iShares Fallen Angels USD Bond ETF

iShares Fallen Angels USD Bond ETF (FALN) is a BlackRock index fund that holds fallen angels: corporate bonds once rated investment grade that have since been downgraded to high-yield, or junk, status. Broad junk-bond funds hold all kinds of high-yield bonds, but this one buys only these downgraded bonds and caps any one issuer at 3%. Its 0.25% expense ratio sits between HYG's 0.49% and USHY's 0.08%, and it yielded 6.82% over the 12 months to October 27, 2026.

• Over the year to Oct 27, 2026, FALN returned -0.3%, 5th of 8 among similar funds.
• Its 5-year annualized return was +2.8% and its 10-year +5.4%.
• In the 2020 COVID crash it fell 29.1% and regained its old high 3.9 months after the low.
• Its worst full calendar year was 2022 (-13.8%); its best was 2019 (+17.4%).
• The deepest fall in its price history was 29.2% (Feb 14, 2020 to Mar 20, 2020), recovered by Jul 17, 2020.

As of Jul 31, 2026, the fund held 158 securities; the ten largest made up 17.53% of assets, and 18.28% sat in cash and money-market holdings.

The bonds mature in 9.1 years on average (weighted by size), with an average coupon of 5.59%.

• Over the three months to Jul 31, 2026, investors withdrew a net $193.8M (creations minus redemptions, per the N-PORT report).
• Monthly total returns reported for that quarter: +0.65%, +0.78%, -0.55%.

FALN tracks the Bloomberg US High Yield Fallen Angel 3% Capped Index. A bond qualifies if it meets six tests. It must be a fixed-rate corporate bond in US dollars from a company based in a developed market. It needs at least $150 million outstanding and at least one year left to maturity. It must be rated below investment grade now, after previously being rated investment grade. Bloomberg uses the middle rating from Moody's, S&P Global and Fitch. If only two agencies rate a bond, the lower rating counts.

Bonds are weighted by market value, so larger issues count for more, but each issuer is capped at 3%. The index had about 149 bonds as of October 31, 2025, with a large share in consumer goods and services and industrial companies. As of July 31, 2026, the fund's largest positions were Vodafone (3.0%), GFL Environmental (2.1%) and Resorts World Las Vegas (1.9%). The top 10 made up 17.5% of assets.

BlackRock uses representative sampling. Instead of buying every bond, it holds a sample built to match the index's yield, credit quality, duration (how sensitive prices are to interest rates) and industry mix. At least 80% of assets must be in index bonds, and up to 10% may go into futures, options, swaps or other bonds. The fund may lend up to one-third of its assets to other institutions.

• FALN charges 0.25% a year, versus an average of 0.12% for the similar funds below (7th of 8, cheapest first).
• Using the prospectus's standard example, $10,000 invested would cost about $26 in the first year and $318 over 10 years (assuming a 5% annual return).

It pays monthly income from junk-rated bonds at a higher yield than investment-grade funds, but its price can swing almost as much as stocks.

FALN could add monthly income: its trailing 12-month yield was 6.82% as of October 27, 2026. That income comes with junk-bond risk. In the 2020 COVID crash the fund fell 29.1% in a month, then recovered by July 17, 2020. In the 2022 bear market it dropped 17.9% and did not recover until March 20, 2024, about 17 months after the low. Its worst calendar year was 2022, a 13.59% loss. The fund launched in 2016, so it has no record from the 2008 crisis. A retiree forced to sell during those drops would have locked in losses, so it may suit a portfolio that also holds steadier reserves. Expenses are 0.25% a year ($26 in year one on $10,000 under the SEC's standard example), above the 0.12% peer average. Past results don't predict the future, and a plan should look at the whole portfolio, not one fund.

Matched by bond funds with the closest average maturity and issuer mix (N-PORT).