FALN Profile
The iShares Fallen Angels USD Bond ETF aims to provide investors with exposure to U.S. dollar-denominated high-yield corporate bonds that were previously rated as investment grade. The fund typically invests at least 80% of its assets in the securities that make up the underlying index, which is designed to track the performance of bonds that have been downgraded from investment-grade to high-yield status. This strategy allows investors to capitalize on potential opportunities within the segment of the bond market that includes downgraded issuers.
The underlying index is specifically focused on high-yield corporate bonds, also known as "fallen angels," that were once rated investment grade but have since seen their credit ratings lowered. This subset of the bond market can offer higher yields compared to their investment-grade counterparts, reflecting the increased risk associated with their downgraded status. By targeting these bonds, the fund aims to provide a blend of yield and potential capital appreciation, given that these securities may be trading at lower prices due to their downgrade.
The fund maintains a diversified portfolio by investing at least 90% of its assets in fixed-income securities of the types included in the underlying index. This includes bonds from a wide range of sectors and issuers that have experienced a downgrade but are still considered to have potential for recovery. The diversification helps mitigate the risk associated with individual issuers and sectors, while still focusing on the high-yield market segment.
Investors in the iShares Fallen Angels USD Bond ETF should be aware that the performance of the fund is closely tied to the credit quality of the underlying bonds, which can be subject to significant volatility. As these bonds are typically lower-rated, they may offer higher yields but also carry higher risk compared to investment-grade bonds. The fund’s approach is designed for investors looking to gain exposure to a niche area of the fixed-income market, with the potential for higher returns from bonds that have transitioned from investment grade to high yield.
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