Catching Fallen Angels: Unlocking Value from Downgrades in Volatile Credit Markets

In this June 2025 fixed income insight, Pictet Asset Management highlights the investment potential of “fallen angels”—corporate bonds downgraded from investment grade to high yield—amid rising market stress and policy uncertainty.

• Fallen angels typically offer excess returns of 0.5–2.0 percentage points within 12–24 months after downgrade, due to forced selling and spread mispricing.

• European issuers are especially attractive, as trade tensions weigh more heavily on US credit and create relative value opportunities.

• Selective positioning—focusing on fundamentals and avoiding the weakest quartile—can enhance performance while limiting downside.

Read the full report for data-driven insights into timing, selection, and risk mitigation in the high-yield credit space.