The Best Of High-Yield Bonds"},"content":{"rendered":"
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<\/figcaption><\/figure>\n<\/p>\n

FALN strategy and<\/strong> portfolio<\/strong> <\/h2>\n

iShares Fallen Angels USD Bond ETF (NASDAQ:FALN<\/span>) has been tracking the Bloomberg Barclays US High Yield Fallen Angel 3% Capped Index since 06\/14\/2016. It has 210 holdings, an expense ratio of 0.25% and a 12-month distribution yield of 5.47%. Distributions are paid monthly.<\/span><\/p>\n

As described in the prospectus by iShares, the fund invests in U.S. Dollar corporate bonds that have lost their investment grade in average rating by Fitch, Moody’s and Standard & Poor’s. Each constituent must have at least $150 million of outstanding face value, a fixed-rate coupon and at least one year to maturity. Issuers must be incorporated in developed countries as defined by the index provider. An issuer may have several bonds held in FALN, with an aggregate weight capped to 3% at each reconstitution of the underlying index.<\/p>\n

The idea behind this strategy is that among all high-yield bonds, those issued by companies previously rated at investment grade have a lower probability of default. Therefore, a fallen angels bond ETF is expected to outperform a broader junk bond ETF.<\/span><\/p>\n

FALN holds 210 corporate bonds with an average yield to maturity of 8.02% and an effective duration of 4.74 years. The heaviest country in the portfolio is the U.S., with over 80% of asset value.<\/p>\n

The top three sectors are consumer cyclicals (23.6%), energy (14.4%) and communication services (12.8%). Other sectors are below 10%. The sector breakdown may change over time, mostly depending on economic cycles. In general, industries beaten down in the last few years have a higher weight. This is the case in energy after the 2014-2020 oil bear market, and for some subsectors in consumer cyclicals after pandemic-related lockdowns and travel bans.<\/p>\n

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\"FALN<\/picture>
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FALN Industry breakdown (Chart: author; data: iShares)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

The next table lists the top 10 issuers, representing 28.2% of asset value.<\/p>\n

<\/span><\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n
\n

Name<\/p>\n<\/td>\n

\n

Sector<\/p>\n<\/td>\n

\n

Location<\/p>\n<\/td>\n

\n

Weight (%)<\/p>\n<\/td>\n<\/tr>\n

\n

TELECOM ITALIA<\/p>\n<\/td>\n

\n

Communications<\/p>\n<\/td>\n

\n

Italy<\/p>\n<\/td>\n

\n

3.09<\/p>\n<\/td>\n<\/tr>\n

\n

NEWELL BRANDS INC<\/p>\n<\/td>\n

\n

Consumer Non-Cyclical<\/p>\n<\/td>\n

\n

US<\/p>\n<\/td>\n

\n

2.99<\/p>\n<\/td>\n<\/tr>\n

\n

PERRIGO CO<\/p>\n<\/td>\n

\n

Consumer Non-Cyclical<\/p>\n<\/td>\n

\n

US<\/p>\n<\/td>\n

\n

2.93<\/p>\n<\/td>\n<\/tr>\n

\n

FIRSTENERGY CORPORATION<\/p>\n<\/td>\n

\n

Electric<\/p>\n<\/td>\n

\n

US<\/p>\n<\/td>\n

\n

2.92<\/p>\n<\/td>\n<\/tr>\n

\n

FORD MOTOR CO<\/p>\n<\/td>\n

\n

Consumer Cyclical<\/p>\n<\/td>\n

\n

US<\/p>\n<\/td>\n

\n

2.87<\/p>\n<\/td>\n<\/tr>\n

\n

HOWMET AEROSPACE INC<\/p>\n<\/td>\n

\n

Capital Goods<\/p>\n<\/td>\n

\n

US<\/p>\n<\/td>\n

\n

2.81<\/p>\n<\/td>\n<\/tr>\n

\n

LAS VEGAS SANDS CORP<\/p>\n<\/td>\n

\n

Consumer Cyclical<\/p>\n<\/td>\n

\n

US<\/p>\n<\/td>\n

\n

2.73<\/p>\n<\/td>\n<\/tr>\n

\n

SEAGATE<\/p>\n<\/td>\n

\n

Technology<\/p>\n<\/td>\n

\n

US<\/p>\n<\/td>\n

\n

2.73<\/p>\n<\/td>\n<\/tr>\n

\n

ENLINK MIDSTREAM PARTNERS LP<\/p>\n<\/td>\n

\n

Energy<\/p>\n<\/td>\n

\n

US<\/p>\n<\/td>\n

\n

2.58<\/p>\n<\/td>\n<\/tr>\n

\n

EQM MIDSTREAM PARTNERS LP<\/p>\n<\/td>\n

\n

Energy<\/p>\n<\/td>\n

\n

US<\/p>\n<\/td>\n

\n

2.52<\/p>\n<\/td>\n<\/tr>\n<\/table>\n

<\/span><\/span>