Has anyone invested in Fallen Angel Bonds? Those that are BB, but were investment grade?
The expected Returns book author, brought them up as a potential high yield bond class, that like SCV, for whatever reason, seems to outperform HY bonds in general?http://www.amazon.com/Expected-Returns- ... 1119990726
Down the road (like year(s)), I may invest some in HY, and it may be in the BB segment of HY.
Was wondering if the above ETF, would best represent the BB HY class, or if there are others. its ER is 0.4%
They would be considered part of my stock allocation if I ever use them.
The strategy is right (an apparent anomaly, created by the fact that many bond investors cannot hold sub investment grade, so sub BBB- bonds or ones headed that way, are dumped, creating an opportunity). Of course you have to believe in inefficient markets (to some extent).
However Rick Ferri and others have warned about the problems with corporate bond ETFs, and that is worth reading around.
The ideal way of playing this would be a 'go for it' active credit manager, running a closed end fund. AFAIK such have way too high fees. But you want someone who is promiscuous across credit, looking for anomalies: CLOs, the right Residential MBS, Commercial MBS, Fallen Angels, Mezzanine Loans, Eurozone periphery etc. A 'credit strategy' fund. Basically buy whatever the market is dumping on.
The Closed End Fund would get out of the illiquidity problem in the underlying assets. A hedge fund with restricted liquidity could do the same.