NEW YORK--(BUSINESS WIRE)--VanEck’s Market Vectors Fallen Angel High Yield Bond ETF (NYSE Arca:ANGL), which seeks to track the BoA Merrill Lynch US Fallen Angel High Yield Index (H0FA), finished the first quarter of 2016 as the top performing ETF in the high yield fixed income category, according to data from Morningstar.1 Year to date through March 31, 2016, ANGL returned 7.39 percent, far outperforming the broad high yield bond market, as represented by the BofA Merrill Lynch US High Yield Index (H0A0), which returned 3.25 percent.
“Much of ANGL’s positive performance came from increased exposure to the energy space,” said Fran Rodilosso, Portfolio Manager for Fixed Income ETFs with VanEck.
Rodilosso explained that ANGL’s energy allocation increased from approximately 13 percent to 25 percent since the start of the year. “ANGL presents investors with a contrarian investment approach, as it tends to increase weights in sectors as they are still under ratings pressure,” Rodilosso continued. “One of the reasons fallen angel high yield bonds2 have performed well in the past is that the bonds have tended to come into the H0FA index already pricing in a high degree of risk.”
Rodilosso went on to explain how this example highlighted one of the main investment theses around fallen angels, namely that they provide investors with a value proposition, as fallen angels tend to be oversold prior to their downgrades. (Original-issue high yield bonds, on average, have offered relatively higher income and lower duration than fallen angles, which start out as investment grade bonds.) Rodilosso continued, “As the energy sector struggled in 2015, more companies saw their debt marked for potential downgrade,” he continued. “As those downgrades took place, ANGL’s exposure to energy began to tick up, and as oil prices recovered since mid-February ANGL and its underlying index were well positioned to participate in the upside, especially from fallen angels that had experienced forced selling as they moved out of the investment grade universe.”
Rodilosso concluded, “The recent distaste for bonds in the energy sector may resemble that of bonds issued by banks in the wake of the global financial crisis. The banking sector ended up driving positive returns of fallen angels for several years, as the category performed better than the broad high yield bond market,” said Rodilosso. “As sectors move out of and back into favor, fallen angel high yield bonds can offer investors access to both opportunities for short-term tactical exposures and compelling long-term holdings in a broader fixed income portfolio.”
ANGL, which recently crossed the $100 million asset threshold, is one of several unique income-focused ETFs from VanEck, which include Market Vectors Emerging Markets High Yield Bond ETF (HYEM), Market Vectors J.P. Morgan EM Local Currency Bond ETF (EMLC), Market Vectors High Income MLP ETF (YMLP) and many more.
Performance History: Average Annual Total Returns (%)
|As of 03/31/2016||1 MO||YTD||1 YR||3 YR||
|BofA Merrill Lynch US Fallen Angel High Yield Index||7.11||6.54||-0.69||5.11||8.35||-|
Source: FactSet. Returns greater than one year are annualized. *In the absence of temporary fee waivers or reimbursements, the 30-Day SEC Yield as of 03/31/2016 would have been 7.19%. **Expenses for ANGL are capped contractually at 0.40% until at least September 1, 2016. Cap excludes certain expenses, such as interest. The performance data quoted represents past performance. Past performance is not a guarantee of future results. Performance information for the Fund reflects temporary waivers of expenses and/or fees. Had the Fund incurred all expenses, investment returns would have been reduced. Investment return and value of the shares of the Fund will fluctuate so that an investor’s shares, when sold, may be worth more or less than their original cost. Performance may be lower or higher than performance data quoted. Fund returns reflect dividends and capital gains distributions. Net asset value (NAV) per share is calculated by subtracting total liabilities from the total assets, then dividing by the number of shares outstanding. Share price is the last price at which shares were traded on the Fund’s primary listing exchange. Fund shares may trade at, above or below NAV. Performance current to the most recent month end available by calling 888.826.2333 or by visiting vaneck.com/etfs.
1Source: ©2016 Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. The year-to-date absolute ranking is based on 22 high yield bond ETFs, as of March 31, 2016.
2Fallen angel high yield corporate bonds are originally issued as investment grade-rated bonds.
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BofA Merrill Lynch US Fallen Angel High Yield Index (H0FA) is a subset of the BofA Merrill Lynch US High Yield Index (H0A0), including securities that were rated investment grade at time of issuance.
BofA Merrill Lynch US High Yield Index (H0A0) is comprised of below-investment grade corporate bonds (based on an average of Moody’s, S&P, and Fitch) denominated in U.S. dollars. The country of risk of qualifying issuers must be an FX-G10 member, a Western European nation, or a territory of the U.S. or a Western European nation.
Morningstar US ETF High-Yield Bond category is comprised of exchange-traded funds with an investment objective to seek returns via significant exposure to low quality bonds, those that are either unrated or rated by a major agency as BB or lower.
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Performance and characteristics of the BofA Merrill Lynch US Fallen Angel High Yield Index (H0FA) are quoted throughout this material. H0FA is representative of the entire fallen angel high yield corporate bond market. H0FA does not represent the performance or yield of the Market Vectors Fallen Angel High Yield Bond Fund.
Fund shares are not individually redeemable and will be issued and redeemed at their Net Asset Value (NAV) only through certain authorized broker-dealers in large, specified blocks of shares called “creation units” and otherwise can be bought and sold only through exchange trading. Creation units are issued and redeemed principally in kind. Shares may trade at a premium or discount to their NAV in the secondary market.
An investment in the Fund may be subject to risk which include, among others, credit risk, call risk, and interest rate risk, all of which may adversely affect the Fund. High yield bonds may be subject to greater risk of loss of income and principal and are likely to be more sensitive to adverse economic changes than higher rated securities. International investing involves additional risks which include greater market volatility, the availability of less reliable financial information, higher transactional and custody costs, taxation by foreign governments, decreased market liquidity and political instability. The Fund's assets may be concentrated in a particular sector and may be subject to more risk than investments in a diverse group of sectors.
Investing involves substantial risk and high volatility, including possible loss of principal. Bonds and bond funds will generally decrease in value as interest rates rise. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 888.826.2333 or visit vaneck.com/etfs. Please read the prospectus and summary prospectus carefully before investing.
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