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A Fund for 'Fallen Angels'

This iShares ETF offers exposure to an attractive area of the high-yield bond market.


IShares Fallen Angels USD Bond ETF is a small ETF worth keeping on your radar. It offers low-cost, broad market-value-weighted exposure to fallen angels, which represent an attractive area of the high-yield market. Fallen angels are bonds that were investment-grade when they were first issued, but their quality has since slipped below investment-grade.

Fallen angels are more likely to be undervalued than original-issue high-yield bonds when they first fall below investment-grade. That's because there's considerable forced selling pressure when these bonds are downgraded below investment-grade, as a lot of investment-grade investors aren't permitted to own lower-quality bonds. This fund is refreshed monthly, which allows it to quickly pick up these bonds after they fall below investment-grade and benefit from the potential mispricing from this forced selling pressure.

Alex Bryan does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.