Bold Bets: 3 Distressed Debt ETFs for High-Return Potential

Overview

Distressed debt is gaining popularity among hedge funds.
A new UK fund raised $500 million for distressed debt investments.
A global corporate debt storm is looming due to high interest rates.
Richard Cooper: Corporate bankruptcies are at the second-fastest pace since 2008.
$500 billion in distressed debt worldwide, with more expected.
Real estate industry holds $168 billion of distressed debt.
Other significant industries: healthcare ($63 billion) and telecommunications ($63 billion).

These ETFs aim to capitalize on the potential high returns from distressed debt:

Tracks the ICE US Fallen Angel High Yield 10% Constrained Index.
Composed of below-investment-grade corporate bonds that were initially investment grade.
Performance: Fallen Angel index (up 346%) has outperformed other high-yield bond indices.
Top holdings include: Newell Brands, Rolls-Royce Holdings, Las Vegas Sands.
Annualized total return over 10 years: 6.0%.

Tracks the Bloomberg High Yield Very Liquid Index.
Composed of USD denominated high-yield corporate bonds with above-average liquidity.
Bonds have a S&P rating of BB+ or lower and at least $500 million face value.
Fee: 0.40% annually.
Total holdings: 1,172, with $7.3 billion in net assets.
Top sector weights: consumer cyclical, communications, and consumer non-cyclical.
Top companies: TransDigm Group, Dish Network, Caesars Entertainment.
Current position: Trading at low levels since 2008, potential for share price recovery.

Tracks the RAFI Bonds US High Yield 1-10 Index.
Composed of U.S.-dollar-denominated corporate bonds.
Bonds criteria: Fixed coupon rate, minimum $350 million face value, rated Ba1/BB+ or lower.
Top sector weights: consumer discretionary, industrials, materials.
Asset distribution: 52.5% in 1-5 year maturities, 44.3% in 5-10 year maturities.

Investment Potential: These ETFs provide defensive and potential high-return strategies in volatile markets.
Publication Note: Article by Will Ashworth, opinions are personal and not tied to any specific financial position.