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Battle Between Fallen Angel ETFs Heats Up as VanEck Joins Fee War

editor@etftrends.com (ETF Trends)

On the heels of BlackRock iShares’ new fallen angel bond fund, VanEck slashed the management fees for its popular bond exchange traded fund that tracks downgraded debt securities initially issued with an investment-grade rate.

On Monday, VanEck announced the expense ratio for the VanEck Fallen Angel High Yield Bond ETF (ANGL) will be lowered to 0.35% from 0.40%.

“ANGL’s unique approach and the exposure it provides for those seeking yield in today’s uncertain climate have truly resonated with investors and advisors this year,” Meredith Larson, the Fund’s product manager, said in a statement. “By lowering the Fund’s expenses, we think we will make ANGL even more attractive and that much more significant a tool in the portfolio construction process.”

Related: Good News for Investors – ETFs Are Getting Cheaper

The sudden fee cut may also be a response to the recently launched iShares Fallen Angels USD Bond ETF (FALN) , which began trading last week and also offers a 0.35% expense ratio.

ANGL has been trading since April 10, 2012 and has accumulated $194.2 million in assets under management.

ETF providers have been known to offer competing funds that track similar strategies. While most investors have stuck to the larger and more established offerings, ETF sponsors that do not enjoy a first-mover advantage in a space have tried to entice investor assets with lower management fees. Competition in the ETF industry has also heated up in recent years, with smaller fund providers slashing fees in a bid to grow assets.

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The lower expense ratio offerings have been an attractive feature as the ETF industry has witnessed a large preference from investors and financial advisors for cheap, passive index-based ETF options.

Fallen angels have been among the best performing high-yield assets this year. ANGL returned 13.7% for the year ended March 31, outpacing the broader high-yield bond market as represented by the BofA Merrill Lynch US High Yield Index, which returned 8.2% over the same period.

Along with outperforming in the speculative-grade debt category, ANGL comes with an attractive 6.25% 30-day SEC yield.

Related: How to Pick ETFs as Fee War Heats Up

Fallen angel speculative-grade rated debt, or debt securities that were initially issued with an investment-grade rating but were later downgraded to junk territory. Fallen angel issuers tend to be larger and more established than many other junk bond issuers. Furthermore, since these fallen angels were formerly on the cusp of investment-grade status, this group of junk bonds typically has a higher average credit quality than many other speculative-grade debt-related funds.

For more information on the fixed-income market, visit our bond ETFs category.