Van Eck [profile] just claimed an exchange-traded fund first. Yesterday the New York City-based mutual fund firm debuted what it calls the first "fallen angels" corporate debt ETF. Van Eck filed back in January to launch the new ETF, the Market Vectors Fallen Angel High Yield Bond ETF (ANGL) [see MFWire.com, 2/3/2012].
This new ETF holds non-invesment grade Fallen Angel securities. It comes with 40 basis points in net expenses.
“Although they were downgraded from investment grade status, many Fallen Angel issuers still retain a capital structure similar to investment grade issuers, which may enable Fallen Angel issuers to enjoy greater financing flexibility than original issue high yield issuers,” stated Fran Rodilosso, fixed income PM at Van Eck. “Many investors overlook Fallen Angels, but historical data shows that in six of the past nine years ending 2011, the U.S. dollar denominated Fallen Angels, as represented by The BofA Merrill Lynch U.S. Fallen Angel High Yield Index, have outperformed general U.S. dollar denominated corporate high yield bonds, as represented by The Barclays Capital high Yield Very Liquid Index.”
Company Press Release
MARKET VECTORS LAUNCHES FIRST U.S. LISTED “FALLEN ANGEL” ETF
Market Vectors Fallen Angel High Yield Bond ETF (ANGL) offers exposure to an often overlooked but potentially attractive segment of the high yield bond universe
NEW YORK, (April 11, 2012) – Market Vectors ETF Trust has added another first-of-its-kind exchange-traded fund (ETF) to its rapidly growing fixed income ETF family, it was announced today. Trading began this morning on Market Vectors Fallen Angel High Yield Bond ETF (NYSE Arca: ANGL), a fund designed to focus on the U.S. dollar denominated “Fallen Angels” segment of the corporate high yield bond market, which currently accounts for approximately 15 percent of the U.S. dollar denominated high yield bond universe.
ANGL seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of The BofA Merrill Lynch U.S. Fallen Angel High Yield Index (H0FA), which is comprised of below investment-grade corporate bonds denominated in U.S. dollars that were rated investment grade at time of issuance. Bonds may have been issued by either U.S. or non-U.S. issuers, but qualifying securities must be issued in U.S. dollars in the U.S. domestic market for inclusion in the index.
Among issuers of bonds considered Fallen Angels are some of the best-known names in American business, including Ford, JC Penney, and The New York Times Company. Historically, Fallen Angels have been concentrated mostly at the higher end of the high yield credit spectrum, and according to Moody’s, are considered more likely to be upgraded in the future than original issue high yield bonds in some instances.
Fallen Angel issuers tend to be larger, more well-established companies than original issue high yield issuers.* “Although they were downgraded from investment grade status, many Fallen Angel issuers still retain a capital structure similar to investment grade issuers, which may enable Fallen Angel issuers to enjoy greater financing flexibility than original issue high yield issuers,” said Fran Rodilosso, Fixed Income Portfolio Manager at Van Eck. “Many investors overlook Fallen Angels, but historical data shows that in six of the past nine years ending in 2011, the U.S. dollar denominated Fallen Angels, as represented by The BofA Merrill Lynch U.S. Fallen Angel High Yield Index, have outperformed general U.S. dollar denominated corporate high yield bonds, as represented by The Barclays Capital High Yield Very Liquid Index.”**
Market Vectors notes that investing in high yield debt is not without risks, including the sensitivity to adverse economic changes, individual issuer developments, liquidity concerns, fluctuations in prices due to interest rate changes, among others.
ANGL joins the growing fixed income component of the Market Vectors suite of ETFs that already includes international bond funds such as Emerging Markets Local Currency Bond ETF (EMLC), LatAm Aggregate Bond ETF (BONO), Renminbi Bond ETF (CHLC), International High Yield Bond ETF (IHY), as well as a full suite of U.S. municipal bond ETFs, and more.
