Invesco US High Yield Fallen Angels UCITS ETF (HYFA.L)

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The Invesco US High Yield Fallen Angels UCITS ETF (HYFA.L) is structured to mirror the overall return performance of its designated benchmark, the FTSE Time-Weighted US Fallen Angel Bond Select Index, after accounting for its fees. Income generated by the fund is distributed to investors every quarter. The benchmark specifically tracks "fallen angels"—these are bonds that originally held an investment-grade credit rating but have since been downgraded to high-yield status. Eligibility for inclusion requires bonds to be denominated in US dollars, issued by corporations based in either the US or Canada. Crucially, they must have undergone a credit rating downgrade from investment-grade to high-yield in the preceding month. Once admitted, these bonds are typically held for five years (60 months), assuming they continue to satisfy the stipulated criteria. Should a bond be removed and later reinstated, its five-year inclusion tenure resets. A distinctive feature of this index is its weighting methodology. Unlike many benchmarks that assign weights based on market value, this index allocates weights according to the duration since a bond became a "fallen angel." Bonds that have been more recently downgraded receive a higher weighting, an approach designed to potentially capitalize on the price rebound often observed shortly after such downgrades. To ensure diversification, no single issuer's bonds can constitute more than 5% of the index. For enhanced liquidity, the time-based weights of constituents are limited to three times what their market value-based weights would be. The index undergoes rebalancing on a monthly schedule. To achieve its investment objective, the portfolio management team employs sophisticated modeling tools and techniques. They invest in a carefully selected subset of the index's securities, chosen to accurately represent the overall characteristics and performance drivers of the entire benchmark. This "sampling" approach aims to replicate the index's returns as closely as possible, while simultaneously minimizing the operational costs typically associated with full, direct replication of all index components. This ETF operates under a passive management strategy, meaning it is designed simply to track its specified index rather than actively seeking to outperform it. Investors acquire units in this index-tracking fund, which provides indirect exposure to the underlying bonds held by the fund, rather than direct ownership of those individual assets.