Amid Asset Surge, Fallen Angel Bond ETF Trims Fees

The VanEck Vectors Fallen Angel Bond ETF (Market Vectors ETF Trust (NYSE:ANGL)) is one of this year's fastest-growing exchange-traded funds of any variety, and VanEck is rewarding investors that are piling into ANGL with a lower annual expense ratio.

In a statement out Monday, VanEck said ANGL's new expense ratio is 0.35 percent, or $35 per $10,000 invested. In March, VanEck revealed that ANGL topped $100 million in assets under management. In less than three months, ANGL's assets have swelled to $194.2 million as of June 17.

Favorable Fallen Angels

Fallen angels are corporate bonds that came to market with investment-grade ratings, but were later downgraded to junk status. One way of looking at ANGL is that the ETF is benefiting from the very issuers that were thorns in the sides of traditional junk ETFs last years: energy and materials companies.

ANGL has returned 13.67 percent year to date through May 31 based on net asset value (NAV), far outpacing the broad high yield bond market, as represented by the BofA Merrill Lynch US High Yield Index (H0A0), which returned 8.15 percent over the same period. Furthermore, relative to the actively managed funds in Morningstars Open End Funds U.S. High Yield Bond category, ANGLs total returns ranked in the first percentile over the 1-year period (against 772 funds) and since its inception (against 567 funds), as of May 31, 2016, according to VanEck.

A Little Competition

Last week, ANGL got its first direct competitor in the form of the iShares Fallen Angels USD Bond ETF (NASDAQ:FALN). Time will tell which one of these ETFs will rule the fallen angel ETF kingdom in asset-gathering terms, but it can be argued that in a niche segment of the ETF market such as this, ANGL's first mover advantage will be tough to beat. FALN also charges 0.35 percent per year.

This particular segment of the high-yield corporate bond market has been soaring this year because many of the newest fallen angels hail from the energy patch and after being battered amid 2015's plunging oil prices, rebounding energy prices are lifting fallen angels in 2016.