ANGL has a gross expense ratio of 0.52 percent and a net expense ratio of 0.40 percent, which is capped at least until September 1, 2013.
*Fallen Angels as represented by The BofA Merrill Lynch U.S. Fallen Angel High Yield Index, and original issue high yield bonds as represented by The BofA Merrill Lynch U.S. Original Issue High Yield Index **Source: FactSet
About Market Vectors ETFs
Market Vectors exchange-traded products have been offered since 2006 and span many asset classes, including equities, fixed income (municipal and international bonds) and currency markets. The Market Vectors family currently totals $23.7 billion in assets under management, making it the fifth largest ETF family in the U.S. and the ninth largest worldwide as of December 31, 2011.
Market Vectors ETFs are distributed by Van Eck Global. Founded in 1955, Van Eck Global was among the first U.S. money managers helping investors achieve greater diversification through global investing. Today, the firm continues this tradition by offering innovative, actively managed investment choices in hard assets, emerging markets, precious metals including gold, and other alternative asset classes. Van Eck Global has offices around the world and manages approximately $33.1 billion in investor assets as of December 31, 2011.
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The Fund may be subject to credit risk, interest rate risk and a greater risk of loss of income and principal than higher rated securities. Investors should be willing to accept a high degree of volatility and the potential of significant loss. Securities rated below investment grade are commonly referred to as high yield securities, or “junk bonds.” High yield securities 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. The secondary market for securities that are junk bonds may be less liquid than the markets for higher quality securities and as such, may have an adverse effect on the market prices of certain securities. The illiquidity of the market may also, at certain time, adversely affect the Fund’s ability to arrive at a fair value for certain junk bonds. The illiquidity of the market could also make it difficult for the Fund to sell certain securities in connection with a rebalancing of the index. In addition, periods of economic uncertainty and change probably would result in an increased volatility of market prices of high yield securities and a corresponding volatility in the Fund’s net asset value (“NAV”). Investments concentrated in the financial services and industrials sectors may be subject to more volatility than investment in a diver group of sectors and are subject to the risks associated with such sectors. For a more complete description of these and other risks, please refer to the Fund’s prospectus. The Fund may loan its securities, which may subject it to additional credit and counterparty risk.
Merrill Lynch, Pierce, Fenner & Smith Incorporated and its affiliates (“BofA Merrill Lynch”) indices and related information, the name “Bank of America Merrill Lynch”, and related trademarks, are intellectual property licensed from BofA Merrill Lynch, and may not be copied, used, or distributed without BofA Merrill Lynch’s prior written approval. The licensee’s products have not been passed on as to their legality or suitability, and are not regulated, issued, endorsed, sold, guaranteed, or promoted by BofA Merrill Lynch. BOFA MERRILL LYNCH MAKES NO WARRANTIES AND BEARS NO LIABILITY WITH RESPECT TO THE INDICES, ANY RELATED INFORMATION, ITS TRADEMARKS, OR THE PRODUCT(S) (INCLUDING WITHOUT LIMITATION, THEIR QUALITY, ACCURACY, SUITABILITY AND/OR COMPLETENESS).
The “Net Asset Value” (NAV) of a Market Vectors exchange-traded fund (ETF) is determined at the close of each business day, and represents the dollar value of one share of the fund; it is calculated by taking the total assets of the fund, subtracting total liabilities, and dividing by the total number of shares outstanding. The NAV is not necessarily the same as the ETF’s intraday trading value. Market Vectors ETF investors should not expect to buy or sell shares at NAV.
Fund shares are not individually redeemable and will be issued and redeemed at their 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.
Investing involves substantial risk and high volatility, including possible loss of principal. Bonds and bond funds will 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 contains this and other information, call 888.MKT.VCTR or visit marketvectorsetfs.com. Please read the prospectus and summary prospectus carefully before investing.
Van Eck Securities Corporation, Distributor, 335 Madison Avenue, New York, NY 10017
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