BNY Efficient U.S.
Fallen Angels Beta Fund*

The Fund is one of the dedicated Fallen Angels investment vehicle in the market. It aims to generate a return in excess of the Bloomberg US High Yield Fallen Angel 3% Cap Total Return Index Value Unhedged (Benchmark) with similar levels of volatility over the medium to long-term before fees and expenses, whilst taking environmental, social and governance (“ESG”) factors into account.

What is Fallen Angel? Why Fallen Angels? Why this fund? About the fund Contact us

The Fund invests primarily in Fallen Angels, which are sub-investment grade Debt and Debt-Related Securities that were previously rated as investment grade.

The Fund investment portfolio may fall in value and there is no guarantee of the repayment of principal.

The Fund’s investments are concentrated in the United States. The value of the Fund may also be more susceptible to adverse economic, political, policy, foreign exchange, liquidity, tax, legal or regulatory event affecting the United States.

The Fund invests primarily in debt securities rated below investment grade or unrated. Such securities are generally subject to lower liquidity, higher volatility and greater risk of loss of principal and interest than high-rated debt securities.

In general, the prices of debt securities fall when interest rates rise. The value of the Fund may be affected by substantial adverse movements in interest rates and inflation.

The Fund may invest in Rule 144A bonds and Reg S bonds and may be subject to a higher price volatility and lower asset liquidity. It may be relatively more difficult to dispose of such investments within the desired time limit.

The Fund may invest in financial derivative instrument (FDI) and may use FDI for investment, hedging and efficient portfolio management (EPM) purpose. Risks associated with FDI include counterparty/credit risk, liquidity risk, valuation risk, volatility risk and over-the-counter transaction risk. The leverage element/component of a derivative can result in a loss significantly greater than the amount invested in the derivative by the Fund.

The fund may invest in debt instruments with loss absorption features (LAP) which are subject to greater risk on liquidity, valuation and sector concentration compared to traditional debt instruments.

The Fund may pay dividend out of or effectively out of capital which amounts to a return or withdrawal of part of an investor’s original investment or from any capital gains attributable to that original investment. Any such distributions may result in an immediate reduction of Net Asset Value per share.

Investor should not rely solely on this document to make investment decision. Please read the offering documents carefully for further details including risk factors.

What is Fallen Angel?

When a company that has been rated investment grade by credit ratings agencies is downgraded below Baa3/BBB-, then it is commonly known as a “Fallen Angel”. The high yield market contains issues that are BB-rated, B-rated and CCC-rated. As they move down from investment grade, more than 70%¹ of Fallen Angels are in the maximum BB-rated category.

¹ Source: as at 31 March 2024, BNY Efficient U.S. Fallen Angels Beta Fund Factsheet, Credit Quality Breakdown.

WHY INVEST?

1. Assessing risk-adjusted returns

Figure 1 below demonstrates that from 2004 (when Fallen Angels were first measured) to the end of 2023, Fallen Angels could have better total and risk-adjusted returns relative to the broad high yield universe. Investors who want to exploit the potential of a company to recover from a temporary decline might consider fallen angels.

2. The unique opportunity of Fallen Angels

When a bond is downgraded to the high-yield universe, its price may decline. For instance, certain investment funds, such as index trackers that focus on investment-grade holdings, may be forced to exclude it from their portfolios. In the period following the demotion, if there are more sellers than buyers in the market, the principles of supply and demand mean that the bond’s price could be pushed below its true value.

Figure 2 shows that, between October 2004 and June 2023, US Fallen Angels that lost their investment-grade status achieved, in aggregate, relatively better performance during the 12 calendar months following their respective demotions to the high-yield market.

3. Fallen Angel default rates versus broader high-yield universe

Over the period December 2004 to June 2024, the average annual default rate of Fallen Angles was 1.73% compared to 2.51% for other high-yield bonds. The Fallen Angels average annual default rate has been lower than the broader high-yield market. What’s more, as shown in Figure 4, the gaps2 indicated the periods when there were no Fallen Angel defaults.

