LOIM tube

Webinar | Fallen Angels spread their wings

Webinar | Fallen Angels spread their wings
Yannik Zufferey, PhD - Chief Investment Officer, Core Business

Yannik Zufferey, PhD

Chief Investment Officer, Core Business
Ashton Parker - Head of Credit Research

Ashton Parker

Head of Credit Research
Anando Maitra, PhD, CFA - Head of Systematic Research and Portfolio Manager

Anando Maitra, PhD, CFA

Head of Systematic Research and Portfolio Manager

Watch the replay of our Fallen Angels Webinar to learn how investing in fallen angel bonds could present attractive opportunities for fixed income investors. 




Our investment team managing our fallen angels recovery strategy, CIO, Yannik Zufferey, along with Ashton Parker, Lead PM and Head of Credit Research, and Anando Maitra, PM and Head of Systematic Research,  discussed all there is to know about fallen angels bonds. The topics covered included the performance engines of this compelling pocket of the high-yield market, and how rigorous credit analysis helps to maximise potential.


Questions raised by the audience included:

  • What is the flow of downgraded bonds entering the fallen-angels universe? Historically, has there been a period without any downgrades from investment grade to high yield? The flow of fallen angels typically corresponds to the credit/default cycle. A significant flow of fallen angels in 2008-09, 2011-12, 2015-16 and 2020 coincided with a default/downgrade wave. In the interim period, the supply of fallen angels was generally much lower, although never zero. The scarcest supply of fallen angels has been in low-volatility periods such as during 2017 and 2021.
  • Is it worth timing the entry into the fallen-angels space? Structurally fallen angels outperform when there is a large supply of new fallen angels on the back of a downgrade wave that coincides with the bottom of the credit cycle. Therefore, timing fallen angels is similar to timing credit exposures but in practice investors are often conservative in such periods. Tactically it is easier to invest in fallen angels during a relative underperformance of BB-rated bonds as fallen angels are primarily BB-rated. Such underperformance occurs earlier in a credit selloff as investors reduce risk through the more liquid BB segment as seen at the start of the Covid-19 crisis and also during the current Russia-Ukraine crisis.

important information.

This document has been issued by Lombard Odier Funds (Europe) S.A. a Luxembourg based public limited company (SA), having its registered office at 291, route d’Arlon, 1150 Luxembourg, authorised and regulated by the CSSF as a Management Company within the meaning of EU Directive 2009/65/EC, as amended; and within the meaning of the EU Directive 2011/61/EU on Alternative Investment Fund Managers (AIFMD). The purpose of the Management Company is the creation, promotion, administration, management and the marketing of Luxembourg and foreign UCITS, alternative investment funds ("AIFs") and other regulated funds, collective investment vehicles or other investment vehicles, as well as the offering of portfolio management and investment advisory services.
Lombard Odier Investment Managers (“LOIM”) is a trade name.
This document is provided for information purposes only and does not constitute an offer or a recommendation to purchase or sell any security or service. It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful. This material does not contain personalized recommendations or advice and is not intended to substitute any professional advice on investment in financial products. Before entering into any transaction, an investor should consider carefully the suitability of a transaction to his/her particular circumstances and, where necessary, obtain independent professional advice in respect of risks, as well as any legal, regulatory, credit, tax, and accounting consequences. This document is the property of LOIM and is addressed to its recipient exclusively for their personal use. It may not be reproduced (in whole or in part), transmitted, modified, or used for any other purpose without the prior written permission of LOIM. This material contains the opinions of LOIM, as at the date of issue.
Neither this document  nor any copy thereof may be sent, taken into, or distributed in the United States of America, any of its territories or possessions or areas subject to its jurisdiction, or to or for the benefit of a United States Person. For this purpose, the term "United States Person" shall mean any citizen, national or resident of the United States of America, partnership organized or existing in any state, territory or possession of the United States of America, a corporation organized under the laws of the United States or of any state, territory or possession thereof, or any estate or trust that is subject to United States Federal income tax regardless of the source of its income.
Source of the figures: Unless otherwise stated, figures are prepared by LOIM.
Although certain information has been obtained from public sources believed to be reliable, without independent verification, we cannot guarantee its accuracy or the completeness of all information available from public sources.
Views and opinions expressed are for informational purposes only and do not constitute a recommendation by LOIM to buy, sell or hold any security. Views and opinions are current as of the date of this presentation and may be subject to change. They should not be construed as investment advice.
No part of this material may be (i) copied, photocopied or duplicated in any form, by any means, or (ii) distributed to any person that is not an employee, officer, director, or authorised agent of the recipient, without Lombard Odier Funds (Europe) S.A prior consent. 
©2022 Lombard Odier IM. All rights reserved.