Invesco PowerShares lists US fallen angels Ucits ETF

Added 5th September 2016

Global ETF provider Invesco PowerShares has listed its US high yield fallen angels Ucits ETF on the London Stock Exchange, which tracks bonds that have been downgraded from investment to high yield.

Invesco PowerShares lists US fallen angels Ucits ETF

The PowerShares US High Yield Fallen Angels Ucits ETF tracks the Citi Time-Weighted US Fallen Angel Bond Select Index.

Fallen angels were previously rated investment-grade but have been downgraded to high yield.

The bonds must have a minimum rating of C by S&P and Ca by Moody’s, and a maximum rating of BB+ by S&P and Ba1 by Moody’s to be eligible. 

Provided they continue to meet the inclusion criteria, the fallen angels will be held for a period of 60 months. If a bond exits and then re-enters the index, the inclusion period would be reset.

Invesco PowerShares plans to list the ETF across other European stock exchanges in the near future.

Pushing bond prices down

Bryon Lake, head of Invesco PowerShares - EMEA, said: “With the ‘fallen angel’ phenomenon there are two things going on that are pushing the bond price down.

“First leading up to the downgrade you tend to see prices begin to drop as investors position themselves for the downgrade. Secondly, after the downgrade there are large asset owners, usually institutional in nature, that are forced to sell what were investment grade bonds but are now high yield due to their strict mandated rules.

“This forced selling creates a phenomenon where the bond can become oversold, which creates an opportunity to buy the bonds at their existing market value. This overselling - more often than not - is followed by a rebound in the bonds prices, potentially creating a unique opportunity and in a number of instances the bond even returns to investment grade.”

Arom Pathammavong, global head of Citi Fixed Income Indices, said: “For the Citi Time-Weighted US Fallen Angel Bond Select Index, we examined the price movements of fallen angel bonds which showed that prices of these bonds tend to recover from the dip of the downgrade over a 30 to 60-month period.

“The index will hold these fallen angel bonds for up to 60 months while applying an innovative time-based weighting methodology that aims to capture the price rebound effect of these bonds.” 

Visitor's Comments Add your comment

Add Your Comment

We won't publish your address

About Author

Kirsten Hastings

Senior Reporter

Kirsten is a senior reporter for International Adviser, covering global news stories about the financial services industry. She joined Last Word Media in October 2015 after two years working as a reporter covering the staffing and recruitment industry. Kirsten has a Masters in Financial Journalism from the University of Stirling. 

Features

US equities: If you can’t beat them, join them

US equities: If you can’t beat them, join them...

European investors have been dismissing US equities as too expensive for a couple of years. But as the S&P 500 continues to outperform other equity markets, appetite for the asset class is again on the...

Directories

Ashburton International
Ashburton International

Ashburton Investments is a new generation investment...

Tweets

Events

Future Advisory Forum Hong Kong 2016
Future Advisory Forum Hong Kong 2016

Tuesday 4th October 2016

Hong Kong

Future Advisory Forum Singapore 2016
Future Advisory Forum Singapore 2016

Thursday 6th October 2016

Singapore

Offshore Bond Workshop Manchester 2016
Offshore Bond Workshop Manchester 2016

12th October 2016
The Midland, Manchester

Future Advisory Forum Cape Town 2016
Future Advisory Forum Cape Town 2016

Tuesday 18th October
The Vineyard, Cape Town

Investment Strategy

Sponsored Content

OTHER STORIES FROM LAST WORD...