iShares Fallen Angels USD Bond ETF (FALN US) – Portfolio Construction Methodology

The underlying Bloomberg US High Yield Fallen Angel 3% Capped Index targets USD-denominated corporate bonds that were previously investment grade and are now high yield. Eligibility is limited to U.S. corporate issuers (industrial, financials, utilities); country of risk in emerging markets is excluded. Bonds must be fixed-rate (fixed-to-float eligible only during the fixed term), fully taxable, SEC-registered or Rule 144A, with remaining maturity ≥1 year and minimum par outstanding ≥USD 150mn. Ratings use the “middle” of Moody’s/S&P/Fitch; bonds must be ≤Ba1/BB /BB and must have held an investment-grade index rating at issuance or subsequently. Convertibles, preferreds, CoCos, floaters, inflation-linked, and structured notes are excluded. Constituents are market-value weighted and subject to a 3% issuer cap, with excess redistributed pro rata. Reconstitution and reweighting occur monthly at month-end.

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