Why BNY Efficient U.S.
Fallen Angels Beta Fund?

Monthly income stream

Aims to pay monthly dividend of ~7%* on goss basis.

*Based on share class USD N (Inc.) (M), average annualised dividend yield from January 2023-March 2024. Dividend amount or dividend rate is not guaranteed. The dividends (if any) may fluctuate from time to time. Distributions may be paid out of capital.

Access to non traditional asset class

Offers investors access to an asset class with fewer dedicated investment options than more well-established financial categories.

Access to diversified basket of bonds

Levies a management fee similar to passive approaches; mitigating barriers to entry through innovative and cost effective bond trading.

About the fund

Available share classes

Share Class	Minimum initial investment	ISIN	Bloomberg code	Launch Date	Factsheet
HKD N (ACC.)	HKD 50,000	IE000ERI9SY7	BEUFANH ID	22 January 2024
HKD N (Inc.)	HKD 50,000	IE000RIGD9Y9	BEUFNHI ID	22 January 2024
USD A (Acc.)	USD5,000	E00BM94ZD48	BUSFAAU	21 September 2020
USD N (Acc.)	USD5,000	IE00061KXGP8	BNFANUA	13 August 2021
USD N (Inc.) (M)	USD5,000	E000BJM58Z9	BNFANUI	13 August 2021
USD SY (Inc.) (M)	USD5,000	IE0004X1VRH1	BEUFSIM ID	21 September 2020

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Talk to us about the BNY Efficient U.S. Fallen Angels Beta Fund*

* Please note that each SFC-authorized subfund of BNY Mellon Global Funds, plc is not aiming to incorporate ESG factors as its key investment focus and, as such, does not constitute an ESG fund pursuant to the Circular to management companies of SFC-authorized unit trusts and mutual funds – ESG funds issued by the SFC on 29 June 2021. Other funds which are not authorized for offering to retail investors may or may not constitute ESG funds (where defined in the relevant local jurisdiction).

Past performance is not indicative of future performance. The value of investments and the income from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested. The value of investments may go down or up.

The Fund transitioned investment manager to Insight on 1st September 2021. Prior to this date it was managed by Mellon Investments Corporation, LLC.

WARNING

This document is for Professional Investors only. Not for further distribution.

This document is not intended as investment advice. This document must not be used for the purpose of an offer or solicitation in any jurisdiction or in any circumstances in which such offer or solicitation is unlawful or otherwise not permitted. This document should not be issued, circulated, distributed, published, reproduced or cause to be issued, circulated, distributed, published or reproduced (whether in whole or in part) to any other persons without the prior written consent of BNY Mellon Investment Management Hong Kong Limited.

Investment involves risk. Past performance information presented is not indicative of future performance. Investment returns may be exposed to exchange rate fluctuations. The value of investments may go down or up. This document has not been reviewed by the Securities and Futures Commission.

Information in this document is subject to change without notice. To the extent permitted by applicable laws, rules, codes and guidelines, BNY Mellon Investment Management Hong Kong Limited accepts no liability whatsoever whether direct or indirect that may arise from the use of or reliance on the information contained in this document.

The information has been provided without taking into account the investment objective, financial situation or needs of any particular person. To the extent permitted by applicable laws, rules, codes and guidelines, BNY Mellon Investment Management Hong Kong Limited and its affiliates are not responsible for any subsequent investment advice given based on the information supplied. You should not rely on this document alone to make investment decisions. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice.

In Hong Kong, the issuer of this document is BNY Mellon Investment Management Hong Kong Limited, which is registered with the Securities and Futures Commission (Central Entity Number: AQI762).

BNY Mellon Investment Management Hong Kong Limited and any other BNY Mellon entity(ies) mentioned are ultimately owned by The Bank of New York Mellon Corporation. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation and its subsidiaries.

AP4180-25-04-2024 (12M)

BNY Efficient U.S. Fallen Angels Beta Fund*