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FALN: Another High Yield ETF For Those Looking To Play It Safe

Published Mon, 16 Nov 2020 05:24:29 -0500 on Seeking Alpha

Seeking AlphaETF AnalysisFALN: Another High Yield ETF For Those Looking To Play It SafeNov. 16, 2020 5:24 AM ET|| About: iShares Fallen Angels USD Bond ETF (FALN), Includes: ANGLby: Dividend SeekerDividend Seeker ETF investing, Dividend Investing, long-term horizon, ValueSummaryAs we approach year-end, I continue to believe investors should build on their equity hedges.
While I tend to favor investment grade debt, fallen angels are a safer way to approach the high yield debt market.
FALN has a lower expense ratio than its peer, ANGL, and slightly better performance over time.

Main Thesis
The purpose of this article is to evaluate the iShares Fallen Angels USD Bond ETF (FALN) as an investment option. With the markets sitting at all-time highs, I see merit to taking some risk off the table, by shedding some equity exposure and lower rated high yield bonds. While FALN is made up of junk debt, it holds fallen angels, which are bonds that were recently investment grade and subsequently downgraded. Most of these bonds fall in the BB-rated category, which is a sub-sector of high yield that is typically safer and posts higher returns. Given that leverage is up across the high yield space, I see focusing on fallen angels as a prudent course of action. Finally, FALN has a lower expense ratio and better short term performance than similar funds, making it a good option for investors interested in this space.
First, a little about FALN. This is a high yield bond ETF with a primary objective "to track the investment results of an index composed of U.S. dollar- denominated, high yield corporate bonds that were previously rated investment grade." Currently, the fund sits at $28.17/share and has an annual yield of 5.25%. This is my first review of FALN, although I have covered the fallen angels sector multiple times in the past by writing on the VanEck Vectors Fallen Angel High Yield Bond ETF (ANGL), most recently in early September. While ANGL has... Read more


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