Robin Marshall, M.A., M.Phil
Director, Global Investment Research
Key takeaways:
- The paper assesses the performance of Fallen Angels (FA) in the credit market, since Covid, using the FTSE Time-Weighted US Fallen Angel Bond Index (TWUSFA), which captures critical timing effects
- We find Fallen Angels have superior risk/return profiles to either US Investment Grade (IG) or High Yield (HY) debt
- Since Fallen Angels are hybrid IG/HY credits, they offer diversification benefits to a credit portfolio
Points of differentiation:
- By looking at specific, single name Fallen Angels, we are able to confirm broader FTSE Time-Weighted US Fallen Angel Bond Index (TWUSFA) results
- Single name studies for Ford and Hudson Pacific Properties verify the importance of Fallen Angel timing effects
- Drawing on the performance data of our other credit indices, we are able to show how Fallen Angels can enhance the efficient frontier and Sharpe ratio of a credit portfolio
What does our research mean for investors?
For investors, our empirical work confirms that Fallen Angels have continued to perform strongly in the post-Covid credit markets. The paper is a sequel to the 2019 FTSE Russell paper, Fallen Angels in the US credit market, and captures the performance and characteristics of Fallen Angels in the credit market since Covid. The research helps inform investor decisions by supplying empirical analysis of Fallen Angels and how they would enhance a credit portfolio.
