VanEck has expanded its fixed income range with the launch of a US fallen angels ETF, ETF Stream can reveal.
The VanEck US Fallen Angel High Yield Bond UCITS ETF (USFA) is listed on the London Stock Exchange and Deutsche Boerse with a total expense ratio (TER) of 0.35%.
USFA physically tracks the ICE US Fallen Angel High Yield 10% Constrained index which offers exposure to 166 US dollar-denominated corporate bonds previously rated investment grade at the time of issuance.
The ETF rebalances monthly and comprises bonds issued in the US domestic market with at least one year to maturity.
VanEck already operates a ’40-Act’ equivalent strategy which houses $2.8bn assets under management (AUM).
Martijn Rozemuller (pictured), CEO of VanEck Europe, commented: “Many institutional investors are often forced by their investment mandate to sell bonds when they are downgraded below investment grade. Our strategy systematically buys these oversold and possibly undervalued bonds.
“Fallen angels have historically shown a higher likelihood of returning to investment grade status following a downgrade than the broad spectrum of high-yield bonds. This offers upside potential that investors can participate in with our ETF.”
The launch broadens the roster of fallen angels ETFs in Europe. BlackRock currently runs the largest ETF, the $975m iShares Fallen Angels High Yield Corp Bond UCITS ETF (WING).
Invesco and Tabula also offer exposure to the asset class while VanEck runs a global fund, the $38m VanEck Global Fallen Angel High Yield Bond UCITS ETF (GFA).